What moves the markets? | Forex Factory

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  • #1
  • First Post: Aug 21, 2005 8:11pm Aug 21, 2005 8:11pm
Hi everyone,

This is my very first post in this forum but have been reading other's posts for some time now.

I do agree with the other people's post that this may be the best forex forum. I said "may be" because I haven't searched for other forums ever since I came across forex factory. I just want to say thank you and hope you keep up the good work. I also would like to be one of the contributors here in the future.

Anyway, I've just become involved with the markets recently (about two months ago). with 0% knowledge of the markets, or how it works. Trading in forex was my very first experience in trading and somehow I'm very much enthusiastic to learn about trading. (Maybe because of the probability of high earnings).

Anyway, I opened a mini-account (about $500 dollar account) and lost it about 60% of it in two weeks.. After that, I figured that I should study it first.. which should have been my first step, but there was a reason behind it.. But anyway, I won't talk about it here.. Anyway, after those two weeks, I read Van Tharp's "Trade your way.." and somehow, what was written there actually hit the spot, like the emotions you'll encounter when trading, etc. etc..

Well, just to make the long story short, I failed and learned from experience (though still not enough), and I'm currently reading Diallist's list of books.

I guess you're probably asking, that this is not related with the subject of this thread.. which really is not, I just wanted to share my story.. But anyway, here's my question..

Since I'm really a newbie in the market and I'm currently reading books, I just have a question.. Maybe I'll get the answer after all my reading is done, but I'll ask anyway..

Could you please tell me the reason behind the change in currency prices in forex? Or what causes such change? Could you please give me an example or a story that triggers a price change?

Hoping for your very kind replies..

Athan
  • #2
  • Aug 21, 2005 9:40pm Aug 21, 2005 9:40pm
There are entire treatises that address this question. It's very complex.
  • #3
  • Aug 21, 2005 10:59pm Aug 21, 2005 10:59pm
welcome to FF!

what moves the Forex market...well...study the calendar, that would be a good start. Forex, like every other market, is controlled by supply and demand. if dollars are in demand, they become more expensive. same for every currency.
Relax and be happy.
  • #4
  • Aug 21, 2005 11:36pm Aug 21, 2005 11:36pm
Quoting merlin
welcome to FF!

what moves the Forex market...well...study the calendar, that would be a good start. Forex, like every other market, is controlled by supply and demand. if dollars are in demand, they become more expensive. same for every currency.
Thanks for the reply.

So, for example, when dollars become expensive, a currency quote is high right (if the base currency is dollar)? So the next step would be to look for factors that cause the dollar to be expensive (which are those that gives the dollar more demand and which I assume are the ones listed in the calendar of forex factory, right? Although they do not guarantee the dollar to become expensive..) ? Though this view is bullish, it works the opposite for the bear market?

I'm really not sure if I'm starting on the right foot here to start trading, and my economics somehow rusty, anyway, I just wanted to know the logic behind price changes, which basically just comes down to law of supply and demand..

But I guess forex is not that simple (or is it?). Any other advice, or words of knowledge you could give me as a newbie? (Maybe based on my post, like review my economics first.. ) Or will the advice given to posts of newbies like me be suffice? I've just read the recent success of Diallist and got inspired, and somehow would also like to achieve that success in the near future.. Maybe by taking the same path he did or start with the foundation he had, then start my own path..

Again, hoping for your kind reply..

-- Far From Average --
Thanks for the reply, but I guess I'm contented with Merlin's answer. Maybe if I have more spare time I could read those treaties you're referring to..
  • #5
  • Aug 22, 2005 12:50am Aug 22, 2005 12:50am
Quoting eastmaels
I'm currently reading Diallist's list of books.
I have a list of books? What are they?

