Forex markets are exciting and with the rise of the Internet, we’ve seen a huge rise in the amount of news available all at the click of a mouse.
However, despite all the advances in communications - and the quantity of news available, the ratio of winners to losers remains the same in the Forex markets:
90% of traders lose money, which may seem a starting fact as more information is seen by many as a key to success
Online currency traders think the news helps them – however, in most cases the news ensures they lose money - for the following reasons:
1. News is discounted by the forex markets in seconds.
All the news is discounted by the markets quickly, in today’s world of instant communications.
If you want to trade profitably, then you need to simply ignore the news.
Markets move on how investors perceive the future and for this you need to study human nature or trader psychology.
Technical analysis is the way to do this; a simple equation will make this clearer:
Supply and demand (Fundamentals) + Investor Perception (human perception) = Price
Humans decide the value of any investment market and that includes currencies.
By studying forex charts, you are seeing the complete picture – and keep in mind investor psychology is constant and shows up in repetitive price trends that you can profit from.
2. They’re stories that’s all
When trading forex markets, online currency news is convincing, but their stories and they won’t help you make money.
The financial writers are knowledgeable and of course they can explain everything in hindsight - but they’re not traders.
If you listened to the news, you could have bought at the top of the market in 1987 - and the tech bubble of the 1990’s.
All the news claimed the market would go on forever, but what happened next? Prices dropped like a stone causing huge losses.
Any market is most bullish at market tops, and most bearish at market bottoms, so listening to currency news will simply damage your online currency trading success.
3. Financial news and emotions
The biggest mistake any FX trader can make is letting his emotions dictate his trading.
If you want to win, then you need to remain disciplined with the execution of your forex trading strategy.
It makes us feel comfortable to go with the news and the consensus opinion but in trading, this is a bad trait to have.
If you feel comfortable, you will not make money.
In trading, you need to stay disciplined and isolated.
Remember, the majority of traders are wrong! - and they listen to, and trade with the news.
Use a technical system - and try to ignore the news and focus on the reality of price.
In the Forex markets, this will enable you to stay detached, unemotional and disciplined and help you achieve currency-trading success while others fail.
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