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My theory about forex market

  • #1
  • First Post: Mar 28, 2012 5:46am Mar 28, 2012 5:46am
My theory about forex is that nothing works here, why?

Lets assume that for moving the forex market you need a big account in a real ECN account, so there are few guys who have this, in addition, forex market moves also because movements of stock markets and commodities markets.

So a guy with a big account in forex, stocks or commodities market wakes up in the morning and read a new about some stocks or about some country, and then he decides to buy or to sell, and then the market moves in one direction and thousands of traders win or lose money.

In the other part of the world another guy wakes up and flip a coin toss, and then he decides to buy or to sell, and the market moves again in one direction, and thousands of traders try to explain with their methods why the market moves, but there is no reason, only the will of a few guys!

So... This is my vision about forex market, it is a completely random market, there are no methods, there are no systems, you can only minimize your losses using SLs and hope that when you have luck the price reaches your TP, that's all, this is the reality IMHO.

What do you think?

PS: sorry for my bad english...
  • #2
  • Mar 28, 2012 6:16am Mar 28, 2012 6:16am
you are right, the forex market is completely random! it's good that you came to this conclusion on your own, I had to read about it from a book (trading in the zone) and at first it was a difficult concept to grasp..

but successful traders have an edge/ trading plan that gives them better possibilities than a 50/50 coin toss to make the right trade, so in the long run they win a higher percentage of their trades.
  • #3
  • Mar 28, 2012 6:47am Mar 28, 2012 6:47am
Quoting jamb0
My theory about forex is that nothing works here, why?

Lets assume that for moving the forex market you need a big account in a real ECN account, so there are few guys who have this, in addition, forex market moves also because movements of stock markets and commodities markets.

So a guy with a big account in forex, stocks or commodities market wakes up in the morning and read a new about some stocks or about some country, and then he decides to buy or to sell, and then the market moves in one direction and thousands of traders win or lose...

you are wrong is not random.

Forex is not random

how do you explain the skewness, the kurtosis and the heteroskedasticity.
if forex was random we would see a more normal distribution.


as well as the trends, the news reactions, and you would be assuming all the movements that go in tandem with a change in fundamental economic, or fiscal as well as monetary policy were mere coincidences.
AVT INVENIAM VIAM AVT FACIAM
  • #4
  • Mar 28, 2012 6:56am Mar 28, 2012 6:56am
Quoting the redlion
as well as the trends, the news reactions, and you would be assuming all the movements that go in tandem with a change in fundamental economic, or fiscal as well as monetary policy were mere coincidences.
No coincidences but the will of a few guys, for instance... How many times have you seen a reaction after a new release and suddendly the market reverses and go to the other direction for no reason..., and at some point another time the market reverses, and finally you can't follow a clear trend because there is a fight between bulls and bears and you are in middle with a low account and your SL hits time after time.
  • #5
  • Mar 28, 2012 7:22am Mar 28, 2012 7:22am
Quoting jamb0
No coincidences but the will of a few guys, for instance... How many times have you seen a reaction after a new release and suddendly the market reverses and go to the other direction for no reason..., and at some point another time the market reverses, and finally you can't follow a clear trend because there is a fight between bulls and bears and you are in middle with a low account and your SL hits time after time.
If you can't follow a clear trend then why are you in a trade? Why are you trading a news release which is notoriously volatile? Do you think you can know how the news will be digested given the bigger picture? Does that even matter? These are rhetorical questions to get you to think. You say the market reverses and goes the other direction for no reason. You should qualify that statement with no reason that YOU know or understand. No offense intended but you sound like a million other people that haven't and/or can't figure out how to trade profitably and since YOU can't do it then the market must be random and anyone winning is doing so by luck. Basically thinking that what you can or cannot accomplish is indicative of what is possible by anyone. What you can or cannot do or achieve means absolutely nothing to whether others can do it. You are not the be all end all. Again, no offense intended but thinking that if YOU can't figure it out that the market is random and everyone winning is lucky is asinine. Good luck to you.
  • #6
  • Mar 28, 2012 8:59am Mar 28, 2012 8:59am
it's only SEEMS random when you can't read it. when you learn to read it you can then trade it profitably.

there are traders on here who pick tops and bottoms consistently.. if the market were random this level of accuracy and consistency would not be possible.

also, there is a reason why they want you to believe it is random.. so you don't try to learn to read it.
  • #7
  • Mar 28, 2012 9:02am Mar 28, 2012 9:02am
Quoting Tyoon
it's only SEEMS random when you can't read it. when you learn to read it you can then trade it profitably.

