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My theory about forex market

  • #21
  • Edited 4:08pm Mar 28, 2012 3:29pm | Edited 4:08pm
my thoughts on that chart is that while support and resistance lines hold, sometimes they don't. they can be tested, they can be broken, and you can't be 100% certain what will happen unless you have information on every trader in action, and every trader sitting on the sidelines just waiting (impossible).

you can know that there is a 80% chance in the long run that a certain s/r line will hold. but it's still random... right? don't get me wrong, 80% is good enough for me haha. and that definitely is a strong s/r line.

with that aside, natural disasters such as Japan's tsunami last march sent the USDJPY down from 81.34 to 76.42... close to 500 pips. was the tsunami random? yes. was what happened to the JPY, everyone rushing to buy JPY even though a natural disaster had just hit japan, predictable?

edit:
YES! i'm a new member now.
  • #22
  • Mar 28, 2012 5:30pm Mar 28, 2012 5:30pm
[quote=4tiger;5521275]
with that aside, natural disasters such as Japan's tsunami last march sent the USDJPY down from 81.34 to 76.42... close to 500 pips. was the tsunami random? yes. was what happened to the JPY, everyone rushing to buy JPY even though a natural disaster had just hit japan, predictable?

Yea, the market is random but with a high degree of orderliness! in order words, a high state of randomness eventually forms an order. I dont trade the news, but i have heard countless traders complain about the market going in a direction and then suddenly change direction. my question is, why would anyone wish to attribute that to randomness? please note that reactions to news always follow existing trends. i was in a trade (GJ) during the tsunami, although the news itself was a surprise, but the impacts it had on GJ wasnt a surprise. point is, learn to read your charts and you will discover that the market is one of the few places in the world where you can find a high degree of orderliness! CHIKENA!
Orderliness of Randomness
  • #23
  • Mar 28, 2012 5:42pm Mar 28, 2012 5:42pm
Quoting jamb0
My theory about forex is that nothing works here, why?...
Your theory is very stupid!!
The Market pays you to be disciplined
  • #24
  • Mar 28, 2012 5:45pm Mar 28, 2012 5:45pm
Quoting mima
Your theory is very stupid!!
Why call it stupid when perhaps it is inexperience? Your bullying is not helping anyone.
When the Joker is in the deck.. fear not and play it well
  • #25
  • Mar 28, 2012 6:02pm Mar 28, 2012 6:02pm
Quoting Slim Buffett
Why call it stupid when perhaps it is inexperience? Your bullying is not helping anyone.
It is not bullying it is the fact. There is no randomness in trading...Investors dont get up and start to buy/sell without plan...Now you know why her/his theory is stupid....With such theory s/he will always lose money if ever trade live money....
The Market pays you to be disciplined
  • #26
  • Mar 28, 2012 6:26pm Mar 28, 2012 6:26pm
Quoting mima
It is not bullying it is the fact. There is no randomness in trading...Investors dont get up and start to buy/sell without plan...Now you know why her/his theory is stupid....With such theory s/he will always lose money if ever trade live money....
No, I don't know why h/her theory is stupid. It might have been erroneous in my opinion and obviously in your opinion.

As I said, maybe the post is due to a lack of experience. And maybe after a few times of trying to ride a bicycle you would call someone stupid because they kept falling off.

Of course, you're not smart enough to offer an opinion as to why that might be happening. You can only call it stupid.

Is that because you don't have a real answer ??
When the Joker is in the deck.. fear not and play it well
  • #27
  • Mar 28, 2012 6:37pm Mar 28, 2012 6:37pm
The problem with many of us retail traders, is we seem to think that the forex market is all about traders sitting in banks or for that matter sitting at home trying to make lots of bucks or a few bucks .

the forex market is made up of 1000,s of participents,from your granny on holiday to multinationals,goverments, currency clearing houses and on and on,all going about there daily buisness.ofcoarse large periods of time are chaotic and prices bounce around randomly as it unravels this process,cross referencing with effects on related currencies,and other instruments.it thrives to be eficient and through this efficiency it makes structure within the chaos,through this structure we see order ,through that order ther lies oppurtuity.

there are lulls in activity and periods were large orders,example a uk clearing house selling pounds,moves price not randomly very conformed and orderly until it has cleared .we need to reconise when we have order an when we dont.
  • #28
  • Mar 28, 2012 6:46pm Mar 28, 2012 6:46pm
Quoting mister me
we need to reconise when we have order an when we dont.
Your post is true. But it's that recognition that takes practice. Hint; it takes longer to learn to trade forex than it does to learn to ride a bicycle.
When the Joker is in the deck.. fear not and play it well
  • #29
  • Mar 28, 2012 7:02pm Mar 28, 2012 7:02pm
Quoting Slim Buffett
No, I don't know ...??

I sugest you to focus on your charts...there you can find any answer about trading....
The Market pays you to be disciplined
  • #30
  • Edited 7:15pm Mar 28, 2012 7:07pm | Edited 7:15pm
Quoting Aldente
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?
I'd guess at the one on the left being USD/CHF, the one on the right seems to have weird movements.

EDIT: Actually scrap that, I just changed my chart to a line chart and everything looks "weird", haha, too used to candlesticks
"Don't Panic..."
  • #31
  • Mar 28, 2012 7:11pm Mar 28, 2012 7:11pm
Quoting mima
I sugest you to focus on your charts...there you can find any answer about trading....
Not that great of a reply. You "assume" that because I'm a new member, that I'm new to trading. If you look at those aforesaid charts and assume that something is true, you're probably not that great of a trader.

