How do Forex prices really move? In this article we will look at what drives prices and surprisingly, most people do not understand why they move and join the 95% of losers. Let's take a look at Forex price movement in more detail and how you can use the information to make bigger profits.
Forex prices don't move to the supply and demand facts but to all the traders who trade a currencies view of them. It's the investors view of the fundamentals not the fundamentals themselves which are important, investor sentiment drives prices. You have to judge sentiment if you want to win but how do you do this?
The first major error traders make is thinking that Forex prices can be predicted in advance with mathematics. What they don't understand is that Forex prices, are made by humans and they are not logical or predictable!
Most traders think they are going to beat the market by using a cheap Forex robot which promises them huge gains but all they end up with are losses. Other traders try and build really complicated systems and think because they are clever they will win but as markets don't move to mathematics, these systems have to many elements to break and lose - in Forex trading you need a simple, robust system because you are trading an odds based market.
Prices move to probabilities not certainties and when you trade Forex, you are really just looking for high odds trades; you will lose now and again but if you keep those losses small and run your profits you will do just fine over the long term.
The best way to look for high odds set ups is to use Forex charts and simply follow price action and lock into trends. You will see trends up or down on any Forex chart and the aim of the chartist is to simply follow them; you don't care why prices are moving you just want to make money and by following price action.
On a Forex chart you are seeing the reality of price change without having to weigh up news stories and there impact which as we saw, at the start of this article is impossible.
Because human nature is constant this is reflected in high odds chart patterns you can trade for profit.
To win at Forex trading, you need to focus on having a simple system which cuts losses quickly and runs the big trends when you get into them. Anyone can develop a system that can win and simply following Forex prices on a chart is time efficient. Just accept there is no perfect system and trade it with discipline and you can make a lot of money over the long term.
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