It's true, but only for now. Just like any other young science, behavioral finance/economics is mainly observation-driven at the moment. However, even now there are theories (such as Barberis, Shleifer etc) that, if reasonably correct, would allow one to forecast 'future direction of the mkt'.
I wonder is it of any use to think what other retail traders are thinking about but instead concentrate on the fellows that actually move the market and try to think like they do? But then again is that possible?
x 
Thats why i've always based my trades of order flow/Level 2 and time/sales - Its always made a bit more sense to me in predicting probabilities to read what others are FACTUALLY DOING or PLANNING to do.
Plus i've always said, the bigger the time-frame the harder it is to estimate the magnitude of a movement - IN otherwords its significantly easier to predict the probable movements during the next minute than week (IMO).
Two things i focus on; What are the 'big' fellows doing and what are there reasons (Can only know they're reasons so much) and in this i look at certain economic indicators and news, time and sales to see what they ACTUALLY have done and level 2 to give me an idea of real support and resistance levels.
Second thing i focus on; Incorporating human emotions into my methodology through thinking hard about my emotions, writing them down throughout the day, i can have a basis to work with of general human emotion and how this shapes the market...
For example; when the market is rising many individuals fear it will stop rising and this prevents them from entering, however after so much pain and 'missing' out they do eventually enter - This is why trends exist; Eventually however the most scared investor will finally buy the top of the market having waited so long....
If i work with this information based on my experiences and thoughts i can assume that in my trading i want to be very decisive and fast in my executions, if i'm going to enter trades i want to get in at the right time or not at all, furthermore i don't want to be buying after a significant rise...
Through placing these thoughts into my trading plan i can trade against emotions that cause market particpants as a majority to lose.
My trading methodology pretty much runs around the following few sentences;
- There is no point trying to predict trend changing direction, its better to wait until easier setups arise
- Trends exist - The earlier i enter, the better my rewards, the less my risk can be = However this means MORE losses, because i'm getting it with more uncertainty of the current direction (It hasn't proved itself yet) however this is preferable to chasing.
- My philosophy of the markets is this, incorporating my acceptance of the existance of trends; In a situation where 50/50 probabilities exist, i will enter with the current trend - If the trend continues i will take 2 points; If the trend ends i will lose 1 point.
Simple
Below you see two graphs. First EURUSD weekly about two decades data. The second graph is done by me with excels random function. It consists of about 5000 points of data. IMHO you can see nice trendline/support/resistance bounces and breaks, double tops, bottoms hs, psych number action etc... I didn't bother to add any indicators there, but the results would probably not have been too surprising. Also surprise, surprise you can see clear up and down trends in both of the graphs. Even though the latter one is done basically by coin-flips.
EURUSD:
Random:
I really would love to believe that markets are not completely random, but this really strongly suggests the opposite. This comes to the point that entry matters not one bit because in the end the probability is always 50/50 or actually a little worse thanks to the spread/commission on a 1/1 R trade. ATM what I am really starting to believe is that all the TA/FA is utterly useless and in the end this business is really comparable to gambling, odds vice.
I argue that in the end all TA/FA is just trying to predict a chance which of course is not possible and will not end nicely in the long run. For example if you enter a trade with 50 pip stop and target, odds are slightly against you thanks to broker expenses. If trade goes your way 50 pips and you move your stop to BE now it is little more likely to close at BE. I can see no way that profits could be consistently generated with these odds. I've had my runs and ruins and now I see that the runs might just well have been because I had luck.
I'm really interested in hearing how people manage their trades and can they justify that there is a larger probability for positive outcome A to happen over negative outcome B on their trade management. In the long run I simply can't see it is possible to be turning in a profit thanks to the randomness of the markets. In my darkest thoughts I actually think that this whole financial crisis we are currently in was caused just a by a chance. Perhaps I'm just crazy, but if not... I just read Van Tharps TYWTFF praised by many. And in the end was disappointed as it really didn't offer anything new and surprising as I had expected. Areas of R multiples, expectancies, entries, trade managements were discussed in it, but in the end none of them IMHO can beat the randomness found in the markets because in the end it boils down to the point that no matter when you enter the market you always have the odds slightly against you on a 1/1 R trade.
Please prove wrong about the points I've made and justify if you see it fit why the markets are not random no matter what the timeframe. Oh and about timeframes. When you look at a 1min TF and then 1M TF what differences can you see on them? I'm asking this because I mostly see people praising their superiority. To be honest I see no differences in them, but I might be blind
I'm looking forward to have civilized, intelligent and knowledgeable comments from experienced people. Please don't come flaming here and accusing me of heresy. I'm not bitter or angry or anything like that: I just would like to discuss this subject that is not IMHO discussed all that much.
Thanks all.