Quoting eastmaels
I've just read the recent success of Diallist and got inspired, and somehow would also like to achieve that success in the near future.. Maybe by taking the same path he did or start with the foundation he had, then start my own path.
Oh dear! It appears I need to set the record straight on my recent "success". Yes, I did get a 72% gain in two months. Would I do again what I had to do to get that huge gain? Not only no, but (excuse my French) Hell no! During that two months, I averaged 3.5 hours of sleep per night. In addition to working a full time job, I also kept my face glued to the charts 6 to 8 hours a day. By the end of the two months, I was a zombie. I couldn't think, couldn't remember and I even started stuttering; something I've never done. When trading normally, I am comfortable with a true leverage of 5:1 and on occasion maybe pushing it to 10:1 if I'm very confident with the probability of the trade. That's trading normally. The two month "success" period was anything but normal. None of my trades were less than 20:1 leverage. A few were 50:1 and once (I hate to admit being this stupid) my leverage was 300:1. Fortunately I got really lucky and won that trade. During a phone conversation with Fiji (one of my heroes), which took place near the end of the first month, he asked how my trading was going. (He didn't know I was pushing myself to recoup my losses.) Not wanting to be counselled on a lie, I told him my biggest problem at the moment was over leveraging my trades. At the time of that call, I was actually in drawdown lower than I had been to start with. Needless to say, I was in a severe emotional drawdown as well. Fiji sensed this and spent some considerable time giving me some excellent advice. Thank you Fiji! However, it spite of Fiji's excellent counselling, I persisted in being stubborn and continued to trade with excessive leverage and inadequate sleep. Trading this way is just plain stupid. The only thing that saved me was the excellent knowledge I gained from this forum and the wonderful mentors found here. Along with Fiji, my other heroes are Merlin, James16 and MuddBuddha. I have also received inspiration from Quinn, Marejp, Scpeter, Narafa and BlueMonkey.

Eastmael, getting 72% in two months, while obviously possible, is not practical and it is not sustainable. And let me repeat, the way I did it was just plain stupid and perhaps even a health risk.

Eastmael, only 10% or less of traders ever become consistently profitable. You said you were attracted to trading because of the "probability of high earnings". The truth is that while there is the possibility of high earnings, the probability of achieving them is very low. If you want a shot at those high earnings, then you are going to have to become a voracious reader. Read every book recommended on this forum; especially the ones in Merlin's library. Read as many posts on this forum as you can by the heroes mentioned above. Then, after you've gained some knowledge, apply it to your trades. The market will kick your butt. Analyse where you went wrong and correct the problem. The market will continue to kick your butt, but with decreasing frequency as your knowledge, discipline and experience grow. You'll get your butt kicked less often, not because you are beating the market, but because you've learned to keep one eye on the market's foot and staying the hell out of it's trajectory. Expect to take anywhere from two to five years to learn to trade with consistent profitability. You can be a success at this, but it will absolutely not happen overnight. I'm coming to the end of my first two years as a trader and am just now starting to show some consistent profitability. Be willing to pay your dues, and you can be successful at this trading thing.


Hope this helps.

Dial
sxaxlxvxaxtxixoxnxbxyxgxrxaxcxexdxoxtxoxrxgx
  • #6
  • Edited 1:19am Aug 22, 2005 1:13am | Edited 1:19am
Quoting diallist
I have a list of books? What are they?
Dial
Well, I think I came across it in another post.
If it's not a list of books, maybe it's a list of suggested readings?
I think you gave the following books:
"Come into my Trading Room" by Alexander Elder
"Trading in the Zone" by Mark Douglas
"Market Wizards" by Jack Schwager

