2Bull Forex Blog

Market timing is the key to successful trading and we all know that human nature is constant so if we know the scientific law related to it, we can use it for more effective execution of our trading signals. Let’s look at this important argument more closely.

Human nature has been constant since the time he first walked the earth. When he participates in buying and selling currencies he is no more sophisticated than Stone Age man.

Why?

Because he is ruled by emotions including hope greed and fear and many others and these are reflected in market trends which repeat overtime (the basis of technical analysis) and these can be traded for profit.

The two most notable people in investment history to try and put this into investment theory are Gann and Elliot.

Fibonacci is another whose theories were not devised for financial markets but have been used by many in the investment community.

So do these theories work?

No they don’t – but that doesn’t mean you can’t trade human nature for profit.

First let’s sate a fact:

No one has discovered the scientific theory of human nature and how it relates to market movement.

1. If any of the scientific theories worked they would be objective and work ALL The time. On the contrary, Gann and Elliot’s theories are totally subjective and don’t work all the time. In fact Gann had to sell courses to make a living and Elliot died a pauper. Fibonacci retracements simply don’t work at all on their own and the theory was never meant to be used in financial markets at all – it was devised to solve a problem related to the copulation of rabbits!

2. This reason is common sense – if there was a scientific theory of market movement there would be no market as we would all know the price in advance.

The above two points are obvious yet, forex traders don’t believe facts that stare them in the face.

Lets look at how to take advantage of human nature the RIGHT way.

Can you make money from the theory of human nature being constant?

Absolutely!

But you need to see trading as an odds game – not a game of certainties.

On any price chart you can human greed and fear push prices to far in either direction up or down however, this huge mass of people don’t move to a single theory.

Millions of traders make the price each day and this cannot and never will be predicted by science EXACTLY But:

You can estimate when traders have pushed prices to far due to their emotions and when the odds of a pullback are due – sure you will get some trades wrong with your market timing – but if you do it correctly, you will get more right than wrong and pile up huge profits overtime.

Losses in the short term are part of trading – but you want to make money and if that’s your goal, you can trade high odds trades you can do this.

A Problem and a Solution

There is a view in all areas of life that science is the answer to everything but its not in the markets. Here you deal with the same problems as traders faced 50 or 100 years ago working out where a huge mass of people are going to send a single price next.

Science is not the answer – probability theory and the odds are and if you understand this, you can enjoy profitable market timing and enjoy currency trading success.

If you want to get better market timing for your forex signals you need to understand price momentum and how it can get the odds in your favour. If you have not used momentum oscillators before, then its time to make them part of your forex education.

Confirmation

If you simply try and buy low sell high by selling into resistance and buying into support your making a fatal error – why?

Because you are predicting which is the same as hoping or guessing and you don’t get rewarded for relying on hope in any venture, let alone forex trading.

Many novice forex traders think that to win they have to predict – but as we don’t know the future, this is not going to help you make money, you simply don’t have the odds on your side.

If you learn forex trading correctly, you will understand that you need to act on the reality of price, confirmed by momentum oscillators which are leading indicators and can confirm trend changes.

Let’s look at the correct way to use momentum oscillators in your forex trading strategy, so you can enjoy currency trading success.

Momentum & Support and Resistance

For example, when a price gets near to support you don’t just simply buy – you wait for confirmation that price velocity is turning away from the level, by using momentum oscillators.

You’re not hoping or guessing – you’re acting on the reality of price change.

We don’t have time to go through momentum oscillators in detail here (there covered in our other articles) but two of the best are – RSI and the stochastic indicator.

Look them up – their easy to understand and use and all you need to do is watch for simple visual setups.

Momentum oscillators can also help you take advantage of some of the best moves which don’t involve looking for support and resistance to hold but help you spot if it will break.

Momentum and Breakout Trading

If you want to catch the biggest moves with your forex trading system you need to trade breakouts.

The fact is the best market trends don’t start from market lows – they take off from new market highs.
Traders who sit back hoping for a lower entry point – end up just waiting as the trend accelerates and DOESN’T pullback.

Buying a new market high is difficult will it continue or do you get the worst possible entry point?

Momentum oscillators can help you decide.

If you have a breakout on your forex chart supported by rising momentum, chances are it will continue and you should go with the break. If momentum on the other hand is weak, it could be a failed breakout and should be avoided.

It’s all about getting the odds on your side and that’s what momentum oscillators help you do.

Momentum and the Odds

Momentum oscillators can help you time market entry better and also help you stay out of trades that don’t have good odds. If you use momentum correctly, you will increase your odds of currency trading success.

So if you are trading forex keep in mind:

Don’t rely on hoping guessing or predicting – rely on trading the reality of changes in price momentum and enjoy greater forex trading success.