Psychology Of Forex Traders
Often traders discuss the individual psychology of forex traders but what are the factors that determine a trend in the market? How does the collective effect the this market psychology as a whole? In all markets there are buyers and sellers giving conflicting opinions and positions. These conflicting opinions about the state of the markets from the herd or the collective are what ultimately define trends. What are the factors that influence trends? When viewing the forex market in the eyes of fundamental analysis it is important to remember that a whole host of factors can turn trends and influence market direction. Any unforeseen event whether economic or political can shake the markets and cause trend changes in an instant. For example, a change of government in a country can reinforce or undermine confidence affecting the currency it represents. Certain measures taken by states or central banks or directly strengthening or depreciating its currency against others, leading to bullish or bearish trends according to the interpretation of traders as a whole. Forex traders regularly follow the flow of price and indicators which generates high expectations on certain occasions. These are the times when the market is usually quiet, and as soon as the data is published, starting the runs as each operator hopes to be one of the first to enter the market to gain an advantage, since there are usually some consensus on expected results. Certain indicators such as economic growth (GDP), employment levels and retail sales effect the willingness of investors as a whole and are important to focus on. In times of more stability traders take on greater risk in hopes of big returns. Conversely, in times of high instability or uncertainty people are much more risk adverse and defense even moving out of paper currency into gold. It is very important to watch the polices of Central banks and market markets (financial coalitions like the EU and hedge funds) and others with large access or market influence. Central banks and also market markets to a lesser extent have the power to change market trends through intervention and you always need to be aware of what their policies are at all times. The forex market psychology may also be affected by potential events that have not yet occurred like 9/11 for example but normally driven by media hype, trends, market movements in a specific direction before anything happens. Finally, another factor contributing to the perceptions of traders are long-term trends where the herd mentality is most easily portrayed. The forex market is now much more unpredictable and fluctuating than it was ten years ago. The more information you have, including the daily analysis of trends and factors that influence them will anticipate a greater chance for profit. Find out how simulated forex trading can turn you into a profitable trader and master your ownrobust trading system. |