Words of Wisdom

[Obsidian 10]

Any market, be it real estate market or forex market, is all about transferring money from the masses to a few lucky ones in the long run. In most real property speculation cases, the masses make money ,a lot of money, but the money stays as paper profit and evaporate before they realize their paper profit into real hard cash. In most forex speculation cases, the masses barely survive a few years thanks to lack of knowledge of the market and the deadly leverage. But both types of speculators all serve their useful purposes in investment food chain contributing their hard earned money to the market in exchange for a dream.

 

For any prospective traders, hope this is not in anyway a discouragement. Trading is a hard mind game and not everyone is suitable to be engaged in such a hard game. Most have neither frame of mind nor mental fortitude to survive in this hard game. Mastering TAs or numbers or options business are at best a first tentative step into the right direction with no guarantee to any success. Training a right frame of mind is the most difficult but absolutely necessary part for success and most are simply not ready to go through that hard stage of the learning process because it is a very painful process. Trading is essentially about pain-taking-process in the end although most do not realize it. The process of overcoming fear, greed and mastering tranquility of mind in this hard school of speculation. Fwiw.

 

Every trader should find his/her method/system which suits his/her own situation and personality. And that system/method must be the one that has proven to be able to make some money through trials. So, if Tom, the medium-term trader, revealed his money making method of last three decades, it may not have the same effect for Dick and Harry, the day traders, and vice versa. Agree that most fail for lack of system/method and/or lack of discipline to follow through.

 

Trading success is all about making as much as one can when one is right and losing as little as possible when one is wrong. That is the essence of this business. So, any theory or system which looks after the above is a good one.

 

System is a weapon of a soldier in this market. You must have one as soon as possible. Otherwise, it will be like fighting well-armed Forex robbers with a handbag. Best one is a self-made one because you can never feel comfy in borrowed shoes although borrowing good ideas from others is a good idea. Good luck.

 

One cannot make a dime unless follow the herd or trend most of the time. It is just that one has to be cautious when overbought/oversold region is approaching and know how to turn at inflection point for the opposite trend. Following herd needs average intelligence and courage but identifying inflection points and taking a necessary action needs not only intelligence but also a lot of courage. Again, fortune favors the brave.

 

Money management is where most traders go wrong in almost all cases leaving only a few as the winner at the end of the day. Money management and discipline of mind is what makes or brakes a trader at the end of the day, not the elementary entry and exit method.

 

Forex/Currency Trading: It is a sentiment game w/ a crowd mentality where even the best players w/ the best forecasts are tricked out of good positions by the magic of price action.

[Obsidian 10]

TREND TRADING: Accumulation and Distribution

 

Forex market like any other market works in a very simple way. It accumulates in a certain area for awhile, and once the accumulation is over, it advances to a certain distance until distribution starts, and accumulation happens again and advances to a certain distance again, and repeat and repeat. Day trading may not yield the best results while the accumulation and distribution work out itself, being double-murdered by zig-zag moves, while the market starts advancing out of accumulation area, day trading is a sure way of cutting profit short. In general, day trading is not the best form of yielding the most profits in my experience contrary to what some writers who never made real money in this game try to say.

 

The safe and better way in making some money must be wait for "accumulation" to be over and ride the whole length of advance until "distribution" starts and reverse as the market dictates as a short-term trade for 2-10 days, as the case may be.

 

Please study 8 hour or 4 hour line charts or candle charts, especially the patterns and 20 MA inside the charts for a few months everyday, and you will discover what I mean by accumulation and distribution for short-term trades in Forex market. Forex market always needs this process, so you can decide what tactics you will use at a given stage.

[Mysticforex 13]

Not hi jacking the thread... offering a possible example Accumulation and distribution.

GBP/JPY 4 HR.

[Obsidian 10]

your contribution is much appreciated

[MightyMouse 12]

TREND TRADING: Accumulation and Distribution

 

Forex market like any other market works in a very simple way. It accumulates in a certain area for awhile, and once the accumulation is over, it advances to a certain distance until distribution starts, and accumulation happens again and advances to a certain distance again, and repeat and repeat. Day trading may not yield the best results while the accumulation and distribution work out itself, being double-murdered by zig-zag moves, while the market starts advancing out of accumulation area, day trading is a sure way of cutting profit short. In general, day trading is not the best form of yielding the most profits in my experience contrary to what some writers who never made real money in this game try to say.

 

The safe and better way in making some money must be wait for "accumulation" to be over and ride the whole length of advance until "distribution" starts and reverse as the market dictates as a short-term trade for 2-10 days, as the case may be.

