This article is going to look at how and why prices move and how to win. Most novice traders make the mistake of thinking prices move to news stories and try and trade them or to some scientific theory - they don't. Forex prices are chaos - but that doesn't mean you can't win, you can and to do so, you must understand the key point of this article...
Here is the equation for market movement
Fundamentals (Supply and Demand) + Investor Perception of = Price
While the above sounds simple and it is most traders don't understand that the facts are NOT important it is how they are perceived by all the investors as a whole that is important.
Many people trade breaking news but it won't help you as it's discounted immediately and furthermore, investors are always looking to the future. To illustrate this think about this fact:
Market bottoms normally occur when the news is most bearish and market tops, when the news is most bullish.
The fundamentals are important long term - but in the short term prices are determined by the greed and fear of the investors, it's what they all think as group that determines price.
Many traders think because human nature is constant, there is a scientific theory of market movement - but of course there isn't. If there was, we would all know the price in advance and there would be no market at all.
Forex is an odds game and your aim is to trade high odds set ups, when the patterns of forex price movement dictate you should and the best way to do this is to use a simple robust trend following forex trading system.
Forex charts show you the supply and demand situation (they simply assume that all fundamentals show up in price action) but they do so something more - they tell you how all the investors perceive them.
Forex charting and technical analysis is not a science, it's an art. You're in fact, playing a similar role to a good poker player. You are looking to bet big on high odds sets, fold ones that don't go right and pass by low odds set ups.
Just like the poker player, you won't win every hand - but if you play the odds, you can win more than you lose and make a lot of money.
Forex charting is easy to learn and if you make it part of your forex education, you can learn it in about 2 weeks and get a robust forex trading strategy together which, you can apply in around 30 minutes a day.
If you can master it forex charting and spot high odds forex price movement patterns, the rewards are huge.
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