Why are predictive statements about forex so astonishingly hard to make ? It is those patterns. It is a bit like tossing a coin. Guess heads and it is heads and you look like you have something. If tails turns up, well things look different.
The problem as I said is in those patterns. Ever noticed how when you make a losing trade you look at the pattern and say wow that was so obvious how did I miss that (or make a good one and thank your lucky stars) ?
Well you did not miss anything. At the point you make a trade (usually in a basing pattern of some kind) you are actually in the point of greatest degree of freedom of movement of those pips, you have to be.
If you do something else, like hop in on a trend, you run a high chance of getting in at or near the top, this is the place where the trend is clear. That is why it is so easy to get in at a top (or bottom). The point is the patterns only make sense after they have happened. And the point you enter has a whole universe of coherent patterns to choose from.
As to what determines the pattern, it needs a boost, these usually come from fundamentals or technical points. Fundamentals usually depend on policy makers, who make judgments which seem sometimes almost random, but they make sense for all sorts of other reasons (that is actually one of the big sources of randomness in forex).
Technical points again have freedom of movement issues. But, this is something to hold onto, to stack the odds, to give you a sense of a possible future. What I call information. One of the reasons I started this blog was to do something for me about the predictions about the market I was reading.
It is so easy to get drawn into predictions but I am trying to give clarity about the stacking of a coherent future for a currency pair. In stocks, in a working market you can say a company will improve its share value if its price now is not in coherence with its balance sheet over time.
A functioning market precisely does this, and it is efficient at finding companies, to make this computation. Again that is not a prediction, it is a description of a coherent future.
© 2010 Guy Barry - All Rights Reserved.
