No offense meant mango, I was amused by how many words it took you to say nothing.
Chaotic system? Implications of it being somewhat random?
Not even close.
I am sorry, perhaps my English is not perfect and may have trouble communicating.
Please be aware: the market is certainly not random, it is certainly not chaotic. We know this, because trends exist. Trends are non-existent in pure chaos.
However, from the perspective of the price as an infinite timeseries, anything is possible and therefore the future potential of price is purely chaotic. Any second, Ben Bernanke could hop on the wire and say he is handing out $1000 to every man/woman/child in the US from his helicopter and the USD would immediately take a huge dive from domestic sellers. Just as likely is that the USD could rocket up in some unforseen manner at any second.
Anything is possible.
The goal of generalising the market into a chaotic system is to present this perspective of chaotic future price potential.
A breakout is a perfect example of this. Breakouts simply don't just happen. For the price to exceed a previous high or low, new information must have entered into the market which drove supply or demand to overwhelm that high or low. Maybe it was inside information, maybe it was a news release, we don't know and don't need to know. We just trade the breakout and even with a >50% failure rate, trading breakouts puts us first in line for every single possible future move in price.
When it moves, it is just a matter of which direction, when and where. Throughout my days of studying charts, price action, indicators and trading systems I have come to know a lot. I spent a grand number of days in the penny markets, learning action at a day traders pace, joining forex was a dream. 24hr trading, mass of indicators and charting that is/was simply unheard of when I started in this game, action that follows a systematic pattern and play style.
Totally agreed, I don't even care about the direction, I just place stops where the chaos ends and wait for price to fill me
It's a funny analogy that your trading beginnings were in penny stocks...liquidity in GBPUSD makes it the penny stock of the forex majors
I have posted several charts, and supports and targets to show that this market is anything but chaotic. Sure there are times that its a pretty good idea to just not be in a trade, (the 3rd true position, no trade), but when it makes a move, do you really need a book to tell you that it does so by specific terminology?
Re the first sentence, please see my above replies.
Yes, mate, I really do need a book to tell me! Mandelbrot was the first to discover financial markets are fractal non-linear dynamic systems! The implications of this are huge:
1. 1 min timeframe holds the same information key as 1 day timeframe.
2. Price can do whatever it wants, whenever it wants. Traders generally recognise this as a gap in their price charts. These gaps occur down to the ticksized timeframe.
3. The use of Hurst statistics and modelling (which rely on the implicit assumption of a chaotic system) allows me to keep my trading style very malleable. Hurst exponents > 0.5 and we are using mean-reversion strategies: buy the dips sell the rips. Hurst exponent < 0.5 we just follow the current trend using breakouts. Ranging around 0.5, is "the times that it's a pretty good idea to just not be in a trade".
Dunno man. To each his own.
Congrats on your successes, and in all seriousness...Welcome to the Asylum!
Of course to each his own, if everyone thought like me, who would be left to be on the other side of my trade?
Thanks for the welcome. I will try to post once a day around the London Open hour. I had some spare time today so thought I would write some forum posts
. Please, who are you kidding, with the level of QE2 priced into the market nowadays if its only $1k/person then the DXY is gonna go straight to 80 and perhaps beyond within one hour. Unless you have missed all the QE chatter I've been spouting all over the FF forums that about $2T has already been priced in. That's about $6.5k/person in the US.........
. Far better for me to regurgitate analysis than it is for you to regurgitate academic theory. I'm sure desk traders are actively plotting through Markov chains and running SDEs all the while scalping pips..........