News Trading versus Technical

What moves the forex market? It’s people’s speculations that move the market! The news don’t move the market, and the graphs don’t move the market! It’s people speculating on those news and people speculating on those graphs is what moves the forex market! When 9/11 happened, the dollar went down, not because 9/11 happened! The dollar went down because everyone thought that everyone else will be selling their dollars, so everyone sold the dollars, therefore the dollar went down. When a bunch of traders are looking at the graphs, and they see a head and shoulders pattern signifying that the EUR/USD pair will go down after the price breaks the neck line, EUR/USD doesn’t plummet down because of that graph pattern! EUR/USD plummets down because everybody recognizes that pattern, and they think that everyone will go short on the Euro at the neck break, so everyone goes short, in hopes that everyone else will go short as well, and it creates this price effect!

Here is the real question… How much money is traded based on fundamentals, and how much money is traded on the technical analysis? As far as I know, most big banks, hedge funds, and other big financial institutions trade mostly fundamentally. Obviously those financial institutions have most of world’s money, so when they place their trades, the market moves accordingly. With fundamentals, it’s pretty clear cut, if the report is better than expected for a specific country, that currency goes up, if it’s worse, that currency goes down. What about technicals? It’s pretty obvious that most of technical traders and individual traders don’t have a whole lot of money, even altogether. It’s also pretty obvious that there are more than 100 different indicators, and at any given time, some are showing up and others are showing down. How do you trade that? I guess look at the most popular indicators, and look for confluence of events, only sell when most of them show sell, or mostly buy when most of them show buy. And only do it, when there are no important news coming out. That’s what Peter Bain teaches, and I think he is one of the very few mentors out there, who recognizes this confluence of events among popular indicators, and that’s why he still produces traders that actually make money, using technical analysis. Most other technical analysis gurus, try to impress you with some fancy new indicator that they developed themselves, and obviously most people who trade with it lose money, simply because nobody else is using that indicator, so the market doesn’t respect what that indicator says.

Merry Christmas everyone :slight_smile:
Time for me to get back to the family.