Sunday, November 30, 2008

Why failed in forex? - Overbought and Oversold and when the market move

What is the main reason people failed in forex currency trading? This is a question that is hardly can be answered by anyone including the professional traders. A perpetual problem of currency trading that will last forever without precise solutions.

Even though traders can easily gain access to forex knowledge from forums, websites, e-books, and trading experience at free trading platform. This is to say that every forex traders alike are highly knowledgable about currency trading market both fundamentally and technically. You can find this on many stories of overzealous novice traders talking about their ambitious trading goals and technique can be found mostly in forums, commercial forex website, individual blogs, etc. But eventually none of this really works after all because they were right only at a time and wrong most of the time no matter what forex trading system is applied.

So what is the real problem? The answer is none because the problem will always remains as long as forex trading is concern. The first problem is no one can ever predict when exactly the market will move. This is because traders will never tell when they will enter their position especially the major crowds or big traders where we rely on for the market to make a move. The unpredictable time of movement usually frustrates those who setup their position too early this is especially for those traders who are using Moving Average Convergence Divergence (MACD) indicators. As the market do not move for example in 1 or 2 days, they already started to lose on the rollover fees. This delay movement forcing to close position early by sacrificing some losing pips and eventually also considered losses. (Read When the market move )

The second perpetual problems in forex trading is overbought and oversold situation. Every traders can witness this almost everyday in their trading activities. The candlesticks move frequently piercing the bollinger bands line defying the technical analysis goal that has been setup. Only later then it will only move back to expect position when the market is cooling down. And for traders who setup their position early on expecting for correction will get a lot of worries and doubts during this overbought/oversold condition. And this will become one of the driving force to close the position early to avoid further losses. In addition for those who are willing to wait, another condition may occur when will the market will make correction. What if it is making correction after 1 or 2 days later how much then you are going to lose for the carry over fees. This is simply why forex signals simply do not work.

So in order to be good in forex is not merely good in your fundamental or technical systems but also capable of anticipating the perpetual nature of the forex (overbought/oversold and when the market move). Many of us have fails in the forex market and others have already given up because they see the forex trading is simply unpredictable. This is because they have been too long in the market overloaded with knowledge of forex and too much reliance on certain technical analysis systems without considering the unpredictable perpetual factor of the market.

Therefore when you trade in forex be ready to anticipate the unexpected oversold/overbought and when the market move.

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