if forex can’t be beaten then why are you here? go do something else.
I’ll have another eggnog… hic… 
I was hoping someone could refute me with some evidence that technical/fundamental analysis works. After all, we are all here to learn. and my research in the past 2 years shows, or seems to show, that tech/fund analysis will NOT work.
Unfortunately, no one seems to have come up with a single robust study that can prove me wrong. If you can prove me wrong, I would be delighted (who wouldn’t be? proven wrong = money).
Which brings me to my point, are there ANY robust studies, ANY AT ALL, that proves that technical analysis or fundamental analysis works in forex??? I’ve backtested myself more than 52 systems, gone through academic journals and read many books. Not even Google could come up with the words “robust” and “research” together with technical analysis (which shows that even BS research has not been carried out)
Otherwise everyone here is just throwing darts at a board. And you don’t want to do that do you?
just because it hasn’t been proven, doesn’t mean it can’t be done.
Actually, when traders talk “edge” they are generally talking about positive expectancy.
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%.
What is your 4% spread cost based on?
At 50:1 permissible leverage it would take $2000 to run a full $100,000 standard lot position in USD/JPY. At the current 82.20 rate for USD/JPY a pip is worth about $12. If so call the spread 2 pips then that’s a $24 expense. That’s 1.2% based on your $2000 margin requirement. Since most people don’t trade anywhere close to max leverage on their account, the expense relative to the value of the account would be much smaller.
And then we have to get into the question of whether spreads are “costs” on the same level as commissions. I’ll leave that for another time, though.
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.
That may be so in stocks, but since forex is a pure two-sided market it’s not the case here.
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.
How are you defining “genuine momentum trades”?
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 CD’s… for MORE RISK!
Its totally irrational.
This I will totally agree with. Eager traders most definitely fail to account for the cost of their time when making plans to trade for a living or whatever.
Do you have any actual numbers to back this claim up?
The difference between poker players and forex players are that poker players can take advantage of subjective emotional manipulation.
Hah, hah! You don’t think traders do the same thing? Granted, you won’t find many retail traders with the ability to influence things, but at the upper levels you most certainly do.
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.
That assumes one’s only objective is to become world champion. Most folks have no such aspiration.
It really begs the question: why not just invest your money someplace else?
Which then begs the question of in what someplace else?
Before anyone can provide evidence one way or another, definitions are required - very specific ones. How are you defining “technical analysis”? How are you defining “fundamental analysis”? Is “quantitative analysis” involved in this discussion?
We also need some kind of parameter for timeframe? Over what period of time is positive expectancy considered proof of validity?
I think this is a key point that the researchers are missing.
Trader discretion (regardless of fundamental or technical style) is what makes the process work and win.
I agree a robotic or 100% mechanical system does not work. At least I have yet to come across one that does [work consistently].
Bourbon’s gone.
So you’ve looked through 52 “systems” that you’ve found randomly that do not work.
The problem here is not that you can’t find a system, it’s that the systems that are “published” are failures. Smart people don’t publish winners…
Try my hedging system posted it works 100% and you don’t need any analysis all you need is to use it before the markets are opening and before the news. It’s an ATM to the Word Bank. But before you jump on live trading make sure you practice on a demo, it’s like an airplane one mistake and you can crash, but if you master it you’ll fly with out any crashes.
Hah! If you were looking to start a discussion … you did!
I personally know some Forex traders that have consistently made money using their trading systems for a long time. Maybe you could review their strategies and publish an article titled: “Forex trading systems and techniques that work”. Or Maybe I could do that … 
[I]“When technicians look at the charts they seem to see all kinds of weird objects and shapes. They see cups and saucers, heads and shoulders and triangles… This practice is no different from reading the palm of somebody’s hand to determine his or her future or using the “stars” to predict what tomorrow may bring. Using charts to determine where stocks might be headed is plain and simple voodoo. It does not work.”[/I]
You are asking for readers to direct you to robust studies that show that technical analysis works. But have you critiqued this article? Take the above assumption as an example. It is completely nonsensical. Technical analysis is more than lines and triangles. In essence it is a mathematical representation of the market’s movement. This is very similar to the mathematical analysis of weather patterns, stars and biological systems. These are all diverse fields, but the mathematical concepts used to analyze them and make predictions are essentially the same.
My ATM to the World Bank does not need any predictions, it’s pure mathematical, it can be started in any direction (buy,sell) at random and it’s self correcting. All you need it’s money, broker and some time to trade and learn it. And it’s free.
You are right in a way to achieve the power of predicting future in Forex which is practically a random market it’s impossible, nobody ever will do it. To make money from it it’s a different story you can do it through money management using all kind of strategies and most important through learning.
Yes there are, particularly in the field of AI. A good starting point for your literature search is a PhD thesis by Bruce Vanstone (I think I’ve posted links to it previously, IIRC correctly its available through Bond University’s website)
There are quite a few more academic papers based on reasonably solid research, but dont expect anyone to hand you anything on a plate, you have to find em.
The problem with most academic research is that its undertaken by academics who dont trade, nor do they understand the problem that theyre trying to solve. Typically they’ll try to assess the effectiveness of a TA signal by correlating the signal against profit or loss using a completely arbitary exit strategy.
