Thread: My theory about forex market

Good discussion on this particular thread.

Let me post 1 query to OP.

You say markets go randomly.

Now suppose for a minute that you're one of those institutional trader. You have a GAZZILION quantity of cash to move the market. Tell me how you'll make profits. What egy are you going to utilize to move the market to make a profit?

Originally Posted by ;

If dice action is random, the price action will be random. But if dice action was random I would be dice action, thus price action cannot be random!

You must be loaded dice action

but seriously, every roll of the dice gives you a 1 in 6 chance of rolling a particular number! In the long run, maybe 1000 dice rolls, the number 1/2/3 / 4/5/or 6 will appear closer to 1 in 6 times although It's random which number it'll be.

This is why, when you play roulette, the casinos like to show which numbers have shown up (and show them as red or black). If a player decides to bet according to what has occurred in the past, Oh, red showed up 4 times in a row so the spin has to be black. So the spin has to be red, or, Oh, red showed up 4 times in a row. NO.

For another spin, red will still have a 50% likelihood of showing up (not counting 0 and 00)

as for the FX market, the market moves in ways, that using a trading platform, perhaps you are correct 8 out of 10 times. Which 8 times out of 10 transactions are you going to be correct? The first 8 or the 8? That is what is random!

Originally Posted by ;

Great discussion on this particular thread.

Let me post one question to OP.

You say markets go randomly.

Now suppose for a minute that you are one of the institutional trader. You have a GAZZILION amount of money to move the market. Now tell me how you'll make profits. What egy are you going to use to move the market to create a profit?

Be the first to buy or sell if a new releases and hope that the rest of institutional traders do exactly the same but AFTER of me.

That, or having privileged info

The forex market, as with all markets, isn't arbitrary. It is very unpredictable, but this is only because you are not controlling it. Random would suggest that there aren't forces out there that do control where the price moves. If you knew beforehand that the Australian central bank was likely to intervene, as they did a few decades back, sending the market crazy for some time, or that the BoJ was likely to intervene, you would place a trade and know very well where the market was going... at least for a brief time period. It's not arbitrary.

The markets are interrelated, and there's a reason why if the housing market collapsed in the united states, then elsewhere, the currencies behaved how they did. There's a reason why currencies are correlated with the movement of commodities and the stock market, or not. When you look at it, it isn't random motion, it is simply chaotic and unpredictable. This is particularly true the lower time period you exchange.

Only take solace in knowing that YOU know a pair will go up or go down, it is just a matter of if and how much.... If entirely random, something may never go back down, or back up. We all know this isn't true. It's due to something ceasing to exist, which is also not arbitrary, As we all know that if something does go down rather than return.

If you believe that it's random see below.

Currencies are influenced greatly by interest rates.countries with higher interest rates have stronger currencies and countries with reduced interest rates have poorer currencies.

Now take Aussie dollar(Strong) and Yen(Weak).

Look at the interest rate for Aussie dollar from 2000-2008



Today, consider interest rate for Japanese Yen from 2000-2008



Today, what do you expect to the AUDJPY pair to do from 2000-2008, see the magical. .



Now, are you telling me that, that big uptrend is random? ...

Originally Posted by ;

The Currency Market market, as with all markets, isn't random. It is very unpredictable, but that is because it is not being controlled by you. Random would imply there aren't forces out there that do control at which the price goes. If you knew beforehand that the Australian central bank was likely to intervene, as they did a few decades back, sending the market crazy for some time, or the BoJ was likely to intervene, you'd put a trade and know quite well where the market was going... at least for a short time period. It isn't random....

When it has tendency, it isn't random. After reading s System I am starting to think that perhaps I had been wrong, but in the example of EURUSD I just see definited fad on monthy charts, below that it's hard to predict that the tendency, and possibly in the intra-day the price yes it is random most of time:

I get it: Forex is a blend of trends on timeframes and randomness on timeframes, so all of us possess the reason! Do you agree?

Jambo, my understanding is that when you're trading short timeframes, they're also affected by economic variables.

Now the price moves are made generally from the smart money, But what is this smart money? This is the money that comes from associations. Now the institutional trades must make their money. On what basis can they exchange? technical , fundamental or both. My guess is that they have a tendency to base their decisions on fundamentals and that is when your analysis is blown from the water, maybe not that specialized analysis was wrong. It was only that the big men decided to move the price according to their views of their currencies and technicals in no way can form the motion of currencies.

Hence the conclusion is that we must use both technical and fundamental analysis to base our trades. Most people use ONLY technicals and that is why they get in trouble. Do analysis after knowing the fundamentals.

Hope the experienced trades can share their views on this.

1 guy, or one institution moving the market???

Are you sure???

Would you know the size of this market???

Takes far more than that...

Originally Posted by ;

1 man, or 1 institution moving the market???

Are you certain???

Would you know how big the market???

Takes way more than that...

Depending on the market, a single person or institution can indeed move the market price.

There is this man in Europe nicknamed'The Flipper', he got that nickname because he scalped the Euro markets with huge positions turning leadership, short then long then short then. . .so on, seemingly his work schools found it bothersome as he literally was affecting market prices. In stocks when a single trading establishment makes the decision to offload risk and drops a massive supply of a certain stock off it is books, everyone will notice it and the price will fall both as a bigger supply of inventory has emerged and that the extra supply would be viewed as a negative sign on such inventory.