Why the market tends to fall faster than it rises ? | Forex Factory

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Why the market tends to fall faster than it rises ?

  • #1
  • First Post: Jan 7, 2010 8:02pm Jan 7, 2010 8:02pm
In this page
http://www.babypips.com/school/ascending_triangles.html
I founded this statement, I'd like to know why.
As my point of view there is no reason that market should falls faster then it rises...







(I don't know if I can post an external link, I don't find anything about it in the forum rules)
  • #2
  • Jan 7, 2010 8:47pm Jan 7, 2010 8:47pm
Quoting AQs
In this page
http://www.babypips.com/school/ascending_triangles.html
I founded this statement, I'd like to know why.
As my point of view there is no reason that market should falls faster then it rises...







(I don't know if I can post an external link, I don't find anything about it in the forum rules)
That's not exactly correct. If the long term trend is up, then the market when rise faster than it falls. And if the long term trend is down, then the opposite is true.
  • #3
  • Jan 7, 2010 9:15pm Jan 7, 2010 9:15pm
In one of her books, Kathy Lien mentioned prices fall faster than they rise.
  • #4
  • Jan 8, 2010 8:44am Jan 8, 2010 8:44am
In Forex its all about the perspective, when GBP falls fast USD rises fast also.
I suppose what you mean is people tend to wait & confirm Good News about an economy but Fear creates a panic or Selling Frenzy.
It never gets easier, you just get better
  • #5
  • Jan 8, 2010 10:01am Jan 8, 2010 10:01am
I believe this assertion make sense only for the stock market...that's becouse the general attitude is to "buy limit" (market driven by plans) when the market is in up trend. On the contrary when in down trend the attitude becomes "sell at the market" (market driven by panic).

my 2 cents
  • #6
  • Jan 8, 2010 10:45am Jan 8, 2010 10:45am
Agreed.

This theory applies more to the stock market. Fear is a stronger emotion than greed. Thus, a market controlled by fear moves faster than a market controlled by greed.
  • #7
  • Jan 8, 2010 10:52am Jan 8, 2010 10:52am
Quoting watchtower4x
In one of her books, Kathy Lien mentioned prices fall faster than they rise.
If you plot a chart of eur/usd which has just started rising strongly, then you plot a chart of usd/eur which would be falling strongly that means if markets fall faster......well hope you get the idea,,if usd/eur is falling fast that means eur/usd is rising fast, just as fast as the fall ..think about it...
  • #8
  • Edited 1:20pm Jan 8, 2010 1:19pm | Edited 1:20pm
Quoting Ronald Raygun
Agreed.

This theory applies more to the stock market. Fear is a stronger emotion than greed. Thus, a market controlled by fear moves faster than a market controlled by greed.
I was about to reply the same ... I've read this in many trading books that are specific to trading stocks.

AQueue - Are you sure this was in reference to the Forex Market.
There are some currency pairs that are 90+% inversley correlated with other. While one might have a propensity to go down faster than it goes up the inversley correlated pair would be almost as likely to move up at a faster rate.
  • #9
  • Jan 8, 2010 4:05pm Jan 8, 2010 4:05pm
Quoting therbcoe
AQueue - Are you sure this was in reference to the Forex Market.
Yep, check my link
  • #10
  • Jan 8, 2010 8:38pm Jan 8, 2010 8:38pm
Quoting AQs
Yep, check my link
Just checked it.
Oddly enough I remember printing out that BP lesson while studying Price Action.
--------
The author is displaying an ascending triangle and I think the author is suggesting that, in the case of ascending/decending triangles, price is more likely to break through the horizontal support/resistence level than it is likely to break through the trendline drawn from Lower Highs / Higher Lows.
---------
I've actually re-read this about 4 times and for the ascending triangle he almost contradicts himself:
"... Many charting books will tell you that in most cases, the buyers will win this battle and the price will break out past the resistance. However, it has been my experience that this is not always the case."
-- THEN --
"Most of the time the price will in fact go up."
------------
When you switch over to the bit about decending triangles you'll see the note about markets falling faster than they rise.
------------
I'm still sticking with my original response -- I think the author is generalizing price action characteristics for stocks/FX/bonds/cattle feed/whatever.
  • #11
  • Jan 8, 2010 10:17pm Jan 8, 2010 10:17pm
Quoting therbcoe
.
ty
  • #12
  • Jan 9, 2010 2:28am Jan 9, 2010 2:28am
Do you mean that it appears that in the market bullish candles tend to climb whilst bearish candles tend to be solid candles that erase days of climbing (as in an up trend). The is a saying that the bulls climb the stairs whilst the bears jump out the window.