 

Please study 8 hour or 4 hour line charts or candle charts, especially the patterns and 20 MA inside the charts for a few months everyday, and you will discover what I mean by accumulation and distribution for short-term trades in Forex market. Forex market always needs this process, so you can decide what tactics you will use at a given stage.

 

Trying to trade a range as if it is a trend will kill a trader and trying to trade a trend as if it is a range will also kill a trader. I will bet anything that every blown account can be narrowed to either the former or latter or both.

 

I call A or D a range or bracket.

[Obsidian 10]

"bulls make money, bears make money, pigs get slaughtered"

[Obsidian 10]

On technical side of the trading, the first thing to do is to find out the trend in one's trading time frame and the proper trading strategy for that trend. Some ride positions for months, while some ride positions for less than an hour or a day and their views of the trend obviously differ. For a trader who is running a position for months, a daily fluctuation may be just a meaningless noise while for a day trader or an hour trader, a daily fluctuation could be a monstrous tsunami. Having a precise definition and a technique of identifying a trend and the turn of a trend in a trader's time frame, and adopting the right strategies for that trend is the first elementary step in a hard school of trading.

 

Chart reading is not to predict the tops or bottoms of any move, but to confirm the change of trend as soon as they are made and adopt right strategies in that new trend.

[Obsidian 10]

Each cycle is different from the last one and that is the beauty of the market. It is extremely important to look at the big picture from the distance rather than studying the minute and hourly charts with a microscope. And repeat the whole show again and again until it shows the sign of turning in daily or weekly chart. As a rule of thumb, 20 MAs in 8 hour, day, week and month are useful for its directional tendency and as a resistance and support point.

 

EUR/GBP and GBP/CHF are leading indicators for EUR/USD and USD/CHF

GBP/JPY, EUR/JPY and CHF/JPY are leading indicators for USD/JPY

 

Generally speaking, if EUR/USD does not move but EUR/GBP moves first, it is a good indicator that someone is maneuvering in EUR/USD front in the same direction later, and when EUR/USD moves but EUR/GBP does not move first or in tandem, then it is highly likely EUR/USD move is countered by its opponent and the opposite move is highly likely soon.

[MightyMouse 12]

Each cycle is different from the last one and that is the beauty of the market. It is extremely important to look at the big picture from the distance rather than studying the minute and hourly charts with a microscope. And repeat the whole show again and again until it shows the sign of turning in daily or weekly chart. As a rule of thumb, 20 MAs in 8 hour, day, week and month are useful for its directional tendency and as a resistance and support point.

 

EUR/GBP and GBP/CHF are leading indicators for EUR/USD and USD/CHF

GBP/JPY, EUR/JPY and CHF/JPY are leading indicators for USD/JPY

 

Generally speaking, if EUR/USD does not move but EUR/GBP moves first, it is a good indicator that someone is maneuvering in EUR/USD front in the same direction later, and when EUR/USD moves but EUR/GBP does not move first or in tandem, then it is highly likely EUR/USD move is countered by its opponent and the opposite move is highly likely soon.

 

Not to nit pick, but if each cycle is different from the last, then it really doesn't have the nature of being cyclical.

[Obsidian 10]

Not to nit pick, but if each cycle is different from the last, then it really doesn't have the nature of being cyclical.

 

only consecutive ones :rofl:

 

anyway...

 

 

Markets' reaction to economic news

 

News or data are always read by the market along the prevailing market bias. Data can provide a good reading for the state of the market. If the data is bad but the price is still rising or not affected, it must be a bull market which means buy on dip strategy is a better one. Conversely, if the data is good but the price is not rising or even falling, it must be a bear market which means sell on bounce strategy is a better one. The inflexion point must be when bad news or good news. no longer affect the prices as they have done before. Medium/long-term bias changes are usually accompanied by such reactions to the news.

 

It is not the numbers that counts but how the market reacts to the numbers that counts. That gives some comfort to those who are not privy to the numbers already.

[mohsinqureshii 10]

only consecutive ones :rofl:

 

anyway...

 

 

Markets' reaction to economic news

 

News or data are always read by the market along the prevailing market bias. Data can provide a good reading for the state of the market. If the data is bad but the price is still rising or not affected, it must be a bull market which means buy on dip strategy is a better one. Conversely, if the data is good but the price is not rising or even falling, it must be a bear market which means sell on bounce strategy is a better one. The inflexion point must be when bad news or good news. no longer affect the prices as they have done before. Medium/long-term bias changes are usually accompanied by such reactions to the news.

 

It is not the numbers that counts but how the market reacts to the numbers that counts. That gives some comfort to those who are not privy to the numbers already.

