Greenspan and Currencies - Delusional? | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Greenspan comments on Bank Regulation 1 reply

Greenspan wrong?! 5 replies

greenspan still has excellent timing 89 replies

Alan Greenspan on Currency Speculation 4 replies

need help with Greenspan testimony 0 replies

Greenspan and Currencies - Delusional?

  • #1
  • First Post: Sep 18, 2009 11:24pm Sep 18, 2009 11:24pm
In 2004, former Federal Reserve Chairman Alan Greenspan made the following statement about currency trading in a speech before the Economic Club of New York:

“My experience is that exchange markets have become so efficient that virtually all relevant information is embedded almost instantaneously in exchange rates to the point that anticipating movements in major currencies is rarely possible.

”…Despite extensive efforts on the part of analysts, to my knowledge, no model projecting directional movements in exchange rates is significantly superior to tossing a coin. I am aware that of the thousands who try, some are quite successful. So are winners of coin-tossing contests.

"The seeming ability of a number of banking organizations to make consistent profits from foreign exchange trading likely derives not from their insight into future rate changes but from market making.”

GOOD LUCK
change the future, not the past
  • #2
  • Edited 2:22am Sep 19, 2009 2:10am | Edited 2:22am
So the market is random? Here we go again....doh!

We are Delusional? Unfortunately most are because they are not using proper Money management, rely on lagging indicators and are totally undisciplined.

You are delusional if you aren't using good money management. Lets take Greenspan's coin toss statement. If the outcome of a coin toss is 50:50 (heads:tails) and your risk reward is at least 2:1 (Reward 2: Risk 1), at 50% wins and 50% losses, whose the loser? If you have at least a 50% edge and are disciplined enough to follow it through? Unfortunately, most traders are trying to win rather than manage risk and respecting the law of probability.

Do you need 50% edge to win overall? No. Look at the turtles for example who had a loss percentage of around 70%. The turtles method relied on basic characteristics of the market. All markets trend and thats what the turtles capitalised on. Currencies are well known for providing sustained trends.

So to suggest the markets cannot make you profitable is to suggest that the basic characteristics of the market (supply/demand), are no longer valid.

Quoting 137
In 2004, former Federal Reserve Chairman Alan Greenspan made the following statement about currency trading in a speech before the Economic Club of New York:

“My experience is that exchange markets have become so efficient that virtually all relevant information is embedded almost instantaneously in exchange rates to the point that anticipating movements in major currencies is rarely possible.

”…Despite extensive efforts on the part of analysts, to my knowledge, no model projecting directional movements in exchange rates is significantly...
  • #3
  • Sep 19, 2009 6:58am Sep 19, 2009 6:58am
Quoting Porkpie
So the market is random? Here we go again....doh!

We are Delusional? Unfortunately most are because they are not using proper Money management, rely on lagging indicators and are totally undisciplined.

You are delusional if you aren't using good money management. Lets take Greenspan's coin toss statement. If the outcome of a coin toss is 50:50 (heads:tails) and your risk reward is at least 2:1 (Reward 2: Risk 1), at 50% wins and 50% losses, whose the loser? If you have at least a 50% edge and are disciplined enough to follow it through? Unfortunately,...
thanks for the reply. the problem is that if you have a consistent system (3% per month?) then you should be able to work with a fund worth billions of dollars. and then within 20 years you will be the richest person on earth. NOTHING WORKS CONSISTENTLY. notice how you said the turtles 'relied'...if you have found a consistent system with a risk to reward of 2:1, you my friend, should call up the major financial institutions of the world because you are destined for greatness. you will be able to pick a small developing country and eradicate hunger.

hey i'm not trying to be obtuse i'm just trying to prove a point and wake people up from the false promises perpetuated by brokers, the media and the internet. you were cool in your response and i'm not trying to attack you.

you mentioned supply and demand. Greenspan is not saying that markets flatline. he is saying that you can't predict where a currency is going based on previous market data. so if it moves up and it could have just as easily moved down, does that imbalance of supply and demand help you?
change the future, not the past
  • #4
  • Sep 19, 2009 7:29am Sep 19, 2009 7:29am
Quoting 137
within 20 years you will be the richest person on earth

pick a small developing country and eradicate hunger.
lol, very naive comments, you're not the first to make them and I doubt you'll be the last! Have you never heard of a little thing called liquidity?

