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Bullish or Bearish Bias in Forex?

November 16, 2009 by

When the average number of long trades is higher than the average number of bearish trades due to some fundamental or technical reasons, it is said that the market is in a bullish bias. If the short trades prevail then it’s called a bearish bias. Stock market is known to have a rather strong bullish bias as it’s much easier for investors to buy the stocks rather than sell. Forex, on the other hand, should be completely unbiased, as it’s fully symmetrical market, where long trade on a currency pair (e.g. EUR/USD) is a short trade on the inverse currency pair (e.g. USD/EUR). But, sometimes a long or short bias appears on the currency market too. Because of the inverse correlation between such currencies as USD and JPY and such assets as oil, gold and stocks, the market gets a bullish bias during the global economical rallies.

I’ve checked my trading journal for the last 6 months and from 30 Forex trades (I excluded trades on metals) 17 were bearish. That’s quite a small bias towards short side (56.7% vs. 43.3%). This bias appeared because during that period I’ve had some bearish sentiment on EUR and GBP, and the majority of the currency pair have EUR and GBP on the long side of the pair. And how about you?

Are your Forex trades biased towards long or short side?

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If you have some interesting comments or questions regarding the bearish or bullish bias in the Forex trading, please, feel free to reply using the form below.

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