Forex Market Logic
At the rate the forex market situations change, it is some times almost impossible for the indicators to keep up with them. That's one reason why automatic trading can easily liquidate a portfolio.
This is why the current performances of individual pairs may be the best indicators of their future price trends. Applying simple logic to Forex trading can be of huge benefits.
Take the current situation where:
EUR/GBP is trading long,
GBP/JPY is trading long,
CAD/JPY is trading short,
NZD/CAD is trading short,
NZD/USD is trading long and
AUD/USD is trading short.
If these trades are posting positive P/L, then reliable simple logical conclusions can be drawn from their performances.
Starting with EUR/GBP, this profitable trade means that EUR is currently stronger than GBP. Similarly, GBP is stronger than JPY.
Given these two simple facts, it will make simple logical sense to think that EUR/JPY should be trading long. This happens to be true (see my Forex updates).
Along the same line of simple logic, GBP/CAD should be trading long because GBP is stronger than JPY, which is stronger than CAD. This is also true.
The only thing that needs to be confirmed here will be the volatility trend, to make sure it is not in opposition to the predicted market price trend.
Elliot's Wave (EW) and Volatility Switch (VS) indicators are very useful for this purpose.
Forex market logic comes in very handy during quick portfolio reviews, especially when a position persistently posts negative P/L contrary to indicator predictions.
At the rate the forex market situations change, it is some times almost impossible for the indicators to keep up with them. That's one reason why automatic trading can easily liquidate a portfolio.
This is why the current performances of individual pairs may be the best indicators of their future price trends. Applying simple logic to Forex trading can be of huge benefits.
Take the current situation where:
EUR/GBP is trading long,
GBP/JPY is trading long,
CAD/JPY is trading short,
NZD/CAD is trading short,
NZD/USD is trading long and
AUD/USD is trading short.
If these trades are posting positive P/L, then reliable simple logical conclusions can be drawn from their performances.
Starting with EUR/GBP, this profitable trade means that EUR is currently stronger than GBP. Similarly, GBP is stronger than JPY.
Given these two simple facts, it will make simple logical sense to think that EUR/JPY should be trading long. This happens to be true (see my Forex updates).
Along the same line of simple logic, GBP/CAD should be trading long because GBP is stronger than JPY, which is stronger than CAD. This is also true.
The only thing that needs to be confirmed here will be the volatility trend, to make sure it is not in opposition to the predicted market price trend.
Elliot's Wave (EW) and Volatility Switch (VS) indicators are very useful for this purpose.
Forex market logic comes in very handy during quick portfolio reviews, especially when a position persistently posts negative P/L contrary to indicator predictions.
Mecrandie