It all comes down to what happens when the event occurs. Usually in an uptrend you have pieces of orders being filled while current orders stay in play. The most likely spot, outside of major fundamental news, that the market will 'collapse' is when a major S/R zone is met and orders filled plus reversal orders are executed. In most cases this will happen and you can have a candle/bar that seems to fall past days of build up but it is just the norm. The opposite is true in a bearish market that once a zone of S/R is hit there is usually a quick upside reply.

It is not always the case but it is just points where there is a great inbalance due to profit taking and opposite order execution which is why taking note of these areas can greatly increase your chances of taking profitable trades and exiting them before a great fall. Take note also of trendlines. If the market tends to build over days there can be opportunties to trade back to a trendline.

Chart below shows USD/JPY with NFP news driving it down yesterday right at the touch of the decending TL and also an area of previous S/R. The next chart shows the way the week closed out. Next week will decide how the market percieves this information. But take note on the first chart how there are great opportunities for rallys when the market moves away from the major TL. It broke through the other decending TL (dashed in red) which would have allowed more bullish bias but now it looks as if that may have run out. Next week will be interesting

Razor
Attached Image(s) (click to enlarge)
Click to Enlarge Name: usdjpy daily TL and Res Touch.jpg Size: 93 KB
Click to Enlarge Name: usdjpy weekly bar highlighted.jpg Size: 81 KB
  • #13
  • Jan 9, 2010 5:05pm Jan 9, 2010 5:05pm
Quoting Ronald Raygun
Agreed.

This theory applies more to the stock market. Fear is a stronger emotion than greed. Thus, a market controlled by fear moves faster than a market controlled by greed.

Your belief about the fear in the stock market vs another is illogical. The feeling of fear by a market participant will be the same irrespective of the market. The exception would be if the participant had different beliefs about one market vs another. ie that one market was safer.
May the fish in your stream of life always bite.
  • #14
  • Jan 9, 2010 5:52pm Jan 9, 2010 5:52pm
Gravity?

Its easier for something to fall than to rise...
  • #15
  • Jan 9, 2010 6:11pm Jan 9, 2010 6:11pm
Quoting aSandman
Your belief about the fear in the stock market vs another is illogical. The feeling of fear by a market participant will be the same irrespective of the market. The exception would be if the participant had different beliefs about one market vs another. ie that one market was safer.
I did not say the theory only applies to the stock market. I merely imply that there is known evidence that the theory applies in the stock market.

You are right that the feeling of fear exists regardless of the market. After all, risk can lead to fear. You did not comment on the intensity of the aforementioned fear. Do you care to clarify?
  • #16
  • Jan 9, 2010 9:48pm Jan 9, 2010 9:48pm
Quoting Ronald Raygun
Agreed.

This theory applies more to the stock market. Fear is a stronger emotion than greed. Thus, a market controlled by fear moves faster than a market controlled by greed.
Agree 100%. There's (supposedly) no structural bias to the forex market, i.e. going long GBPUSD is effectively the same as going short USDGBP.
  • #17
  • Jan 9, 2010 10:17pm Jan 9, 2010 10:17pm
Quoting hanover
Agree 100%. There's (supposedly) no structural bias to the forex market, i.e. going long GBPUSD is effectively the same as going short USDGBP.
Remember the USD-DJA correlation. If the market falls fast then ppl are selling stuff fast and probably buying dollars equally fast.
  • #18
  • Jan 9, 2010 10:45pm Jan 9, 2010 10:45pm
Quoting Rabid
Remember the USD-DJA correlation. If the market falls fast then ppl are selling stuff fast and probably buying dollars equally fast.
You're right Rabid, but in the context of rise and fall, Forex has no 'up' or 'down'
  • #19
  • Edited 11:27pm Jan 9, 2010 10:57pm | Edited 11:27pm
Quoting AQs
As my point of view there is no reason that market should falls faster then it rises...
Panic & fear are much stronger emotions. take a look at the last sell off in the AUD/USD or the cable. the sell off eclipsed a multi year rally in 4 months.

this is the case in most sell offs.
  • #20
  • Jan 9, 2010 11:34pm Jan 9, 2010 11:34pm
Quoting AQs
In this page
http://www.babypips.com/school/ascending_triangles.html
I founded this statement, I'd like to know why.
As my point of view there is no reason that market should falls faster then it rises...
(I don't know if I can post an external link, I don't find anything about it in the forum rules)
In forex, from what I have observed, it is simply about "trends" and nothing more. When a trend "blows up" so to say, it could be a very quick riser after a long run down, very quick faller after a long run up. Either way, it is effectively the same thing. GBP coming before USD on the cross, thus making a strong GBP move the candles from bottom left to top right, doesn't play into the psychology as it would somewhere else.

Commodities and stocks, which generally have a very biased LONG position ideal, gold always, oil two years ago, will move different and are better examples of this fear that has been mentioned earlier.

All those psychologically weak investors heading for the exits at the same time make things fall quicker.
The market is my nation. Traders, my family. Hello, brothers and sisters!
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