Its impossible to make money from forex through technical/fundamental analysis

Trading Systems Free Forex Trading Systems
1

All markets, including forex, are too efficient for anyone to ever make money from it.

The movements in forex follow a random walk. No one, not retail traders, not big banks, not even insiders, can predict where the market will go. Everyone who speculates on the forex markets will lose money. Out of 100 trades, they will make money half of the time, and lose money half of the time. However, they will lose slightly more than they gain, because of the transaction costs.

This has been proven for 30 years, by market researchers like Brian Malkiel, Eugene Fama and etc.

Forex is just not a zero sum game. It is a NEGATIVE SUM GAME when you add in the brokerage costs.

I recommend anyone who wants to play forex to go down to your local casino and spend $50 trying to beat a roulette wheel. That roulette wheel will teach you more about forex than the internet ever will. It will save you a lot of hardship, and will help you come to the realisation that forex is just gambling, and will rip you off just as that roulette wheel did.

Technical analysis does not work. If it did, then people would buy/sell whenever there is a buy/sell signal and the advantage would dissapear because the price would move to yoru target profit even before you enter.

Fundamental analysis does not work, because if there was an advantage, then everyone will buy/sell forex to a price where the advantage no longer means anything.

For example, lets say the EUR is 10% undervalued. Speculators will buy the EUR to the point where it is no longer undervalued, so that by the time you jump in, it will no longer move up.

Be forewarned. I respect babypips for making information free, but forex cannot be beaten.

2

Certain price actions are almost predictable though. I see the same moves everyday, but it is not accurate 100%, that is certain as well.

People find different strategies and patterns all the time. In my case, I have one pattern I always follow and that is over 70% accuracy. If I win 7 out of 10, I only gain money :smiley:

It is all about the percentage. You just need to take a position when higher percentages. Then establish a good money control. That itself is a profitable system, really.

3

Oh joy, that tired old chestnut again (yawn) :rolleyes:

Youā€™re either bored stupid or seeking a little attention from the holiday crowd.

Itā€™s been done to death buddy & the only responses youā€™ll attract will be from the professional debaters who revel in this type of stuff or equally bored, mischievous individuals intent on yanking your chain.

Merry Xmas & pass the bourbon.

4

Youā€™re right.

I was going to yank his chain, but I think Iā€™ll have some of that bourbon, instead.

Merry Christmas, guys!

5

Iā€™d say itā€™s almost impossible, haha!

6

Canā€™t help myself here. Got nothing better to do at the moment :stuck_out_tongue:

To suggest Malkiel, Fama, et al have proven anything is patently false. Thereā€™s a reason Random Walk and Efficient Markets are still only hypotheses. It is impossible to prove a negative postulation - in this case that there are no patterns or inefficiencies (respectively) in market prices. In order to do so youā€™d have to test every possible pattern/inefficiency, and since there is an infinite number of possibilities, it canā€™t be done.

Forex is just not a zero sum game. It is a NEGATIVE SUM GAME when you add in the brokerage costs.

I recommend anyone who wants to play forex to go down to your local casino and spend $50 trying to beat a roulette wheel. That roulette wheel will teach you more about forex than the internet ever will. It will save you a lot of hardship, and will help you come to the realisation that forex is just gambling, and will rip you off just as that roulette wheel did.

Trading is more like poker. There are probabilities involved as well as skill. The money will tend to end up in the hands of those with the most skill.

Technical analysis does not work. If it did, then people would buy/sell whenever there is a buy/sell signal and the advantage would dissapear because the price would move to yoru target profit even before you enter.

Fundamental analysis does not work, because if there was an advantage, then everyone will buy/sell forex to a price where the advantage no longer means anything.

These statements are so ā€œivory towerā€ as to be embarassing. They assume everyone trades based on the same information, with the same methods, in the same timeframe.

For example, lets say the EUR is 10% undervalued. Speculators will buy the EUR to the point where it is no longer undervalued, so that by the time you jump in, it will no longer move up.

And thus you point out the paradox of EMH. It requires those who donā€™t believe in efficiency - namely arbitrageurs and speculators - to identify inefficiencies and correct them. If everyone believed in it absolutely the markets wouldnā€™t have any self-correcting mechanism and would be very inefficient. Your 10% undervalued EUR would never move back in line.

