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 hoping or guessing which is not a way to make money in any venture let alone forex trading. You cannot 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 predictable 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 certainties.
If you want to win you trade the reality of price change and don't 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 couldn't 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 don't 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 shifts 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 more forex profits.
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