The main drawback of sentimental trading is that emotion can play a large part in what happens. Because humans are emotional creatures and not robots, this is a natural part of the trading process. Never trade without evaluating the psychological effect; even investors in large banks sometimes trade with their emotions out of control.
Fear is by far the most powerful of these emotions. When traders are afraid of losing their money, they will pull out of whatever trades they have open. This, as you know, leads to markets sinking even lower than before. The Euro’s is set up to become a prime example of this using Tom’s EA. Although it has been gaining steadily over the last several days in relation to the dollar, the Euro has finally met with some resistance. It is destined for a pullback because of the news coming out of Europe. France and Germany have effectively questioned the Euro, and market fears are beginning to take hold in the U.S. While investors and traders are questioning the Euro’s value in the future, it is only natural for the dollar to gain a slight bit of headway against the Euro once again. A period of consolidation is likely to occur as the Euro sinks down to its true worth. In other words, consumers are starting to question the Euro’s value because of the economic situation in Europe. Some experts have even predicted that the Euro will sink from 1.4535 down below 1.4000. With such dire predictions, fear is only a natural response.
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