Be forewarned. I respect babypips for making information free, but forex cannot be beaten.

Thatā€™s the thing about a zero sum market. You donā€™t need to beat "forexā€™. You just need to beat the person on the other side of your trade.

7

I suppose too, then you think it is impossible for man to walk on water?

. .

. .

. .

I just walked across about 1/3 of a lake yesterday.

. .

. .

Now granted I canā€™t do it all the time, but, I assure you I was walking over water that was at least 12 feet deep.

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Hmm not to hard to figure out ā€“ - but if your perplexed, I will trade a some forex training for the answer . . . as I have yet to find some profits.

8

Hello,

Well I was not going to get involved here myself but I TOO have nothing better to do!!! LOL!!!

rklee1:

Iā€™ve looked at your other posts and you joined in 2008 and stopped posting around June of 2009 (that is until you started this thread) so I can only assume that things have not gone according to plan for you. But donā€™t dispair. Had you made this statement two or so years ago I MAY JUST have agreed with you i.e. Iā€™ve been at this now for five (or is it six???) years now and it took at least three of those years for the ā€˜penny to dropā€™. While I PERSONALLY am not a big fan of trading spot forex (for a variety of reasons which Iā€™ve mentioned numerous times on other threads on this site): itā€™s by NO MEANS IMPOSSIBLE to make money trading spot forex. Yes: most people WILL lose their money but in my opinion what youā€™ll most probably find is that their losses can be attributed to their lack of control over their own emotions rather than the trading systems being used (there are some very good trading systems out there that are profitable but without the emotional control they too are useless).

Put it this way: Iā€™m by no means saying itā€™s easy trading retail spot forex (or any other market for that matter) i.e. your chances of success are not quite as good as they would be if you were a floor trader for example but again itā€™s not IMPOSSIBLE to make money.

And I couldnā€™t help but notice that in your first post you were saying that Parabolic SAR is the only accurate indicator around and (ironically) I replied to you back then warning you about it so if thatā€™s what youā€™ve been using to trade with since then well, then, thereā€™s your problem right there!!! LOL!!!

If you have the capital and the time and the patience and the dedication and learn to control your emotions you will succeed trading ANY market (of course a good trading system is a plus of course)!!! Iā€™m even prepared to help you with one or two (trading systems) that ARE profitable if you like. Come to think of it hereā€™s two already (and one or two more on the way): Technical Trading Systems (my own little ā€˜blogā€™ designed to actually HELP people make money).

And by the way: annual statistics show that generally the stock market has outperformed any other type of investment vehicle so SOMEBODY is INDEED making money right???

Then again: this business isnā€™t for everyone (that Iā€™m pretty sure of anyway).

Regards,

Dale.

9

Bourbon please :stuck_out_tongue:

And Merry Effinā€™ Christmas! :smiley:

10

Same to you (all) and thanks for the great interactions weā€™ve had this year. I have to say that I feeling extremely positive about the coming year (something which Iā€™ve not felt for many of the past years) and I hope Iā€™m right for all of us!!!

Regards,

Dale.

11

Iā€™ve got that warm and fuzzy feeling about the new year tooā€¦oh waitā€¦itā€™s the hot buttered rumā€¦:smiley:

Ho Ho Hoā€¦Merry Christmas and Happy New Year to everyone here at Babypips :slight_smile:

12

Thanks for the replies guys.

A recent New Zealand study has researched over 5000 technical analysis systems. NONE of them, and I repeat, NONE OF THEM, had positive expectancy. All of them lost pretty much close to the market edge, or the cumulative brokerage costs (what casino gamblers would call the ā€œhouse edgeā€)

This is in addition to the hundreds and hundreds of studies carried out for the past century. NONE OF WHICH ever proved that technical analysis works.

Fundamental analysis on the other hand, is slightly different. However, its subjectivity makes it almost impossible to research.

Every single technical pattern researched, be it head and shoulders, triangle patterns, double bottoms etc. were found to be as predictive of market movements as an ordinary coin flip.

13

I think you should contact those New Zealand researchers, and suggest that they study poker systems next.

