Understanding the market. Part 1
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    Understanding the market. Part 1

    Hi everyone!

    Is it possible to understand the market? People have been thinking about it since market has appeared. Just remember Japanese candlesticks, they were applied in early 1800-s in Japan. Later on, attempt to formalize market movements was made by Charles Dow, which has become popular for “technical analysis”. It’s interesting that Louis Bachelier in his “Theory of speculation” had developed absolutely opposite views on the market - he claimed that nature of the market is close to random.

    In 20-s of 20 century, market has accumulated enough history for making conclusions about effectiveness of different theories. It has become clear that “moving with the market line” can’t beat the market, and average investor has to apply something more complicated and smart.

    Richard Wykoff, who also was journalist and trader, has developed technical analysis into VSA (Volume spread analysis) method. Later, in 1934, Benjamin Graham had claimed principles of “value investing”.

    Later on, models for understanding the market were developing, along with new nuances and details. There’s no “right” or “wrong” model, everything depends on current market conditions. But, we can say, that all approaches for understanding the market, can be put in 4 groups:

    1. Market action discounts everything;
    2. “Smart money” vs “Public”;
    3. Random walk hypothesis;
    4. Harmonic analysis.


    First refers to technical analysis in all it’s forms, second is closer to VSA and "auction market theory", third one refers to statistical distributions and probability theory, fourth involves application of Fibonacci retracements/extensions, Gann or Elliot principles.


    Market action discounts everything:

    When we talk about technical analysis, we remember it’s first and basic rule - “Market action discounts everything”. If we take larger timeframes - Weekly or daily chart, it would be good to use conventional technical analysis on them, because relative percentage of market “noise” is low there. Comparing price action on “W1” with that on “H1”, we will find that on “W1” quantity of conflicting information is relatively lesser.
    That’s why professional traders who employ “Head and shouders”, “Flags” or “Pennants” work on larger timeframes. They compensate low quantity of trading signals occuring on their timeframes by analysis more markets and more trading instruments.


    “Smart Money” vs “Publiс”

    When we switch to intraday charts, we will find that there’s a lot of “price probes”, “tests”, “false breakouts” and other irrelevant price movements. So, intraday, or even swing trader (who works on trends of 1-3 days of duration) has to filter information.
    Professional traders, who are working on small timeframes, often analyse 3 parameters - price, time and volume. They combine it together and get the idea of value. Distinction between price and value is the most difficult and important task for intraday trader.

    The goal of this process is to capture activity of “other timeframe trader” (OTF) from intraday chart. If we trade within a day, yet can’t understand big picture, we can easily be caught up in false price moves.

    To be continued...

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    Last edited by Value trader; 03-20-2015 at 11:32 AM.

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    Forex is a big business of online. Now many people of the world depend on Forex. Many people are earning now from Forex and even solely lead their lives on it. But we should know that they are able to achieve consistent income from Forex and this is possible because they know the perfect way to trade here. Something that suits one trader may not suit the other.

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    It is an excellent thread sir. Many strategies have been developed to beat the market. But sooner or later the market proves that it can prove any strategy wrong. Sometimes the market proves the technical wrong and sometimes it discounts even the fundamental factors. So overall lot of smartness needed to exploit the earning potential of the Forex market. Eagerly waiting to read more about

    Random walk hypothesis;
    Harmonic analysis.

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    it important we place any kinda entry when we are trading we need to understand the condition of the market when we are trading is business is all about analysis and when we have good understanding to analyze we can surely determine how to profit from the market

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    When traders go wrong they sometimes try to take revenge with the market. They want to fight and gain back their money through emotional trading. Instead of fighting the market you should rather fight yourself. It is not the market that open positions for you or do the analysis for you, and or perhaps the gambling that many do. All faults in our transactions is our fault.

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    Quote Originally Posted by Abhishekwala View Post
    When traders go wrong they sometimes try to take revenge with the market. They want to fight and gain back their money through emotional trading. Instead of fighting the market you should rather fight yourself. It is not the market that open positions for you or do the analysis for you, and or perhaps the gambling that many do. All faults in our transactions is our fault.
    There is nothing to take revenge from Forex. It is not very hard to earn. It just need a good plan to earn from Forex. Trader will learn Forex. Trader will analysis market and then make a plan. After that start work. Trader will work in planned way , so it will be easy to earn from Forex.

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    Quote Originally Posted by AmitChallenger View Post
    There is nothing to take revenge from Forex. It is not very hard to earn. It just need a good plan to earn from Forex. Trader will learn Forex. Trader will analysis market and then make a plan. After that start work. Trader will work in planned way , so it will be easy to earn from Forex.
    We should not take revenge but always trade with a cool mind. Many traders share their own strategy here in Roboforex forum on the others websites and on youtube videos. I beleive that the success on forex trading is not about a strategy which can be given in some words, it's also a result for the good use of such strategy and the best time of it.

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    Quote Originally Posted by SuccessfulKartik View Post
    We should not take revenge but always trade with a cool mind. Many traders share their own strategy here in Roboforex forum on the others websites and on youtube videos. I beleive that the success on forex trading is not about a strategy which can be given in some words, it's also a result for the good use of such strategy and the best time of it.
    We should plan our recovery and not the revenge. Forex is good for all. I am trading beside my studies so you can also do that. but for that you can not spend as much time you want in Forex. that will be a minus point on that purpose. So keep one thing in your mind that you can not do two things at a time. So trade while trading.

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    it is one of the m ost vital things to us to understand the market very well and of course we may be able to assemble some tools which may help us o understand the market . all of these tools may be very important to us . it is a way to be a part of the market to understand it and os course a way of getting of it what we want

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    I think that it is very important to many of us to understand the market with a very smart way . the market may be so difficult and may try to trick us all the time for our loss is it s profit . so we may think if this issue by using many tools an d combine them together in order to make a new style for the trading

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