Quoting diallist
Oh dear! It appears I need to set the record straight on my recent "success". Yes, I did get a 72% gain in two months. Would I do again what I had to do to get that huge gain? Not only no, but (excuse my French) Hell no! During that two months, I averaged 3.5 hours of sleep per night. In addition to working a full time job, I also kept my face glued to the charts 6 to 8 hours a day. By the end of the two months, I was a zombie. I couldn't think, couldn't remember and I even started stuttering; something I've never done. When trading normally, I am comfortable with a true leverage of 5:1 and on occasion maybe pushing it to 10:1 if I'm very confident with the probability of the trade. That's trading normally. The two month "success" period was anything but normal. None of my trades were less than 20:1 leverage. A few were 50:1 and once (I hate to admit being this stupid) my leverage was 300:1. Fortunately I got really lucky and won that trade. During a phone conversation with Fiji (one of my heroes), which took place near the end of the first month, he asked how my trading was going. (He didn't know I was pushing myself to recoup my losses.) Not wanting to be counselled on a lie, I told him my biggest problem at the moment was over leveraging my trades. At the time of that call, I was actually in drawdown lower than I had been to start with. Needless to say, I was in a severe emotional drawdown as well. Fiji sensed this and spent some considerable time giving me some excellent advice. Thank you Fiji! However, it spite of Fiji's excellent counselling, I persisted in being stubborn and continued to trade with excessive leverage and inadequate sleep. Trading this way is just plain stupid. The only thing that saved me was the excellent knowledge I gained from this forum and the wonderful mentors found here. Along with Fiji, my other heroes are Merlin, James16 and MuddBuddha. I have also received inspiration from Quinn, Marejp, Scpeter, Narafa and BlueMonkey.

Eastmael, getting 72% in two months, while obviously possible, is not practical and it is not sustainable. And let me repeat, the way I did it was just plain stupid and perhaps even a health risk.

Eastmael, only 10% or less of traders ever become consistently profitable. You said you were attracted to trading because of the "probability of high earnings". The truth is that while there is the possibility of high earnings, the probability of achieving them is very low. If you want a shot at those high earnings, then you are going to have to become a voracious reader. Read every book recommended on this forum; especially the ones in Merlin's library. Read as many posts on this forum as you can by the heroes mentioned above. Then, after you've gained some knowledge, apply it to your trades. The market will kick your butt. Analyse where you went wrong and correct the problem. The market will continue to kick your butt, but with decreasing frequency as your knowledge, discipline and experience grow. You'll get your butt kicked less often, not because you are beating the market, but because you've learned to keep one eye on the market's foot and staying the hell out of it's trajectory. Expect to take anywhere from two to five years to learn to trade with consistent profitability. You can be a success at this, but it will absolutely not happen overnight. I'm coming to the end of my first two years as a trader and am just now starting to show some consistent profitability. Be willing to pay your dues, and you can be successful at this trading thing.


Hope this helps.

Dial
Oh, sorry for that, but it was really a feat.. Though it took a lot of toll.. I guess what I really meant was to be a successful trader..

It's fine with me if I need to read a lot of books. As long as there's a possibility to be successful at it.. I'll take my chance with that 10%..

Thank you very much.. I guess I'll just sign off right now and continue my reading.. Then if questions come my way, then I'll visit this site for answers..

Hope to gain the required knowledge within tho years..
Again, thank you very much..

P.S.
I like your "Market kicking your butt" thing.. "Sounds" cool..
Though it hurts being kicked, it's just part of the process.
thanks. chow!
  • #7
  • Aug 22, 2005 2:13am Aug 22, 2005 2:13am
Quoting eastmaels
Well, I think I came across it in another post.
If it's not a list of books, maybe it's a list of suggested readings?
I think you gave the following books:
"Come into my Trading Room" by Alexander Elder
"Trading in the Zone" by Mark Douglas
"Market Wizards" by Jack Schwager
Oh, that list! Great books, especially Market Wizards.


Quoting eastmaels
Oh, sorry for that, but it was really a feat.. Though it took a lot of toll.. I guess what I really meant was to be a successful trader..

It's fine with me if I need to read a lot of books. As long as there's a possibility to be successful at it.. I'll take my chance with that 10%..

Thank you very much.. I guess I'll just sign off right now and continue my reading.. Then if questions come my way, then I'll visit this site for answers..

Hope to gain the required knowledge within tho years..
Again, thank you very much..

P.S.
I like your "Market kicking your butt" thing.. "Sounds" cool..
Though it hurts being kicked, it's just part of the process.
thanks. chow!
I'm glad to see that I've not discouraged you. I am pleased to see that, despite my post, you are maintaining the attitude of being willing to educate yourself through reading and butt kicking for at least two years. That attitude will serve you well. As to the market's foot.......be afraid.......be very afraid.
sxaxlxvxaxtxixoxnxbxyxgxrxaxcxexdxoxtxoxrxgx
  • #8
  • Aug 22, 2005 3:09am Aug 22, 2005 3:09am
Quoting diallist
I have a list of books? What are they?

