Simplicity of thought

[Tradingkid]

As a reasonably recent forex addict it strikes me that forex price movements are occasioned by the simple market forces of supply and demand. I think the correct forex jargon would be OB or OS. I would like to become a serious trader as opposed to a gambler - which often seems the most likely path for the newcomer.
If my assumption be true, it would follow that one should be part of the herd in placing trades as it is the herd rather than the loner that moves the market, unless it be a news announcement of substantial consequence like the first friday of every month - the non farm stuff.
In the event of the above scenaro being correct, is there not someone somewhere with a great deal more technical ability than myself that would be able to work up a signal based on the fact that a price move follows a herd move. ie if the volume increases the price will move (maybe out of its narrow range) or simply move - the question is have the herd gone long or short?
Any one have a reasonable indicator to gauge such a move?
thanx

 

[timsk]

Hi Tradingkid,
Welcome to T2W.
If you've not yet seen it, take a look at the Essentials of First Steps Sticky as some of the points you raise are covered in there. In terms of following the 'herd' as you put it - that depends on what markets and instruments you trade. If you trade equities, then conventional wisdom goes something like this: when price is moving for technical reasons with the ebb and flow of the market, then the stock is influenced by its sector which, in turn, is influenced by the market as a whole. Therefore, most stock traders will reference either or both the index and/or cash chart before making any trading decision purely on the basis of the stock itself. This all goes out of the window if the stock is moving for fundamental reasons, i.e. broker upgrade/downgrade or an earnings report etc. On those occasions, price can move independantly of - and contrary to - the sector or index. Whatever markets and instruments you trade, you would be wise to consider other markets that might have an impact on yours. An obvious example is if you are looking to trade airline stocks, it's as well to keep an eye on oil prices.

On a more general point, your idea about the herd is fine in principle. The problem that most traders have is that by the time you identify which way the herd are moving and decide to jump aboard - it's often too late. That's when the 'smart money' are bailing out; selling (assuming they're long) to those who join the party late. You don't want to be the one left standing when the music stops. If you're set on forex, take a look at pozzyp's journal which should provide some good ideas: My Journal at a Prop house
Enjoy!
Tim.