Past Performance Predicts the Future

Focus: FOREX

Rick Wright Image Rick Wright Instructor, Online Trading Academy

Previous memories of good or bad trades very often will be a cause of future moves in price, writes Rick Wright of Online Trading Academy, which is why traders need to be discriminating when it comes to what trades they take.

Hello traders! Now that the US presidential election is finally over and we can stop being bombarded with half-truth commercials every 30 seconds, we can now fully concentrate on trading. Whether or not your candidate won is irrelevant. Neither showed the slightest interest in addressing the true economic problems of the US government, namely that we spend much more than we take in. So let’s talk about some charts, ok?

In every Online Trading Academy class that I teach, the statements “What was support becomes resistance” and “What was demand becomes supply” are thoroughly discussed. Many new traders have at least heard this statement before, yet are unsure why it is the case. This week’s newsletter will demonstrate why.

In the following EUR/USD chart, I have marked a demand zone that didn’t hold, thereby becoming a supply zone.

chart
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At point labeled 1, in a current uptrend price action pulled back and regained strength defining a new demand zone.