Oh dear! It appears I need to set the record straight on my recent "success". Yes, I did get a 72% gain in two months. Would I do again what I had to do to get that huge gain? Not only no, but (excuse my French) Hell no! During that two months, I averaged 3.5 hours of sleep per night. In addition to working a full time job, I also kept my face glued to the charts 6 to 8 hours a day. By the end of the two months, I was a zombie. I couldn't think, couldn't remember and I even started stuttering; something I've never done. ... <big snip> You can be a success at this, but it will absolutely not happen overnight. I'm coming to the end of my first two years as a trader and am just now starting to show some consistent profitability. Be willing to pay your dues, and you can be successful at this trading thing.


Hope this helps.

Dial
Wow what an amazing story dial! You are one of a kind. I'm glad to hear I was able to provide something useful when you were on this marathon of self inflicted success.

What prompted you to binge out like this and what promted you to stop? Was it the suttering or did you begin hallucinating? Clue us in here.

FT
  • #9
  • Aug 23, 2005 2:20pm Aug 23, 2005 2:20pm
Quoting fijitrader
Wow what an amazing story dial! You are one of a kind. I'm glad to hear I was able to provide something useful when you were on this marathon of self inflicted success.

What prompted you to binge out like this and what promted you to stop? Was it the suttering or did you begin hallucinating? Clue us in here.

FT
Yeah, I'm one of a kind all right, and I hope the World is grateful!

Fiji, everything you've ever shared with me, either in forum, email or phone has always been extremely useful. Don't know what I'd do without you dude!

My "marathon of self inflicted success" was done as a personal challenge simply to see if I could pull it off. I knew the risk and was willing to take it for the duration of the challenge. As I mentioned, it was definitely not the way I normally trade, and is not something I would ever recommend to anyone else. That's why I had to post the reply I did to eastmaels. I guess a little of Jim (James16) has rubbed off on me. Like him, I don't ever want to post anything on this forum that would hurt anyone, especially newbies. I only want success for everyone here.

As a closing note, I did get one unexpected benefit from my marathon. It cured me of ever wanting to over leverage a trade again. Returning to my normal trading leverage was like a cool breeze compared to the fiery furnace of high leverage!

Take care Fiji, and thanks for everything I've learned from you.

Diallist

Edited to add: You asked why I stopped my marathon. Simple. I achieved my objective. As soon as that last pip hit my last limit, I was done.
sxaxlxvxaxtxixoxnxbxyxgxrxaxcxexdxoxtxoxrxgx
  • #10
  • Aug 24, 2005 12:50am Aug 24, 2005 12:50am
Quoting eastmaels
Hi everyone,

This is my very first post in this forum but have been reading other's posts for some time now.

I do agree with the other people's post that this may be the best forex forum. I said "may be" because I haven't searched for other forums ever since I came across forex factory. I just want to say thank you and hope you keep up the good work. I also would like to be one of the contributors here in the future.

Anyway, I've just become involved with the markets recently (about two months ago). with 0% knowledge of the markets, or how it works. Trading in forex was my very first experience in trading and somehow I'm very much enthusiastic to learn about trading. (Maybe because of the probability of high earnings).

Anyway, I opened a mini-account (about $500 dollar account) and lost it about 60% of it in two weeks.. After that, I figured that I should study it first.. which should have been my first step, but there was a reason behind it.. But anyway, I won't talk about it here.. Anyway, after those two weeks, I read Van Tharp's "Trade your way.." and somehow, what was written there actually hit the spot, like the emotions you'll encounter when trading, etc. etc..

Well, just to make the long story short, I failed and learned from experience (though still not enough), and I'm currently reading Diallist's list of books.

I guess you're probably asking, that this is not related with the subject of this thread.. which really is not, I just wanted to share my story.. But anyway, here's my question..

