Spotting the Big Trends in Forex Trading

By: Sacha Tarkovsky

The way the markets move and how to spot big trending moves is not as easy as it first appears and many traders simply have no idea of what really moves prices and how to take advantage.

Let's look at this in more detail and show you how to spot the big moves.

1. The market

Like any market we have buyers and sellers millions of them trading trillions of dollars a day.

They all have different objectives. Some are hedging and some are trying to make money. There are many different groups from the central banks down to small speculators.

2. How is value determined

Of course value is determined by the participants and all their opinions come together to give us the market price.

The facts are there for all to see, but all the participants see them in a different way and that's why currency markets are so hard to predict.

Well that all sounds chaotic, so how on earth can you predict or even try to predict where prices will go?

In the short term in the period of a day for example it cant be predicted ( that's why day traders always lose ) but in the longer term they can by a study of:

Human psychology.

Humans determine the price of anything and they will always push prices to far up or down.

Humans are emotional as well as logical beings.

It's these spikes in human emotion when greed and fear push prices to far up and down, that you can trade for big profits.

Consider in an example we all are familiar with that happened recently.

Crude oil spiked up to $80.00 a barrel and people predicted it would go to $100.00.

The supply and demand fundamentals pointed to no shortage of oil but greed and fear took hold and pushed prices way above fair value

What happened next?

It dropped to the $50.00

This happens all the time in ANY market, to varying degrees.

Human emotion pushes prices to far and then they return to realistic levels of value.

Sentiment indicators

Charts give you a great view of human psychology and there are some good indicators to help you spot that are sentiment based.

The fact is if you can sell into mass greed and buy into mass fear you can get some of the best risk reward trades around.

Discipline and the right tools

Its not easy to do. With the news and everyone else opposing you, but if you can get a method and stay disciplined then you will end up winning and winning big in forex trading, or any other market you wish to trade.

In part two of this series, we will look at some tools to help you achieve this and become a contrary trader earning big profits from the big moves

Foreign Exchange
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 

» More on Foreign Exchange