Statistics and Probability helping to gain profits in Forex Trading

The prices in Forex or any other financial market seem to move up, sideways and down everyday. But sometimes it can be observed that Forex prices constantly move in one particular direction. At that time, one may get tempted easily to invest in a currency pair (Exchange rate relationship between two currencies, where one currency is expressed in terms of the other – e.g. GBP-EUR (British Pound against Euro) is a currency pair). As soon as he buys the currency pair, suddenly the value of it changes direction, leading to a big business loss for the investor. On the other hand if the value of the currency pair keeps moving in the same direction the investor would profit from his investment decision. So, understanding the market is the basic and foremost step of forex trading and broadly of financial markets. A person may blindly invest on rising shares and suddenly the values drop and eventually the individual suffers a big loss and may be also out of the market due to lack of capital so, one is always advised by the financial experts that he or she must not gamble blindly. In some cases the luck factor is also needed.

If one does not understand how the currency rates go up and down, he can never be a good forex trader. For understanding the market the subject of statistics is very much necessary. It’s statistics which helps with future predictions. Understanding the probable future value of the share is not rocket science. It simply depends on certain factors. Moreover the statistical review of the particular share helps to understand this matter more clearly.

During a single trade the rate fluctuates a lot and this seems to be a big problem in forex or any other financial market. But after checking around 100 trades, one may start understanding the patterns, events and moves of a particular trade. With the help of statistics one can easily predict the long term value of a particular share. Therefore statistic helps to guide the person to take the right decision about a particular trade. When one studies all the details of a share in depth, even the share history and its rate graph, can adopt statistical models to predict the more likely estimate of the future value of the share.

Huge risk factors are present in forex or any other financial market. The market goes up and down. Even the value of shares changes within a fraction of a second. A beginner approaching the financial markets who has got just a minimum idea about share trading may face huge problems when trying to understand the movements of the trading market. Many have lost all their capital by bidding on a growing share whose value suddenly dropped drastically. So, you need to be very patient and tactical and use statistical analysis while investing in shares. Not invest blindly without understanding the market. It may lead to a big loss at the end of the day.

Leave a Reply

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