EurAnalysis

Guys do you have any expectations from todays FOMC?

Good Morning Tom

I often say to people that I know what I do not know. I also say that when anyone thinks that they know it all then they know nothing.

This is my lead in to the following link that I will post here now that I found this morning on another thread on Forex Factory.

http://www.fxstreet.com/education/fo...es/2012/01/20/

I have recently branched out to teaching forex as well as the trading of forex. That has created a situation where over the last months I am always eager to read how others in the trading industry teach and what do they teach.

I always like to have an EDGE in trading and I do through my proven use of money flow which I talk about here often.

With that as background I can now post some snippets here from this fascinating article to enforce that which I know I know. The article written and my own monthly results confirm to me my EDGE.

If anyone here does not agree that is fine. Each to their own.

Snippet:


http://cdn.fxstreet.com/img/temp/for...rkWhistler.png

Perception is almost everything in trading for Mark Whistler: price, value, news, technicals,... are manmade perceptions. The key for the trade is then to “understands price relativity, and being able to align or separate his perspective with/from the unmanageable expectations of other market participants.”

Mark Whistler is a full-time trader and author of several books on Swing Trading, Trading Psychology and Volatility who investigated a lot the sentiment and news technologies in the markets. He believes that markets and news are inefficient by nature and “the only real way information technologies will assist the masses, is to help dissect information to make it more easily understandable.” Whistler thinks sentiment and gossips tools can be useful, but the traders have to consider them as noise that alert them to some sort of imbalance. His advice is “not to depend on the last post you just witnessed” but “look beyond the hype.” He foresees that “when technology-based-data-sentiment finally collides with effective processes to ensure efficacy and reliability, technology-based sentiment tools will win out.”

We also address issues like the existence of a Big Brother in the markets, contrarian trades, Google Trends or the creation of the US Dollar.

Kno's Comments: Now that we know who the Author is I will ONLY post Snippets to comment on that I have personal knowledge of and agree with based on my own trading experience of almost 9 years and my excellent monthly results.

In the end it only has to be about results. Results means making money consistently however each of us can manage it. There is NO Holy Grail.

There is hard work matched with desire and the mental assets and trading tools to get into the 5% group. My own personal trading target is always 5% each month.

Snippet:

Who rules the market?
He who is able to accurately perceive a perspective of price relativity in relation to other participants... rules the market. Foremost we must ask, "What is price at the most fundamental level?" In essence, price is a manmade perception of current and future value, opportunity, and/or risk. Unlike items of nature, price cannot exist without people. Price esse is percepti (to be is to be perceived.)

Kno's Comments: I always tell traders that it is about PERCEPTION. Then along comes reality with a HARD FACT like a Greek Default. By having the vision and the understanding before the actual event gives those that really understand the truth of the matter get an edge before the actual event happens.

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What then is value?
Value is the perceived worth (in monetary terms) of any particular item, at any particular point in time. However, value is really nothing more than a manmade perception in and of itself, built upon another set of manmade theories and equations attempting to measure perceived worth, ultimately quantified by a current or future amount of currency (again, nothing more than a perception of a perception)... All of which, dynamically and never-endingly fluctuates via the most recent perception (price) within markets each day.

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Does perception always lead the trader to wrong decisions?
The problem is that the average retail trader most often attempts to measure opportunity or risk within all of the above, via another set of manmade tools (i.e. technical analysis), which are really nothing more than another set of abstract perceptions tacked on top...
Furthermore, much like the true and accurate professional and academic calculation and context of value is relative only to perspective; retail technical traders who are not able to perceive price relativity beyond blind faith in the lines on their charts, are doomed for failure. We begin to see that the true cycle (for the technical trader who believes the abstract deterministic pattern matcher he downloaded this week - is pure truth) falls into a never-ending succession of guesses he calls trades.

Kno's Comments:

If we accept that 95% of all Retail Traders lose then we can also say with some accuracy that of those well over 60% would call themselves technical traders. I AM NOT a Technical Trader however technicals make up about 25% of the tools in my personal toolbox. Technicals are IMPORTANT if they are used in the correct manner.

Snippet:

At the end of the day, it is price that catches the deterministic trader who refuses to look beyond his red line crosses blue line perceptions (mindless abstract technicals), which are nothing more than a derivative of another perception (price), chasing a whole other set of perceptions (value and fundamentals), all influenced by another final set of perceptions: the unmanageable expectations of most market participants... All of which comes down to whether he perceives greed or fear from his/her flavor-of-the-week gimmick.