Since I'm really a newbie in the market and I'm currently reading books, I just have a question.. Maybe I'll get the answer after all my reading is done, but I'll ask anyway..

Could you please tell me the reason behind the change in currency prices in forex? Or what causes such change? Could you please give me an example or a story that triggers a price change?

Hoping for your very kind replies..

Athan
I know that this thread has taken a turn in Diallist's direction but I thought I might reply anyway!

From my understanding the basic fundies of forex can be classified as (with example reports):

 

  1. Interest rates - FOMC rate decision, also look for reports like NFP
  2. Inflationary expectations - CPI, PPI
  3. GDP Growth - well, er, GDP reports
  4. Budget and Current Account surplus or deficits - Trade, TICS

Other important reports are Retail sales, Ind production, some sentiment surveys like Univ of Michigan. Normally these reports will fall into at least one or more of the four categories above.



The examples I've given are for the US Dollar but do remember that you need to look at the fundies for the other half of a currency pair as well, to make an assessment of the relative strength or weakness of the half you might be focussing on.

There is a good article at:
http://www.investopedia.com/articles.../04/031704.asp

Hope this helps

  • #11
  • Aug 24, 2005 1:57am Aug 24, 2005 1:57am
Quoting Isotonic
I know that this thread has taken a turn in Diallist's direction but I thought I might reply anyway!

From my understanding the basic fundies of forex can be classified as (with example reports):

 

  1. Interest rates - FOMC rate decision, also look for reports like NFP
  2. Inflationary expectations - CPI, PPI
  3. GDP Growth - well, er, GDP reports
  4. Budget and Current Account surplus or deficits - Trade, TICS

Other important reports are Retail sales, Ind production, some sentiment surveys like Univ of Michigan. Normally these reports will fall into at least one or more of the four categories above.



The examples I've given are for the US Dollar but do remember that you need to look at the fundies for the other half of a currency pair as well, to make an assessment of the relative strength or weakness of the half you might be focussing on.

There is a good article at:
http://www.investopedia.com/articles.../04/031704.asp

Hope this helps

Hello Isotonic,

Thank you very much for your reply.

I'm currently reading the article.

So maybe based on the reports you listed, you can somehow get an idea/feel for a currency's strength against another?

But I still need to understand or learn how to read those reports. Specially if ever I choose to be a fundamentalist?

Again, thank you..
  • #12
  • Aug 24, 2005 2:50am Aug 24, 2005 2:50am
Quoting eastmaels
Hello Isotonic,

Thank you very much for your reply.

I'm currently reading the article.

So maybe based on the reports you listed, you can somehow get an idea/feel for a currency's strength against another?

But I still need to understand or learn how to read those reports. Specially if ever I choose to be a fundamentalist?

Again, thank you..
I think you would have to read the most important economic reports for both countries in each pair to perhaps get that feel. I'm not sure if thats possible just using the reports alone! Most traders out there are most focussed on the technicals (analysing charts) to gauge how strong a currency is against a number of pairs - the most common being USD vs majors.

What most people are looking for is when trading fundies are:
1. Which are the big reports for each pair?
2. What is the consensus vs actual number? If there is an appreciable difference then it might move the pair in a big way.
3. Will the move after the report sustain, or will it quickly fade? In other words, could there be a futher move over the next few days or weeks after the intial one?

As for reading all of the actual reports, I suspect most traders never do! Some of them are difficult to follow and it can be easier just to read a summary from a respected economist!

Don't let me put you off from trying though!
  • #13
  • Aug 24, 2005 3:28am Aug 24, 2005 3:28am
Quoting Isotonic
I think you would have to read the most important economic reports for both countries in each pair to perhaps get that feel. I'm not sure if thats possible just using the reports alone! Most traders out there are most focussed on the technicals (analysing charts) to gauge how strong a currency is against a number of pairs - the most common being USD vs majors.

What most people are looking for is when trading fundies are:
1. Which are the big reports for each pair?
2. What is the consensus vs actual number? If there is an appreciable difference then it might move the pair in a big way.
3. Will the move after the report sustain, or will it quickly fade? In other words, could there be a futher move over the next few days or weeks after the intial one?

