Forex Trends And Coutner Trends

Forex Trends And Coutner Trends

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 every market there are conflicting positions between buyers and sellers. It is precisely these conflicting views that define market trends. Since all generally have access to the same information, which makes the difference is the position we take each other, the majority herd mentality defines the trend and when it is about to end.

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.

All traders are following the flow of price and the reflection of that through indicators so there on certain expectations on traders as a whole on what is going to happen. The thing is in an instance the trend can change as everyone will experience the same emotions. This creates the herd. Also be aware at news event releases or sudden unexpected news as it can change the trend in an instance.

In times of high instability investors in this uncertainty become more risk adverse and prefer hard currency or gold. People are willing and able to take on greater risk in favor of higher returns during times of stability.

It is also important to pay attention to the behavior and policies of market makers" those with access to large amounts of foreign exchange (financial coalitions, hedge banks, governments). They are market makers that have the power to change the course of the latter at any time they feel that particular currency or economic situation could be in danger.

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 much more unpredictable than ever before with more traders, liquidity and transactions taking place daily than ever before. The more information you have on your side, the more homework you put in paying attention to analysis of trends and factors that influence markets and traders the better your chance of profiting trading.