Forex Price Movement - the Equation for Price Movement and How to Use it for Profit

Most new traders (and some who trade!) don't understand the way Forex prices move and they lose. Not only must you understand the equation enclosed, you must understand its implications so you can build a Forex trading strategy for success...

The equation is this.

Fundamental Facts (Supply and Demand) + Investor Perception of Them = Price

Now it's a simple equation but means you CANNOT base your Forex trading strategy on the following

- Complex mathematical theories

- Systems to predict prices in Advance

Most traders think that they can beat the market with a mathematical theory, as prices move to science and they also think you can predict in advance but it's obvious both assumptions are wrong - Why?

Because humans decide the price of any currency, so the facts are unimportant, it's how investors perceive them that counts.

Humans are not logical beings, they cannot be predicted and they don't conform to a scientific theory which then leads to the question how do you win?

The answer is you trade the odds and you trade the reality of price change.

Think of how a good poker player plays hands, he simply plays the odds. He knows he can't win every hand but if he keeps losses small and bets on high odds hands, can win long term.

While humans cannot be predicted with total accuracy, human nature is constant and never changes. This shows up in high odds chart patterns, which occur all the time. Your aim is to trade these high odds set ups, keep your losses small and run your profits.

When you trade in this way, you don't predict anything you simply follow the chart action and the best way to trade is to use a breakout strategy.

This is a simple, timeless way to make money and we will look at it in the next article in this series on Forex price movement.

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