06 October 2010

Forex Topographies

Forex is like a sine wave of retracements and investing is like the slope of the Dow over its lifetime. By the time you get high on that slope though, in general it's too late to get in, but you can get in on forex at any time, but you can get on the wrong side.

What about money management. Well, if you keep getting in on the wrong side, all that happens is you get small bits making one big bite. But why not get in on the right side. Because you cannot, in the way you can be somewhat assured of getting in on a Dow component. That is why forex is like how it is, why it feels so hard.

There is nothing related to the topography of the real world you know to tell you when to get in on the right side, but you keep on trying to see it this way (with linear indicators, news events, and so on).

Why - because that sine wave is not a sine wave, it is a multi-dimensional shape, with an extremely complex topography, impossible to see. What my positivity about forex is, is based on this, the way the mind can feel structure. What that means, is the mind can sense that topography, and maybe not give you the correct entry point, but can bias it for you.

Even if you know the topography from study of the market, a new event can change it radically in a moment and put you on the wrong side of the market. And one cannot visualize that topography, one can only sense it.

From this one might even get the impression very few make money in this market let alone get rich. But it is also fascinating and remember you really need to study it and immerse yourself in it and listen to other traders to get that feel for structure.

Now, what about equities. That is not exactly a straightforward topography either, but is has a static element. Essentially, one needs to be able to see a financial statement in terms of its structural deviation from the range of other statements.

That is another inherent ability such as probably Graham had and other like him. That is why he says don't get too caught up in ratio analysis, that tells you nothing about that structural formalism. That is precisely what I do when I analyze companies (but I take note of ratios as well).

Think now how hard it is to combine forex with investing. One needs to optimize across a very complex topography. But does one, it may be the combination simplifies this topography to something which one can visualize. Remember once one visualizes, one solves, one has a path.

But it may be the case it only simplifies as it is solved. However those who have got immensely rich from forex and equities suggest otherwise. It may be that investing topography is linked to dynamic forex topographies. Together they simply make systemic sense, they clarify that topography with a result that one can see ($).

One needs that fractal growth embodied in Elliott Waves in forex, it is something static to hold onto, in a way patterns are not (as this blog has discussed). It is just as one find out, the severity of forex retracements means one has to get in early, and forex Elliott Waves are unstable.

If they have the backing of a chaos source like the Dow (US equity hours) then they are more stable. But otherwise they are prone to sharp changes. Why, well an Elliott Wave is basically a growth process. It is structured from the way market orders are made, but within this are strange attractors which are like a kind of dynamo, in complex topographies of functionality.

As I have said before I use Raghee Horner's 34 EMA to test the stability of these waves (e.g. on a valid Alligator signal, the Polarized Fractal Efficiency I use to tell me if a chaos trend is in progress). It is basically telling me how much chaos is in the market, how strong the growth processes are.

Fractally grown structures are stable, but as this blog has suggested many times and other evidence supports, the forex market is not primarily a chaotic system, it is an optimization system, and that optimization will override chaos growth at any time, that is also what the Dave Wave may be capturing, that interface between optimization and chaos structure.

It is hardest to override that growth process during US equity hours, except when the Dow is a money flow phenomenon (e.g. the crisis). Again the consequences of continuing to flood assets with cheap money may have continued effects on the way the Dow computes value, which may make investing itself problematic and forex less stable. That affects all investors and hence the economy itself.

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