How do forex traders predict price?

Here is a start. Either you trade the reversals or you trade momentum (isn't that enlightening? wish someone told me that when I just started learning FX), i.e. you look for the bounce on the support or the resistance or the break of these support or the resistance. You can't really predict price, but if you have stared at the charts for long enough, you begin to recognise patterns, and the way price behaves.

Nison books on Candle sticks are excellent.

But remember to trade with trend.

Unfortunately none of us can predict the markets (unless you've got some kind of crystal ball that I haven't got!) The best we can do is find profitable set-ups. They won't work all the time (heck, they may not even work 50% of the time), but the important thing is that they can give us an edge over the market. I'd recommend starting off with a dead simple set-up - I began with a v basic moving average system called the DIY Trading Strategy, and have slowly adapted it myself. I've still got a long way to go - but feel that I'm headed in the right direction!

The market decides the price, has been and will always be so..

Here's a starting point.

Pull up a chart, take the scroll bar all the way to the left and then start moving it slowly to the right. Analyse, Analyse, Analyse. Looks for repetitive patterns, repetitive setups, points where trade could potentially occur. Continue this until you start to get a few things that stand out.

Now work on 1 of those things. Write down a set of rules in bullet or flow chart form, invest in getting a program that you can backtest on ( I have used Forex Tester in the past) and work on it. If after a few thousand bars you start to find a positive build then you might be onto something.

Next put your plan into motion. You will be wrong a bunch, you will be right a bunch and depending on whether the damage was greater on 1 side of the scales will give you a picture. Do this until you have confidence in what you're doing and have a trading plan that you can stick too. There are some very simple systems out there that work well, it is normally individuals inability to trade through rough times that sees them hoping from system to system, setup to setup.

The reason you go through a few thousand trade setups is so that you start to understand that even with high probability methods, loosing streaks will occur. The sooner you can embrace losses as a cost of business and move on, without altering the final plan that has worked in the past, the sooner you will have an answer to your question.

Predicting is only the very small part of the beginning, at the end of the day it is only after you enter the trade that you will know whether you are right or wrong, it is the move after that that determines whether you can be successful or not.

Prediction is not a good way to frame it. You should see trading from a probabilistic standpoint.

Traders usually have a trading system, a set of strategies and steps that they follow to find opportunities of buying and selling the currency that in the long run will show a profit.

It's impossible, today, to really predict the price, but we know some common reactions expected from the market to news and chart patterns.

A good trading system is important, but more than that is a great risk management.

who ever said that a prediction is 100% likely to happen. If you get a weather forecast or prediction then it is also not 100%. It is as well based on probabilities.

a trading system is as important as good risk management. However the first one is pretty hard to find, while the second one is just pure common sense.

"There are not time frames" , and if you think there are then you are going to have a bad time trading ... What i meant is that if you trade only h1 , or h4 etc you are going to lose money if you dont pay attention to other time frames , for example if you trade M30 time frame you need to know what is going on M15 - H1 time frames , also check higher time frames once in a while to get a better view of a pair .

It is not the best example of the chart , but i think you will get the point .

Pic 1 . Trader who use only 1 time frame sees chart like this and might think that it will go up so he takes long .

Pic 2 . Trader who uses more than 1 time frame clearly sees that overall trend is down , and woun't take the risk to take long .

@LeanLowFX Yes, true that.

I personally use timeframes 5m~1MN to see where the market is going. I trade on several timeframes (if it fits). I don't use indicators, I think they are crap. Why no indicators? The big fishes do whatever they want with the price. They wouldn't care less about what any indicator is saying.

I use support and resistance to understand where to make entry . It is much effective. Also wave analysis is good for correct prediction.
But I like to follow trend then prediction. Again I use pending order if I see any probability of reversal.

price patterns, support resistance.

omg The topic is the best question in the world All the books and schools are about it. But knowledge and all the indicators can't answer easily. You should use your intuition and experience. And that will come some day or another.

I don't think that professional traders try to predict price, rather, their goal is to win more often than they lose. To do this one would need to have an edge. How to develop one you say? Dunno, that's why I'm here to find out .

i use the order book from a website that is at: http://fxtrade.oanda.com/analysis/forex-order-book

here's the drill ; if a support/resistance is broken, don't ever ever do a reverse trade on it only until..... ye it's an industry secret .

but just remember one thing in this market

1) Don't marry a trade
2) keep loser short
3) Let profit run

this is really all the 3 things that matters.

5percent, you say well, but for example, what does it mean "let profit run". We all know, that a lot of traders blow up because of their greed. So I guess it's a little more difficult ))

Forex Traders "predict" price by experience and knowledge gained in course of learning to trade.
History repeats itself and so is applicable to trading.
No matter what your system ,if it has been working for quite a long duration of time irrespective of the volatility , liquidity , it will continue to work .
You just need to study when is the best way to trade utilising your knowledge and experience of previous such trading set ups.

I'm going to post a daily chart which gives a near perfect example of how traders predict price, in simple terms.

The components of this chart are Gbp/Chf, the 200 day moving average, a price channel, and a 1.5 "big number".

The price dropped to 1.5 from the July high and bounced from 1.5 to form the upper trend line by simply joining the highs. A parallel line was drawn on the low of August giving us a rough channel.

Observe how the price chooses the 200dma and the (new) lower trend line to bounce. This will not always happen, but it's called confluence. There may be other factors at the level. The more, the better. Where is it going? Well, it's going to test the 1.5 level again. Because we are in a down trend, on the daily, we expect sell orders at 1.5. If the daily candle closes above 1.5 it means there were no sell orders there.

Here is the chart:



This is why it is dangerous to use systems based on indicators. Indicators will scream at us to go long or short but these levels will beat indicators every time.

Now that the above pair has reached 1.5, I am observing price action around that figure, to see if it would be possible to short from here. I am looking on the hourly time frame for a good bearish pin bar or engulfing bearish bar, to trade off of. If nothing transpires on the hourly (low risk, high reward) then I will be looking at the daily for clues as to how the market is reacting to this level. The best trade would be a drop from 1.5, followed by an attempted and failed retest of 1.5. Why? because it flushes out the longs and they give up. I'll post a chart later if anything interesting crops up.

1.5 was virtually ignored but I am still looking for a good place to short this pair. It is still in the down trend channel.



Here looks like a possibility. There was a significant high of the year in May at 1.5090 and we have a 61.8% retrace of the last swing down at this area. I am now looking back through the chart to see how significant this level has been. I see August 2012 using this level as support, for example, and another case of significant support at this level in October 2010. Is anybody reading this? I wonder?

Anyway, talking to myself I decide this is an important level and I look to join the downtrend by setting a sell stop about 1.5060, which is the low of today. I do this because if my theory was correct, then my order will be picked up. If it was not correct, hopefully my order will be passed by.

Looks like it overshot 1.5060 slightly, but no matter because with a short bias we are looking for something like this. A bearish engulfing hourly bar:





Just to place an order under this bar, with a stop loss well above it, will deliver a high probability, high reward/risk ratio trade. Best to go in with low lots, and add to the trade if it succeeds.