The Forex market is a market in which for the most part, traders speculate on changes in future interest rates changes from one country to another. Market data accumulates day by day and week by week that will tell us that the chances of inflation in country ‘A’ are greater than country ‘B’ thus yielding higher probabilities of Central Bank increases. Results of the economic data accumulate and make up Market Consensus.
Both you and I and all of our esteemed colleagues across the globe as participant traders are the people who change market consensus and translate Market Consensus into price movement. We are all very much like the judge and the jury in the virtual court room of Market Consensus. What we are seeking is the cold hard evidence that helps us formulate a collective opinion of sentiment towards the outcome of the trial we are all presiding over.
What’s on trial is the value of each individual of our Major eight currencies based on the fluctuations of inflation for each respective countries economy. Market sentiment translates into daily price movements which constantly moves towards a final determination of a currencies true market value based on the current fundamental criteria.
Our virtual court however is different than that of a court of law in the respect the trial in our court is never over and a final verdict is never actually reached. Sentiment keeps evolving as the evidence keeps changing over weeks, months and years.
The evidence we are dealing with in the court of market sentiment is derived for the most part from the data that we find on our weekly Economic Calendars. It’s also derived from another extremely important factor that is not on our Economic Calendars – Fear and Pessimism.
Let’s talk about the Calendar first.
This is business as usual in the Forex market. One by one as data is released, evidence is revealed and sentiment is translated over to price movement which is reflected on our charts. This business-as- usual operating sequence is what that I refer in my teachings as the ‘Underlying Fundamentals’ of the market.
The underlying fundamentals are by and large, what drives much of the time. They will always exist and be present in the market no matter what else occurs off of our calendars. The underlying fundamentals are in every sense the entire foundation and super structure of the Spot Forex Market.
From time to time we have another type of fundamental that comes into play.
These are fundamentals that are not scheduled on our Weekly Calendars. In fact, these are fundamentals that seem to come out of nowhere and blindside the market, often pushing the underlying fundamentals into the back seat and taking over the wheel as the temporary driver of market sentiment. These are what I call in my teachings the Over-Riding Fundamentals. This is the part of the Forex market where Fear and Pessimism comes into play.
These are the market drivers that we as traders need to be aware can take hold of the market for extended periods and reverse the underlying fundamentals completely towards the opposite direction in which price was previously moving. Count on this occurring in the market in a larger and more protracted sense once every few years. Count on this occurring in the market in a smaller and less protracted sense about once ever month or two.
