There are 3 market conditions in the free Market that affects price action trading.
- Trending Market
- Sideways Market/ consolidation
- Reversal Market.
Not many investors know about the investment theory that won a Nobel Prize in 1991. Nor do they know about a landmark study that showed that over 90% of the returns on an investment portfolio comes from how- not what- you own in your portfolio. We have talked about using higher risk-reward currency trading as the spice in your portfolio, but here is another “option” to choose from.
As a currency trader, I depend heavily on chart analysis that tracks price behavior. The underlying philosophy is that the market filters all those thousands of factors that could influence price and forget about the limited information that individuals can glean from reports, blogs and other sources. Indeed, the veracity of information is always suspect.
A decade ago, there were about 300 Exchange Traded Funds (ETFs). Today, there are more than 1,400 ETFs. The spectacular growth of ETFs demonstrates a shift in investor strategy that takes advantage of the risk dampening effect of ETF diversification as well as having the liquidity of trading like stocks. To find out more about ETFs go to http://www.bloomberg.com/markets/etfs/etf_about.html
We Human beings are curious animals. We love complexity, masochists that we are. Everyone knows about the famous study that demonstrated rats preferred intellectual stimulation over sex. Of course, running a maze does have very little sex appeal. But the fact remains, most of us do like mental stimulation of various sorts. In fact, maybe it is the attraction of constant mental stimulation that attracts people to Forex Trading.
What is Price? What is behind the movement of Price? The price movement is a result of the collective perception of buyers and sellers in the market, when the collective perception changes the prices move.
A lot of currency traders learned a big lesson this week; one that bears discussing.
Since last December, the Royal Bank of Australia has been hinting at raising rates. The Aussie economy had been doing well and showed signs of overheating. Prices for food, housing, beer and just about everything has been rising but not at an alarming rate. Well, some AUD traders made a big mistake. They anticipated the “promised” rate increase the RBA had been hinting.
Just last week, one of my traders made a case for buying spot gold. His reasoning was based mainly on technical indicators. As a price behavior trader, I like to have some “ideas” of what might happen in the markets but only make actual position decisions based on what is happening to prices at the moment. After so many years trading, I know the markets can be capricious and spiteful for those who possess the arrogance to feign understanding of its wisdom. Well, as a trader, it’s silly not to consider the possibilities. So, I decided to add some fundamental analysis to the argument of buying gold.