EUR/DOG
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It is a well known fact that most people loose money trading, usually it is only a matter of time. If it weren’t true the trains and buses would be empty at 8 am, nobody would go to work anymore. A fundamental reason why it is so difficult to trade successfully is that the market is extremely sensitive to any changes that are introduced by participants. And it has to be. The very survival of the market depends on its ability to accumulate money. It is a unique, incredibly efficient self regulated system, a phenomenon that is yet to be fully understood. I’ve got a bad news for those of you who have spent fortune on TradeStation or other similar programs and simulators. If you are trying to guess a direction a stock or currency pair will move then think again. The ability of the market to react to any change, e.g. a new buy or sell order, no matter how small, makes back or forward testing rather unreliable if not useless. Because if the order had been opened with real, I repeat, REAL money the chart would look different now. The market would have reacted. Of course the system and indicator developers would want you to think otherwise, they have their families to feed after all. For that reason they are not going to tell you that there are better thing to do than searching for the right period of Moving Average for the rest of your life.
Things stay in proportion. A big order may visibly move the market and a small order will move the market too even though by a small number of points. But be rest assured there will be enough points there to create a situation when the system you are using fails because the computers know exactly how much money you have on your account and where your stop orders are. If it does not fail immediately it will inevitably fail over time. The market will detect it and re-adjust itself. Any attempt to squeeze money out of it is not unlike running around the house trying to catch your own butt behind the corner. Well, do I sound pessimistic? Yes, I do. But it is better to be a pessimist and sometimes earn than to be an optimist and always loose.
Now, let's look at a candle with a long tail pointing south. The tail represents a quick price movement down and then retracing back again to the original level. The process is known as “shaking”. Why did it happen? Because a sufficient number of participants bet on the market going up and had their stop loss orders are placed below (price). The market maker’s computers could see them and acted accordingly driving the price down and back up again. That’s why an ideal method to set a stop loss at the right point can never be found. These people had to close their positions with a loss only to see the trend going in the right direction afterwards. We already know that the market is fractal and the chart looks the same on any time frame. So how many people in the world are getting shaken off every second, minute or hour? Thousands. And that’s how the market makes money. Is there any answer to this? Yes, there is. Market neutral and hedge strategies.
Things stay in proportion. A big order may visibly move the market and a small order will move the market too even though by a small number of points. But be rest assured there will be enough points there to create a situation when the system you are using fails because the computers know exactly how much money you have on your account and where your stop orders are. If it does not fail immediately it will inevitably fail over time. The market will detect it and re-adjust itself. Any attempt to squeeze money out of it is not unlike running around the house trying to catch your own butt behind the corner. Well, do I sound pessimistic? Yes, I do. But it is better to be a pessimist and sometimes earn than to be an optimist and always loose.
Now, let's look at a candle with a long tail pointing south. The tail represents a quick price movement down and then retracing back again to the original level. The process is known as “shaking”. Why did it happen? Because a sufficient number of participants bet on the market going up and had their stop loss orders are placed below (price). The market maker’s computers could see them and acted accordingly driving the price down and back up again. That’s why an ideal method to set a stop loss at the right point can never be found. These people had to close their positions with a loss only to see the trend going in the right direction afterwards. We already know that the market is fractal and the chart looks the same on any time frame. So how many people in the world are getting shaken off every second, minute or hour? Thousands. And that’s how the market makes money. Is there any answer to this? Yes, there is. Market neutral and hedge strategies.
