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  • #141
  • Dec 16, 2006 8:56pm Dec 16, 2006 8:56pm
Quoting Tony Wonder
Simply put technical analysis works because we use it!

Yes it is something made up out of humans inherit need to understand and simplify things that can not be understood easily.

100 years ago trading the stock market technically would have been close to impossible. 30 years ago technical analysts were laughed and thought to be crazy. Today just about every trader in the world uses some form of analysis.

Yes humans to have a need to make a pattern out of everything and to simplify the most complex thing. Easy is one of the most powerful words in the English language. We want everything to be easy and technical analysis simplifies a complex market it brings it all down to a few lines.

Are those lines useful? Yes they are useful because of humans inherit need to simplify everything in life.

They are useful because however many years ago thousands of people bought into the idea of an easier way to trade forex. They are going to continue to grow more and more useful as thousands upon thousands of new traders come into this market every week all using technical analysis.

The fact is tech analysis is slowly becoming more powerful than fundamental analysis and soon fundamental analysis will become useless. When we get 100,000 new retail traders next year and 200,000 the year after most of which using tech analysis fundamentals will become obsolete. I see it myself the central banks are losing their grip on the market they do not have as much effect as they use to.

It's human nature we like to simplify things we had ovens we made microwaves we had bikes we made cars.

What it all comes down to is technical analysis if used right is the most effective way if predicting market movement.
Yes, a prime example of a self-fulfilling prophecy
  • #142
  • Dec 17, 2006 3:31am Dec 17, 2006 3:31am
It is exactly the opposite. Markets becaming more and more random because people use technical analysis.(find Merlinīs post about "signal inflation"). We use technical analysis to examine how would the market behave in natural way, not because others are using it to.

When market volume will be created mostly by small pseculators, making money will very difficult. It is basicly easier to outsmart big banks who are just buying because of interest rates then bunch of small speculators who are trying to outsmart you.
  • #143
  • Dec 17, 2006 4:04am Dec 17, 2006 4:04am
right I didn't say tech analysis will make the market easier I said its making fundamental analysis obsolete.

at the moment as in right now technical analysis is more rpractical than fundamental and it is working better than it did 10 years ago.

Read what I said, don't just read half and give an opinion man.
  • #144
  • Dec 17, 2006 5:53am Dec 17, 2006 5:53am
put technical analysis works because we use it!

In my post, I reacted on this statement.
  • #145
  • Dec 17, 2006 6:20am Dec 17, 2006 6:20am
Technical analysis doesn't predict how the market moves in a natural way.

Nostradamus explaind how the future of the world would unfold in a natural way, as do tea leaves and astrology.

Do they really work though? No

But wait they do, why? because enough people believe they do. People read into what Nostradamus wrote and think he predicted September 11th. Yeh but his other 900 predictions didn't do much of anything did they?

Do you think that the natural occurrence of some mathematical formula in flower petals really tells us if GBP/USD will rise or drop? (Fibonacci)

No it doesn't (didn't rather) but it does now because enough people use it. The market is at a stage where it has become very predictable thanks to technical analysis. My dad use to be a full time trader and was for 40 years I have been in this game ever since I was 10 I know what I am talking about. There is no doubt in my mind as time progresses the market will become more predictable. What will happen after that point I do not know, it may very well become unpredictable. I know that 20 years ago using Fibonacci would have got you NOWHERE but today it is very effective.

It's not hard to see, a market that use to be run by central banks is now being taken from them. 20 years ago they controlled this market, they still do but they have to work harder. In the next 20 years when millions of people are trading Forex do you think that fundamental analysis will still work?

In my opinion the market will become more and more predictable in the next few years, like it has in the past 10 years. 30 years ago technical analysis was laughed at now its what every new trader learns.

I agree with the starter of this post that patterns are ridiculous, the human mind is built to recognize patterns. The thing is patterns work now because so many people look for them.
  • #146
  • Dec 17, 2006 9:01am Dec 17, 2006 9:01am
What works or doesn't work is strickly a matter of one's skill level and belief systems.

The like to have it both ways crowd: TA doesn't work but if it did it is only because so many use it.

The markets are not less and not more complicated. random or harder to trade than 10 years or 100 years ago.

Look at a chart from the past and one from today without the time shown. Same overall volatility and patterns. The more things change the more they stay the same.

Also look at a non-financial related chart. You can find the same patterns. I am not saying one can predict any and everything.

