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You may love to trade, but no one trades for love. Fear and greed drive markets. That’s why to succeed as a trader, you must learn to respect the two principal driving forces of price. To win consistently, you must put the odds in your favor by understanding when sentiment reaches the extreme at either end of the scale and takes advantage of the markets at that time.
Random Nature of Price
Most retail traders rely exclusively on technical analysis, preferring the seemingly certain specificity of price patterns on a chart over the much more ambiguous nature of economic data. But We believe that in foreign exchange, traders ignore fundamentals at their own risk. Technicals are great at recording the past and providing a snapshot of the present. But prices move on future expectations; and future expectations are driven by fundamental data that can change the dynamics of price action at any time.
The hedge fund specializes in index arbitrage for a variety of global equity instruments and its offices contain more computers than an intelligence room at the Pentagon. One of the most interesting insights the hedge-fund operators shared with me is that in their many studies of price action for the currency market, they discovered that price loses as much as 70 percent of its directional bias within 24 hours of any point in time and within 48 hours turns essentially random. That means that at any given point in time your chances of accurately predicting price action in FX more than two days in advance are essentially zero.
Now many of you reading this article may argue that this is nonsense. Generally, technical traders firmly believe: prices trend, trends can be quite persistent and technical analysis can ascertain those trends without any help from fundamentals. These are all points with which we would agree but with one caveat. The problem with trends is that they are only obvious or callable in hindsight. For every nice price trend on the chart, there are hundreds of examples of failed breakouts or breakdowns. These failures look nearly identical at the point of entry (to those that don’t fail) only to reverse and generate losses.
There is an easier way to begin your forex career. Have you maybe heard of forex magic machines? Right! This is forex trading software. If you do not believe that forex robots can earn money, you are stuck in the 19th century.
Nowadays, forex magic machine are capable of analyzing information and making forecasts. Unlike most of forex traders, forex magic machines collect information, analyze it and only then enter the market if it is favorable.
Thus, there are no random trades performed for no reason at all.
Please before you start your real forex trading – make sure to get properly prepared for the realities of the forex trading market.
Or (as an alternative) you can use forex managed account service where other currency traders will take care of managing the trading process on the currency exchange market.
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