If all is perception, what can the trader trust and base his activity upon?
The solution is to merely understand that what you are using to perceive opportunity and/or risk is/are really nothing more than a broken set of perceptions, built upon even more perceptions, and are only relative to perspective... He who rules the market is he who understands price relativity, and is able to align or separate his perspective with/from the unmanageable expectations of other market participants. Thus, the savvy trader begins to find he/she is able to effectively predict (or react to) where the most important of all perceptions (price) will be when all other anticipated or reactionary perceptions (technicals, fundamentals, value, news, and opinions) are either validated, or violated.

Snippet:

In financial markets everyone wants to be a Contrarian, but it requires to process a lot of information very fast, doesn’t it?
All trading requires processing a ton of information quickly, diligently, patiently, without bias, and without fear. Whether "contrarian trading" requires more information to be processed than any other style of trading, is up for debate... Most likely, the validity of such is in the hands of the beholder. Of important note though, unless a trade is specifically momentum based, with the trend and order flow, every other trade one makes is a contrarian trade of some capacity; the only discrepancies being distance in time to entry and total potential reversal capacity...

Do you have some examples of contrarian trades which are different from momentum based ones?
We can break down the Contrarian trades into four types...
Readers will note that I have excluded any mention of short-term technical reversal trading from the below list... Simple technical contrarian trading, merely for the sake of trading a reversal is a retail strategy. We won't forget 95% of retail loses. The short-term technical reversal trader who is not trading with larger concepts and information regarding order flow, is trading a losing game over the long haul.

Kno's Comments: The truth is not always pleasant since it might force us to be realistic depending on our nature. This article is probably the BEST article I have read on forex trading. The credentials of the Author cannot be challenged. I have only commented on matters that I have DISCOVERED on my own to be true.

Snippet:

Here are the four types of contrarian trades:

1. Pullback Entry
In an ascending trend - with significant signs of sustainability - it would likely be wise for a trader to wait for a pullback before entering long... In the case of a pullback, the trader must find the most opportune contrarian point to enter long within the shorter-term descent...





2. Mean Reversion
Short-term mean-reversion based upon institutional benchmark order flow risk management... Highly specialized method of quantifying volatility and probability, trading back to the mean in mass compression, risk-off uncertainty situations. (Most retail traders should not attempt...)

3. Paradigm Shift
Highly specific, well researched, justified, and quantified reversal entries... The paradigm shift contrarian is NOT a doomsayer or a "contrarian just to be a contrarian", rather has uncovered specific evidence citing reason for a reversal, has considered all other options, has constructed a trading plan for the pending reversal, while also considering all aspects of risk... The paradigm shift trader does not put on a contrarian position because his Stochastics are overbought at the most relevant Fibonacci Retracement.

4. The Constant Contrarian or The Stinky Ego:

Kno's Comments: Please Read About the Stinky Ego from the link attached. It is what it is.

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When all things are calm - trade the plan. But when noise picks up, get your head up, start checking everywhere and figure out what's going on... Do NOT depend on the last post you just witnessed. We did not depend on the Squawk for the final verdict of news, as to what was making markets move, but rather used the pickup in noise as a "tip-off" to momentum, or volatility starting to accelerate...

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Do you believe that access to the sentiment information is just the Sword of Damocles that will make the "sell the rumour, buy the news" tendency more dangerous?
"For traders who act upon the rumor the car is going to spin lose... Traders who initiate the/their spin themselves, will likely produce better results."


I do not believe information or trading in any way produces a sword hanging over our heads by a horsehair, unless one is buying and selling based on rumors and rumors alone. Perspicacity via data, information, analysis, experience, knowhow, and intuition is different from merely trading rumors, hunches, broad sentiment, tips, Internet opinions of faceless egos, dogma, biased pundits, slanted media, political rhetoric, or "pro" analysis. I would like to relay a short excerpt from the novel “The Art of Racing in the Rain”, by Garth Stein:

“Drivers are afraid of the rain,” Denny told us. “Rain amplifies your mistakes, and water
on the track can make your car handle unpredictably. When something unpredictable happens you have to react to it; if you’re reacting at speed, you’re reacting too late. And so you should be afraid.”
“I’m afraid just watching it,” Eve said.
“If I intentionally make the car do something, then I can predict what it’s going to do. In other words, it’s only unpredictable if I’m not…possessing… it.”
“So you spin the car before the car spins itself?” she asked.
“That’s it! If I initiate the action—if I get the car a little loose—then I know it’s going to
happen before it happens. Then I can react to it before even the car knows it’s happening.”

The moral of the story: For traders who act upon the rumor the car is going to spin lose... Traders who initiate the/their spin themselves, will likely produce better results.

