Real Forex Trading pt.2

 We are now in a position where we can begin to construct a profitable forex trading strategy. Where should we start? Let us look at the graph below and see what we can learn from it:

Explain this

If this graph was following the efficient market hypothesis, then we would expect that the candles would move in a focussed direction, based upon the current understanding of the fundamental data. But we can see in the graph that the price is moving in anything but a focussed direction. What caused the large movements as pointed out by the arrows in the graph above?

Here we come to the first important point about creating a trading strategy. If the price moved so quickly in such a short period of time, this signifies that a large number of people entered into a trade in the same direction at the same time. If so many people traded at the same time, then some signal must have indicated to them that they should have traded. The responsibility of the currency trader is to explain what instigated the large movements in the graph.