The FX Bootcamp Guide to Strategic and Tactical Forex Trading

MARKET BIAS

Market bias is the majority opinion of all traders in the currency market. Everyone has equal access to the economic announcements the instant they are released. There are no secrets in forex. Information is available to everyone.

As new information is announced, the latest consumer price index (CPI) report for the United States for example, everyone in the market will have access to the results. This new information may or may not change each trader’s opinion about the health of the U.S. economy. What is important is that the new data is priced into the currency immediately.

A low CPI reading may be a sign to some traders that the U.S. economy is slowing. They may ponder how the central bank, a.k.a. the Fed, will interpret this low number. Does it mean there is less inflation? Perhaps the low CPI is evidence the Fed should lower interest rates? If this is the opinion of the trader, then the trader would consider selling USD.

In today’s Internet-powered world, all active forex traders would get this CPI data immediately. If the majority of currency traders are also worried about the low CPI data, then the market bias for the U.S. dollar could turn negative. In this case, you may see the U.S. dollar decline in value the second the poor CPI data hits the market and traders around the world start selling greenbacks.

Remember, market bias is the majority opinion of all traders in the market. Bias is shaped by all known information. This information primarily comprises ...