Forex as a system with what rules? What laws move forex prices?
I have been obsessed with forex for a long time… As soon as I’ve learned to automate and backtest strategies I’ve been doing that day and night. I have tested enough strategies to write a book… However I have not met good results. There were good strategies that seemed to work, but not on every major currency… Anyways, results have not been that great. Then I’ve started to think, what is the cause of the problem? Is there an underlying cause of all causes that I am missing? And then it downed on me…
The most important question regarding Forex that must be solved is “what are its rules? What is its system?”. Imagine if an alien observed Chess Players and chess game. A smart alien would make detailed and accurate notes of : number of people, size of the game board, colours, number of figures and how they behave. A game may be a mystery to an Alien who might not even KNOW what he is observing… The Alien would NOT make a good chess player, unless, it learns the rules of the game. Then it will all make sense and alien will win. Same is here… I was looking at the indicators, at the currency pairs. I was making thousands of calculations…. And now I realize that the key is what matters.
<FONT face=Arial><FONT size=3>One thing to add is that FX may not be the same thing as the Stock market, even though they may LOOK the same, they aren’t the same and may follow vastly different rules (and not just the obvious differences). Like 2 variations of a card game, may use the same deck and some rules may be similar – but it has enough variance to make the player who is not aware of additional rules and internal logic, loose… For example candlestick were developed by Japanese RICE traders. What the **** it has to do with currency trading in 2005 I have no idea (I checked candlesticks patterns, they suck by themselves).
Unfortunately all the courses the brokers teach (only for their commercial benefit) and all the books teach miss the mark. If you buy a book on Forex (or trading in general) you will most likely see the standard rehash of these things:
Currency Pairs, spreads, what is bid/ask, value per pip, some other general things that any proper trading station should calculate for you, general volatility of trading sessions,
Importance of exiting before news, some general fundamental analysis (which if followed mechanically works about 50% of the time), some standard bunch of indicators that come on every/most platforms (with all the pics showing how well they work, while avoiding the equal number of situations when these indicators bomb), some major players, and how SAFE and how beneficial (safe and beneficial to the brokers) the forex is.
If all these things worked, then why do 90% of traders fail? Who benefits? Trading is a negative sum game, money earned is money lost. If everyone is taught to look for the same stuff, if everyone has access to computers and programs that calculate all the popular indicators, who would be smart (or dumb) enough to take the other side of a (good as brokers claim) position?
Why do you think that top, richest and the brightest traders would give their money away to some newbie who read another cloned fluffy book about Forex?
Decades ago before the computers emerged, you had to calculate all the indicators by hand. Rich banks could hire dozens of people manually calculating and plotting indicators by hand. Maybe this, slippage and spread are some of the reasons why most trading was long term (try to calculate stochastic for every 1 minute bar). If indicators worked, they probably worked much better decades ago before everyone had access to them. Now everyone can use them which brings a question – against whom are you playing? Also another equally important question, why are there so many indicators? If there is a good indicator, why create another one? Many programs have dozens of indicators, as if you must use all of them at once. What each indicator tries to add to previous one? I have done extensive research into indicators and found that most of them ARE SIMILAR if not identical to each other. After al,l there is just 4 aspects to a bar (OHLC) and to tell you the truth, taking the close value vs OHLC doesn’t make a difference. Plot ema of closing price and ema of OHLC/4, the movement will be 99% identical. The indicators are obviously based on the price in one way or another, thus a shift in price will shift the indicators, not vice versa!!!
FairyTales of Dr.Elder
Even mathematically analyzing so called oscillators and trend following shows that they are virtually identical. There is no such thing as “range indicator” or trend indicator. The difference is only in how the data is presented. The neuronet analysis shows that “oscillators are good for trend following and not vice versa” . If the prices are moved by people than what formula can predict that? What indicator shows what Greenspan will say or where Bin Laden is? What indicator shows the future action of people?
Some say that Psychology is the key. Hey, you got to write books, you have to have that “edge” over other writers and you write about what you can. However psychology while being very important, cannot make up for a bad system. Easy test is to write an automated program (PC is emotionless, fearless, tired less machine) and see how well it performs . As far as I know Holy Grail does not exist… yet…
Also as I was talking before, stuff written for Stock market may be useless for the Forex, like strategy for Poker is useless for Bridge…
What is more important? Some stock from some town in Alabama or Currency such as USD? If some stock crashes, 99.999% of the people will not even know about it. Now what if USD crashes (and all the rest of the currencies are connected to it, so they will crash as well)? It will be a financial world crisis… Banks, international companies, entire financial infrastructure that holds us its slave will crumble… Of course the powers that are don’t want that to happen and they are well aware of manias that mass psychology can bring. Thus, how can they give us the power to control the rates? Remember, one cent difference in an exchange rate may mean billions lost for the banks that daily exchange trillions of dollars. If the rate is moved by the majority of the people and knowing how fragile the groups can be, do you really think that rates are allowed to free float? Look at stock charts and at forex. You will notice that Forex rates do not crash… Today with the technology it is not hard to control the numbers that appear on peoples terminals… After all it can mean great profits for the organizators of the game. They see the peoples positions and reverse the rates, thus pocketing the money. After all, what kind of people would offer 100:1 leverage to you? Brokers are not altruists and they are people who need to feed their families as well and free cheese is found only in a mousetrap.. Being a negative sum GAME (where organizations play against you) it starts to answer the question: “Why is everyone taught the same from all the courses and books”…. When all orders are all in one area, when all indicators show the same info it makes catching fish so much easier…
So the major questions are:
What moves the rates? They can’t free float because that doesn’t guarantee that they will be where importers/exporters and banks want them. Banks are in it for the money and power, and controlling us is what they like to do.
if they are moved by people than what kind of indicator would work and how math or geometry possible be used to explain peoples choices?
