Do you know how and why forex prices really move? Most traders don't do that and they lose. Here we are going to give you a simple comparison that will give you a deeper understanding of how and why forex prices are moving, which could lead to forex trading success.
Here is the comparison:
Fundamentals (supply and demand factors) + (human perception of them) = price.
That is beautiful and simple – but its simplicity is deceptive, and if you think about it, you can conclude the following:
– You cannot easily trade the news and investment facts
The reason for this is – the fundamentals are immediately discounted by the market and it is how investors view them as important, NOT the facts themselves.
Facts are immediately discounted, so you can never trade them in – you play catch-up and otherwise we see them all differently, so you can't hope to predict where they are going. Prizes don't go to the basics and this has been proven time and again, because markets collapse when they are the most bullish and collect when they are the most bearish.
So forget to trade the news!
– To win you have to study human psychology
It is not facts that set a market in motion, are traders like you and millions of others and our perception of the facts.
Now they were all different – but we are all controlled to a certain extent by greed and fear, and because human nature is constant, this is reflected 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, as they simply assume that the basic principles are immediately reflected in the price (so there is no need to study them), you just need to study their effect and you can see that on a graph. You get to see the fundamentals and more importantly, how investors perceive them and how to trade the reality of price for profit.
With Forex charts you can easily trade the truth and follow price trends without having to watch news stories or listen to opinions.
You can distance yourself non-emotionally and just trade in the market as it unfolds. A forex chartist doesn't care how or why prices move, he just wants to get stuck on trends and make money when they do – it's that simple.
Get a system for profit
If you want to earn money in forex trading, you can, with a simple robust forex trend following strategy. Although many traders think that developing a Forex trading strategy is difficult, that is not the case and we will show you how in the second article of this series.