When a pedestrian turns from the street and tries to cross the road, the first thing he or she looks at is the traffic light. If it is red, normally that would signal to the pedestrian that it is safe to cross the road.
When a pedestrian sees the red light, with all the cars at a standstill, the most logical thing to do is to cross the road. But what if the
light turns green while he or she is in the middle of the road?
There are two groups of people; there are those who meet the red light and cross the road anyway, and there are those who may decide to wait for the lights to turn green, then red again, before they feel safe to cross the road.
Both groups are smart; simply because they choose to cross the road when the cars are at a standstill. In the same vein, smart traders buy when the market is bullish, and sell when the market is bearish.
There is a funny reaction among some forex traders. When these traders see a bullish market, with price climbing up steadily;
their first thought is to open a short position. At such moments, you start hearing phrases like “Retracement expected”, “price is over-bought” or “price is over-sold”.
Basically, these traders look for any opportunit…