Mass Market Psychology

Filed under: Learn Forex Trading |

 

Trading the financial markets is all about mass-market psychology – and trading the foreign exchange markets is no different. You have to remember that markets are made up of countless numbers of human participants; and an interesting thing happens when groups of humans get together. Often, people are predisposed to following the pack. This human trait probably originated from hundreds of thousands of years ago when our humanoid ancestors lived in a state of nature. When a carnivorous animal would attack, our ancestors would probably have stayed in packs because they would be more difficult to pick off. Modern day animals do this, and it is always the one that strays from the pack that inevitably ends up as lunch.

 

This could also apply to the forex markets. If you follow the dominant trend, you have a much greater chance of success. However, if you go against the pack, you just might end up as dinner.

 

However, there are infinitely more mass psychological nuances in the forex markets than this. It is like a massive game of chess. Big institutional players with a large financial backing try to dupe individual traders into following them so that they can get cheaper prices and then reverse the market. Stop losses are gunned down, and trading robots muddy the waters. However, despite all of this, the forex market is still a game of market psychology. If you can figure out what the vast majority of people are going to do, then you will make money. If you cannot and get it wrong, then you will lose money. It’s as simple as that. How you reach your conclusions, however, is the name of the game. I personally use price action signals – but there are other ways. The choice, ultimately, is yours…

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>