Forex

Most novice traders fail to understand how and why prices really move.

Here we will give you an introduction to how and why prices move and how you can take advantage of these movements for profit. Let’s look at some key points in relation to how and why prices move.

Markets Do Not Move To a Scientific Formula


Firstly, let’s get rid of this myth.

Many traders believe this and numerous vendors on the net perpetrate the myth of markets moving to a scientific law which appeals to the greed and naivety of traders.

Common sense tells us that markets don’t move scientifically:

If markets moved scientifically, there’d be no market as we’d all know the price in advance!

A forex market by its nature, involves uncertainty - that’s what makes a market move - the fact that human nature is un-predictable.

Trading the Odds for Profit

While you are not trading certainties but that doesn’t mean you can’t make a lot of money, you can - by trading the odds.

With a sound trading method that runs profits and cuts losses quickly you can build significant long term wealth.

It is no coincidence that many of the world’s top traders started out as either blackjack or poker players. The reason for this is - any good card player knows he won’t win every hand but if they bet when the odds are in their favor and fold when there not, they will make a lot of money longer term.

Trading is simply an odds game.

If you know how to calculate the odds correctly, you can win and build significant long term wealth. Let’s look at how to get the odds in your favor.

Price Movement – The fundamentals

Many traders like to trade off news stories and watch the fundamentals, it’s popular but will trading news stories make traders money? Let’s find out.

A currency trader, who makes trades based upon fundamental analysis, will look at the supply and demand situation relevant to the particular currency studied, and try and predict the impact of such factors as:

* The health of the economy
* Economic policy
* Interest rates
* Balance of payments
* Employment
* Trade deficit
* Political factors

And many more.

On the face of it fundamental analysis provides a logical and rational basis for investment decisions however there are problems in applying it and traders who try and trade off the news generally lose.