Forex Trading Sentiment - Learn How to Gauge it For Huge Profits and a Live Example

by kelly Price

The most important variable in forex price movement is not the sentiment of the participants who ultimately determine the price. Humans are creatures of greed and fear and if you watch and know how to gauge extremes in sentiment you can make huge profits here's how and a huge immediate profit opoortunity.

Markets tend to really when there most bearish and crash when there most bullish and this has occurred throughout history and is human sentiment at work. All markets exhibit price spikes which are simply peaks in sentiment when greed and fear pushes prices to far from fair value.

But how do you spot them - let me give a live example now that could pile up huge profits of 1,000 pips or more.



Let me first start with a quote:

"If you can hold your head around you when everyone is losing theirs you probably haven't heard the news"

In forex trading this can be translated as:

You have but your seeing the news from a different angle and let's take the euro/US dollar pair as an example.

Most analysts and investors are bearish the dollar and it's been hit by a lot of bad news over the last few weeks including:

Interest rates have dropped by 1.25%, the housing and jobs market look terrible, GDP has crashed, consumer confidence is low and the Government is trying to put together a $150 billion rescue package - so the dollar is going to fall into oblivion - RIGHT?

Dead wrong!

This is old news and discounted by the market and if you look at a chart, the euro has hit chart resistance and is FALLING. Why?

Because the news is discounted and traders who were gripped by fear and selling the dollar have sold as much as they can and sentiment is at a bearish extreme - that's why the dollar is rallying, in the face of what appears to be bad news.

Furthermore, the market will soon look ahead and think the Fed has been proactive and things must improve. Sure euro zone has better interest rates - but it to has a struggling economy which needs interest cuts and traders will realize this will sell the euro and buy the dollar.

Remember what I said earlier:

Markets always rally when they appear most bearish and the dollar is no exception.

The fact that bearish news cannot send the dollar lower, points to a turn and it could be 1,000 pips or more in profit.

If you get up a forex chart and look at it, you will see the reality of the dollar getting support and euro momentum falling.

All markets do this and forex markets are no exception.

Always Remember This:

Traders push prices to far up or down based upon the emotions of greed and fear and when the buying or selling frenzy ends, the market turns and a counter rally starts.

Check out a forex chart of the US Dollar and euro and you will see exactly what I mean and if you take into account what we have said on sentiment above you could get in on a huge profit opportunity.


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Published at Feb, 04 '08 , Read 420 times.

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