Do you know how and why forex prices really move? Most traders don’t and they lose. Here we're going to give you a simple equation that'll 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's nice and simple –. Its simplicity is deceptive and if you think about it, you can conclude the following:
–. You can't 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. You can't hope to predict where they go. Prices don't 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 –. 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.