Quoting TradeVectorDislikedEastmaels:
What moves the markets is far too complex to explain for this type of forum. Furthermore, what moves the markets truly is not a concern of mine.
What is a concern of mine is "when", "how much", "in what direction", and "how frequently" will I be able to capture that move.
I call it simply: Timing, Direction, Magnitude and Probability.
What moves the markets is far too complex for any human being to both store and process in their head under real-time market conditions. To attempt to code such a system with a computer is possible, but it would take years of research, development, testing, analysis, and tweaking. However, it could be done to a fairly precise degree of acuity.
But, this is not what most people want to hear. Most people want to hear about the silver bullet theory. The fact of the matter is this: no human being alive on planet earth can trade the market consistently and accurately without a CLEAR understanding of Timing, Direction, Magnitude and Probability.
Trading without this understanding is nothing more than guessing. And, you don't want to guess with your hard capital.
So, start with "Magnitude", and that will open the door to Timing and Direction which will then allow you to calculate Probabilities. Magnitude is nothing more than Delta over Time. (^/t)
You will need to pick a time-frame (a bar of data) and then determine the price delta between two (2) clearly identifiable points within that bar of data. Then measure the average delta between those two points over X number of bars. Use that as your baseline. Study that baseline until you know when the delta is expanding, or contracting.
Then you will be ready to tackle the next big one which will be Direction. Direction is a derivative of Magnitude and Timing is a derivative of Direction.
People don't do well in this business only because they don't yet understand the baseline principles of what constitutes "price".
Price is not what you think it is. The eurusd for example is not $1.2405 at the close of 9/10/05. Price is multi-dimensional and in reality is does not have a point of singularity. True "price" is diffused through both space and time. You cannot actually “see” price with your naked eye because “price” as you think of it simply does not exist. Price is definitely non-linear and very abstract. It has no “place of being”, no “where”, no “there” by itself.
When I trade, I don’t trade where the market is right now. I trade where the market is going to be at some point in time in the future. Price has a built-in multi-dimensional structure that spans an endless number of interlaced bars of time. Price is more like a piece of fabric than a definite “value”. People get hung up on “value” and “valuations” when trying to trade and that’s non-sense. For the trader, the concept of “value” does not apply. We move in and out of the market too fast for “value” to have any grip on what we do. So, dispense with “value” language – it won’t fly here.
When you think about “price” you will have to start thinking about “structures” with multiple dimensions across multiple time-frames moving at different rates of speed simultaneously, yet having a definite “pattern” and “form” or “geometry”.
When you can learn to see price as a “structure” having length, width, height and a time dimension, then you will be ready to enter the next phase which is Probability. The Probability merely determines the likelihood that the structure of price will be maintained over X bars. Once you are confident that the structure of price will be maintained over X bars, then you will be able to enter orders with a higher sense of purpose, seeing what most others in the market don’t, won’t, or can’t.
Of course, all it takes is one good news flash to come across the wires to blow the structure into bits – but, that’s the risk we all take and that is why we use Stops and Recovery trade strategies.
I would not worry too much about what “moves” the market – a super computer would have difficulty with that question in real-time. Instead, I would focus first on what constitutes the “Magnitude” of the currency pair that I was interested in trading for the time-frame that I was interested in trading it. You could make a living just on Magnitude alone without getting anymore sophisticated or complex.
Forget conventional TA, everybody and their dog uses it. You are going to have to build your own TA from raw data. So, start with raw Forex data and begin the process of studying it and analyzing its behavior over whatever time period is of interest to you. Get very familiar with the deltas within the raw data points of a single currency pair until you begin to see the “fabric” of the price within the pair itself unfolding before it happens. Then you can worry about creating the trade logic, rules and protocols – but you can’t have any of that until you first understand how the data likes to “flow”.
Rule number 1: Price is composed of data points.
Rule number 2: All data flows.
Rule number 3: Data has structure.
Rule number 4: The law of Inertia applies to market data structures.
Figure out the structure of the data (price) and you will be much better at projecting the “next” move.Ignored
Continued success.
Mike
"You can make money or you can make excuses, you can't do both".
unknown
do please give me any feedback, good or bad, whatever.
