If you wanted to trade solely in technical, you do need to know enough about fundamental such as Central Bank speech, monetary policy changes, interest rate changes, election etc. If one of this occurs, you can stay away with it and wait for your “tools” to tell you when/ where to get in…
I was recently introduce to fundamental myself (I am thankful for it) just recently because like you, I only rely on tools but then you will question what had happen when the price starts moving so quickly and fast like 50 pips in a min!!.. You are wondering why that is because your “tools” didn’t tell you or didn’t give you any warning… Not knowing there are some “talking heads” in ECB who is doing his speeches on the Euro…So, fundamental helps too or in your case just put that back in your mind…do not completely ignore it…
In addition, focus on your psychological as well… how to deal with emotions, greed, fear is the best thing you can do so you can focus on becoming successful…
Yeah! Yeah!! i wanna scale up to the daily TF now, so i won’t be bothered about minor happenings and or news events for the day, all i will have to keep an eye on is Super Marhio Draghi’s speech making events. Cause even NFP/FOMC report doesn’t move the markets any longer, it’s already priced in and i see it hours before the actual release in my charts anyway.
With a 100-150 pip stop loss and a sound money mgt skill, i wouldn’t be bothered about fundamentals. I wanna be a rich/successful technician
I can’t really answer your question, because I am around only for like 6 months and only just went live. Still, since i have made it to the very top level in 2 games that share common traits with forex + mathematical degree i hope i will make it here too.
The simple truth is that price changes when either supplay or demand gets edge. Or in other words you have to examine buyers and sellers and reasosn why they step in. Your statement would be true only if these (the ones you mentioned) were the only reason why buyers/sleers step in and get edge over other side. Since there is big part of market participants that steps in not because of ‘‘fundaments’’ and makes price move I can assure that your beliefs are inaccurate.
100 pip stop loss? I would argue that you can use so big s/l with fundamentals… but not technical. Technical edge is usually short term. Ok-ey there are times where you can predict longer term sentiment from chart, still I would never use so big stop loss.
If you plan to use 100 pip s/l I would advise to stay with fundamentals.
Tony
It really depends on what type of trader you are / want to be. If you strive for long term trades, you definitely will need to focus heavily on fundamentals alongside technicals. A 150 pip stop loss is fine. I hold my trades for upto 4 months, my last stop loss was 250 pips (my average risk to reward is 1:3 ie risk 1 to make 3). If you want to be a day trader or scalper, fundamentals won’t really impact your trading, it’s mainly technicals. A 100 - 150 pip stop loss here is excessive.
Whatever you decide, always always, look at your charts from the highest time frame down (ie month,week, daily, 4h etc).
The other point is 15 hours a day sounds a little self destructive. Your brain can only take in so much info a day.Good luck to you.
While you are developing as a Trader… this amount of time is good if you understand your time is utilized efficiently and studying Price Action and your personal Trader’s profile. After you refine your Trading approach and model its unique application to “You”… you will want to reduce the exposure to the markets.
Fundamentally… I trade with very limited or next to nothing. I use COT reports and Interest Rates to guide me and leave reports from Banks and such to those who want to worry with them. I can’t glean anything useful from them and my mind can’t digest the dry wordy Dove and Hawk stances one is supposed to discern from reading them. This is not to say it can’t be done by others or that it isn’t… but to some degree you will want to consult a measure of Fundamental insight.
Good Luck with your journey and decision either way! :57:
The market is not made entirely of speculators trying to make money (the ones looking at charts and technicals) …not even close… If the market WAS entirely made of speculators then a technical only perspective would make sense.
Your view of the market is tiny… You think it’s just charts… The market is a representation of macro economics, central banks moving money around, corporations buying hundreds of millions of dollars of goods, one country exporting hundreds of millions to billions of dollars of goods… All of these MOVE the market much more then a few thousand or tens of thousands of like minded traders entering the market because they think they see some pattern developing… And these transaction (to a large degree) are independent of technical price levels… As in they will be initiated regardless of exchange rates… So you need to analyze the fundamental context otherwise you are trading blind to large dynamic market drivers who are controlling a larger sector of the market then pure speculators sitting in front of their computer all day.
This is not a math game… Physics or math equations do not govern the market.
@PipNRoll; As kingtony is now up to the daily time frame 100-150 pips is a tight stop. I very rarely use one this close one the trade is more than 3 days old.
