Forex Market Trading – Understanding the Market
By: Harold Hsu | Posted: 21st January 2008
One of the biggest reasons why there are so many losing traders in the Forex market is because they don’t understand how and why currency prices move. In this article, let’s examine 2 main points to help us better conceptualize market movements.
95% Speculators
Did you know that roughly 95% of all traders in the Forex market are speculators? Many new traders make the mistake of assuming that the majority of players in the market are multinational companies that exchange currencies to run their businesses. In reality, this is far from the truth.
And this is one of the reasons why there are so many losing Forex traders: they don’t realize that 95% of the market is geared to take their money! The Forex market is essentially a dog-eat-dog arena… and those who aren’t prepared for this reality are soon taught a very expensive lesson.
But now that you know the majority of traders are planning to make money at your expense, you can adjust your trading strategy to counter these attempts and to minimize your unnecessary trading losses.
Conflicting Interests
Another important concept to understand is that currency price movements are rarely clear-cut. The marketplace is an accumulation of traders that buy and sell for any reason, with each trader having a different set of expectations from the other traders.
But with so many conflicting interests among all Forex traders, how can you know whether the price will immediately go up or go down?
The short answer is that you can’t. No one can.
Losing traders make the mistake of assuming they can know where market prices are headed for, in the short term.
And this is the precise reason why so many traders get stopped out almost immediately after placing their trades! They make unrealistic assumptions because they don’t understand that the market is often filled with conflicting signals.
Learning More…
Now that you have an introduction to these 2 concepts, you’re better equipped to ask the right questions about profitable Forex trading.
About the Author
To learn more, download my free 26-page guide here: "Forex Trading Traps!"
Harold Hsu is the owner of ForexSystemProfits.com where he provides premium Forex trading information and resources.
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Tags: signals, marketplace, mistake, speculators, attempts, short answer, accumulation, currency prices, forex traders, forex market, trades, new traders, multinational companies, dog eat dog, trading strategy, precise reason, currency price