Do you know how and why forex prices really move? Most traders don’t and they lose. Here we are going to give you a simple equation that will give you a deeper understanding of how and why forex prices move, which could lead you to forex trading success.
Here is the equation:
Fundamentals (supply and demand factors) + (Human Perception of them) = Price.
Now that is nice and simple – but its simplicity is deceptive and if you think about it, you can conclude the following:
– You cannot simply trade the news and investment facts
The reason for this is – the fundamentals are discounted straight away by the market and its how investors perceive them that’s important, NOT the facts themselves.
Facts are instantly discounted so you can never trade them – you’re playing catch up and further more we all see them differently, so you cannot hope to predict where they go. Prices do not move to the fundamentals and this has been proven time and time again as, markets collapse when there most bullish and rally when there most bearish.
So forget trying to trade the news!
– To Win You Must Study Human Psychology
Its not facts that makes a market move, its traders like you me and millions of others and our perception of the facts.
Now were all different – but we all are to a degree governed by greed and fear and as human nature is constant, this shows up in repetitive price patterns that can be traded for profit – if we look at a forex chart.
Forex charts are the best way to trade forex because they simply assume the fundamentals show up in the price straight away (so there is no need to study them), you only need to study their effect and that can be seen on a chart. You get to see the fundamentals and more importantly, how the investors perceive them and can trade the reality of price for profit.
Trading the Reality
Forex charts allow you to simply trade the truth and follow price trends without the need to look at news stories or listen to opinions.
You can stand back non-emotionally and simply trade market action as it unfolds. A forex chartist doesn’t care how or why prices move, he just wants to lock into trends and make money when they do – it’s that simple.
Getting a System For Profit
If you want to make money in forex trading you can, with a simple robust forex trend following strategy. While many traders think that developing a forex trading strategy is difficult its not and we will show you how in the second article of this series.