What do you mean by "predictable" or "predictability" when you talk about forex? |
|
Imagine tossing a coin which is slightly bent in a way which is known to you. The bend is almost unnoticeable but it does exist and this fact will become obvious after a long enough series of coin tosses, if you do the book-keeping accurately. Trading the markets with a good trading system is similar. The amount of predictability is small, making it justifiable for people who do not have access to an analysis technique of sufficient sensitivity to talk about "efficient markets" -- the markets indeed look "efficient" to their methods of observation. The fact of predictability only becomes undeniable after hundreds or thousands of "coin tosses" (trades). The world economy is never in equilibrium. "I assume that markets are always wrong" said George Soros. Bookmark with:
|
|
| Last Updated ( Saturday, 25 October 2008 15:59 ) |
A market actor (investor, trader, central banker) requires finite time to analyze the changing environment and to make a decision. Yet more time and resources are needed to turn it into action visible by the market. No analysis is perfect, and some are less perfect than others. In addition, people who share common educational and cultural background tend to make similar, rather than the most efficient, decisions. Groupthink exists inside communities and large organizations. For these and other reasons, the so-called market inefficiency exists. Once the market inefficiency is quantified, predictive power (and a winning strategy) is only a step away, since such inefficiency -- always specific and quantifiable -- is in some sense but a deviation from the perfect symmetry which random noise (aka "efficient market") would possess. Active algorithmic systems:
Danica | daily | 9am Eastern time | 14 forex pairs
"I noticed that in advances as well as declines... prices were apt to show certain habits, so to speak. There was no end of parallel cases and these made precedents to guide me. I was only fourteen, but after I had taken hundreds of observations in my mind I found myself testing their accuracy, comparing the behaviour of stocks to-day with other days. It was not long before I was anticipating movements in prices. My only guide, as I say, was their past performances. I carried the "dope sheets" in my mind. I looked for... prices to run on form. I had "clocked" them. You know what I mean... Another lesson I learned early is that there is nothing new in Wall Street. There can't be because speculation is as old as the hills. Whatever happens in the... market to-day has happened before and will happen again."
-- from Reminiscences of a Stock Operator, a classic by Edwin Lefèvre, inspired by the biography of a legendary trader Jesse Livermore, an author himself, who made and lost fortunes, was like catnip to women and commited suicide at an age of 63.
"...I hope to prove that traditional approaches such as the economic indicator approach do not work. No consistent correlation exists between the U.S. dollar and U.S. economic indicators, but conventional wisdom says that the two move in lockstep. Why is this approach followed so fervently if its foundation is rooted in falsities? The reason that markets move in identifiable patterns is probably the same reason that many accept as gospel the conventional approaches to market analysis and trading that have marginally successful track records at best. That reason is the propensity for humans to follow the crowd, especially in situations as emotionally driven as trading. ...I think that I can share with you a better (and cheaper) approach to analyzing and trading the FX market, an approach that will give you an edge, if only because you are not following the crowd." -- Jamie Saettele, Sentiment in the Forex Market.
Futures Magazine Provides you with the essentials you need to make smart trading decisions... Our partner TradePub.com offers Futures Magazine for FREE to qualifying professionals.
Foreign Currency e-newsletter: Your daily source of information for global market conditions affecting currency rates and trends... Our partner TradePub.com offers Foreign Currency World Market Update -e-newsletter for FREE to qualifying professionals.
Share Your Opinion
|
Disclaimer: Forex, options and futures trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the forex markets. Don't trade with money you can't afford to lose. This website is neither a solicitation nor an offer to Buy/Sell forex, options or futures. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this website. The past performance of any trading system or methodology is not necessarily indicative of future results. Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may be under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. See Terms of Service for the full disclaimer. |
Copyright © 2010 Forex Automaton. All rights reserved.
Joomla! is Free Software released under the GNU/GPL License. ROOT -- An Object-Oriented Data Analysis Framework.