Why are there so many indicators if they are virtually the same and available to everyone? Who is supposed to loose?
How can some simple, and linear math determine the future rates? Bill William’s chaos theory is incorrect. Alligator is a modified moving average, not something new. What the frick does divergence signify other than some permutations of old numbers?
Why is everyone taught the same?
Why do 90% of traders loose? It is said that two biggest groups of traders are: Engineers (smart at math) and farmers (hard working and patient people), yet I have read that successful traders aren’t necessarily the smartest ones. Is this one of the keys? Even the miniscule minority of traders have had periods where they lost almost if not everything (some even their life).
Why do very successful traders need to sell expensive courses, merchandise and so on? Why do people such as Bill Williams, Dr. Elder and other heroes of trading sell so much at such high prices? If they are pro at trading then they can easily live very well on trading profits alone and enjoy it (especially if you are a level 5 or whatever Bill Williams calls it).
It is not unlikely that people who do WIN did it because they were either lucky or had the kind of information that we cannot have. Of course these people would not go around telling everyone that they were merely lucky or were spoon fed. It is not good for business, your ego and people would not like to listen to this brutal hard truth. You can make a lot of money teaching and selling books. There were millions of traders yet there are only few who make it rich. This does not go against “random winnings” hypothesis.
Comments anyone?
I have been obsessed with forex for a long time… As soon as I’ve learned to automate and backtest strategies I’ve been doing that day and night. I have tested enough strategies to write a book… However I have not met good results. There were good strategies that seemed to work, but not on every major currency… Anyways, results have not been that great. Then I’ve started to think, what is the cause of the problem? Is there an underlying cause of all causes that I am missing? And then it downed on me…
The most important question regarding Forex that must be solved is “what are its rules? What is its system?”. Imagine if an alien observed Chess Players and chess game. A smart alien would make detailed and accurate notes of : number of people, size of the game board, colours, number of figures and how they behave. A game may be a mystery to an Alien who might not even KNOW what he is observing… The Alien would NOT make a good chess player, unless, it learns the rules of the game. Then it will all make sense and alien will win. Same is here… I was looking at the indicators, at the currency pairs. I was making thousands of calculations…. And now I realize that the key is what matters.
<FONT face=Arial><FONT size=3>One thing to add is that FX may not be the same thing as the Stock market, even though they may LOOK the same, they aren’t the same and may follow vastly different rules (and not just the obvious differences). Like 2 variations of a card game, may use the same deck and some rules may be similar – but it has enough variance to make the player who is not aware of additional rules and internal logic, loose… For example candlestick were developed by Japanese RICE traders. What the **** it has to do with currency trading in 2005 I have no idea (I checked candlesticks patterns, they suck by themselves).
Unfortunately all the courses the brokers teach (only for their commercial benefit) and all the books teach miss the mark. If you buy a book on Forex (or trading in general) you will most likely see the standard rehash of these things:
Currency Pairs, spreads, what is bid/ask, value per pip, some other general things that any proper trading station should calculate for you, general volatility of trading sessions,
Importance of exiting before news, some general fundamental analysis (which if followed mechanically works about 50% of the time), some standard bunch of indicators that come on every/most platforms (with all the pics showing how well they work, while avoiding the equal number of situations when these indicators bomb), some major players, and how SAFE and how beneficial (safe and beneficial to the brokers) the forex is.
If all these things worked, then why do 90% of traders fail? Who benefits? Trading is a negative sum game, money earned is money lost. If everyone is taught to look for the same stuff, if everyone has access to computers and programs that calculate all the popular indicators, who would be smart (or dumb) enough to take the other side of a (good as brokers claim) position?
Why do you think that top, richest and the brightest traders would give their money away to some newbie who read another cloned fluffy book about Forex?
Decades ago before the computers emerged, you had to calculate all the indicators by hand. Rich banks could hire dozens of people manually calculating and plotting indicators by hand. Maybe this, slippage and spread are some of the reasons why most trading was long term (try to calculate stochastic for every 1 minute bar). If indicators worked, they probably worked much better decades ago before everyone had access to them. Now everyone can use them which brings a question – against whom are you playing? Also another equally important question, why are there so many indicators? If there is a good indicator, why create another one? Many programs have dozens of indicators, as if you must use all of them at once. What each indicator tries to add to previous one? I have done extensive research into indicators and found that most of them ARE SIMILAR if not identical to each other. After al,l there is just 4 aspects to a bar (OHLC) and to tell you the truth, taking the close value vs OHLC doesn’t make a difference. Plot ema of closing price and ema of OHLC/4, the movement will be 99% identical. The indicators are obviously based on the price in one way or another, thus a shift in price will shift the indicators, not vice versa!!!