As for reading all of the actual reports, I suspect most traders never do! Some of them are difficult to follow and it can be easier just to read a summary from a respected economist!

Don't let me put you off from trying though!
Gosh, seems like a lot of work! Maybe I'll further look into these after all my reading assignments from Merlin's library..

Anyway, thanks for the info..
  • #14
  • Aug 24, 2005 11:04am Aug 24, 2005 11:04am
hi eastmaels,

as far as i'm aware price movements in Forex generally occur because of some event in the outside world, whether it be a news announcement, election, storm, oil prices taking a hike... or whatever. sometimes the events are very, very unpredictable. what also causes the market to move are technical factors..... the market may hit a very key level of support or resistance, at which point the price will often do something dramatic. and on occasions there are significant price moves which occur for no apparent reason

one of the most interesting parts of forex is how news and price relate to each other. there may be a news release which is very bearish for the dollar (much worse than consensus). so you'd expect the dollar to weaken against other currencies.... well, sometimes it does the complete opposite. things start to become clearer when you understand the various players and see how forex operates... maybe go to the fed reserve website and read their ebook... it gives a good intro.
a mistake i made initially was to look at forex exclusively from a speculators point of view, which limited my understanding of how the market moves.

a final thing i should mention.... don't be fooled by what the analysts say AFTER a big price move takes place. they often state a reason why it moved as though it's very obvious... but it ain't. there's always news floating around... if the price goes up, they report some bullish news. if it goes down, they focus on the bearish stuff. just look in some news archives (esp. the dates of big news releases) and see how inconsistent it is.

anyway... all i've written above are just things i've read about and observed.
i hope it helps.
  • #15
  • Aug 24, 2005 11:49am Aug 24, 2005 11:49am
To add to mrcooldude's post, traders themselves move the market drastically.

You can witness this amazing phenom on early Friday afternoons when pro traders (traders working for account mngt.firms and other institutions) close out and square their positions so that they close out in the positive for the week and don't risk a negative movement during the weekend period that the brokers are closed.
Everyone has qouta's to fill - pro traders are no different.

Sometimes the market moves in an attempt by traders to take profit at an opportunity point.
Main point is: the market moves solely on the response of traders. Someone at sometime made a decision to buy or sell for whatever reason. That moves the market.
Capital Preservation is key to long term wealth accumulation
  • #16
  • Aug 24, 2005 12:27pm Aug 24, 2005 12:27pm
In past market moves were usually caused by fundamental factors, such as purchasing power parity, interest rate parity surplus/deficit of payments balance etc. Now as majority of market participants are speculators they cause such moves, which in most cases are not well predictible. The main reason of that is psychology of traders. If every trader will develops rational thinking there will be predictible moves in most cases .
As psychology plays important part in market move's formation, you should develop study that corresponds with majority's thought.
In forex you should not think that you are the cleverest and you can anticipate market more exactly than others because you were excelent at Maths and Economics. you should think as majority does. But majority's thought is not always rational. Btw, you should think cleverer than majority in one situation. You should always wait until market itself chooses direction and after having confirmation signals you enter the market and join majority. All technical indacators are saying the same: you should not enter the market until you have clear signal of movement. All technical studies are derived from simple rule as I described above.
kiss the trend
  • #17
  • Aug 24, 2005 10:27pm Aug 24, 2005 10:27pm
mrcooldude, MuddBuddha, fx-trader777, thanks for the insights.

Ok, now based on the posts, here's my understanding:

The market moves basically because of supply and demand. I mean the mere price change is caused by the law of supply and demand - for example, the more supply of a currency (currency being sold), the lower its price; the higher the demand (currency being bought), the higher its price. This is logical right?

Now, what causes the demand/supply for a currency is determined by many factors, like those mentioned by Isotonic, mrcooldude, MuddBuddha, and fx-trader777. So, if ever you want to predict a price change, you have to take all those factors (is this possible?), or just take the major ones (which basically means a lot of reading ). However, even if you have these resources (which requires time), you're still not guaranteed as to whether the price will go up or down.. Although, you have a higher assurance/possibility of the movement..