@ARTjoMS; A technical trader can use any time frame - short or long term - A good technical system will work on most, though they will tend to favour one end of the spectrum or the other.
@Banker928; Whilst many of the market’s major moves are dictated by large corporate capital flows and the like, it does not mean that they can not be traded on a technical basis. If you have read Market Wizards then you would have found some who totally ignore the fundamentals, and some who only trade them and ignore any form of technical analysis. To be a trader that was successful enough to have been interviewed for the book then they all must have done quite well for them selves, so I think it is what works for the individual.
For me I know what is happening fundamentally, but I trade almost entirely technically.
To learn more about technical trading have a look at these guys here: IFTA
I am not sure why are you saying this to me? I never said you can’t…let me repeat what I said is "If you are a position trader then it is quite logical that you have some fundamental analysis behind your plan.’’ The idea is that in long term price will follow macroeconomical situation, so knowing fundamentals makes sense.
I am not sure how you define a good technical system, but I can’t agree with your statement. Yes, i have heard before something like “Good system will work on every market and on every time frame”, but, while I agree that price do tend to share some common traits from my experience they do have some differences.
I have examined a couple of (hmm, lets say price patterns) and found that while the main idea might hold true there are also some visible trait difference. I am staying this within one market, because I find that there are more visible differences betweeen different markets.
What is perhaps the most famous, as well as the most complete technical only trading system developed… “The turtle method”… Which had astounding and well documented performance when applied to commodities in the 80s now no longer is a profitable system… This is the fate of any “technical only” system. You may get lucky and find some technical way to trade that will work for a few years, if you are extremely lucky maybe ten years, but eventually the system will bust. Google Jesse Livermore… A famous technical trader who made millions and died broke because in the end, his technical trading busted.
If you trade fundamentally your system never goes obsolete because you are adapting dynamically to the market everyday… You know why the market is changing because you are paying attention to the economic context behind the market. You know the drivers behind price movements, you anticipate where price is going to be without even needing to look at charts… Whereas the technician is a slave to probabilities and curve fitting a strategy to historical price behavior.
Why do most technical systems break down in the long term? Is this true, or just an assumption? Robust technical systems identiy and exploit human nature, so there has to be a fundamental shift in human nature before such a technical system breaks down.
The market is not driven by traders… If it were then technical systems would be much more stable… The forex market is driven by central banks first and foremost… Take a look at the Swiss Franc… The Swiss national bank imposed a peg of its value to the euro … Look at the yen… It’s being devalued by the bank of Japan… Everything that is traded has some underlying fundamental driver that WILL change substantially at some point in time which will in turn change the market behavior of that asset… What lulls traders into a false sense of security is that there can be years in between structural shifts where a technical system CAN work… Eventually though something will change rendering your method obsolete.
Smart technical traders are aware of this… Believe it or not there are proprietary automated trading firms on Wall Street that solely use EA’s (not the kind you buy off the internet for $99) to trade millions of dollars… These firms spend hundreds of thousand of dollars developing them, and the average useful life expectancy of these EAs are about 6 months before they are overhauled to match current market conditions…
Human nature doesn’t change. But what has changes is market participants. Years ago there were no HFT or sophisticated systems or stop hunters. It is understandable that what might have worked in past doesn’t work today simple because market structure is so much different.
Another point about technical systems losing their edge. More people start to notice the edge as time goes on. The more people that see it they will start buying higher and selling lower to “beat” the other guy. Eventually the edge disappears.
Such a pity channel trading no longer works. It was obviously a fluke I netted 10,000 pips last year using channels.
The need for a HFT system to be updated regularly is quite different to the long term trend following systems. HFT’s need an edge just to break even so ‘curve fitting’ can actually be beneficial in this area, but that edge needs to be maintained - so the constant updates.
Maybe I have read different sources to you, but my understanding of Livermore’s bust was more a physiological failure, rather than a system failure.
On a side not if you trade purely fundamentally how can you tell if your system is at peak efficiency, or if it has lost an edge, or if there has been a change that you haven’t yet picked up on?
Yeh I totally agree with you! Fundamentals just cloud a traders vision. As long as you just look at the charts and don’t get distracted by anything you can make so much money! I am learning ICT’s methods, and technical only approach is the best way to go it seems to me.
