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someone PLEASE explain this market to me

  • #41
  • Aug 9, 2011 4:55pm Aug 9, 2011 4:55pm
Quoting Mr Breakout
You could even be right on your fundamental "analysis" and STILL lose 800 or 1,000 pips before the market starts moving in the expected direction.
Working out when it's going to happen is part of it. It's not as simple as saying i think this is fundamentally strong so i will go buy right now.

It's also market sentiment. Working out what is being looked at today, for the week, possible reactions to announcements, how traders are and may be positioning if 'a' or 'b' and many more things. Economic fundamentals are only a small part of the overall picture.

You're trying to simplify something that isn't simple because you don't understand it.

What if you have a perfect price action setup and long AUD. Right after your entry commodities start moving down, stocks move down and a huge acquistion is announced that an aussie company is buying a US company. RBA releases a dovish statement. Do you just stay in the trade because the past price action was right? That's just unintelligent thinking.
  • #42
  • Aug 9, 2011 5:05pm Aug 9, 2011 5:05pm
I don't know why I'm responding to this thread, as I've avoided these kinds of threads since they usually go down the paths marked by pettyness, abuse or some measure of ego. However, things haven't got dirty yet, and so perhaps I'd like to air a viewpoint or two.

Mr.Breakout, I assume is a strictly technical trader. It's likely he has devised a trading methodology whose sole inputs are the chart, which he has backtested through all manner of events and it has shown to come out ahead. You are correct that such an approach is profitable but to think that this is the only path to success is beyond myopic.

Quote
As a trader, I am not in the business of explaining/rationalizing why the price moved that way or that way and not that way. I really, really do not care at all about the WHY (which is the fundamental approach), it is a complete and total waste of time and energy
Absolutes in trading are some of the most damaging paradigms traders can impose on themselves. Perhaps you have not been successful with a fundamental approach, but that does not diminish its effectiveness in the hands of a studied practioneer. Furthermore the why of price movement being either technical or fundamental is the biggest false dichotomy I see paraded around the forum - there are quite a few other reasons why price does what it does, but by vowing adamantly to be indifferent to the causes, you will be very hard-pressed to find them.

Quote
The minute the trader tries to "predict" anything he is finished. A trading system does not predict, it simply exploits a statistical bias, just like a BlackJack card counter does not try to predict the value of the next card, he is just playing the odds because he knows that in the long run he is going to mathematically beat the casino.
Does the mere notion of having a statistical bias not imply that your system can identify/define/predict opportunities where you can buy/sell with significant follow-through to make a profit?

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I don't either, but again we are not trying to predict this or that event, that's not the purpose of a trading system. The trader backtested his system with 10 or 15 years of data and discovered that it is a profitable system (and the test includes all the previous BOJ interventions, weird spikes, crashes, etc...), that's all he needs to know.
Again, another erroneous absolute. Perhaps your trading system does not require making the effort to perform detailed analysis to predict likely trading outcomes, but to categorically state that it's not the purpose of a trading system is ludicrous at best. There are several successful traders who make and continue to make fortunes based on doing just that - the greatest traders and trades all have the common link that they had a concrete reason for taking those trades, got in at the top/bottom, and profited handsomely.

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That said, the minute BOJ intervenes my system will sense that and I can place a high probability trade with little risk. I made over 100 pips yesterday shorting USD/JPY (see USD/JPY thread) while almost everybody was buying and "expecting" an intervention. Sorry but trading on rumors and expectations is a losing proposition, I only trade what is actually happening right now on the chart.
Sure, you may been able to catch the BoJ intervention with your system, but given it's nature, it's quite likely that it went down in your system as just any other regular trade. I can attest that there are traders here who can spot, anticipate and correctly position themselves for such events like CB interventions; can comfortably risk amounts on the trade that would make you squirm, and proceed to make bank on that opportunity. Your approach is a one-size fits all, which I'm not slandering or trying to put down - it's just to highlight that there are other approaches, which may even be more profitable.

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I know, but like I said in a previous thread, Soros also used his "judgment" and lost Billions betting against the Euro and other currencies.

And during all that time, a simple moving average could have prevented those catastrophic losses.
Sure he may have lost billions betting against the Euro and other currencies, but he's still a billionaire for a reason, which indicates his approach must have some merit behind it. No approach is invincible.

Of course he could have used a moving average to identify that the Bank of England would not be able to prop up the pound and would be forced to devalue it. He could have risked the conventional 1-2% and had a nice little trade. However he chose to analyse the situation and predict that the odds were overwhelmingly in his favour, giving him the confidence to place the most well-documented trade in history.

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When you mix Fundamentals with TA you only create confusion and indecision.

Fundamentals = This and that "should" happen because according to blah... blah... blah...

TA = This is what IS happening right now, jump aboard and make money.

You could even be right on your fundamental "analysis" and STILL lose 800 or 1,000 pips before the market starts moving in the expected direction.
Actually such an approach would provide more value than the majority of systems touted around the Internet. Fundamentals move the market but a fraction of the time, and participants who let the trade move 800-1000 pips against them before their analysis plays out, are simply doing it wrong, or have horrible market timing. Obviously there is a legitimate reason for that 800-1000 pip movement which they have not discounted in their analysis.