FairyTales of Dr.Elder
Even mathematically analyzing so called oscillators and trend following shows that they are virtually identical. There is no such thing as “range indicator” or trend indicator. The difference is only in how the data is presented. The neuronet analysis shows that “oscillators are good for trend following and not vice versa” . If the prices are moved by people than what formula can predict that? What indicator shows what Greenspan will say or where Bin Laden is? What indicator shows the future action of people?
Some say that Psychology is the key. Hey, you got to write books, you have to have that “edge” over other writers and you write about what you can. However psychology while being very important, cannot make up for a bad system. Easy test is to write an automated program (PC is emotionless, fearless, tired less machine) and see how well it performs . As far as I know Holy Grail does not exist… yet…
Also as I was talking before, stuff written for Stock market may be useless for the Forex, like strategy for Poker is useless for Bridge…
What is more important? Some stock from some town in Alabama or Currency such as USD? If some stock crashes, 99.999% of the people will not even know about it. Now what if USD crashes (and all the rest of the currencies are connected to it, so they will crash as well)? It will be a financial world crisis… Banks, international companies, entire financial infrastructure that holds us its slave will crumble… Of course the powers that are don’t want that to happen and they are well aware of manias that mass psychology can bring. Thus, how can they give us the power to control the rates? Remember, one cent difference in an exchange rate may mean billions lost for the banks that daily exchange trillions of dollars. If the rate is moved by the majority of the people and knowing how fragile the groups can be, do you really think that rates are allowed to free float? Look at stock charts and at forex. You will notice that Forex rates do not crash… Today with the technology it is not hard to control the numbers that appear on peoples terminals… After all it can mean great profits for the organizators of the game. They see the peoples positions and reverse the rates, thus pocketing the money. After all, what kind of people would offer 100:1 leverage to you? Brokers are not altruists and they are people who need to feed their families as well and free cheese is found only in a mousetrap.. Being a negative sum GAME (where organizations play against you) it starts to answer the question: “Why is everyone taught the same from all the courses and books”…. When all orders are all in one area, when all indicators show the same info it makes catching fish so much easier…
So the major questions are:
What moves the rates? They can’t free float because that doesn’t guarantee that they will be where importers/exporters and banks want them. Banks are in it for the money and power, and controlling us is what they like to do.
if they are moved by people than what kind of indicator would work and how math or geometry possible be used to explain peoples choices?
Why are there so many indicators if they are virtually the same and available to everyone? Who is supposed to loose?
How can some simple, and linear math determine the future rates? Bill William’s chaos theory is incorrect. Alligator is a modified moving average, not something new. What the frick does divergence signify other than some permutations of old numbers?
Why is everyone taught the same?
Why do 90% of traders loose? It is said that two biggest groups of traders are: Engineers (smart at math) and farmers (hard working and patient people), yet I have read that successful traders aren’t necessarily the smartest ones. Is this one of the keys? Even the miniscule minority of traders have had periods where they lost almost if not everything (some even their life).
Why do very successful traders need to sell expensive courses, merchandise and so on? Why do people such as Bill Williams, Dr. Elder and other heroes of trading sell so much at such high prices? If they are pro at trading then they can easily live very well on trading profits alone and enjoy it (especially if you are a level 5 or whatever Bill Williams calls it).
It is not unlikely that people who do WIN did it because they were either lucky or had the kind of information that we cannot have. Of course these people would not go around telling everyone that they were merely lucky or were spoon fed. It is not good for business, your ego and people would not like to listen to this brutal hard truth. You can make a lot of money teaching and selling books. There were millions of traders yet there are only few who make it rich. This does not go against “random winnings” hypothesis.
Comments anyone?
these indicators work because of humans acts in forex are connected with them. all traders look at fibonacci numbers and most of them will not make decision against it. Pivots are also in traders consideration. in Forex it is inevitable to know what does majority think. I agree with you that brokers are one of worst enemies of traders they know a lot, they know where stops are, they know where take profit orders are they can simply manipulate in illiquid markets, they often hunt stops. But however this does not decline and eliminate attraction of marginal trading. To be a winner you do not have to predict 100 in 100 cases. It is quite enough to predict 60-70 and indicators together with chart patterns can do this for you. But there is another moment. May be 99% of traders know basics of fundamental and technical analysis but only 10% are profitable. The key is in psychology and money management. If you are not personally motivated to act on your best interest none of books or trading courses or psycholigist advice can help you. It simply will n ot happen. If you do not see yourself as a successful trader and fear is with you in trading you have heard that 90% of traders are losers and you are afraid that there is possibility you to be among them yes it will be so. You will be a loser, if you self-image is like that. As I have said many times and practice shows this: To win in Forex is not difficult, difficult is to keep what you have gained. 
). 
