Without any doubt, most of us want to know future currency exchange rates. While manufacturers need to know this to reduce the cost of importing some raw materials or equipment abroad, retailers need to plan their imports. Tourists need to exchange their currency for the local one. In other words, almost all of us are interested in currency exchange rates for this or that reason.
Apparently, if there is demand, there will definitely be supply. The quality of this supply is another thing. More often than not, Forex analytics is difficult to read and understand. Therefore, most people have difficulty extracting some valuable information from it. So, what is the difference between analytic forecasts and predictions made by Forex traders.
More often than not, analytic forecasts are full of some complicated and twisted terminology. A mediocre reader will definitely have difficulty understanding such a forecast. There is no surprise since the financial science has hardly ever welcomed anyone.
Nevertheless, the amount of currency speculators and people concerned about currency exchange rates keeps growing. For those of you who is on that list, we will try to show the difference between the average analytic forecast and the one made by professional Forex traders representing Masterforex-V Academy.
First of all, let’s have a look at the recent analytics for EURUSD made on December 23rd.
The forecast reads:
At this point, Forex is subject to massive profit-taking while traders close long trades for the US Dollar after the American currency showed significant strength. This led EURUSD to a slight recovery even despite the fact that S&P cut the EU’s rating a couple of days ago. Stock indices, metals and some other riskier assets are gaining value, which is another bullish factor for the common European currency.
The ECB has just announced that European banks are going to pay off over 20,7bn euro, which is more than expected. The news is reassuring, which is another bullish factor for EUR.
Technicals:
The short-term bias is bearish. The daily range is 1.3620 –1.3720.
Swings in both directions are expected.
My tactical views:
EURUSD. The trend is neutral. Today's analytic forecast for trading in the 1.3620-1.3720 range. Today, we expect upward rebounds. That is why we can start carefully selling from local highs. For example, from 1.3720, Т/Р = 1.3620, S/L = 1.3850. Move your stop-loss orders actively to capture profits.
Now it is time to compare it with the outlook made by Forex traders.
Chart H4:
The uptrend started on July 9th formed 2 major volume clusters – 1.3250 and 1.3520. The move started on October 25th can be considered the beginning of the bearish reversal. The supposition will be confirmed if the price breaks and consolidates below 1.3520 and further below 1.3296 (the end of the red bearish wave).
The upward move since November 7th (the blue lines) still fits a correction (recovery)against the red-line bearish move.
If the supposition is correct, the move started on December 11th is the 3rd red wave. The expected targets are 1.3090 - 1.2960. The scenario is also confirmed by the decline of EURUSD caused by the Fed's statement made on December 18th. Still, this is a small-scale move at this point.
The scenario implementing further blue waves cannot be completely excluded by now. By the way, the price has already shown a clear reaction to levels 1.3620 and 1.3710. The price consolidation relative to those levels will determine the near-term behavior of EURUSD.
Most of you may have noticed that the analytic forecast doesn't have an attached chart while the one made by Masterforex-V Academy does have one. Still, analytic forecasts usually include charts.
The difference in figures may also seem irrelevant. The thing is that the difference can be seen only by those guys who are planning to trade EURUSD and make money on it.
Now let's ask Masterforex-V Academy to explain the actual difference to us…
The major difference is that a trader has a plan that explains how exactly to capture profits by trading the currency pair in question while an analyst doesn't have one. In this aspect, analytic forecasts are useful only when helping you to outline the general prospects of a certain market. That is why most of the analytics seen today can be dangerous to beginning traders since the info may be delusive. Anyway, analytics can hardly be useful when trading Forex since a decent trading strategy is needed to trade any financial market profitably.
Another key difference is that an analyst seems to look more into the past while a trader looks into the future. In general, an analyst doesn't care a lot whether he/she will be eventually right or not. He/she will earn money anyway since he/she is paid for the text, not for the prediction itself. If the prediction fails, the analyst tries do find as many excuses as possible. At the same time, traders have to make decent predictions in order to make money in the long run since they invest their own money and will lose it once they fail to determine the correct direction of the price movement. For traders, predictions are only the first stage of the trading process. It is followed by making a plan and following it when opening, maintaining and closing the trade. Professional traders also consider 2 alternative scenarios and define clear conditions for each of them. These conditions further determine the trader's decision and behavior.
Another thing to pay attention to is the time scope or timeframe, especially when it comes to analytics. For example, if a representative of a certain bank writes that he/she goes short EURUSD and the target is 1.2900, you should keep in mind that this is a long-term trade (several months or more) and that the bank will definitely hedge such trades. Short-term analytic forecasts are difficult to use for trading purposes even though they may contain two scenarios. The shorter the term, the more clear the forecast should be.
The ultimate goal is to learn how to make your own forecasts to use them in trading. All the other forecast work best when used just for reference sake. So, if you wont to start a trading career, you can visit a free school for traders and investors under Masterforex-V Academy! Good luck to you!
