Any constants in the market?

This thread is to find if there are any constants in the market so that a system could be built. If you have one please share.

My short list:
1.Chaotic
2.Random movement

With these two, I find it impossible to measure the market. If it was just random then it could be won with some consistancy.

Please share your thoughts.

imo the market is like a roulette wheel - but instead of 0 being green its red or black, you just have to figure out what colour it is, however

change is guaranteed 100%

Hi Trevman,

...a roulette wheel with a small but important difference: in roulette, the wheel dos not care how much money is put on red or black by the players - and the probability does by definition not change - stays constant.

If you take the markets and say long is red and short is black, (and the market would stop and re-bet after each try) you could make that comparison.

Instead, the more people go long (red) at a given time (a bias/trend develops) towards red and the more people come in the game and see that red is in favour (up-trend) it will carry on until the (red) chips are gradually taken off the table and black (shorts) start to dominate.

In roulette, that would mean that if there were 20 people betting red and only 10 people betting black (same stakes for argument sake), the ball would have to fall on red - which it doesn't.

That is why many roulette players come up with martingale or fixed fraction bet sizes, since the chance is constantly equal (well, forget the zero for a moment)

regards
daytrading

mrjtdude,

There actually is a constant and it is quite significant:

Investors will always gravitate to currencies that give them the highest return (i.e. higher interest rates)...

...this is where interest rate differentials come in:

You can make some very nice predictions based on this fact with currency pairs that have the greatest interest rate differentials (like AUD/USD, EUR/AUD <- i like this pair the best since it displays very pronounced price movements, and of course NZD/JPY which has the highest differential)

The greater the difference, the easier it is to see where investor tend . Price movements will be more volitile short-term, but this is something that long-term traders benefit from nicely.

Think of investors are pushing against a rubber band by default in the direction of a higher-yielding currency, but when the pressure increases, they snap back to a safe-haven currency like the EUR (or even the USD still). Look at a daily, 6 month chart of the EUR/AUD pair and you'll see this action displayed in an almost ideal way!

So, to recap: A constant is that investors will always want more return for their money in times of normal volitility (business as usual) or when times are really good (stock market rally), BUT when times are bad (take august and november) investers will go into bond, lower-yielding currencies, and sometimes gold (although this also depends on the dollar, since a low dollar tends to increase the price of oil which in turn increases gold), etc...


take care!

rudenstein