Many new forex traders think the core of a forex trading strategy should be predicting where forex prices will go. Try it and you will lose, you will win if you trade in a different way so why is prediction not the way to make money? Let's find out. If you are predicting you are in effect hiring or guessing which is not a way to make money in any venture let alone forex trading. You can not predict the future and if you try, your predictions will be as accurate as your horoscope.
There is however a big market in people who say they can predict and many theories that say you can such as Elliot wave, Fibonacci and Gann. They argue that as human nature is constant so the markets must be as well. However if you think about it this logic is obviously not true, because if markets were foreseeable with science, we would all know the answer in advance and there would be no market.
Markets move based upon uncertainty and while human nature is constant, it is not predictable with science – trading is a game of odds not certainty. If you want to win you trade the reality of price change and do not try and guess in advance.
For example if you see a market testing a level of resistance you do not simply enter a trading signal – if you do you are trading against the trend and you could be wrong. Instead you wait for prices to test resistance and wait for prices to turn back the other way. Sure you miss the turn – but you could not predict that anyway, so there is no point trying!
How do you know when to trade.
The secret of correct market timing is using momentum oscillators. There are many you can use and three of the best are: RSI, ADX and the stochastic indicator. We do not have time to go through exactly how they work here simply look at our other articles and make them part of your essential forex education.
The key advantage they give you with your forex trading strategy is they allow you to gauge gifts in price momentum. You can use these shifts, to allow you to trade the reality of a price change to achieve better market timing and and more forex profits.
The forex traders who rely on prediction lose and are generally naïve or greedy traders who think forex trading is simply a walk in the park – its not and regardless would you expect it to be. The real pro forex traders do not rely on hope or guessing or trying to buy market tops or bottoms they look at and trade the reality of price change.
The way to succeed in forex is simply to look at support or resistance and time your entry on shifts in momentum and you should not just do this with a view to these levels holding.
You also need to buy or sell breakouts of new market highs or lows. It's a fact that most markets develop their best trends from these highs and lows and you need to learn to go with them and enter the market.
It may look like your getting at at good levels and its tempting to wait for the pullback – but these moves tend to not pull back and accelerate and offer the largest profit potential. The market price is the right place and if you cut out prediction and trade the reality, you can have the basis of a forex trading strategy that can make big consistent profits.