I know that trading is not an exact science - far from it - but there must be some concrete methodologies and philosophies behind the way in which the market moves.
Assuming this is correct, and there are concrete principals that all approaches to trading should take into account, what are they?
Also, to what extent can do laws the laws of motion/mechanics apply to trading? For example, basic laws of mechanics dictate that the further an object has fallen, the more momentum it will have, and therefore the higher it will bounce when it hits a surface. Could this theory be applied to trading? i.e. The further and more sharply price has fallen, the greater the bounce will be when it finds resistance?
Another example would be that every time an object bounces, it loses momentum and as such, the next time it bounces it will not bounce as high. Is this relatable to trendlines - every time price bounces off of them, the bounce should be smaller?
Sorry, I understand that this is a poorly articulated question, but hopefully you’ll understand what I’m asking.
I am kinda sure that this is true, but it is a very sophisticated way to look at market.
It loses momentum because of friction, but there is no friction of that type in the market.
Imagine ascending triangle - it happens when there is conflict of strong resistance and momentum. So… price goes up and finds resistance R, then it finds support S1 somewhere lower, then sellers show up again at the resistance R, but now price finds support higher, at S2>S1, etc… Well, this does happen, but eventually volatility (=good) will show up and it will go one way or another way.
Physics is a science not related to the markets. There’s no physical place, no gravity, no boundaries…
But psychology is another story. Price is remarkable influenced by behavioural aspects, sentiments, wishes and fears.
Probably it resembles in some way the science of movement but I don’t think so…
Some interesting stuff there, but not quite what I was looking for. I’m currently just trying to get my head around the nature of the market. Some people seem to be able to look at a chart and understand what’s going on in an innate way that has little to do with the basic TA methods taught on websites such as these. They just seem understand the physics behind the way price moves naturally - on a day to day basis - whilst being uninfluenced by news releases.
I read once that price movements can be applied to newtons first law of motion: That an object will continue to move in the same direction indefinitely, until acted upon by an external force. This would, to me, suggest that on days without news releases, price should trend in the same direction. Perhaps I interpreted this incorrectly, but it lead me to wonder what other laws of physics may be applied to price movements.
You are on the right way. Even if you understand at some point the mechanics of the market you still need to look at the chart with some special “lenses” (indicators). If get in this point you will be very dangerous.
JRC - if I understand your question right. What you need is - a language - based on which you could explain yourself what is happening right now.
The only problem with any “language” (for example - “Technical analysis”) - adapted to Forex market - there is no way to get 100% “one direction” result. At any point - result will come out as a “probability” of further movement. Knowing that, I think, that the main task for profitable trader is - to understand what exactly is going on right now (i.e. be able to explain to yourself what is going on based on one or another “language”)
Forex market - is a regulated system (far from “free-market”)
As it is a system - there are no “odd” movements, and all movements comply to certain rules and “regularities”.
As soon as you find these regularities, and master them - you will manage to explain to yourself what is going on right now. You will be able to follow the market and understand.
And Then: Based on this “seeing” - you will be able to make a trading decision (open a trade, or stay out of the market).
You probably heard a pro-trader saying: “sorry … I can not explain why I made this trading decision - I just knew that “this” movement will happen”. I think this is exactly the case. Experienced trader is watching long enough - so his mind starts to see these regularities subconsciously -> accordingly as he can not logicaly explain “why” - he would “blame” his large experience.
First you will need to learn the forex basics. Then bone Up Supply and Demand as it relates to Support and Resistance. Learn and practice practice practice and before you know it, you will be able to look at a chart and see what’s what, yourself.
As far as indicators, they are designed to confirm your analysis and decisions. That’s how successful traders use them. A lot of traders get in trouble cause they use them the other way around, expecting the indicator or indicators to take the place of analysis and give them a decision. All movement (price action) for a currency pair is amde up of a trend (direction), momentum (force), cycle (beginning and end of the movement). between support and resistance. When I started I used indicators for the trend, momentum, cycle, support and resistance to make my trading decisions. Today, I still analyze trend, momentum, cycle support and resistance, if and when I use an indicator I use them to confirm my analysis and help me to make decisions.
Good Luck
Gp
Thanks, but if you don’t use indicators as part of your analysis, what do you use? Do you simply look at a naked chart and use intuition to make your judgements?
Also, it seems that there must be a lot more to supply and demand than I understand. Is there any difference between an ‘area of supply/demand’ and an area of support/resistance? Is supply and demand orientated analysis not more relevant to people who trade the news or use fundamental analysis? Where can I learn a bit more about what supply and demand means in the context of forex trading?
Money itself moves the market. Emotions/News/Fundamentals/Technicals/every other possible “variable” are driving forces BEHIND the physical (or in our case electronic) force itself… Money.
I think rather than Physics one should look to Biology. Specifically, fractals. Fractals are all around in nature and most certainly apply to markets. I use almost no indicators. As has already been stated, an indicator will not tell you what PA is already showing you. Indicators lag, PA doesn’t. However, I do use Fractals on multiple time frames on any one instrument. I’m currently in a GU trade. If you pull up a 1h, 4h and daily and apply fractals it should be obvious in which direction. :20:
[QUOTE=“ForexEagle101;622432”]I think rather than Physics one should look to Biology. Specifically, fractals. Fractals are all around in nature and most certainly apply to markets. I use almost no indicators. As has already been stated, an indicator will not tell you what PA is already showing you. Indicators lag, PA doesn’t. However, I do use Fractals on multiple time frames on any one instrument. I’m currently in a GU trade. If you pull up a 1h, 4h and daily and apply fractals it should be obvious in which direction. :20:[/QUOTE]
I don’t even have to look at GU, but I am assuming short? Or you are losing pips.
I’m not sure how you came to a conclusion I don’t use indicators. Like I said, I do use them but only to confirm my analysis not make an analysis from them. In addition to tech analysis, I use fundamental and trader sentiment. Example, trend. a trend has to have 3 higher highs, 3 higher lows or vice versa. I do that with support and resistance lines, But when I’m skimming threw currencies looking for setups, I make use of fundamentals and traders sentiment and a zig zag indicator to quickly point out trends.
Supply and Demand is what moves the pair up or down. You use major Support and Resistance to draw your supply and demand zones Here is a thread on baby pips that will help you with supply and demand. You can also get some pretty informative videos on utube as well.
To answer your question in regards to concrete principles. Here’s 4 that will put the balance of probabilities on your side more times than not. 1. Trade the trend, when momentum is on your side, enter at the beginning of an up or down leg and verify entries with support and resistance. Apply proper money management to your trading and excercise patience and discipline. Lastly the more you practice and try to learn, in most cases the better you’ll be at all of the above.
