Mp -- Can A Mean Point Be Found ??
M P
Your posts argue for either technical anylysis to be king or fundamental anylysis .It is quite clear you are making a strong case for only one type of anylysis to exist.
The case I am making is both fundamental and technical anylysis for forex to be used in conjunction with each other.
I read about real forex traders and they only trade 4 to 5 times a year AND THEY WORK FOR BANKS , unlike the new generation of forex traders who want the forex roulette to turn every minute.
Bill Lipschult traded mainly on fundamental anylysis and he is the only well known succesful forex traders
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Im really gonna try to lay this out as simply as possible especially as to avoid arguements and rancor, but im sure it shall continue for a while anyway because our two ideas are so intertwined at one point, and so independent at another that one must first define where theyre standing, before they can explain how they got there !
FIRST, trading of any kind is not limited to only ONE method, and while some traders from years back traded one way, the computer and the new retail traders have changed the landscape significantly ---- retail traders have been allowed into the spot forex market for only a relative few years now, and they have dramatically altered the way the markets now perform, and thats in ALL types of trading, be it commodities, futures, options, equities or forex !
WHAT WAS GOOD TRADING 5 YEARS AGO is now only ONE WAY of trading, as all the other methods were not being used (except by the institutions themselves) only a few years ago.
I have shown you charts which INCLUDE all types of fundamental situations --- news releases, downside moves on the dollar, fed presidents wearing the wrong ties, etc ---- what you see before you is a roadmap --- it shows trend and it shows "normal" support and resistance points for the currency pairs and pretty much spells out how one can trade these currencies, in two different timeframes.
while the tops and bottoms of the channels are "usually" support and resistance areas, what I always teach is they are the points where one takes profit and then GOES FLAT, waiting for what shall be the next move (either a historic "bounce" back in the other direction or a possible breakout !)
Having said that, one also understands that the ORIGINAL TREND was driven by fundamentals --- the weakness of the dollar vs. the Euro, so in that case your fundamentals were the driving factor behind the ORIGINAL trend change. But once that trend changed, technical factors of support and resistance came strongly into play, resulting in the relatively easy to chart and trade charts I supplied.
What i put forth is that EVEN WITHOUT KNOWING OF THE DOLLARS WEAKNESS ( lets assume you lived in a cave somewhere), the trend change would have been noted by tech analysis, positions sold or added to depending on your holdings, and you would be trading in the right direction again.
Because of that "built in" warning and alerts, a technical trader can survive almost anything whereas a fundamental trader would only be "guessing" as to outcome !
to make it clearer, let us imagine the NFP is coming out on friday --- WATCH the direction the currency is moving for a few days before AND ESPECIALLY AN HOUR BEFORE THE NEWS ----
The banks and the mm's pretty much KNOW what the release will be, as they have large research facilities behind them that follow each currency VERY closely, so if you see the currency being runup before the news, you will know immediately that the currency will continue to runup after the news is released, to its major resistance area, where it will then turn around and go short for a few days. The banks have simply run the price up so they have the highest STARTING POINT FOR A SHORT --- ie: they have
SOLD INTO THE RALLY, which is what the SMART MONEY does !
Now, have you ever seen a currency that receives BAD news continue UP for another day or two, and wondered WHY this is happening when it should be going down ? What you are seeing, if you use the channels i presented, is that
the currency had NOT YET HIT THE TOP RESISTANCE POINT, and the banks wanted to continue moving it up so they could short at the top of the channel ! This is often called "the news was priced in", but in reality the price was not yet high enough to initiate the shorts that the banks desired, and so they let the price go higher, selling into the rally once again !
so after a fashion, what you say has much truth to it, BUT for the realities of trading the currency for profit, the TECHNICALS are the ruling reasons behind how the currency moves !
Many indeed DO bet on the continued weakness of the dollar, but you also hear analists speaking of "late spring" or early summer for a reversal ---- they do this because they are checking back many years to find support figures for the currency, and once the market makes its decision as to "thats it" on the LONG TERM MOVES, the currency will reverse again. If you wish to see this simply go to a weekly and monthly chart, using the channel, and where you find TWO timeframes agreeing, ill bet that is where the currency reverses !
Technical analysis has become a self fullfilling prophesy amongst traders simply because SO MANY PEOPLE are using it. If a currency is reversing, a fib of 50 is usually chosen as support, and if you see a few of the more impt moving averages, a strong pivot point and a few other telling indicators LIVING AT THE 50% POINT, I will put dollars to doughnuts THAT IS WHERE THE CURRENCY WILL REVERSE !
of course none of this is written in stone and there are many analysts out there who havent a real clue but mouth off anyway, but how the currencies move repeats so often intraday or on the dailies that to ignore what is happening is to invite failure in trading.
so the whole thing comes down to STRONG FUNDAMENTALS will alter TREND, but that trend is then TRADED using technicals and technicals only because thats how everyone else is trading it !
therefore I agree with you that with MAJOR, earth shaking news that can change trends, you are correct in what you say, but I ask that you notice that the trend change ALWAYS OCCURS AT A TECHNICAL GO/NO GO POINT and after that point, fundamentals take the back seat to technicals until the next asteroid hits the planet !
So to answer another thought you put forth, concerning how tech analysis "looks good after the fact", understand that tech puts forth the points of caution to a decent trader --- those that try to lead others around by support and resistance and even my beloved LRC channels should be followed UP TO A POINT ---
and that point is where resistance or support is reached --- it is the point where one goes flat and WAITS to see if there is more upside or downside, because to rush in at that point, assuming the currency will go up or down, is to invite disaster from the pantheon of gods who sit on the shoulders of bankers and brokers and laugh at we mere mortals !
TECH WORKS BECAUSE EVERYONE EXPECTS IT TO WORK, JUST AS THE DOLLAR HAS NO BACKING UNDER IT BUT FAITH IN THE COUNTRY, WHICH ALLOWS IT TO WORK ---- but betting the farm on something that "might" happen is senseless until it DOES happen !
Going further, one can learn to trade amazingly well with some EXPERIENCE --- that experience gives you insights into how the markets work, how a price is moved in ways other than an amazing runup, and it teaches of how the markets reverse twice a day, going from long to short (or the opposite)
What i teach is the "realities" of trading, and yes I will ID support and resistance and normal tp points (those who know me are no longer in awe as to how I hit the topmost profit point, day after day after day -- Its amazingly simple once you understand the movements of the market) I have a thread somewhere around here, opened by the mods since i had gotten into a "scuffle" with a drunk on site, and once i find it I shall probably start laying out some surprising ideas that most brokers DONT want you to understand, cause if you understand they wont be able to take your money anymore !
enjoy and trade well
mp