By the way Greenspan was wrong about so many things, this is just another example.

There are plenty of traders making consistent gains from this market by analysing historical data and exploiting the probability of future price direction, it's not rocket science

Anyway what's your story, why so skeptical?
  • #5
  • Sep 19, 2009 7:37am Sep 19, 2009 7:37am
1:1 is better , just takes lots, & lots of screen time & learn to follow pa, imho.

Quoting 137
thanks for the reply. the problem is that if you have a consistent system (3% per month?) then you should be able to work with a fund worth billions of dollars. and then within 20 years you will be the richest person on earth. NOTHING WORKS CONSISTENTLY. notice how you said the turtles 'relied'...if you have found a consistent system with a risk to reward of 2:1, you my friend, should call up the major financial institutions of the world because you are destined for greatness. you will be able to pick a small developing country and eradicate...
  • #6
  • Edited 10:41am Sep 19, 2009 10:39am | Edited 10:41am
Quote:
Originally Posted by 137 http://cdn.forexfactory.com/images/buttons/viewpost.gif
In 2004, former Federal Reserve Chairman Alan Greenspan made the following statement about currency trading in a speech before the Economic Club of New York:

“My experience is that exchange markets have become so efficient that virtually all relevant information is embedded almost instantaneously in exchange rates to the point that anticipating movements in major currencies is rarely possible.

”…Despite extensive efforts on the part of analysts, to my knowledge, no model projecting directional movements in exchange rates is significantly...

There is another Greenspan quote that explains the value of everything else he said...

I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said. Alan Greenspan

Additionally,I have an observation about economists. In a group of 5 of them it is entirely possible to hear 6 different theories about what has happened or what the future holds.


Phil
  • #7
  • Sep 19, 2009 10:58am Sep 19, 2009 10:58am
Ok, well i'd say most traders are looking for consistency and when there is talk of consistency people are thinking regular winners and maybe losers. Traders should be thinking in terms of consistently following their rules, consistent execution of orders etc etc. The turtle method in respect of winning consistency is far from consistent. 8-9 months of consecutive losses and maybe 3 months worth of winners. This method does not rely on consistency at all. It relies on the structure of the market and its short bursts of trends whenevr they might happen. If they weren't consistent in applying their rules then they'd miss these short bursts of the larger trends. The turtles relied on the market to do what it has always done for centuries. Its not about consistency.

Most traders start off with very small account and the only way to achieve profits is to keep the leverage small and progress slowly. So no they won't be wiping off world debt. But I am sure there are banks that could certainly wipe off a small countries debts and erradicate their poverty through taking the money of thousands of novice traders.

I think what you should be arguing is that you won't become successful over night. It takes time, possibly many years for some people. There is an enormous amount of misinformation out there about forex trading, you have every righ to be angry and it takes time to realise what is bullcrap and what isn't. Hang on in there or do something else.

Quoting 137
thanks for the reply. the problem is that if you have a consistent system (3% per month?) then you should be able to work with a fund worth billions of dollars. and then within 20 years you will be the richest person on earth. NOTHING WORKS CONSISTENTLY. notice how you said the turtles 'relied'...if you have found a consistent system with a risk to reward of 2:1, you my friend, should call up the major financial institutions of the world because you are destined for greatness. you will be able to pick a small developing country and eradicate...
  • #8
  • Sep 19, 2009 11:18am Sep 19, 2009 11:18am
I have posted extensivley on this topic in other threads. I am not going to travel that road to perdition again. I will summarize:

The vast majority of retail traders will never accept that the market is random. Period. Double period. This notion does not match up with their hopes, beliefs, and dreams so it is discounted. There are several sound mathematical arguments that point toward randomness (short term) and NO mathematical arguments that refute them. However, nobody really even likes math so traders dismiss these agruments and continue to cling to their comfortable belief system. Short term randomness is also evident by simple deductive logic. Logic is a close cousin to mathematics, so let that be dammend as well. My point is that what people believe is a very, very hard thing to change. With regards to forex, most will not change their minds until they reach a pain threshold that is high enough to make that change happen.

