Currency Trading Forecast - Spotting the Big Trends

By: Kelly Price

Many traders like to follow currency trading forecasts from news wires and brokerage houses. Here we are going to give you some tips on spotting the ones that are good and also how to do it yourself.

Today we live in an age of instant communications and information overload and there are numerous people involved in currency trading forecasts:

Banks, brokers, vendors and TV analysts and most of them are dead wrong.

Why?

Because they either forecast to far ahead - or they base their view simply on the supply and demand fundamentals.

There are problems with both methods.

You will often see annual reports telling you where such and such a currency will end up in a year - How on earth can you do that?

We live in a world where events change constantly and you simply cannot look too far into the future as world events will simply make the forecast redundant.

Supply and demand fundamentals don't move prices - human opinion of them does.

Humans are not logical and we base our trading views not on logic but on the emotions of greed and fear. The facts are there for all to see but we all draw different conclusions from the facts presented to us.

Markets tend to collapse when the fundamentals are most bullish and rally when their most bearish - this is investor psychology at work.

Humans push prices to far from fair value and these price spikes don't in many instances reflect the supply and demand facts, they reflect greed and fear.

So how do you forecast correctly?

The answer is never to look to far ahead and simply back up your opinion with the reality of price change - this is obvious from forex charts.

Forex charts not only give you the advantage of seeing the fundamentals reflected in price action, they also tell you how humans perceive the fundamentals.

In conclusion you get a complete picture to look at.

By using a forex chart you are trading reality of price change and can act upon it.

You're trading the facts and truth you see - not speculating into the future, so the next time you see a currency trading forecast that sounds convincing, check your forex charts for confirmation.

Trade the facts as they are and the truth of price movement.


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