there are traders on here who pick tops and bottoms consistently.. if the market were random this level of accuracy and consistency would not be possible.

also, there is a reason they want you to believe it is random.. so you don't try to learn to read it.
How to read the market? Could you recommend me some thread or some book? I want to learn, but the more I learn the more ramdom I think this market is...
  • #8
  • Mar 28, 2012 9:25am Mar 28, 2012 9:25am
Quoting jamb0
it is a completely random market.
Unpredictable, but not random. As a simple example, say a strong swing low breaks down, price rockets down. Is this simply random? Hardly, sell stops have been hit, both from people who were long and from waiting sell stops below, and so there is a reason price has moved down... Whether that move through the support was based on news coming in or whatever, there is still a reason and it is not random, only unpredictable.

It might seem random and you might be screaming "Argh! Support and resistance don't work!", but that does not make it so.

It's driven by humans, or algo's/bots that attempt to mimic humans. Behaviors repeat, all you need to do is to learn what that looks like on a chart or just follow momentum, and know when to stay out.
"Don't Panic..."
  • #9
  • Mar 28, 2012 9:27am Mar 28, 2012 9:27am
Quoting jamb0
How to read the market? Could you recommend me some thread or some book? I want to learn, but the more I learn the more ramdom I think this market is...
yes, there are many things to learn and does take some time to learn it. it can take some people perhaps 6 months to read the market profitably, or it could even take a few years.. all depends on how much work you put into it.

you will come across two types of traders who read the market; fundamental traders (use news to trade) and technical traders (use the chart to trade). there are also system traders (use indicators to trade). they do not read the market.. they trade using signals which is all to do with probability and money management (money management is an essential part to EVERY trader).. this is very unpreferred by many professional traders but novice traders get consumed by the indicators.. do not let that be you.. read this post.

there are many debates about what is right; fundamentals or technical. there are like 1000 threads on here on that topic.. but if you want my opinion.. technicals is all you need to earn yourself consistent profit.

here are some threads i will recommend for you.

basics
j16

advanced
price is everything

romancing the price

additional
trading with deadly accuracy

you have everything here that you need all for free. if you truly want to become a successful trader you will read through all of this and practise it on demo until you get the hang of it. then when you feel comfortable open up a micro account and trade with the smallest lots.. you will then have to learn about about psychology.

hope i have helped.. i wish someone had layed it out for me this way when i had started.
  • #10
  • Mar 28, 2012 9:39am Mar 28, 2012 9:39am
maybe i should rephrase what i said... i'm not sure I have the concepts right.

btw I recommend Mark Douglas' book Trading in the Zone.

okay.. so here is me regurgitating information.

anything can happen in the market... there are always unknown factors acting on the market. this doesn't make it Random, but unpredictable (like someone else said)

but when you place a trade there can be random outcomes with consistent results. having a good system will make the odds in your favor.

you need to accept risk and be consistent in trading your system, this requires discipline.

from the book:
1. Anything can happen.
2. You don't need to know what is going to happen next in order to make money.
3. There is a random distribution between wins and losses for any given set of variables that define an edge.
4. An edge is nothing more than an indication of a higher probability of one thing happening over another.
5. Every moment in the market is unique.
  • #11
  • Mar 28, 2012 11:12am Mar 28, 2012 11:12am
Quoting Tyoon
yes, there are many things to learn and does take some time to learn it. it can take some people perhaps 6 months to read the market profitably, or it could even take a few years.. all depends on how much work you put into it.

you will come across two types of traders who read the market; fundamental traders (use news to trade) and technical traders (use the chart to trade). there are also system traders (use indicators to trade). they do not read the market.. they trade using signals which is all to do with probability and money management (money...

Thank you, I'm gonna return (I have blown many real accounts) to demo until I have 3 consecutive months in profits while I read the J16 thread.
  • #12
  • Mar 28, 2012 11:15am Mar 28, 2012 11:15am
Quoting jamb0
How to read the market? Could you recommend me some thread or some book? I want to learn, but the more I learn the more ramdom I think this market is...
good questions. Unfortunately profitable trading isn't sexy and takes a good amount of research until you find out that most of the stuff that is or will be suggested to you is just outright crap. Doesn't make it any easier that people here are notorious liars about their profitability.