But from my earlier post, 55%+ of the times a down close or 2 down closes in a row are followed by an up day. Tested over many "random" markets over time

And oh by the way, it is called drunken sailor. And L.Williams further said if you can't believe this point then you might as well throw darts. Now as to how to throw darts, is it like a drunken sailor or technically
  • #147
  • Dec 17, 2006 9:11am Dec 17, 2006 9:11am
If you say trading was not diffrent 20 years ago you are ignorant. So many changes in the years like TA and the internet have alterd the face of trading in all markets.

Not to mention new rules and restictions.

Technical analysis came into populour sue 30 years ago before that stuff like fibonaci did not work. Today it does because the market has changed.

Central banks admitedly have less control over the market than they sue to 20 years ago because the market is changing.

The induction of retail forex trading a few years ago changed this market dramtically.

Have you been trading for 20-40 years?
  • #148
  • Dec 17, 2006 2:35pm Dec 17, 2006 2:35pm
So you imply that TA works because people use it.
-> More people use TA, more accurate the TA will be
-> The more accurate the TA will be, the more money can be made by using it
-> If whole market starts using TA, everybody will start making money, wonīt they.

Well... If one makes money, someone else has to lose it, and since everybody is using winning TA, who will be losing it?

Other traders arent your friends who will help you to make money by start using same methods..

The sole purpose of TA is to give you the edge OVER THE OTHERS, mainly, OVER THOSE WHO AREN USING IT. If market behave naturaly(long trends resulting from crowd behaviour) tools like MA would make a fortune.

Could anyone reasonable add to this discussion please?
  • #149
  • Dec 17, 2006 5:05pm Dec 17, 2006 5:05pm
I didn't say that I said overtime the market will become more predicatbale as mroe retail traders come in. It has already in the past 20 years.

I have been in this for 25 years and my father for 45.

The market over time has become more rpedictable especially with the induction of tech analysis. I am not saying its predictable to newbies or that its easy I am saying it is less eratic than it was 20 years ago.

I didn't say the whole makret will start making money that is impossible. The market will be based almsot totally on TA and it will become more predictable. People will still be losing I NEVER SAID THE MARKET WOULD BECOME EASY.

All I said was it would be more predictable and that fundamentals would become obsolete. You elliminate a whole from of analysis especially one as erreactic as fundamental analysis the market will become more predictable.

Don't put words in my mouth.
  • #150
  • Dec 17, 2006 6:02pm Dec 17, 2006 6:02pm
All you have to do is look back on charts in the 70's to early 90's the market moved diffrently to what it does now. So if you tall me the market isn't changing you don't know anything about trading.
  • #151
  • Dec 18, 2006 4:33am Dec 18, 2006 4:33am
"I didn't say that I said overtime the market will become more predicatbale as mroe retail traders come in. It has already in the past 20 years."

I dont understand this man.

You are peating same thoughs time and time again, you are not reacting to my posts.

FA can never become obsolote , FA is the main force which moives the market. I am lazy to explain, but If you had at least basic economics skills, you would know that. In long term run, exchange rates reflects power of nation economies where given currency is used. Volume created by minor traders can never be so large to override this.

If you donīt know this you cant be in bussines for 25 years.
  • #152
  • Dec 18, 2006 5:17am Dec 18, 2006 5:17am
What you all assume is to understand what "random" mean. No one on earth knows what that means, only the mathematician flip some numbers to 'explain' it.

From PSI researches of the past it is known that 'random' can be influenced, not only realtime, but backward in time too. True randomness does not exist. It is predictable in probablities and there we are back at the markets. Someone who is trained to predict the market moves gets a better attention in the real world. Trading is like learning any other skill, it will open your awareness to other, prior only unconsciuos noticed things.

People who trade only for some hours are not even traders in my understanding.
  • #153
  • Dec 18, 2006 5:22am Dec 18, 2006 5:22am
interest rates don't move th market people move it, peoples reaction to interest rates rather. When we have million and millions of new traders in this business all using technical analysis who is left?

20 years ago a central banker coughed in public the market would move a few hundred pips. Today a central banker has to literally spell out that they are raising or cutting rates to get a movement of a few hundred pips.

How do you explain this?

In the last 5 years with the induction or retail trading the market has become less and less affected by fundamentals. This is a fact I have seen it over the years and there are tons of articles on it.

For something that cant ever become obsolete it is sure becoming weaker at an alarming rate.