Is your only method of seeing the world/trading an assumption ??
When the Joker is in the deck.. fear not and play it well
  • #32
  • Mar 28, 2012 9:45pm Mar 28, 2012 9:45pm
actually this debate has been going on for a while
and great mathematicians have been on both sides of the debate

EMH states that the market is a random walk and any information or movement is sqrt((itself)^2) however fundamentals have been empirically shown, to contribute to no less than 40% of the long term movement.


here is a histogram of returns

Attached Image (click to enlarge)
Click to Enlarge Name: histogram returns.jpg Size: 27 KB


looks to have a somewhat of a normal distribution supporting your argument for randomness, but you can see some skewness to the right although slight.

now here is a histogram of daily ranges

Attached Image (click to enlarge)
Click to Enlarge Name: histogram of ATR.jpg Size: 25 KB


we can clearly see that ranges have fat tails but the mean is heavy on the left side. At least with this premise we can have some some idea of what usual ranges are and can come up with a good risk management strategies as we clearly have our VAR more or less defined.

now to conclude my view of non random market, clearly the intervention of the BOJ to precisely ease pressures on exporters by devaluation has had the intended result, the SNB floor at 1.20 has also worked. when the FED decided to debase we clearly saw the USDX losing value.

so not random, here are the things that are predictable

1) trends exist
2) volatility is more or less constant (we dont have 1000 pip days, followed by 1 pip days, and 0 pip days)
3) price moves in waves
4) price does have similarities with stochastics process.
5) price does NOT have a normal distribution, has kurtosis, fat tails, and skewness, as well as heteroskedasticity.
6) price goes from clustering to sharp rapid movements in search of new homeostasis
AVT INVENIAM VIAM AVT FACIAM
  • #33
  • Mar 28, 2012 10:09pm Mar 28, 2012 10:09pm
Trading forex successfully is 90 % in your head. If you cannot develop a clear perspective on the market, you will constantly be focusing on the elements of the market that confuses. This chart gives my perspective...
Attached Image (click to enlarge)
Click to Enlarge Name: indi concept 3.gif Size: 25 KB
  • #34
  • Mar 28, 2012 10:17pm Mar 28, 2012 10:17pm
Even if the markets were random, they could be traded successfully. Once the price moves from point A to point B and we see how it progresses there, it can be traded successfully. The law of the Averages will always apply as longs as the market moves up and down. Cheers!!
  • #35
  • Mar 28, 2012 11:13pm Mar 28, 2012 11:13pm
i would take it further, as long as currencies impact the real economy and are used as vehicles of exchange to facilitate the distribution of aggregate supply with aggregate demand, they will seek stability, and will in some ways reflect the underlying economy they serve viz a viz the quote currency.
AVT INVENIAM VIAM AVT FACIAM
  • #36
  • Mar 28, 2012 11:26pm Mar 28, 2012 11:26pm
I've come to realize that the market boils down to mathamatics. Like the square of 9. Gann's version of S/R. It's all a numbers game.
Time turns trend. - W.D. Gann
  • #37
  • Mar 29, 2012 1:00am Mar 29, 2012 1:00am
The market is not random. Governments and institutions create/alter policies to strengthen or weaken currencies. There is more to it than that, but that's another story. It is only random to the untrained eye.
  • #38
  • Mar 29, 2012 12:01pm Mar 29, 2012 12:01pm
Here's my take:

Your idea that it is random does not stand up to logic. If a system has an edge based upon x number of trades, then it is not random, because if it was random the system would not have an edge!
Also, Marc Douglas is wrong when saying that the casino make 2% based upon a random outcome - i.e. makes 2mill usd if people gamble 100mill at the casino. OBVIOUSLY it is not random if the casino has a 2% edge!!! Duh!

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 money....
  • #39
  • Mar 29, 2012 12:36pm Mar 29, 2012 12:36pm
Quoting dice action
Here's my take:

Your idea that it is random does not stand up to logic. If a system has an edge based upon x number of trades, then it is not random, because if it was random the system would not have an edge!
Also, Marc Douglas is wrong when saying that the casino make 2% based upon a random outcome - i.e. makes 2mill usd if people gamble 100mill at the casino. OBVIOUSLY it is not random if the casino has a 2% edge!!! Duh!
you seem to confuse system with the underlying structure it seeks to exploit.
The casino games have a built in system, that exploits the underlying random structure of throwing dices or throwing a ball or whatever.
For example roulette. Let's say we just bet on red or black. The game itself is totally random. The only thing that makes the casino win in the long-term is the zero and double zero (green). That puts the odds into the casino's favor. The underlying game / outcome is random, while the built in system in the game makes the casino win over the long-term.

And lastly, let's turn to the markets. I have seen systems that have had a run for a thousand trades. They seem to work but in the end if you look at the system over a 10.000 to 50.000 trades, you soon realize that it was just a lucky streak within a random dataset. So systems with an edge or even traders that are successful over many years may just experience a lucky streak. I sometimes wonder if this was the same with the turtle system, it used to work for such a long time but then suddenly only gave out random signals. Maybe it had an extraordinary long lucky streak.
  • #40
  • Mar 29, 2012 3:51pm Mar 29, 2012 3:51pm
I used to think that way it was all random and some pros even advise it that you lose most of the time utter bullshit.

The market has order just like everything else in life key is find the order and use skill to execute it.

Look how many M and W's there are every single day all pairs in all timeframes!
Find your Favourite Pattern
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