Good luck with the price action threads
  • #13
  • Mar 28, 2012 11:16am Mar 28, 2012 11:16am
Quoting 4tiger
from the book:
1. Anything can happen.
2. You don't need to know what is going to happen next in order to make money.
3. There is a random distribution between wins and losses for any given set of variables that define an edge.
4. An edge is nothing more than an indication of a higher probability of one thing happening over another.
5. Every moment in the market is unique.
This is very important, even if after all forex is a random market if you have an edge and with MM you may take some money from the market to your account.
  • #14
  • Mar 28, 2012 12:29pm Mar 28, 2012 12:29pm
Quoting jamb0
My theory about forex is that nothing works here, why?

Lets assume that for moving the forex market you need a big account in a real ECN account, so there are few guys who have this, in addition, forex market moves also because movements of stock markets and commodities markets.

So a guy with a big account in forex, stocks or commodities market wakes up in the morning and read a new about some stocks or about some country, and then he decides to buy or to sell, and then the market moves in one direction and thousands of traders win or lose...
your comments sound unfavorable toward forex? soory to hear that.

frankly speaking there are plenty good traders whom I know off in ff sure have made good money in forex, by applying their simple trading methods, with proper RR and MM, in a discipline trading manner.

if traders trade outside the scope as mentioned above, then they may have to review their trading approach before continue losing more money.
  • #15
  • Mar 28, 2012 1:47pm Mar 28, 2012 1:47pm
most quants,that is people who believe they are smarter than all the other 'dimwits' coz they can do complex math are the ones that believe the markets are random.just because they have been defeated reading the markets they think none can.guys like Bruce kovner,soros etc prove otherwise.

btw the arguments of whether the markets are random or not is the same as whether there is God or not.
....useless to argue.
wo-yoy! wo-yoy! wo-yoy! wo-yoi! wo-yoy-yoy-yoy!
  • #16
  • Mar 28, 2012 1:50pm Mar 28, 2012 1:50pm
Quoting jamb0
it is a completely random market, there are no methods, there are no systems
Depends on your definition or interpretation of randomness. I like this one:

Applied usage in science, mathematics and statistics recognizes a lack of predictability when referring to randomness, but admits regularities in the occurrences of events whose outcomes are not certain.

The text in bold is a very important distinction. Even in seemingly random processes, statistical regularities can be found. I think chart reading falls into this category. Charts are about as random as, say, Brownian Motion, which is to say, pretty darn close.

Here are a couple of 'Charts' for you-- one of them is a one-dimensional plot of Brownian motion, the other one is a 15 minute line chart of USDCHF, can you tell which one is which?
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  • #17
  • Mar 28, 2012 1:57pm Mar 28, 2012 1:57pm
wow I can see a stop hunting move on the the Brownian motion chart....
wo-yoy! wo-yoy! wo-yoy! wo-yoi! wo-yoy-yoy-yoy!
  • #18
  • Mar 28, 2012 2:19pm Mar 28, 2012 2:19pm
Quoting pemully
wow I can see a stop hunting move on the the Brownian motion chart....
lol, its funny, I've been watching this 1D brownian motion simulator, and the brownian charts actually look more tradeable than the real ones oooh theres a nice trend...wow look at that consolidation break out!
  • #19
  • Mar 28, 2012 2:52pm Mar 28, 2012 2:52pm
Quoting pemully
btw the arguments of whether the markets are random or not is the same as whether there is God or not.
....useless to argue.
the closest the market can be to random is arbitrary.

when you spend enough time studying the charts you find it is actually very structured. if you think about it.. why are there diagonal and horizontal levels (TLs and SRs) respected? they are needed by traders (small and big money) to make good entries with little draw down. we human hate uncertainty so we have to create structure to give us comfort (a sense of certainty) in a seemingly random (unstructured) environment. so we create these levels (in a horizontal or diagonal fashion) as triggers and targets. only when a trader knows where price is coming from and going to will know what levels will be respected or not on the way.

here is a textbook example. resistance becomes support. random? no, nothing random about that. it's all deliberate. except for erratic new reactions, everything in the market is deliberate.

only when someone does not understand something they call it random.. nothing is random.. in fact a nobel prize would be awarded to anyone who can achieve it.

..
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  • #20
  • Mar 28, 2012 3:21pm Mar 28, 2012 3:21pm
[quote=Aldente;5521041]Depends on your definition or interpretation of randomness. I like this one:

Applied usage in science, mathematics and statistics recognizes a lack of predictability when referring to randomness, but admits regularities in the occurrences of events whose outcomes are not

i like this post,chaos has more structure than one can imagine,but most concider it to be chaos
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