How is Forex Trading Like the Hot Potato Game

In the Hot potato game, that players gather in a circle and toss a small object such as a ball, an apple, beanbag or even a real potato to each other as music plays. The player who is let holding the object when the music stops is eliminated from the game.

How is forex trading like the Hot Potato game?

In trading, a currency, for example, will keep moving higher (lower) until it reaches a level that brings in sellers (buyers) to stem the tide and either sends it sideways or reverses direction. In other words, it keeps moving in one direction until the music stops.

What does it mean in trading when the music stops?

This may be best explained with an illustration from January 22, 2025. As this daily currency chart shows, EURUSD, which seemed headed for parity at the start of the year reversed direction to move highe. From a broader perspective, this could be viewed as a retracement of the broader downtrend.

Well, on this day it extended its recovery to test, as this daily chart shows, a key resistance at 1.0467.

When the music stops.

As this 15 minute chart shows, as ong as EURUSD kept rising the hot potato game continued. It kept going until it reached the key 1.0457 level in hope that there would be stops to run and the game would go on.

However, instead of stops it ran into sellers. This is where the music stopped. Those pushing for stops got caught with the cooling potato. Game over.

How is Forex Trading Like the Hot Potato Game

To sum up, if you think of trading in this way it will make sense to you. The hot potato game is like a trading episode.

In this episode, buyers kept passing around the potato by pushing EURUSD higher until there were no more stops left to run as sellers stepped in. This is when the music stopped. As a trader you do not want to be the last one holding the potato when it cooks off.

It is easy to say this in hindsight but those bursting the EURUSD recovery as a retracement should have been on the lookout for signs (e.g. 1.0457 holding) the game was about to end when the music stopped.

How is Forex Trading Like the Hot Potato Game