Thoughts1

I have been thinking about FX Trading.
There are 2 forces in play in affecting the prices. They are fundamentals and market participants' psychology.
If I put them into an equation, pretty much it will be on the following.
Psychology + fundamentals = market sentiment.

In relates to FX, I feel that Psychology plays a very large role (so much larger) in the pricing. Why? we often see patterns, price bounced on the support and resistance lines. So it is obvious enough for me to approach FX only through technical point of view and psychologically.

Plus, Soros mentioned before - the value of fundamentals can be affected and changed through psychology. there is a feedback loop from psychology to fundamentals. when prices go up for a particular asset, people will start to think the new prices are the correct prices. this will shaken the real fundamental values. given enough time and support (i.e. prices go up even further).

As the prices increases, people start to doubt themselves, they start to feel afraid. "is this bubble going to burst?". A bell curve starts to form.

Anyway, how are we going to detect or identify this opportunity. Staying ahead of the pack?? How??
Could we only measure this through our feelings or guts? If we do that, what are the factors that affect our guts? reading all the leading and lagging indicators (such as cpi, unemployment and etc)??

I should start testing this.
Result:
Start making a list - what are the factors that affect FX.
See the impact of these factors.

However, I am contradicting myself now. I mentioned that I should approach this through Technical point of view. And now, I am looking into these indicators. This means I am looking into it fundamentally as well.

hmm.., where does psychology come from? they come from fundamental. so any changes in the fundamental, the prices of the security changes, but psychology amplifies it. however, i have seen where fundamental says security goes up, psychology brings the prices down. But for how long??

Argh....