It is a difficult question to explain how to develop a gut-feel. The way it has worked for me is to read read read about economics of a specific currency and see how new data cause the market to re-act. From this you will get a feel for the sentiment that exists. For instance if bullish data for the USD comes out but the currency do not re-act bullish then this tells you a lot about where its going. From everything you have read about a specific country you also develop your own feeling of where it is going. I receive various newsletters from many banks re their interpretation of the current economics, I read it and decide whether the market is reacting as these writers expect it to react if it does then I go that direction if it doesn't then obviously the market is either flat or in transition to a different trend.
When I say the market is in a specific trend then I do not imply you go look at the chart and see if its up or down or if it has been going up or down. What I mean is that the sentiment in terms of reactions is telling you something about the underlying forces working in the market. Take the EURGBP as an example if you look at the charts there is no discernible trend that stands out - however should you apply almost any technical system to it you will quickly notice that your short trades were more profitable than the long ones so I perceive that there is a "short-bias" undercurrent to what the eye can see on the chart. It is almmost as if there is a hidden layer only observible should you take the time to understand the fundamentals of a market and the way the market reacts to fresh news.
How to develop this gut-feel? I think after many many articles read and opinions listened to it comes automatic.
Take for example something like a sport that is not well known- say the world hockey tournament. Which country will win this year? You don't know, you don't know the teams nor the stats nor the injuries or nothing. You look at the nice colours they wear and decide you are going to bet on the red team winning. You make this bet without knowing what is underlying any of the teams. This is the way almost everybody tries to trade forex. Then the red team loses a game and you switch to the blue team. Now, if you just get a program and a profile on each team and the players and the history of them and read up on it without caring for which team which player plays. Then you will get a feeling for which players are strong and witch are weak or inexperienced NOW if you look at the team with the most strong players and the most weak players you have a winner should these two teams ever play against each other. You still don't know who will win but because you know the strengths and weaknesses you are betting in the direction the trend "should" go. Not many forex practitioners take the time to investigate the weak and strong economic numbers in their chosen currency pair. They blindly bet on the one with the nicest MA crossover or funniest wiggly socks or is that stochs?
Hope this helped a bit to clarify
Thanks for the insight.
