Alan Greenspan on Currency Speculation | Forex Factory

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Alan Greenspan on Currency Speculation

  • #1
  • First Post: Jun 4, 2007 8:28pm Jun 4, 2007 8:28pm
no model of porjecting exchange rate movements is significantly superior to tossing a coin.

"The exceptions to this conclusion are those few cases of successful speculation in which governments have tried and failed to support a particular exchange rate.
Nonetheless, 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 exchange rate determination but from the revenues they derive from making markets" - Alan Greenspan 2004
  • #2
  • Jun 4, 2007 9:07pm Jun 4, 2007 9:07pm
great quote. arguably the world's greatest central banker telling the quants that their systems dont work

even though i know with my own eyes that mechanicals systems can make high returns, i totally agree with greenspan. he is NOT saying its impossible to make money in the currency market with a mechanical system. the key part of his phrase is "no model projecting directional movements". but you dont have to predict the direction to make money, and most of the profitable quants i know arent even trying to predict direction.
Relax and be happy.
  • #3
  • Jun 4, 2007 9:11pm Jun 4, 2007 9:11pm
Simply brilliant!

I completely agree that the best speculator in the whole world only make 50% of accurate decision -in the best cases I think- but the profitability comes from CUTING THE REMAINING 50% OF WRONG TRADES ON-TIME! After that, the profits will take care of themselves.

And about the banks superior performance I completely agree this guy -LOL!- they are able to perform better due to their condition of being marketmakers... and of course besides the multimillion investings they make in fundamental and technical analysis.

iiivb


Quoting amylase
no model of porjecting exchange rate movements is significantly superior to tossing a coin.

"The exceptions to this conclusion are those few cases of successful speculation in which governments have tried and failed to support a particular exchange rate.
Nonetheless, 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 exchange rate determination but from the revenues they derive from making markets" - Alan Greenspan 2004
  • #4
  • Jun 4, 2007 10:03pm Jun 4, 2007 10:03pm
"their insight into exchange rate determination"

Don't you think that the big boys are a least a little bit interested in keeping a pulse on the general market bias in one direction or another? I do not see them as sitting on their hands where the fundamentals are concerned. The fundamentals as a combined set of data would give an impression of market pressure or bias toward certain direction, I think.
  • #5
  • Last Post: Jun 5, 2007 7:43am Jun 5, 2007 7:43am
Quoting merlin
even though i know with my own eyes that mechanicals systems can make high returns, i totally agree with greenspan. he is NOT saying its impossible to make money in the currency market with a mechanical system. the key part of his phrase is "no model projecting directional movements". but you dont have to predict the direction to make money, and most of the profitable quants i know arent even trying to predict direction.
Yep. The good traders don't try to predict the market, they follow what the market is doing. Predicting the market is nearly impossible, and at best, you can only have a rough idea of what the next one or two price bars will do.

I read a book by someone who's been successfully trading commodities since the early 80's. In the book, he said that trading is like navigating down a river in thick fog: you can see the river banks on each side to get a feel of which direction you are currently going, and you can even see a little bit ahead of your boat... but beyond that, there's nothing but a blank cloud.
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