{quote} That's nonsense, Proximus. Bubbles occur in FX markets just like any other market, and bubbles are driven by irrational emotional behavior, not "pure" economics. In July 2008, the EURUSD was at 1.60. By October 2008, only four months later, the EURUSD was at 1.23. Two months later, it was back up to 1.47. By the way, I think you're completely wrong about the FX market. Commercial operations account for the smallest segment of the FX market, about 10%. The vast majority of transactions in the FX market are speculative in some form of another....
Although i have a few problems with this.First of all the FX is the ratio of 2 markets, so bubbles as you call them, and you pointed specifically to the 2007-2008 period, why do they go always up?
Of course in stock markets a bubble is a price rally up, because what other direction can the price go, where people would rush to join? A stock market crash happens very quickly where guys dump their worthless stocks as quickly as they can.
But an up move in stocks is slow ,steady as many people are teased to enter, and then suddently as the big boys hit TP, it reverses and crashes back to normal state.
But you forgot that in FX, the both directions carry a neutral sentiment, good for 1 currency and bad for the other, while on stocks UP is good and DOWN is bad.
So the point is, i dont think that bubbles can form in FX, we know that the 2007-2012 period was a global crisis,its a very rare period of time it happens once every 100 years, so its not the best period to draw conclusions from.
The FX is just too mechanical, ok i agree with you and thanks for enlightening me about speculators power in fx markets vs non speculators, honestly i thought its the other way around.So thanks for that
But i still insist that the market is mechanical, even if speculators are in charge, there is so many of them, that you just cant see the sentiments and emotions of them,its so well hidden, that it looks random, and for most cases it is random
.If 1 billionaire buys the EURO and the other sells the EURO, doesnt matter which one of them loses = fear or wins=greed, there is probably an equal number of them.Otherwise how could they trade? You need equal sums of bullish traders trade size and bearish traders trade size, so BULLS CAPITAL= BEARS CAPITAL.
This is how orders are coupled, you always need a BUYER and a SELLER.So that being said, doesnt matter which one of them has any sentiments, it cancels out eachother
So the FX market still remains a neutral mechanical market to me.As for temporary sentiment fluctuations known as "trends" (since big boys may hold their trades for months , in this time smaller traders can cash up), they can be useful, but only if you know how to take advantage of them.
Does this make the market a "zero sum game" , nope, since there are always clever traders who can be profitable consistently, so they pull out capital from the market, but the majority will fall into the trap anyway.
"There's a sucker born every minute" - P.T. Barnum