 

First I just Want to say that this is very cool and Nice article Dear Obsidian!

 

Well...In my opinion it is not possible to make sustainable profits trading economic Data releases simply because any subsequent movements after the announcements are often highly volatile and highly unpredictable. They are basically open to interpretation, and any subsequent movements are based on traders initial reactions to the news, Which is itself can be unpredictable.

Sometimes you will find that straight after a news announcement, The market will move strongly in one direction or the other. This can either continue, or completely retrace and head in the opposite direction, making it impossible to trade. This is because there is often a knee-jerk reaction to the news, and hen a subsequent move a few minutes later once traders have fully digested the figures. You will find sometimes that seemingly good news for the dollar, for example, will see a surprise sell-off and vice versa. It's all about traders perception of the news and is basically too unpredictable to trade with any confidence so my advice would be to stay away from the economic data releases, because there are plenty of easier ways to profit from the forex markets.

[Mysticforex 13]

First I just Want to say that this is very cool and Nice article Dear Obsidian!

 

Well...In my opinion it is not possible to make sustainable profits trading economic Data releases simply because any subsequent movements after the announcements are often highly volatile and highly unpredictable. They are basically open to interpretation, and any subsequent movements are based on traders initial reactions to the news, Which is itself can be unpredictable.

 

I have a friend with 19 years experience trading commodities in the Chicago Pits. He holds degrees in economics and agriculture. He taught me to trade economic release's in 2006, into 2007. It took 6 - 7 month's to get the hang of it. We continued for another 5 months or so.

I made a little money, more significant, I didn't loose money. Speaking only for myself, I found it Waaayyyyyy Too Stressful to justify the money I had made. I think Bull Fighting would be less stressful.

[mohsinqureshii 10]

I have a friend with 19 years experience trading commodities in the Chicago Pits. He holds degrees in economics and agriculture. He taught me to trade economic release's in 2006, into 2007. It took 6 - 7 month's to get the hang of it. We continued for another 5 months or so.

I made a little money, more significant, I didn't loose money. Speaking only for myself, I found it Waaayyyyyy Too Stressful to justify the money I had made. I think Bull Fighting would be less stressful.

 

Thats the Reason i Start my Comment With "In My Opinion" just mention it because Technical Studies are much Profitable In my case.

[Mysticforex 13]

Thats the Reason i Start my Comment With "In My Opinion" just mention it because Technical Studies are much Profitable In my case.

 

 

Agree, I am a technical trader. I have found that if you have say, a short bias, and a news release sends price in the opposite direction, it is just delaying your analysis from playing out.

[zdo 20]

Trying to trade a range as if it is a trend will kill a trader and trying to trade a trend as if it is a range will also kill...

but … but…

:haha: All too often, when you’re looking at a chart to get in, it’s “trending”… as soon as you’re in, that same chart is suddenly just “ranging”. What just happened?

 

 

Each cycle is different from the last one and that is the beauty of the market.

and

Not to nit pick, but if each cycle is different from the last, then it really doesn't have the nature of being cyclical.

Not to nit pick the nit picking but to clarify for beginners…

It might be more accurate to say each ‘rulership’ is different from the last instead of “Each cycle is different from the last one”

(The alternation between rulerships is cyclical ... not as linear as we would like of course - but still ‘cyclical’)

A ‘rulership’ is a weighted combination of distinct ‘crowds’ - with sufficient extremes in individual weighting to allow them to be Typed into a limited number of general categories.

 

re

and that is the beauty of the market

There are many ways of coping with that “not as linear as we would like” issue.

Many, if not most, traders note / observe / perceive this phenomenon (actually it’s these phenomena) to varying levels, but on the first few thousand attempts at understanding it, experience increasing, even more unpredictable, chaotic morass – and do not find the ”beauty” at all.

:crap:

So they settle, declare it unnecessary, and try to find methods that discount / go around / do not incorporate these ‘cycles’ at all…

[onesmith 10]

It might be more accurate to say each ‘rulership’ is different from the last instead of “Each cycle is different from the last one”

(The alternation between rulerships is cyclical ... not as linear as we would like of course - but still ‘cyclical’)

A ‘rulership’ is a weighted combination of distinct ‘crowds’ - with sufficient extremes in individual weighting to allow them to be Typed into a limited number of general categories.

 

Cycles are non-linear on a time axis. Events are non-linear on an event axis because event order is unrestricted. Indvidual observable events are linear along the logic axis that opens and closes the gates to a specific observable action reponse, keyed to a specific combination of events. Machines have a limited number of logic gates which follow a linear logic axis.