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What are the most powerful tools to create and/or change market sentiment?
M o n e y

Contrary to the generalized belief that money is a store of value, we see currencies fluctuating in value pretty much like a commodity. Could you explain the relationship between value and price of currencies?

Let's start with the US Dollar... What is the greenback? In essence, it is a trade-weighted "fiat" currency, constructed out of the value of nearly 20 other currencies, backed in "full faith" by the US Government. Until 1971-1972, the US Dollar was an "Index Basket" based on six major currencies from global powers around the world, constructed using an arithmetic mean. With the absolution of Bretton Woods, the dollar was then moved into a Trade Weighted Basket, and from then onward, constructed using a Geometric Mean.

Why?

Because a Geometric Mean artificially lowers the value of the currency over time. Which is exactly what has happened to the US Dollar ever since Bretton Woods was kicked to the curb. While the United States constantly gripes about China artificially devaluing its currency, perhaps it should look at the way our currency was covertly "remanufactured" for devaluation over time, but in a way that would look as if "the market" was/is the provocateur of such. Talk about the kettle calling the pot black...
Anyway, we understand currency is constructed in various different ways, and backed by commodities, or other currencies, or faith. Nevertheless, the substance making up the currency and the method in which such is calculated all influence the "value" of the currency over the long haul... Tack on economics and politics, and you're in for a ride. Moreover, as I have already mentioned before, value is a perception. The short-term wiggles, however.... The volatility... is pure perception.

Conclusions ... By Kno:

What changes would you expect?
I predict answering the final question would unveil some of my trading plan and strategy. What I can say is this: Enter a time of shock...grind...shock...grind...shock...grind.

Are You Ready To Change ?

Have A Great Day and Make plenty of money never losing track that Money is just a Tool of Life.

Be Good To Yourself and your loved ones.

G-D Bless

Your the golden nugget in FF, keep it up.

Good luck on your teaching career m8

Hey PT,

Seems everything is going according to plan (although it went much higher than 1.317...).

Sold the high as discussed on Friday, looking for 1.3056 today
Hope you reloaded

Excellent reckon! I'm only familiar with a couple of this concepts though I'll have to look it into the others.. However I believe due to such fluctuations in the pairing it's difficult to position trade and have that as a target.. I have to agree with PT's way of trading just using underlying economics and technicals to trade..

Have a good trading I'm off to the cheltenham races look up hurricane fly on YouTube gonna win me a lot of money today :thumbsup;

Hey GOld,
I preferred the clint eastwood avatar, leave that one to Clogg

I think cloggie has never used it, I like it, don't make me change it

No you are right, his own had needles.

I must say you have a good memory on avatars

Oh I'm very well re-loaded thanks... I even have sell stop orders in place.
As long as things remain normal, I am targeting a double bottom at 2975 area before the next bounce up.

PT so understanding about euro moves

Hope to see these levels soon rather than later

Found the extension to 1.319 unsettling, lots of buying during asia (anyone knows who was buying?) Only put my short this morning after confirmation for trade. I even checked the market overnight...

yeah, unfortunately doesn't help much for trading

Technical entry on 50% fib retrace of last swing high 1.3288.
Now I

Technicals do serve well in low volatility trading times if set ups are supported by funnymentals.

Entry- Asian session at 2:14 GMT 10:14 EDT. As I

What do I know......I'm just a hack!

Most likely the IMF stocking up on Euros for their portion of the Greek bailout

Very nice @ 1.3104 can bring us some bigger difficulty, if that's cleary exceeded then 1.3047 next. I more look @ them as interim zones.

http://www.forexfactory.com/attachme...9&d=1331637862

Looks like I closed my position last night literally 5 minutes too soon just to see the Euro hit my second target of 1.3175 and move on to eventually peak at 1.3190 before turning back.

Weekly pivot was tested for nearly 2 hours staying near the bottom 15M trend channel and dropped like a stone. You can see a nice retrace once it failed the daily pivot and failed that as well to drop to a low of 1.3106 which is below where the bounce I thought would occur (1.3124).

1.3106 is first daily support and all indications are that we are not going to stay here much longer. Lower is the thought for today and I'm short right now at 1.3121 with first target being 1.3075/70. This being DM2 line and near my 23% FIB line on the hourly.

If move below that target, the next stop I have is 1.3000

Have a great trading day and don't let the cat get away!

Cheers!

Hey Gofer. Nice trigger. Let's see if we break 3080 today. I'm hoping it's today. If not, there's always tomorrow.

beautiful