While understanding Forex price movement is essential in terms of winning at Forex trading, most traders simply don’t understand the facts behind how prices move. These traders believe various myths which cause losses. Let’s take a look at how prices really move and how you can take advantage of the big trends and make big profits.
Let’s start with a simple equation which is the basis of price movement in any currency pair:
Supply and Demand Facts + Investors Opinion of = Price
Now the above is obvious enough but traders still believe two myths which are:
1. Forex prices can be Predicted
If you look at the above equation this is obviously not true because people decide what a price is and there not predictable at all, Those traders who look for some scientific method of price movement are simply never going to find it. Forex prices move to the odds only but you can make money and we will return to this fact in a moment next, lets look at another myth.
2. Forex Prices Move to the News
No they don’t and anyone who trades news stories will lose because Forex prices don’t move in response to the news but investor perception of the news. If you want a clear example of why trading news stories will not lead to success consider this:
All major market tops, occur when the market is at its most bullish and all market bottoms, form when the news is most bearish. You need to understand, that its investor sentiment that moves prices and investors will always push prices too far to the upside and too far to the downside, when greed and fear come into play.
So how do you win at Forex trading and get the odds on your side?
Firstly, forget trying to predict prices because that really is hoping or guessing and simply follow price action and trade the reality of price change. If you want an easy way to do this, trade breakouts to new chart highs or lows. All big trends start and continue from breakouts, so it’s a timeless way to make money.
You also don’t need to know the news, simply look at a price chart and not only in our instant world of communications, will you see the news reflected in the price instantly and more importantly, you will see what all the traders think of the news; so you are seeing the fundamentals and sentiment in one glance.
If you don’t predict and trade breakouts, you can get in on all the major trends and you ignore the news and the economic background, you don’t need to know about either! Just trade the reality of price change on a chart and you can win.
Anyone can learn to trade with Forex charts and you will always get high odds chart patterns which repeat again and again, because human nature is constant and reflected in the charts. Charting is easy to learn and a very powerful way, to make money so become a chartist and enjoy long term currency trading success.