Predicting Forex Charts

By: Monica Hendrix
One of the biggest mistakes any trader can make is to try and predict currency prices – it has never and will never work. If you try and predict you will lose and lose quickly, however if you want to win you can but you must:

Treat forex trading as an odds game.

First let’s look at why predicting is doomed to failure.

It’s obvious that if you could predict prices in advance there would be no market, as we would all know the price in advance!

Everyone would make money and that is not the case in any free market.

Let’s look at some dumb predictive theories.

Let’s start with the king of them all - Elliot wave.

Elliot said he has an objective scientific theory and then tells people to make subjective judgements – Well that’s not an objective theory as an objective theory would tell you EXACTLY what to do.

Another great one is the Fibonacci number sequence.



All those levels that magically are supposed to hold and they do sometimes, but more often than not they don’t.

There are many more including the numerous e-books and currency trading systems that are sold by vendors promising you “the secrets" of forex success for a few hundred dollars.

Think about it:

If their currency trading systems were any good, they would not be selling the system, they would be to busy making money to bother you for a few dollars.

Many forex traders don’t use the above theories, but they still love to predict.

Here is a typical scenario.

They see prices dip to support and buy. They hope that support will hold and lose.

Now if you want to trade and win pay attention!

If prices dip to support and you think the level is going to hold, don’t buy and hope, get confirmation and trade with the odds - this means looking at price momentum.

Price momentum MUST support your view before you enter and execute your trading signals.

What you need to look for if buying into support is, for price momentum first to turn up then enter your trade – this way you have the odds in your favour.

You’re not predicting and hoping, you are trading on confirmation of price.

So forget predicting and hoping, trade on confirmation of price momentum and get the odds in your favour.

Two great momentum indicators to look at are:

The Relative strength Index (RSI) and the stochastic – if you don’t know what they are and how to use them, check our other articles.

DON’T PREDICT AND HOPE TRADE THE ODDS!

If you want to win, you need to trade with price momentum and get the odds in your favour. If you want to predict and hope then get ready to lose - its as simple as that.

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