Hey everybody, i’ve found out about the world of forex about a month ago and fortunately found out about you guys soon after, and i’ve realized by my own mistakes that knowledge if i wanna be profitable, I just finished High School (by the way, great school you guys put together) and i’m also reading a book on the side by Cliff Wachtel, and i’ve recently stumbled upon something referring to currency cross pairs that i think will help me a lot, and I quote: “The profit obtained on the bearish market is about buying “refuge” currency and selling the “risky” ones to pay the first ones, in case of bullish market, it’s the other way around”, keep in mind that what Wachtel classifies as “refuge currencies” are: CHF, USD, JPY, and the “risky currencies”: AUD, NZD, CAD, EUR,GBP. Now, my question is, and it may just sound noobish, how the hell do I know if i’m trading in a bearish or bullish market?
The most basic answer is that bearish=down, bullish=up
Aka, if the price at the far right of the chart is significantly higher than the far left of the chart, it’s bullish. If it’s significantly lower, it’s bearish.
Download and save this pdf.
The answer is that there are many ways to quantify a price trend. The larger the time frame in which the trend is manifested, the more certain the trend.
I will catch flack from some for this, but ignore “trends” that are on time frames smaller than a daily chart. While they can be said to be price trends technically, they do not truly manifest any aggregate bias among market participants. They merely demonstrate the impact of short term order flow on price.
Now take that information and see if it is true for yourself. I am no authority, I am just a dude drinking a beer with a laptop.
A Great question actually. Most market moves do not constitute a trend. Just as flipping a coin 3 heads in a row tells you nothing about the likelihood of it being heads or tails on the next flip. Just because price is going up, that price action may or may not contain tradable information. If price is going up on the H1, is that an up trend? What if it is going down on the 15M, H4 and daily? Actual trends are driven by fundamental information that we might or might not have access to. For instance, look at the monthly chart of the yen. The Bank of Japan decided to devalue the Yen In Oct 2012, but they didn’t announce what they were doing until several months later. Once it was announced though, you could have taken UJ for a ride for thousands of pips. A trend like that only comes around a few times a year at most. In my own humble opinion, most price action does not represent a tradable trend. It’s just random motion that will yield a negative expectation due to the costs of trading. There is no trading system in the world that can produce a positive expectation after the costs of trading on random price action. All the effort expended to try to find that magic system that can predict the next flip of a coin is wasted. Read about the “Gamblers Fallacy” if you like.
All that simply justifies your question as an excellent one. You shouldn’t trade any real money until after you find the answer.
I would say these facts about “risky” and “refuge” currencies are from advanced level, as a newbie I would advice your to get the knack of MT4 platform and basics of macroeconomics (with NO bias to Forex trading). Start off with clear mind regarding trading strategy as any impartial information you get on current stage can bottle up your own trading ideas.
Start with simple Supply and Demand Balance, try to evolve from basic trading ideas, not under someone’s views.
Thanks for the PDF by the way!
It also depends what type of trader you are and what time frames you use.
You can have a long term bearish trend in your D1 charts but trade a shorter term bull trend in M5
nice download. thanks for sharing, in a nut shell market trend is the direction its heading to in a spcific time frame, lets say in the past 2 weeks its bulish etc.
Rightly said, more important is the time frame you are trading on. A same pair can have different trends on different time frames so a trader needs to check thoroughly on his time frame before entering any trades.
Here is a concrete example. It is actually the very same chart
AUDNZD m15. Uptrend
and now the same pair, same time, AUDNZD but daily.
It’s a downtrend.
So yes, always be sure you are referring to a specific time frame when talking about trend.
Use line curve. When the graph show a staircase like pictures. You know where the direction is.
The issue is not where the market is going. The trick is how to get in when the market do what you want it to be. How to get out when the market is not going in your direction.
I don’t care where the market is really going. I care where I want it to go. Does it show sign of weakness in the other direction. Does it show strength in my direction.
The reason is abundance. You want to get in when the market is moving so that you can be early on the move. Bad idea. Let the market decide where it wants to go. You decide where to take the ride without paying for ticket.
Do you want it to go??. Ithinkg its impossible, you know that market is unpredictable. its really walk like ghost. we never know where is it going. I think that the best way is using good strategy and trap them. I’m using Robot trading to trap and get the pips in liteforex broker and some others. its work great.