By the way, I never said you could not get rich trading forex. It is possible. That has nothing to do with the randomness of short term currency moves.

Kindest Regards,
  • #9
  • Sep 19, 2009 11:50am Sep 19, 2009 11:50am
Quoting FX-Petra
The vast majority of retail traders will never accept that the market is random.
And they would be right!

The problem traders face is not knowing when it's going to be non random so trades have to be based on the premise that the market is random.....ie the market isn't always random but we have to trade it as if it was.

Markets often move in some spectacularly predictive ways with easily identifiable and exploitable patterns, perhaps you just haven't seen them yet?
  • #10
  • Edited 12:32pm Sep 19, 2009 11:58am | Edited 12:32pm
Just checked out your threads. So you pulled the plug on Forex last year and you mentioned you were successful in the e-mini. I am interested to know why you switched to forex and whether you are still trading the e-mini and how its going?
  • #11
  • Sep 19, 2009 9:10pm Sep 19, 2009 9:10pm
Kind of surprised to hear that coming from a music teacher.

Any harmonic &/or murry math traders out there?


Quoting FX-Petra
I have posted extensivley on this topic in other threads....
  • #12
  • Sep 19, 2009 10:30pm Sep 19, 2009 10:30pm
I would like to know, where Greenspan states that the market is random?
What I understand is that he thinks that fundamental analysis is useless because you can not have an edge with this appoach. One single person can not have more information that the others.

The second statement I understand is, that, if big banks make a profit, it is due to their ability to market making, this means in clear words, they manipulate the markets, e.g. they buy until everybody thinks it's going up and buying also, then they sell suddenly, and the followers are being trapped. That's the way it works every day. (in both directions of course)

For all the naive traders it's like coin tossing, because you can not know, what the big boys will do next to drive you nuts.

Good luck!
/ ... clarifying decisions ... /
  • #13
  • Sep 20, 2009 10:53am Sep 20, 2009 10:53am
Believing the market is completely random simply tells me you don't know how the markets work, haven't put in the research time, and haven't put in the screen time. Saying "I can't do this b/c the market is random" is simply a cop-out...
What makes a market? People, right? So are people's decisions completely random, lol? No...
  • #14
  • Sep 20, 2009 10:27pm Sep 20, 2009 10:27pm
Quoting pipmutt
lol, very naive comments, you're not the first to make them and I doubt you'll be the last! Have you never heard of a little thing called liquidity?

By the way Greenspan was wrong about so many things, this is just another example.

There are plenty of traders making consistent gains from this market by analysing historical data and exploiting the probability of future price direction, it's not rocket science

Anyway what's your story, why so skeptical?
it doesn't seem improbable to me that, with daily average turnover reaching 4 trillion or 4000 billion, that after 20 years or 19,200,000 BILLION dollars later, it would be possible to take out 50 billion. maybe you think this is too high? so let's say 20 billion/10/5/3/2/1?? still it goes without saying that you'd be able to make a ridiculous amount of money.

no it's not rocket science - it's harder, it's impossible, it's based on luck. so all these traders you know of, who make consistent gains (let's say 2%-3% per month?), are all going to be worth tens of millions of dollars eventually or more? no? why not? if you ran a bank and had access to a CONSISTENT system would you not put a significant amount of money toward using that system? if you ran a business and had a product that was guaranteed to make a certain amount of profit over a given time frame, would you not try to sell this product to the highest bidder?

i've tested out A LOT of systems and the only thing that seems to possibly work is nanningbob's countertrend trading but that's no fun because things go crazy every once in a while and the market will take you out. the more i think about it, the more it seems that forex is little more than a coin tossing contest because if it wasn't, it would no longer work efficiently. and of all the things Greenspan was wrong about, i don't think this was one of them.

