Forex Price Action - Price Trends for Profits

by : Monica Hendrix

Forex price action you need to know the factors that affect price to make money with your forex trading strategy and it's a fact most traders do NOT understand the factors that drive prices - If you do, you can enjoy better market timing and bigger forex profits...

Let's start with a simple equation:

Forex Fundamentals (supply and demand factors) + Investor Perception of = Forex price Movement.

Now the above is simple - but many traders misunderstand what the equation means and make these critical errors:

1. They try and trade the Fundamentals

They see all those convincing experts on news wires etc and try and trade the news stories - but that's all they are stories. Prices don't move based upon the fundamentals alone - they move on how humans perceive them.

We all have the same facts to look at - but we all draw different conclusions from what we see and your view, my view and millions of others, determines the final price.

Humans are not logical either, their view is colored by greed and fear and if try and trade the fundamentals in isolation, you will lose.

Will Rogers once said: "I only believe what I read in the papers" and he was of course joking - but you would be surprised at how many people take news stories as gospel and trade them and end up losing. Keep in mind this fact:

Markets rally when the news is most bearish and fall when its most bullish - this is not a reflection of the fundamentals but of investor psychology.

2. Market Move to a Higher Force

On the other hand, you have a group of traders who believe prices believe that prices move totally detached from the fundamentals and move to some higher scientific theory and can be predicted with scientific accuracy.

Of course this view is wrong. Humans are NOT scientific and don't move to a criteria you can judge. Sure, human nature is constant - but it can't be measured with scientific accuracy - if it could, we would all know the price in advance and there would be no market!

So how do you Judge Forex Price Action?

We know the fundamentals don't help on there own and we know all the scientific theories based on forex technical analysis are wrong, that doesn't mean you can't make money from forex price action. Here's how you do it:

Understand this first:

Forex trading is a game of odds NOT certainties but if you can play the odds you can win. Just like the good poker players, you bet when the odds are in your favour and fold when there not.

You can still use forex charts and all you do is look for high odds trades.

Keep in mind forex charts show you the fundamentals (they simply assume all known fundamentals show up in price action) but they do something more they show you the reality of how humans have reacted to them - its clear on a chart right in front your eyes.

Trade the Truth For Bigger Forex Profits

You don't need to hope, guess or predict forex price action you simply respond and act on forex price action as it is and trade the truth.

Forex charts are a great tool to make money with and you can then trade in a disciplined fashion with your forex trading strategy, for big long term profits by trading the odds.

A forex trader who does this doesn't care how or why forex price action unfolds - they just want to make money when they do, by locking into price trends for profit.