The problem is that the individual components of a trading system are synergistic, and you cant mix and match in this way. Any weakness in a single element of the system can destroy potentially good results. You can screw up a good entry technique by applying an inappropriate exit metod, you can even screw up a perfectly good system with positive expectancy by applying inapropriate money management.
You really need to start thinking outside of the box, and the first step is to stop measuring success or failure of a particular element of your system by using profit or loss because PnL is a function of the whole system, not just a component part in isolation.
Simple TA works, its just a derivative of price after all so it cant fail to work. The key point its not predictive, and its not supposed to be predictive. Its just a simple proxy for price. The majority of people just dont understand TA, and the reason is due to misinformation (usually promoted by brokers) which is then redistributed through forums, books, training seminars etc. There are also good solid psychological reasons why the majority of traders dont want to know this stuff.
Another good resource is the book evidence based technical analysis by David Aronson. In the book he studies a bunch of entry signals based on TA and concludes that they dont work, on the basis that the systems dont make a profit. Its hardly surprisig that simple systems with arbitary exits, and no regard to trade management, or position sizing fail.
If your serious about trading, take a few hundred trades over the next 6 month period, if possible, completely at random, or if you must based on an indicator based system (or even historical trades taken by your EA’s)
Now seperate them into two groups, profotable, and non profitable. Ask yourself do the profitable trades have anything in common, do the non profitable trades have anything in common ?
Once you worked that out, ask yourself can you measure this property using TA.
Off topic:Why are you promoting this system so much, it not like you have any gain from other people using it, or do you want to test it? I’m not saying that the system is bad, I haven’t tried it yet, but it is strange that you’re promoting it, as far as I know good traders doesn’t share their systems easily unless they have some gain.
On topic: There is a guy here with the “volume spread analyse tread” he is making 1000-1500 pips per month constantly, as well as the '30 pips per day, keep your money at bay" and many others, here and on forex factory too. Even Cowabunga system is making some profit, if you check the stats Cowabunga has 700 pips profit this year. isn’t much but it is one pair and 15-20 minutes per day.
It is hard, not many people do it but It is definitely possible do make some profit via technical analysis.
RHODYTRADER:
[QUOTE=rhodytrader;235027]Do you have any actual numbers to back this claim up?
I think the best answer to that question would be another question: Have you ever heard of anyone, even anecdotally, like in a magazine, of someone getting rich from forex??
“Hah, hah! You don’t think traders do the same thing? Granted, you won’t find many retail traders with the ability to influence things, but at the upper levels you most certainly do.”
yes and that makes it worst. Big players suffer the worst slippages (by up to hundreds of pips) because of the big volume of their trades. By the time they are in a position, the price has already been moved by them close to their target point.
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Technical analysis: The use of indicators like moving averages to signal a buy or sell. Basically the use of a chart and anything that could be embossed on it.
Fundamental analysis: The use of any other factors other than a chart to signal a buy or sell, such as news.
The timeframe depends on how many trades are taken. According to statistics, one needs a minimum of 100 trades (an ideal number is 1000) to make a conclusion that positive expectancy exists.
If it takes 100 days to make 100 trades, then the time frame is 100 days. If 100 years, then 100 years. The time frame is a function of how much time it takes to carry out 100 trades.
If an Edge ratio can be demonstrated for 1000 trades, or 100 trades minimum, then there is evidence that positive expectancy exists.
The problem here is that other trades will also notice that edge, and will seek to exploit it, destroying it instantly.
Thats almost the same as saying that tech/fund analysis doesn’t work.
so we seem to agree on the same point.
If a system says 1+1=2 but a trader can just step in for some subjective reason and say no 1+1=11, how is that even a system? Doesn’t it make it even more subjective? How could any trader, no matter how smart, possibly be expected to practice such hit and miss discretion properly?
Thanks for the reply Dale.
You are indeed right about the stock market. However, it is a totally different thing altogether compared to trading.
The only people who benefit from the outperformance of the stockmarket are the buy and hold long term investors.
On the other hand, 80% of stock traders underperform buy and hold
investors. The other 20% who do, do so by luck and usually underperform in the next year.
The reason why long term investors benefit is because they are no participating in the zero sum aspect of the stockmarket, but in its positive sum aspect.
If a person tries to make money trading on the stockmarket, he or she is only trying to win by another person losing. and that totally makes it a game of luck.
On the other hand, an ‘investor’ is buying a business (a stock/share in the business) and their wealth/outperformance comes from the real wealth generated by the business they buy, wealth that everyone who invests in that company can share. It is not wealth from another trader.
Technical analysis wont guarantee you a win, but will give u a percentage of you winning. and fundamental well help u knowing what is happening or going to happen with that particular currency. combine both and it well help you. I might now be a professional as some people here as im a bit beginner/moderate but when i first started trading ive made gains because i managed my money. Thus I made a loss during the problem with greece and the euro only because i did not know that one can “sell” 
instead only “buy” but i learned and i make money enough to cover my rent and some bills, and still have my full time job, which i keep the money to save and what ever i feel like doin.
so yea it works just need knowledge, self control especially once u see that money grow or shrink u must bail out at a certain point. So yea i have this as extra money in my pocket.
and yet, none of Birinyi’s studies could prove that technical analysis works.
Instead, the studies prove that it DOESN’T WORK, that the market is random.