Most new forex traders think they know how prices move but in reality they misunderstand the formula for market movement and this contributes to their downfall. If you want a good forex trading education, you need to know how and why forex prices move. Let's check out the formula...
The formula is simple and is the following:
Forex fundamentals (supply and demand inputs) + Human Perception of = Price
Now many traders don't understand what the above really means and make these errors:
- They trade the news and events
- They believe markets move to a scientific theory
- They believe you can predict prices in advance
- They try forex day trading and scalping
If you understand the above equation, you will understand why none of the above will work.
The fundamentals are important but what is more important is how the traders perceive them.
It's not the fundamentals by themselves that move markets its trader psychology, this is why markets rally when the fundamentals appear most bearish and markets collapse when there most bullish.
While humans determine the price of anything, they do not move to a scientific theory and those who believe they do are wrong.
Forex trading is a game of odds not certainties. Also, if you try and predict, you are simply hoping or guessing and you don't get rewarded for that in life and especially not in forex trading.
The way to trade forex correctly is:
To get the odds on your side and that means trading longer term, only in longer term time frames can you get the odds in your favour.
The forex day trader or scalper is destined to fail because, all volatility is random in short time frames and you cannot get the odds on your side. No one can predict what millions of forex traders, will do in a short space of time, so don't try.
If you understand the above equation, you will also understand that to win at forex trading you need to use forex technical analysis, follow trends and trade the reality of forex price movement and not guess.
You only need a simple forex trading system and the mindset to succeed.
Then in just 30 minutes per day, you could soon be earning big forex profits and enjoying currency trading success.
So learn currency trading the right way and make sure you understand the equation for forex price - simple? Yes it is - but most traders don't understand it, make sure you do.