But wait...what other reasons could there be for the market moving? There is only TA and FA..my analysis is spot on..the markets are rigged..FA is bollocks... Yeah right...

I hope you do not construe this approach as an attack. Far from it. You're actually more levelheaded than many people on this forum, and I respect that.

Regards,
xXTrizzleXx
  • #43
  • Aug 9, 2011 5:23pm Aug 9, 2011 5:23pm
Quoting Custos
I generally agree with the statistical edge thing. But you should also be aware that there are highly successful individuals that do try to predict fundamental events: george soros, victor sperandeo, paul tudor jones,...

So, I think both approaches towards the market are valid.
he actually created that event, or at the very least put those last heavyweight straws on the poor camel's back.
This kind of trading is not applicable to us retail lot.

btw, anyone surprised that this thread, too, has turned into fundamental vs technical? While personally trading on technicals, I do acknowledge that there are many highly successful traders in each camp.
  • #44
  • Aug 9, 2011 6:00pm Aug 9, 2011 6:00pm
the dollar rise because the banks are intervening in the markets right now,
and support buying the dollar also other currencys and pushing price in the wrong direction.
because of this it's very bad time to trade right now,
this is not the real market flow we are seing.
very volatile and without direction
my advise is to stay out until better times come
Bulls are stupid Animals!especially when Im short!
  • #45
  • Aug 9, 2011 6:13pm Aug 9, 2011 6:13pm
Quote
he actually created that event, or at the very least put those last heavyweight straws on the poor camel's back.
This kind of trading is not applicable to us retail lot.
The only thing he created on that event was a name for himself.

Quote
While he may have borne a disproportionate amount of the criticism because of his
significant gains, the government’s own policies are believed by many to have been the root
cause of the problem, the speculators merely a symptomatic presence.
http://www.pauldeng.com/teaching/int...of%20Money.pdf
Cautiously optimistic. . .
  • #46
  • Aug 9, 2011 6:19pm Aug 9, 2011 6:19pm
Quoting roughtrader
the dollar rise because the banks are intervening in the markets right now,
and support buying the dollar also other currencys and pushing price in the wrong direction.
because of this it's very bad time to trade right now,
this is not the real market flow we are seing.
This is as real as it gets.

What exactly do you mean by
Quoting roughtrader
the wrong direction
?
Who decides what the "right" direction is?
Sure, the markets are very volatile these days. But we've had periods like this before, and in the grand scheme of things, I don't find this highly unusual.
  • #47
  • Aug 9, 2011 6:33pm Aug 9, 2011 6:33pm
Quoting xXTrizzleXx
I don't know why I'm responding to this thread, as I've avoided these kinds of threads since they usually go down the paths marked by pettyness, abuse or some measure of ego. However, things haven't got dirty yet, and so perhaps I'd like to air a viewpoint or two.

Mr.Breakout, I assume is a strictly technical trader. It's likely he has devised a trading methodology whose sole inputs are the chart, which he has backtested through all manner of events and it has shown to come out ahead. You are correct that such an approach is profitable...
Very good post my friend, nice and to the point, I will answer it very soon I promise, right now I am watching the GBP/CAD, I shorted this pair around 8 AM (NY time) and I am waiting for the right exit point to collect my profits.
  • #48
  • Aug 9, 2011 6:33pm Aug 9, 2011 6:33pm
Quoting kevguy
the only thing you need to understand about fundamentals is risk appetite (EUR/ AUS/CAD/OIL) AND RISK AVERSION (JPY/USD/CHF/gold)...
Keyguy...

That is the most lucid, intelligent, and well thought out response I've heard to date. This actually makes sense when I look at the different pairs and now I think I understand why these currencies are moving the way they do.

Thank you! If there is a prize for the best answer you win.

Question: GBP/USD, EUR/GBP "risk" currencies or "risk aversion" currencies?
  • #49
  • Aug 9, 2011 11:29pm Aug 9, 2011 11:29pm
Quoting Mr Breakout
When you mix Fundamentals with TA you only create confusion and indecision.

Fundamentals = This and that "should" happen because according to blah... blah... blah...

TA = This is what IS happening right now, jump aboard and make money.

You could even be right on your fundamental "analysis" and STILL lose 800 or 1,000 pips before the market starts moving in the expected direction.
Kevguy schools you on money flows, and this is your response? Did you even try to understand how it work?

I hope your rookie year turns out to be a good one, Mr. Breakout.
  • #50
  • Aug 9, 2011 11:49pm Aug 9, 2011 11:49pm
Quoting Goat
Kevguy schools you on money flows, and this is your response? Did you even try to understand how it work?

I hope your rookie year turns out to be a good one, Mr. Breakout.
Let us guess Goat, you just lost 219 pips today on some unproven, untested "system" and you just want to let some steam out, right?
  • #51
  • Aug 10, 2011 12:10am Aug 10, 2011 12:10am
Good NFP: People got confidence in the market, hence they sell dollar and buy stocks.
S&P downgrade: Immediate reaction over the weekend is expected to hurt USD.
But the real investors comes in knowing that the S&P only downgraded one level , they are happy and USD went up.

