I´m the new kid on the block and I´m no native speaker of english.So please be nice
I have been searching the web and this forum pretty intense, but didn´t find an answer to my question. So I hope you guys are okay with me, opening this new thread.
As most of you probably know, stocks have the tendency to move upward. So statistically the probability of a stock-trade you go long on to be successful is higher than when short selling.
My question: Is this true for currencies as well?
I have been crunching some data myself already, but of course I´m no scientist so the results may very well be flawed. However my crude “research” shows that most times currency pairs seem to move up as well. Even in a huge downtrend, intraday most times it´s going up an if rates move down they do so very quickly just to let the market go back into it´s constant slowly up-moving tendency.
And since many traders have a psychological problem with short selling,this would make perfect sense…
Does anybody know more about this?
Do currencies in fact just like stocks tend to move up, though not as obviously?
I dont think so. Mainly because The movement up or down is arbitrary. Let me explain. When you sell the eurusd you are selling the euro and buying the dollar. So in other word if your expecting the usd to become stronger, (bullish) you can sell the eurusd. Maybe both currencies are growing at this moment, but you are trading one respect the other, if the chart will move up or down its just the arbitrary decision of calling the pair eurusd instead of usdeur. The pair could be named Usdeur, and the chart would be the same but inversed.
About the piscological issue with selling, it can be solved with correlations: if there is a strong bullish trend in eurusd, there will probably be a strong bearish trend on usdchf. When 10 pairs are going up, another 10 must be moving down (just an example). But anyway, I think this is not a particularly important behaviour in forex market, because of the reasons i posted above.
In resume, with stocks you are buying something, with currencies your buying one respect the other. To buy the 1st you must sell the 2nd. This means that the chart can show an strong bullish trend caused by negative news on the second currency, so you can ride the bearish move of this currency buying the pair.
Is late in the night, and im a bit asleep, hope I have explained my point of view in an understandable way
Forex rates are determined by the market fundamentals and then the technical s which are dependent on the market players.
Now if you have some understanding on how market fundamentals are working for any currency pairs then you would know what is the probability for any currency pair to go UP or DOWN