I think the problem with you is that you are not farsighted enough and have not got enough experienceto understand these things.

Lets do the numbers...... 2 millions retail traders each putting in 1 standard lot or $1000 at 100:1 leverage is $200 Billion and most traders trade more than a standard lot. You think that when this market gets well known and every guys with a spare $5k jumps in technical analysis wont override fundamentals?

The thing is ITS ALREADY STARTED! Fundamentals are becoming less and less market moving.
  • #154
  • Edited 5:45am Dec 18, 2006 5:30am | Edited 5:45am
Quoting Tony Wonder
Fundamentals are becoming less and less market moving.
Thanks for the good laugh ...
  • #155
  • Dec 18, 2006 5:47am Dec 18, 2006 5:47am
Man I have been in the market for years, look at gbp/usd Monthly chart back in the 70's look at the range you would see then tell me fundamentals have as much effect now as they did back then.
  • #156
  • Dec 18, 2006 5:50am Dec 18, 2006 5:50am
Quoting Tony Wonder
interest rates don't move th market people move it, peoples reaction to interest rates rather. When we have million and millions of new traders in this business all using technical analysis who is left?

20 years ago a central banker coughed in public the market would move a few hundred pips. Today a central banker has to literally spell out that they are raising or cutting rates to get a movement of a few hundred pips.

How do you explain this?

In the last 5 years with the induction or retail trading the market has become less and less affected by fundamentals. This is a fact I have seen it over the years and there are tons of articles on it.

For something that cant ever become obsolete it is sure becoming weaker at an alarming rate.

I think the problem with you is that you are not farsighted enough and have not got enough experienceto understand these things.

Lets do the numbers...... 2 millions retail traders each putting in 1 standard lot or $1000 at 100:1 leverage is $200 Billion and most traders trade more than a standard lot. You think that when this market gets well known and every guys with a spare $5k jumps in technical analysis wont override fundamentals?

The thing is ITS ALREADY STARTED! Fundamentals are becoming less and less market moving.
Well, minor traders still contribe by less then 2% to total volume.

This duscussion is pointless because you dont get basic principles. I recomend you to read something about political economy and exchange rates.
  • #157
  • Edited 6:12am Dec 18, 2006 6:00am | Edited 6:12am
how long have you been in the market?

Where you around 25 years ago when the market would consistantly fall for years and years and then consisitanly rise for years and years?

Does the market still do that? NO!

Not sicne the 90's when Tehc analysis came into it's prime....

Explain this to me since you know more about the market than I do?

Fundamental analysis use to drive the market for 10,000 pips runs now it doesn't, explain that!

Over the past 20 years fundamental analysis has become less and less market moving the charts back it up.

What backs up what you say? what someone wrote in a book.

I udnerstand the basic principles of what drives the market but when you have millions of people contributing hundreds of billions a day 200, 300, 400 billion you say the market will move based on fundamentals?

By saying that you are suggesting that hundreds of billions have no effect on the market......

Fundamental analysis will become obsolete in the future a America cuttingrates will move GBP/USD less than it does today, just like today it mvoes less than it did 30 years ago when a rate cut is announced.
  • #158
  • Dec 18, 2006 6:05am Dec 18, 2006 6:05am
This is an interesting discussion. Let's keep it a friendly discussion.

Remember rule number 1

Thanks Scott
Moderator
  • #159
  • Edited 7:16am Dec 18, 2006 6:11am | Edited 7:16am
You guys should cheer-up, give one another a hug and agree to dissagree.
  • #160
  • Dec 18, 2006 7:07am Dec 18, 2006 7:07am
Market volatility is decreasing, that is a fact. However this is not because of introduction of TA but because of economies of countries are melting. More connected they are, more stable are the exchange rates. Simply put, world currencies are becoming one single currency. (This is very rough explanation)

By now minor traders contribute no more then 2%, that is a fact. Forex boom is going to end sooner or later, so it is impossible that volume created by minors ever exceeds 10%.

If volume created by minor speculators exceeds certain level, namely that exchange rates stops corresponding with relative strenghts of econimies of participating countries, the forex stops fullfilling its original purpose and became playground of small speculators. This could bring economical instability which is what nobody wants and therefore forex would be shut down.

Another arguments: Amount of funds which brokers provide to clients for purposes of leverage is limited. With increasing number of speculators, amount of money wont increase. From that I conclude that leverage will be lesser and lesser.
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