please prove me wrong. please tell me that profitable systems do exist and that i too can eliminate needless blindness from Africa.
change the future, not the past
  • #15
  • Sep 20, 2009 10:38pm Sep 20, 2009 10:38pm
Quoting 45Fxguy
1:1 is better , just takes lots, & lots of screen time & learn to follow pa, imho.
like i said, if you can make money consistently in this market you are on your way to making tens of millions or more during your career. congrats if this is the case!
change the future, not the past
  • #16
  • Sep 20, 2009 10:57pm Sep 20, 2009 10:57pm
Quoting Phil4x
Quote:
Originally Posted by 137 http://cdn.forexfactory.com/images/buttons/viewpost.gif
In 2004, former Federal Reserve Chairman Alan Greenspan made the following statement about currency trading in a speech before the Economic Club of New York:

[i]“My experience is that exchange markets have become so efficient that virtually all relevant information is embedded almost instantaneously in exchange rates to the point that anticipating movements...
ok so you're suggesting Greenspan didn't mean what he said and it is or might be possible to make consistent gains which aren't based on luck in this market. would it not be logical to assume you're taking this perspective because you believe that? and if you believe that then you must have proof that this is the case, or else you would simply be hanging onto a false sense of what it means to 'trade' in this market.

and if you have proof you either must know someone who you know you can trust and in that case i would suggest you get this person to teach you their method, because then you would be able to build up a consistent track record which in turn would give you access to massive investment funds, and then you can start watching the millions roll in! or maybe you yourself have a consistent money maker? then i hope you wrote this post in your helicopter on your way to your yacht which is on course for the humanitarian mission your foundation has decided to participate in. if not then i'm sure it won't be long.

hey i know people reading this thread must find my statements pretty annoying by now but honestly, does what i'm saying not make sense? if you can't prove you have a consistent method, then you don't have a consistent method. and if you don't have a consistent method, how long are you going to 'search' for?
change the future, not the past
  • #17
  • Sep 20, 2009 11:10pm Sep 20, 2009 11:10pm
Quoting Porkpie
Its not about consistency.
no? with all due respect, how could it not be? if a system has no element of consistency then why the hell should it be traded? the fact is there has to be some sort of consistency. like you said the turtles' system was profitable 3 of 12 months - that is an example of consistency. a system that doesn't have any measurable profitable consistency is definitely not a tradeable system. it is a random pattern generator.
change the future, not the past
  • #18
  • Sep 20, 2009 11:16pm Sep 20, 2009 11:16pm
Quoting FX-Petra
I have posted extensivley on this topic in other threads....
well put!

but are you suggesting that there are ways to negate the market's randomness using higher timeframes? or are you just saying what Greenspan did, that the market makers are the only consistent winners whose profits are not based on luck?
change the future, not the past
  • #19
  • Sep 20, 2009 11:25pm Sep 20, 2009 11:25pm
Quoting pipmutt
And they would be right!

The problem traders face is not knowing when it's going to be non random so trades have to be based on the premise that the market is random.....ie the market isn't always random but we have to trade it as if it was.

Markets often move in some spectacularly predictive ways with easily identifiable and exploitable patterns, perhaps you just haven't seen them yet?
these patterns are not predictable and because of this are only identifiable after they have occurred. how do these facts help you to make money? or can you somehow magically see the future and are therefore destined to make consistent gains guaranteeing you a life of unbelievable riches and eternal success?
change the future, not the past
  • #20
  • Sep 20, 2009 11:36pm Sep 20, 2009 11:36pm
Quoting jpat1023
Believing the market is completely random simply tells me you don't know how the markets work, haven't put in the research time, and haven't put in the screen time. Saying "I can't do this b/c the market is random" is simply a cop-out...
What makes a market? People, right? So are people's decisions completely random, lol? No...
interesting perspective. i think it comes down to the fact that you can't CONSISTENTLY predict patterns therefore they appear randomly and because of this it is easily arguable that the market, for all intents and purposes, is perceived as a random set of events. and what is a system? it is a way in which to 'perceive' a market.
change the future, not the past
0 traders viewing now