How and why to Forex prices move is basic knowledge that all Forex traders need to know to make money but its surprising how few traders really understand Forex price movement. In this article, we will look at the factors which cause prices to move and how you can benefit from these moves for big profits.
A simple formula for how and why Forex prices is the following:
Supply and Demand Fundamentals + Traders opinion of them = Price
The equation is nice and simple and the facts you need to keep firmly in mind are:
1. The supply and demand factors are NOT the reason prices move – traders opinions of them are.
2. When traders look at the facts, they're not logical, there decisions are colored by the emotions of greed and fear.
3. In conclusion, its traders who set the value of any price and there is not predictable in advance. Forex prices move to probabilities NOT certainty.
So all the traders who think they can trade news stories lose money and all the Forex robots and predictive systems which say Forex markets can be predicted in advance lose money. Today, we live in a world where science enriches our lives and merchants think they can apply science to the markets and win but they lose money, as the markets are governed by greed and fear and what traders do is simply not predictable in advance – so how can you make money?
The smart trader does not focus on trying to be perfect, he focuses on the odds and uses a simple system. Simple systems work better than complex ones, because they have fewer elements to break. The successful trader accepts he will have a lot of losses (even the best traders do) but he keeps his losses small and runs his profits.
The real key to winning at Forex trading is to accept the market is all powerful and right and not arguable with it which most traders do. When they wrong they run their losses and hope they turn around and get wiped. These traders are also obsessed with predicting the exact low of the market and are really hiring or guessing whereas the smart trader waits for the trend to be confirmed before getting on board.
If you want to win at FX trading accept Forex trading success is simply about trading the odds and while you may not win every trade but if you use a simple system, keep your losses under control and run your profits you can make huge gains – it really is that simple.