Iā€™m sure they will conclude that no poker system ever devised can make money. Phil Ivey canā€™t make money with his system. Howard Lederer canā€™t make money with his system. And Tom Dwan canā€™t make money with his system. And they will have to conclude, therefore, that the only people who can make money from poker are the casinos that host the games.

Oh, really? Thatā€™s news to Phil Ivey and a whole bunch of millionaire poker players!

What you have demonstrated on this thread is that a group of New Zealand researchers ā€” who, themselves, donā€™t know how to trade ā€” canā€™t take someone elseā€™s trading system, wind it up like a mechanical toy, and watch it make money.

Nor would they be able to take Phil Iveyā€™s poker system, wind it up, and watch it make money. Because those researchers probably canā€™t play poker, either.

14

And yet even the academics admit that momentum oriented trading has demonstrated an ā€œedgeā€. The 5000 the kiwis tested must not have included that sort of strategy. As I stated previously, there is basically an infinite number of different trading strategies. Those 5000 donā€™t even scratch the surface.

15

I personally have study the affects of alcohol one swallow at a time, that is -0ver 5000 swallows, NONE of them, and I repeat , NONE OF THEM, got me pregnant.:confused:

16

rklee1, could you point me in the direction of this research or where you have found this info, thanks.

17

no problem

here it is, bottom page:

Why using technical analysis in stock market investing does not work - Part 2 | Learn Stock Market Investing

18

A trading edge is different from positive expectancy.

If a system wins 5% of the time, it has an edge. But if the brokers costs are say, 10% (which is very realistic) , then the expectancy is actually -5%.

In other words, if you use position sizing of 2% of capital per trade:

  • 67% of traders will lose ALL their money within 50 trades
  • 95% of traders will lose ALL their money within 100 trades
  • 99.7% of traders will lose ALL their money within 150 trades (virtually all)

Note that these traders are emotionally perfect, use excellent 2% risk money management, and have a system that works. Despite all that, and cheap brokers costs, (equivalent to 5 pip spread) all these traders still LOST ALL THEIR MONEY!

MOMENTUM TRADING

Momentum trading does exhibit an edge.

However, its edge is NOT ENOUGH to overcome even cheap brokers costs of 4% (2 pip spreads). that is why momentum trading only works in the stockmarket, were brokers costs are less than 1%. However, oppurtunities are so rare for momentum trading in the stockmarket that even fixed CDā€™s offer higher returns.

Furthermore, studies have shown that momentum trading loses more money in bullish trades, and makes more money in bearish trades. But the costs of trading go up when the market is more bearish, destroying the edge.

Conclusion, momentum trading can only work if you have zero spread and zero commission, and zero slippage.

However, even if you find a broker that is willing to give you that, the setups for genuine momentum trades are quite rare. Even then, it only has an edge of a few percentage points.

Overall, the adjusted return is less than putting your money in a fixed deposit account in Australia or New Zealand.

Figure in the amount of time you spend trading, the time value of money, and oppurtunity costs, and you actually make a lower return compared to CDā€™sā€¦ for MORE RISK!

Its totally irrational.

19

then why not just play poker?

You will make money faster.

If forex is like poker, then its better to concentrate on poker because you can choose to increase the number of games you play and increase the number of oppurtunities for your edge to kick in.

In forex, the number of oppurtunities are chosen for you.

20

its interesting that you mention poker.

Although most players lose in poker, things are so bleak in the forex world that there are more poker millionaires in our world than forex millionaires.

The only forex billionaire in the world is George Soros. And even he lost all the money he made from shorting the british pound by shorting the asian currencies, just one year later.

The difference between poker players and forex players are that poker players can take advantage of subjective emotional manipulation.

However, there are so many other smart poker players out there that the chances of even a very smart person becoming a poker champion is the same as becoming the reigning world champion in starcraft.

Very very difficult, almost impossible, and when taking into consideration the enormous oppurtunity cost, not worth the effort. It really begs the question: why not just invest your money someplace else? After all, everyone is here to find an easier way of supplanting their incomes, not to lose more money and more time in an endeavour even more difficult than their former jobs.

Its the efficient market theory in another form.