From here I see the market is going to be sideways for sometime, except the occasional interventions from CHF/ JPY. Euro may get hurt a bit, but the worst is over for Euro as well as USD.

Thats fundamentals, but trust your technicals and dont depend too much on fundamentals as there is competition against each other to get thier currency devalued. Also big boys might dump any currency for none of the reasons we know, until we read the news after sometime.

Just my 2 cents and I am learning as well
  • #52
  • Aug 10, 2011 2:54am Aug 10, 2011 2:54am
Quoting 6pack
This is as real as it gets.

What exactly do you mean by
?
Who decides what the "right" direction is?
Sure, the markets are very volatile these days. But we've had periods like this before, and in the grand scheme of things, I don't find this highly unusual.
I mean the us dollar is a mess right now and it doesn't look good for the future,
if the banks wouldn't intervene and support buying dollar as they do right now, it would fall like a rock,
it is to prevent the dollar to fall to much as they are doing this,
the market wants to sink the us dollar,
this is the natural direction of the market,
and of the fundamental situation, the banks intervene and pushing the dollar up,
these are the guys moving the market,
this is not the natural direction of the market,
the us situation is much worse than most prople think,
and it will be getting even worse,
at that time the banks won't be able to support the us economy anymore and then the market will crash down with full force,
this would be something we never seen before,
we could end up worse than the old depression days. not kidding!
Bulls are stupid Animals!especially when Im short!
  • #53
  • Edited 7:26am Aug 10, 2011 6:40am | Edited 7:26am
Quoting gspajon
Keyguy...

That is the most lucid, intelligent, and well thought out response I've heard to date. This actually makes sense when I look at the different pairs and now I think I understand why these currencies are moving the way they do.

Thank you! If there is a prize for the best answer you win.

Question: GBP/USD, EUR/GBP "risk" currencies or "risk aversion" currencies?

when i typed that what i meant was - risk appetite currencies EURO,AUS,OIL,GBP,CAD.... AND RISK AVERSION currencies...JPY, USD,GOLD, CHF.

SO if there is risk aversion then currencies that go down are..EUR/USD, AUS/USD, CAD/USD , EUR/CHF....ETC the POINT IS that the most movement will be between a risk appetite currency versus a risk aversion currency....thats why they are called MAJORS.

so a cross of EUR/GBP...will move for very small pips while paying a ton for spread because not very many people will be trading that cross...

so Technical analysis is good to get the perfect entry, and also on the days when there is nothing major in the news all countries have minor problems (like we all do at work) like today 10/8/2011. But on the days of an impending catastrophe thats causes stock markets to drop....thats when you move you r stop loss to break even, hang on to your hat and watch 400 pip moves drop into your lap.
  • #54
  • Aug 10, 2011 6:57am Aug 10, 2011 6:57am
Quoting Mr Breakout
I would go even further Eagle4X, fundamental analysis is totally worthless, everything we need to know is already reflected in the price, end of story.
as long as you think like that i'm fairly confident that you're gonna have a hard time making money in this market. If everything is factored in then it would be impossible to make consistent profits.


Quoting Mr Breakout
Fundamental "analysis" can, at best, explain the past.
aren't you confusing fundamentals with technicals ?
  • #55
  • Aug 10, 2011 7:31am Aug 10, 2011 7:31am
Quoting kevguy
...so a cross of EUR/GBP...will move for very small pips while paying a ton for spread because not very many people will be trading that cross...
Thank you again kevguy...

I've only recently begun paying attention to fundamentals. For a very long time my attitude was very much like that of Mr. Breakout but I have come to reconsider this point of view.

I'm sure this is nothing new but for those of you out there willing to open your mind consider this...take a look at any major chart on a long term view...weekly or monthly. Then look at each major turning point. Check the date and then research the fundamentals. Each and every one of these major turning points was caused by a signal macroeconomic or world changing event.

Last year's (2010) precipitous fall in the EURO was stopped cold by the US Fed's announcement of QE2. This years halt in the EURO rise has been the ending of that same program. The US dollars seemingly bottomless fall started in Sept 2001, or as we American's refer to it...9/11.

These things are NOT coincidence and I believe that by paying close attention to the fundamentals, then using a technical analysis method to find good risk-reward point for entry and exit, much money can be made.

Fundamentals are the engine that drives the car, and the technicals are a steering wheel that we can use the navigate the road. I have honed my tech skills and believe they are adequate and sharp.

Now that I know how to steer, I am trying to understand (being a rookie at this type of analysis) how to use the engine to my advantage. Especially at what I consider a very important time during world history. Even small changes in macroeconomic policy can have a profound effect on the markets for years to come. I want to be ready.
  • #56
  • Last Post: Nov 19, 2011 9:10am Nov 19, 2011 9:10am
Quoting gspajon
Fundamentals are the engine that drives the car, and the technicals are a steering wheel that we can use the navigate the road. I have honed my tech skills and believe they are adequate and sharp.
Well said. My trading improved substantially when I started to pay attention to the fundamentals.
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