2Bull Forex Blog

The most important variable in forex price movement is not the sentiment of the participants who ultimately determine the price. Humans are creatures of greed and fear and if you watch and know how to gauge extremes in sentiment you can make huge profits here’s how and a huge immediate profit opoortunity.

Markets tend to really when there most bearish and crash when there most bullish and this has occurred throughout history and is human sentiment at work. All markets exhibit price spikes which are simply peaks in sentiment when greed and fear pushes prices to far from fair value.

But how do you spot them – let me give a live example now that could pile up huge profits of 1,000 pips or more.

Let me first start with a quote:

“If you can hold your head around you when everyone is losing theirs you probably haven’t heard the news”

In forex trading this can be translated as:

You have but your seeing the news from a different angle and let’s take the euro/US dollar pair as an example.

Most analysts and investors are bearish the dollar and it’s been hit by a lot of bad news over the last few weeks including:

Interest rates have dropped by 1.25%, the housing and jobs market look terrible, GDP has crashed, consumer confidence is low and the Government is trying to put together a $150 billion rescue package – so the dollar is going to fall into oblivion – RIGHT?

Dead wrong!

This is old news and discounted by the market and if you look at a chart, the euro has hit chart resistance and is FALLING. Why?

Because the news is discounted and traders who were gripped by fear and selling the dollar have sold as much as they can and sentiment is at a bearish extreme – that’s why the dollar is rallying, in the face of what appears to be bad news.

Furthermore, the market will soon look ahead and think the Fed has been proactive and things must improve. Sure euro zone has better interest rates – but it to has a struggling economy which needs interest cuts and traders will realize this will sell the euro and buy the dollar.

Remember what I said earlier:

Markets always rally when they appear most bearish and the dollar is no exception.

The fact that bearish news cannot send the dollar lower, points to a turn and it could be 1,000 pips or more in profit.

If you get up a forex chart and look at it, you will see the reality of the dollar getting support and euro momentum falling.

All markets do this and forex markets are no exception.

Always Remember This:

Traders push prices to far up or down based upon the emotions of greed and fear and when the buying or selling frenzy ends, the market turns and a counter rally starts.

Check out a forex chart of the US Dollar and euro and you will see exactly what I mean and if you take into account what we have said on sentiment above you could get in on a huge profit opportunity.

Using technical analysis and forex charts is an excellent way to make money in forex trading. The problem is there are a number of myths that traders fall victim to and lose. The mistakes are easy to avoid and enclosed.

1. Trying To be to Complicated

Many traders see all the indicators that are available to them and think they have to use them, after all 10 indicators are better than 2 – Wrong.

The best forex trading systems are simple and this means they are more robust in the hard world of real trading with fewer elements to break, than a complicated trading system.

Less really is more in forex technical analysis! All the best forex trading strategies used by successful traders are relatively simple and yours should be too.

2. Predicting Prices

If you try and predict forex prices your predictions will be as accurate as your horoscope and you will lose. Predicting is another word for hoping or guessing and that won’t get you far in life or forex trading.

What you need to do is to simply act on the reality of price change.

Sure you miss the exact change but you can’t predict that anyway.

Your aim is to make money not strive for perfection!

3. Scientific Methods

Leads on from the above and currency prices unfortunately don’t move to a scientific theory. This is of course obvious because if they did, we would all know the price in advance and there would be no market.

A forex market moves because we don’t and never will know what happens next.

So forget prediction and forget science, they won’t help you your trading the odds but if you trade them successfully you will make a lot of money.

4. Invalid Data

The biggest mistake novice traders make is to believe the myth of forex day trading and scalping.

Forex day traders never make money and never will – why?

Because the data is invalid and all volatility in short term time frames is random.

As volatility is random, you can’t get the odds in your favour and you will lose. You need to trade longer term time frames where you can get the odds in your favour and this means long term trend following or swing trading.

The above are the 4 biggest mistakes traders make with forex charts and there easy to avoid.

If you want to learn currency trading the right way, then you need to understand forex charts can help you achieve currency trading success only if you use them in the correct manner.

Simple odds based, currency trading system which trades the reality of price change is a simple yet powerful way of making big long term gains.

Most successful Forex retail traders use a variation of the moving average indicator. It’s one of the oldest technical indictors in existence, and its widespread popularity is mainly due to its simplicity and effectiveness.

What Is A Moving Average?

A moving average is basically the dynamic average of past market prices. It’s dynamic in the sense that the moving average number will constantly change as time passes.

How Does A Moving Average Work?

To give you a better sense of how moving averages work, here’s a simple example:

5, 7, 6

Above is a sequence of three numbers. The average of these three numbers is 6, right?

Now, let’s say that the next number in the sequence is revealed to us:

5, 7, 6, 2

Because we’re calculating the average of the latest three numbers, we have to drop the first number (i.e. 5), and use the more recent numbers 7, 6, 2 instead. The average is now 5. When the next number in the sequence becomes known, we will have to drop the earliest number of the three-number sequence (i.e. 7), and include the latest number to get a new average.

And this is basically how moving averages work, except that instead of random numbers we use historical market prices instead. You can of course specify the number of past prices to include in your moving average calculation. In a 20-day moving average for example, you would calculate the average based on the prices of the last twenty days.

What’s The Significance Of A Moving Average?

A moving average indicator shows the general trend of the market. It is used to smooth out short-term spikes of price fluctuations. When the market is trading above the moving average, it is considered to be strong. When the market is trading below the moving average, it is considered to be weak. A good understanding of moving averages is essential to help you decide whether to enter or exit a trade.