The video below, and how it describes “entropy” all in all sums up why we get our arses handed to us in forex so many times. “The way things and energy can be arranged based on random motion” is how entropy is described within the video. Essentially, I look at us placing orders as the spark/catalyst of Entropy. We place orders based on market randomness, thus ignoring the basic rules which trumps the randomness of the market. The basic rules of the market is that, it will do 1 of three things no matter what TF a trader picks.
- Extend
- Reverse
- Accumulate
Those three things all need one another in order for it to exist as an individual, just as Entropy needs a catalyst to interact with “randomness”. To not bore you with more scientific notion, the reality is “water and oil” don’t mix due to entropy, as our system doesn’t mix with how the market is structured. Although, water and oil don’t mix, the reality is for a moment in time, prior to the randomness of “Entropy” water and oil are able to interact with one another, or as the video simply puts it “dance”, which in forex leads to a “winning” trade, the reality is the market’s randomness created the victory, and not the trader actually "following the aforementioned three rules of the market"thus, once the randomness kicks in (your new order, which based on your last trade seems like a sure win) then leads to a loss thus causing you to believe that the market is random and wins are based on luck.
Market randomness in forex creates a distraction from the set rules which are put into place to cause constant wins, where as in Entropy, randomness determines if molecules can “co-exist”, thus breaking the temporary bond which allows to interact positively.
In other words, our wins and losses are mainly determined by randomness and not by us actually following the rules of the market. As if we did follow the market rules, then we would be able to be efficient and consistent in our quest to increasing our account value.
