Are there any constants in trading?

Hi all,

I was wondering whether there are truly any constants in the markets, around which one can build his/her strategy?

Or are there only endless variables?

For example, when trading currencies, it's important to know the central bank policy. Are there any others?

Nothing in the market is constant. Sentiment ebbs and flows daily and the underlying reasons constantly shifting. You don't want to be focusing on endless variables. Just focus on one and that is what the guys and gals that move the markets are doing.

The fact that you have to keep learning can be a constant for all of us. Because the market is dynamic and requires consistent learning and practice.

There are these everlasting constants that will always occur every day without fail.

1. Price will move up
2. Price will move down
3. Not necessarily in the above order.

Not much help... I know. But if you focus your study on WHY price moves up, or down, or sideways. You will have advanced far beyond the majority here and will shave at least 5 years off your journey to consistent profitability.

Would you give us some more tips please, Mr. Don Pato? :-)

1. Price rises when the volume of buying overwhelms and surpasses the volume of selling.
2. Price falls when the volume is selling overwhelms and surpasses the volume is buying.
3. Price ranges when neither side (buyer or sellers) can muster enough volume to overwhelm the other.

This flow of orders is the basis of the "constant" you are looking for to base your trading methodology. Learning to "see" this constant flow of orders in and out of the market is what gives you the skill to time your entry and exit.

Anything more involved will require you to dig in and find the relevant information and apply it. Hint:. You will never find it in a mathematical indicator.

of course there are constants !!!

trade price without time and you will see them clearly

There are many different strategies which are constant, but not 100% accurate, like swing trading. From my experience with the market over the Years I have realized that trading forex is not only in the chart, but in the information I collect every day doing unendless hours of researching. A chart and to execute an order is technical easy, but the psychology you will need and the resources are harder to find, so collect the best from the net and I am sure you are going to make it.

warning not all are axioms in the true sens or constants, think at this post as a false truth if i can call it like that they are some of my false belives that i use to aproach markets. (i don't know if they are any good or not and i don't care, i did not discover any of them i just found them study actual and historic markets, maybe they don't even exist, maybe my mind just telling me that they exist but i'm fine with the idea and aware of it or maybe just i really want to belive that i'm aware of it, my flows and in the end of the flows of the idea)

Price itself it's an indicator. ( it's the most honest indicator of popular sentiments)

Profitable trading is like taking advantage of people flaws, trading people perceptions if i can put it like that.

in market like in life "risk free" dosen't exist, and even the logic dictate it: no gain without risk. every situation, decision has some risk to it.

Huge moves are often global in nature.

Money moves markets.

Today Price will break yesterday low, high or both .Today Price will not break yesterday high or low.

Volatility, in and of itself, is not risk; the risk is with the uncertainty in the thing that moves.

Just because your win rate is 90% doesn’t mean that the 10% can’t wipe you out.

While doing that pay attention to RISK, it's the most honest indicator of delusions and whie doing that pay attention to Capital Allocation it's the most honest indicator of prudence. After doing all this, rest. You don't know tomorrow.

Every bull market creates overly aggresive traders who crash out once things stop going their way. Some people think they are geniuses for being aggresive when things are going up, only to fail out whent it stops. There are also the smug bearish types who have that "told you so" personality and miss out big. To be successful you have to be able to switch and constantly reevaluate.

Trading is a human game, as a result emotions affect prices as much as or perhaps more than the news and price movments themselves affect future price movments.

i will not debate if markets are random or not, if they are efficent or not what i'm saying is that in market is some decision making process (good or bad, based on good information or not) by people or algoritms and this in effect can shape the form of things and when the thing have a new form, same process start again.
Statistics don't create events, events create statistics.


Volatility is mean reverting.

we humans are pattern seeking animals., craving signals,ordrer and connections

The longer it takes to form the consolidation, the bigger the expected move to follow.

Imperfect understanding is human condition, there is no shame in being wrong, only in failing to corect our mistakes. They cannot obtain perfect knowledge of the market because their thinking is always affecting the market and the market is affecting thei thinking. the Palindrome

The price you see before you is the distillation of all known opinions and wisdoms, fundamental and technical, that has the faculties to bet money about that company, commodity or instrument

all trading is discretionary (even at funds like Renaissance they first started to buid/design profitable system/approches to trade markets and even if they deisgned 100 profitable systems in the end the people will select just a number of them to use them in they fund) hope make sense.

a trend can be determinated after the fact. some trends are false trends (even if they persist for 1 year or more) they don't have fundamental, economical and geopolitic basic (the trend in that asset is made only by people behaviour: they only speculate and make decissions and they exprim they decissions taking long and shorts possitions) this process can be found in every market from currencies to stock market.

for example: if a company is listed on stock market even if the company is not profitable the price of shares can go up and up and because the stock price increase will atract new buyers (from small retail traders to some hedge funds and others) of course others speculators will go short but the thing is that beccause the stock is accting so good the company can borrow money at cheap rates and in fact the stock will go higher and after that the company can borrow even more cheap that before, is a self reinforcing proccess that can go on and on for a very long time creating trends and in some cases "bubbles" that in the end will blow up slowly or fast.

smart people want to be right because they are used to it, its athing that greew with them from when they have been young and its very hard to break from it and they can't accept that simpe things are working, is like wasting their intellect.

fact: black swan and dragon king exist, or call them abnormal events (like people markets have a chracter, behaviour, some are normal people, some not but from time to time both are doing some irattional decisions ec.),
fact: when they happen they are positive and negative in the same time (trader A was long eur/chf so for him is negative/bad swan but trader B was short eur/chf for him was postive swan)
fact: nobody can design a system that can skip opening position before a black swan

In the past 20 years the Dow Jones daily monday to wednesday gains add up to 200%, which is not just 200% because they are "compounded" daily (it goes from 2000 to 11000). Yet on thursday and friday, they add up to -7%. same for sp500 monday is more bullish than others day.

Volatility, in and of itself, is not risk; the risk is with the uncertainty in the thing that moves.

When we buy a stock, we exchange a fixed amount of money for fluctuating value. When we sell, we exit fluctuation for the fixed amount. So buy/sell is just increasing/decreasing our exposure to volatility. All investing is volatility, choose a comfort level before entering.

from middle of '90 to 07 after sp500 has droped 3 days in a row it has risen more than 4 times its average weekly gain over the next 5 days

So many people bank on rare events being rare. But they underestimate multiple uncommon events generating just as rare results. Two 2stdv events are 2.5x more likely than one 4stdv event. Unrelated events, related in time, make high unlikely far more likely.

people/traders are irational
price are nongausian
price are corelated

What we do changes what we know. What we know changes what we do. Jean Piaget

reallity is that money is the most important asset (when you will get this one, your trading will evolve as never before) and in fact the money is the basic thing that affect prices of assets, people perceptions and decissions eg.
every moment money change hands, pockets and are passing from one asset to another, from one country to another one, from one currency to another one. this is the power of money, and is the biggest force that drive the markets and the world itself. as Soros is saying :" the most important fundamental is credit flows." yes money flows are moving markets.

gaps: breakout gaps, reversal gaps, continuation gaps. they have any edge or not? many, many years ago lumber gapped limit up one day. some people went short. next day it gapped limit up again. more people went short. then it gapped limit up again next day and some short toke the loss, others added to the losing possition and otherts whent short again. it gapped limit up for 20 days in a row. (a small lesson)

p.s. a small lesson about risk (i don't preach that people should bet on reversal or breakout gaps).
try to study markets, people and charts as old as possible.

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hey ray...... another constant comes to mind....... "talk is cheap but commitment of traders is money"......h