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Chapter 6, Part II. Technical analysis Page 2

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 15, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    2. Current price includes all information that exists on the market right in the current moment of time. Here you have to understand that with this statement we do not want to say that this is really so, we just talk about qualities and basics of technical analysis. Where does this statement lead us? Well, if price includes all available and possible information about an asset (in our case this is some currency rate), then all that we need to make a decision about trade is the current price behavior.

    3. There is a suspicion that technical analysis has a tendency to be a self-fulfilling prophesy. Just imagine that you see some well-recognizable pattern, and everybody else sees it. So, if many-many traders will open the same position due to this pattern, then the price will really move according to this pattern. That is a self-fulfilling event. But it’s worth saying here, that currently there are a lot of technical strategies that exist on the market and some of them are particularly sophisticated to apply, so, this statement is just partially true. Besides, it will be useful for you to know this extremely important market rule: If something on the market is obvious – this is obviously wrong. Remember when we talked about “Easy money” in a previous chapter. Let me explain this statement a bit. If everybody sees some reversal pattern on the market, you should understand that market-makers and the largest traders also see it, and they see in advance where the public will place stops and how it intends to act due to this pattern. Do you really think that they will not use it to rob you? You do? Well it’s very naive. That’s why some classical patterns that had worked perfectly in the 60s and 70s now fail more often than they work. There is a limited amount of money on the market and majority should stay in loss but minority in profit. That is the law, otherwise, the markets will just stop to function.
     
    TOURADA and fran alvarez like this.
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