And since predicting price changes (speculators) are what the majority of those in the market are doing, it would be better (or clever) to let the market do its move first before entering it..

So this is basically what I've understood so far.. And based on this understanding, I think I don't want to be a speculator.. So I guess what I'll do is somehow get a few fundamental reports, study the charts, then wait for entry signals before entering the market..

Now, the next would be exiting.. I'm still studying though, but somehow, I now have a basic foundation for entering..

Thanks guys.. I do appreciate your replies..

Oh, and if ever I misunderstood anything or maybe I'm going on the wrong direction, please do tell me.. I'm just really giving my trust to the people in this forum to point me in the right direction, and so far that's what I've been receiving..

So again, thank you and hope you'll be willing to take the time to guide me..
  • #18
  • Aug 25, 2005 2:48am Aug 25, 2005 2:48am
Quoting eastmaels
mrcooldude, MuddBuddha, fx-trader777, thanks for the insights.

Ok, now based on the posts, here's my understanding:

The market moves basically because of supply and demand. I mean the mere price change is caused by the law of supply and demand - for example, the more supply of a currency (currency being sold), the lower its price; the higher the demand (currency being bought), the higher its price. This is logical right?

Now, what causes the demand/supply for a currency is determined by many factors, like those mentioned by Isotonic, mrcooldude, MuddBuddha, and fx-trader777. So, if ever you want to predict a price change, you have to take all those factors (is this possible?), or just take the major ones (which basically means a lot of reading ). However, even if you have these resources (which requires time), you're still not guaranteed as to whether the price will go up or down.. Although, you have a higher assurance/possibility of the movement..

And since predicting price changes (speculators) are what the majority of those in the market are doing, it would be better (or clever) to let the market do its move first before entering it..

So this is basically what I've understood so far.. And based on this understanding, I think I don't want to be a speculator.. So I guess what I'll do is somehow get a few fundamental reports, study the charts, then wait for entry signals before entering the market..

Now, the next would be exiting.. I'm still studying though, but somehow, I now have a basic foundation for entering..

Thanks guys.. I do appreciate your replies..

Oh, and if ever I misunderstood anything or maybe I'm going on the wrong direction, please do tell me.. I'm just really giving my trust to the people in this forum to point me in the right direction, and so far that's what I've been receiving..

So again, thank you and hope you'll be willing to take the time to guide me..
First study all fundamental and technical analysis then use DEMO account to practise. First trade only fundamentals like super-short term fundamentalist when there is big difference between expected and actual datas wait confirmation when rate changes fast after fundamental (about 10 pips after data release) join market and place your stop loss and take profit orders. But you should take into consideration: Analyze Overbought/oversold situations with fundamental info, for example if major oscillators show EUR is overbought and there comes better data than expected in US then more possibly EUR will go down (but I repeat here: always wait confirmation). Note and find out statistic what Economical datas can hardly impact markets (for example US datas have very hard influence, on this forum I remember someone has posted most influental datas, unfortunately does not remember where, but try to find). Write down in your note-book all of your attempts, anticipations, deals and what market has done. Read recommendations on Forex sites but never trust them, simply find out what is major expectation. Be sure that your are psychologically ready for this. Learn to love loss never wait until market reverses if you have loss, do not get emotional when you gain or lose.
kiss the trend
  • #19
  • Aug 25, 2005 3:47am Aug 25, 2005 3:47am
Quoting eastmaels
mrcooldude, MuddBuddha, fx-trader777, thanks for the insights.

Ok, now based on the posts, here's my understanding:

The market moves basically because of supply and demand. I mean the mere price change is caused by the law of supply and demand - for example, the more supply of a currency (currency being sold), the lower its price; the higher the demand (currency being bought), the higher its price. This is logical right?

<snip>
Oh, and if ever I misunderstood anything or maybe I'm going on the wrong direction, please do tell me.. I'm just really giving my trust to the people in this forum to point me in the right direction, and so far that's what I've been receiving..

