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Reading the Market Feeling While Trading
Reading the Market Feeling While Trading
It is not a secret that the Forex market is complex. Sometimes technical indicators suggest that the market is moving into one direction and suddenly the movement goes in the opposite direction. The same way technical indicators point to a direction, economics news and data reinforce technical analysis, and performance is otherwise. For example, since the second half of the year 2012, EUR/USD was on an uptrend in spite of the recession of many countries of the Euro Zone. Considering the general economic data in US, the expectation was a bearish trend for EUR/USD rate. Nevertheless, the pair got very high levels despite the news and overall anticipation.
Some economic announcements produce trend reversal that resulted to be stronger than expected. The question is how to trade during these situations?
When the price describes deterioration during an uptrend, the decision is going short. Sometimes, this decline is not as strong as foreseen from technical analysis, and the price continues getting higher and selling option produce losses. But, what is the cause of this reaction? The explanation is the Market Feeling.
To be a successful trader in any kind of financial markets it is crucial to develop intuition and knowing how to read the market feeling. This can be very hard and trying to understand it, may cause huge losses. This is why it is better to get started with best no deposit Forex bonus deals.
The market feeling is the push of the market in certain moment and is consequence of the mixture of all participations while some traders are selling (bearish) and other ones are buying (bullish). So the market feeling is the average expectation of participants about a determined instrument and moment.
How to approach to the market feeling?
There are four preeminent manners to approach to the market feeling:
1) Identifying the tendency
The tendency is the main indicator related to the market feeling. Especially in short-term trading, trying to recognize price trend can be very confusing. So, it may happen that when analyzing hourly and 30 minute charts there is an uptrend and so a trader decides to go long. Later, the operation will produce losses. May be if the trader have checked bigger timeframes, as daily and 4 hours, he could have recognized an opposite tendency and would not have opened any transaction. Therefore, the recommendation is to look at charts for bigger lapses of time, in order to be sure about the trend direction, and as a result, about the market feeling.
2) Price direction
To keep focused on one pair or one market is very useful to identify accurately the tendencies and to develop intuition and perception about the market feeling. Many traders negotiate and put all their trust on one pair and have been successful in the business.
When a trader focuses on a pair, it should have a good background about price action. For example if GBP/USD has not reacted positively to favorable economic disclosure, a downtrend can be identified earlier, getting higher benefits. Therefore, the market feeling is turning bearish as the price reaches lower highs, in spite of satisfactory economic development related to this specific currency or country. The trader can anticipate before this fact and going short previously than others making higher profits.
3) The Commitment of Traders Report (COT)
There are reports that broadcast information about volumes being traded for every market. For the Forex market, this report is published weekly by CFTC every Friday around 7:30 GMT and it is called the Commitment of Traders Report (CTO). This report reveals information about net selling or buying trades hold by commercial and non-commercial or speculative traders in the Forex future market. Therefore, this is valuable information to anticipate price trends or if the market is experimenting overbought or oversold levels. Once again, the background about the market is fundamental to read accurately these kinds of reports, and being able to establish when is better to avoid certain trend or to wait to find a clearer trend that assures you best opportunities to get profit and to avoid losses.
4) Worldwide circumstances
The circumstances around the world change from one moment to another, causing an impact at the market feeling and traders’ expectations. Nowadays, all events are linked and they have consequences in the Forex and financial markets where the money is at risk and looking for lifeguards to avoid losses. For example, in 2013 the Japanese nuclear plant emergency had effects in the main currencies around the world. Since the Swiss Franc was considered a safe currency, traders looked for it, to avoid reactions of possible new unexpected related events. Therefore, the Swiss Franc reached higher volumes trades than usual.
To sum up, having success in trading business requires a lot of practice and market background. The only way to anticipate the market feeling is recognizing predominant reactions to go with the right trend. It is not an easy journey, but with discipline and focus it may become a possible and gratifying experience.
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