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Predicting the Trends in Forex Market
Written by: PaxForex analytics dept - Thursday, 28 December 2017 0 comments
Moving back to predicting movements in the market, we acknowledge that a trader must have a thorough comprehension of the factors that can affect the movement of a currency's exchange rate if they want to be successful. Being capable of identifying trends is one of the core skills a forex trader should possess, as it can prove to be useful in making any forex market prediction. Experienced forex traders use market indicators to identify market trends and make trading decisions, among other functions. Simply explained, indicators are tools – algorithms, software, scripts or computer trading "experts” – used to identify investment opportunities.
Predicting anything in the forex market is actually impossible. Your best bet will always be to read the price action and act accordingly. Whatever you may read around the internet, no one can predict anything. Price action reading means starring at the screen and looking at the price go up and down in certain recognizable patterns. With enough training and knowledge, you'll be able to recognize patterns and trade them with a high probability of success.
Trading with the trend is trading with the flow. When the prevailing trend is up, why would you want to look for short entries when buying might result in much smoother trades? Many amateur traders, even when facing a long lasting trend that has been going on for months, can’t stop trying to predict reversals, whereas they could have made so much more money by simply joining the trend.
But even if you are not a trend-following trader, you can combine the concept of trading with the higher timeframe trend with your regular trading approach.
When analyzing data to predict price movements in forex trading there are essentially two different methods. One involves technical analysis, which is where you study charts and price actions to track trends. Fundamental analysis is used to determine the reason why those trends happened in the first place. Once you learn those fundamentals that make the market move and cause currencies to suddenly change direction, you can read economic reports about the nations whose currencies you trade the most and get a good indication of which way their money is about to move.
Being able to make forex predictions requires constant analysis of the market and good skills in exploiting different kinds of approaches and software. Predictions can be very costly, especially when we take positions against the prevailing price movement in anticipation of a quick and sharp reversal. Several reasons have been laid out for why predicting the markets is dangerous and ultimately not needed in order to make money. By realizing prices move in waves and that we should not predict whether important levels will hold or be broken, we can enter trades at significant points, but in reaction to what price is actually doing and not what we expect it to do.