So again, thank you and hope you'll be willing to take the time to guide me..
Supply and demand is how the universe works. It is not just econcomics. If it rains too much an increasing number of people don't want more rain until the point where nobody wants anymore rain because their houses are floating away. You cannot sell rain to anyone during a monsoon. However go to the Sahara desert and you could make a fortune selling rain if you could produce any.

Little babies puke up their milk if they drink too much too fast. Supply exceeded demand and baby stops drinking and "oh god I better get rid of some of this...". You could probably use fibonacci to measure the timing of the upchuck if you were truly interested... but there's not much demand for that kind of information so that's why we don't have those kind of figures. Nonetheless supply and demand moves milk from place to place.

The same is true with forex... if the price of a currency seems right to a lot of people it just wanders around an eqilibrium point for a while. But if something inspires traders that the currenct price is over or undervalued then people begin to sell or buy it. As that happens the market gets flooded with more of one kind of order (buying or selling) than the other. Like if you are living on a street and there are for sale signs in front of every house then prices drop as buyers become less and less interested and sellers become more eager to sell. However if nobody has any houses for sale in a particular area and lots of people are looking for a house in that area then people line up and bid up the price for the one that finally decides the demand has risen enough to meet or beat the price they'll sell at.

However if you don't mind me saying your analysis sounds like you have perhaps a longer way to go than you may realize. Please don't take that the wrong way. Most people underestimate this business and fail because of it. There is a myriad of ways to filter the mass of information out there and most of it is done with some sort of tech analysis or price analysis on this forum. To keep from losing your money you'll need some key things. First you need a system that will most likley make money. Many people begin trading money before they have a solid system they are confident in. Don't.

I notice in your post that you may want to learn the types of analysis that forms the basis for any of the systems out there. That point leads me to something rather basic and that is to point out that there are two primary types of market analysis:

1. Fundamental. The collection and evaluation of market news that may affect peoples perception of a currencies value and forecasting the aggregate probable effect that it should have on a markets direction.

2. Technical. This is about using a variety of mathmatical and visual tools to make quantitative measurements in order to evaluate historical price changes through time. TA (technical analysis) is based on the premise that the aggregate of all pertinent fundamental information is reflected in changes of market price. TA attempts to determine the probability of whether a market will continue in a direction or change direction by isolating potentially useful measurements of price changes into recognizable patterns and assigning degrees of significance to one sort of pattern over another.

Fundamental analysis can be used both as a short term and long term trading approach. Many traders get started by trading news releases and letting the market direction after a news item serve as an indicator of market supply and demand. Other traders take much longer term views and do complex forecasts of a currencies underlying financial stablity and propensity to be affected by various kinds of events. Such approaches may lead a trader to buying or selling a currency against another for several years or as little as a few seconds.

In this forum there is some scattered discussion of fundamental analysis but what you'll find here is mostly TA. That is true for a variety of reasons that are beyond the scope of this post. About 10 percent of traders who use TA are able to trade profitably and probably 10 percent of those 10 percent are able to make serious income from it. To excel in this field the odds are about the same as excelling in any field (about 1 percent) but the odds of just making a living at it are much much lower than in most fields. There is not much to say about TA except that it is popular. The fact that it is the method of choice used by the 90 percent of retail traders who never trade profitably may be a bit unnerving until you also note that (at least in recent years) it has also tended to be the method of choice among the 10 percent of retail traders who do make a profit at this.

Lastly some traders combine the two. In fact some of the most successful traders combine the two. Regardless it is a good idea to develop a healthy immunity to the marketing schemes that you'll find everywhere with very compelling advertisements that give you the impression you can buy their system or signal service and make money right out of the gate. Probably the best value you can get in learning this business is from a few of the myriad of books out there for traders. Merlin has list of recommended books on this forum that is a great place to start. By the time you've read a few books James16 on this forum may have his teaching available. It looks like that will be an extremely good value.

FT
  • #20
  • Aug 25, 2005 4:37am Aug 25, 2005 4:37am
Well put!
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