the "anti-chaos" trading strategy and tactics at Forex market (Part I)
It is horrible to imagine what could happen to USD rate at the
spontaneous market in this case. At the controllable market of Forex
USD rate would fall down just by 1-2%.
I hope that my opponents, who deny the existence of a system
controlling Forex market, do remember the elementary economical laws.
The spontaneous market is a barometer that establishes the real price
of goods on the basis of the demand and supply (in the given case, it
is the real rate of exchange of any national currency).
The Episode #2 . The hurricane "Katrina" and the flood in USA on
September 7, 2005. USD rate stably increases. Chronicle of events.
As the result of the dam (dike) debacle, several states in USA become
submerged. The industry, agriculture and transport network were
destroyed. There started panic not only among common inhabitants but
among officials of various ranks as well. Hundreds and thousands of
people perished. There were cases of looting. Many looters (and,
maybe, just desperately hungry and thirsty people) were shot by
soldiers of USA army. The government of USA declared this hurricane to
be a disaster on a national scale. For the first time a new plan of
civic defense was introduced (see "BBC. The total chronicle of
events").
"Katrina" was bringing USA to ruin. Senators from Louisiana asked $250
milliards from the federal budget for getting over "Katrina" after-
effects.
Thus, it is an illustrative example of the greatest natural cataclysms
in USA in the last decades. Even the poorest country in the world -
Haiti - provided the financial help for USA ($ 36 thousands). The help
of Ukraine made 1 million of hrivnias , etc.
What did happen to USD rate at the controllable Forex market?
Notwithstanding all economical laws and even against the common sense,
USD rate increased!
Chart 8.7. EURO/USD pair movement (For view picture see notes in end
of article)
Chart 8.8. GBP/USD pair movement (For view picture see notes in end of
article)
Brief conclusions for traders .
As I think, the thesis that Forex has turned from the spontaneous
market to the controllable one does not need further proofs. Hence,
traders must introduce amendments into strategy and tactic of their
work at Forex.
What are the conclusions, significant for traders, logically follow
from these facts?
Under the new conditions of the controllable market, a trader must not
follow the "crowd" (flock). As B. Williams, A. Elder and many other
authors have fairly emphasized, the "crowd" pushes the price at any
spontaneous market. On the contrary, at the organized Forex market
orders must be opened in advance of Consortium's interests!
I try to find the core of a good sense in each technique of the
successful work at Forex . Is it necessary to rediscover the well-
known principles? There are many prosperous traders who openly and
honestly present their methods of gaining profits at Forex . If their
techniques are successful, it means that these authors have a thorough
grasp of the problem in its essence.
However, in practice, each of the techniques sometimes brings profits,
whereas in other cases it is disadvantageous. And it does not matter,
whether this technique is developed by B. Williams or by a not
celebrated but a successful trader.
Conclusion #1. It is necessary to clearly delineate the domains where
a given technique does work and where it fails (as well as the
corresponding reasons). In such a way we can clearly understand what
of the method by a given trader is worthwhile to be used - as well as
how and when to make advantage of it for our work at Forex .
Conclusion #2 . Your trading system must not be just a mixture
(farrago) of various techniques. This rule is especially important for
the beginners. After reading heaps of books on Forex , all of them
make complaints about "such a mess in their heads instead of
enlightenment".
Conclusion #3. A trader must develop his own trading system. In order
to gain profit, the following steps must be taken:
a. you choose just any technique developed by any author-trader (e.g.,
mine or B. Williams's, or somebody's else);
b. you must get used to work with the demo account according to this
technique to such extent of automatism that you "sense' it as your own
initial (original) trading system of the work at Forex
c. Only after this you should start to study additional literature.
You must clearly see what pointes, "borrowed" from other authors, can
help you personally to work at Forex , to improve your trading system
for getting extra profits.
Objectiveness of Forex turning from the spontaneous market into the
controllable one. The pattern of this process
Any profitable business transits from the spontaneous to the
controllable one. It is an objective stage in the evolution of
business undertakings.
In each branch of a big and super profitable business the initial
stage of the chaotic competitive straggle is already has been passed
through (petroleum, gas, ferrous and non-ferrous metallurgy, precious
metals, arms traffic, etc.). At present all these areas are definitely
divided between the principal participants. That is, there exist
certain financially-industrial groupings, well-controllable and
protected from intrusion of a concurrent.
The same concerns the biggest and most conservative area of business -
i.e., its financial branch, the world market of currency exchange
included. Can it be otherwise? Can "Chaos" rule the market where the
turnover exceeds $1 trillion per day? Can the biggest banks and
governments depend on "Chaos" - i.e., be dependable of the "off-floor"
traders - such as me and you? Can these organizations be worried about
the direction in which we (traders) could turn the trend of all
national currencies at this or that second? It is ridiculous to
imagine!
To realize the power of the grouping that has organized the "game" of
Forex all over the world, we should refer to the thesis from the
journal "Speculator". In June, 2001 the three biggest dealers at Forex
market - Citibank, J.P. Morgan Chase ' Deutsche Bank - together with
Reuters Group PLC had started up the system Atriax . However, the
latter did not meet competition and stopped operations in spring,
2002. The author of the paper just hinted that even the alliance of
the 3 biggest world banks could not make any serious competition to
Organizer of the "game" at Forex (to Consortium or somebody else).
In this connection, how one can take on trust the principal thesis by
B. Williams concerning "Trading chaos" that rules Forex? What's
important, all methods of this author issue from this postulate. The
following conclusion by B. Williams's also raises doubts. He states
that trends are created by traders, whereas brokers just realize these
trends and place traders' orders. According to B. Williams, the fact
that now trends are made rather "off-floor" than "on floor" (as it was
earlier) permits detecting what next will happen at the market (see
"Trading Chaos", Chapter 6).
So, to what extent can B. Williams's techniques be correct if their
basis is principally erroneous? Let us enumerate the fundamental
mistakes made in "Trading Chaos". It is necessary to facilitate
understanding of the techniques and practical recommendations given by
B. Williams concerning the work at Forex .
1. B. Williams sees Forex as a spontaneous market, uncontrollable by
anybody. According to this author, it is chaos but not an organized
system that would have its own strategy, tactic, techniques, goals,
methods of fraud, etc.
2. B. Williams mentions the pair "trader + broker". However,
unconsciously or deliberately, he has omitted the third participant of
this very process. This is banks and the world financial system in
general. Surely, this organization will not just take a detached view
of the traders' arbitrary "game" with the basic world currencies (USD,
EURO, GBP, CHF, etc.).
Let us now evolve B. Williams's idea by ourselves. Our aim is to
demonstrate absurdity of his "chaos theory" applied to the up-to-date
market of Forex.
' How brokers and banks market-makers can pay off profits from
traders' deposits if the traders' total earnings would be bigger than
the market-maker's profit in this period?
' Being in shoes of market-makers, National Banks, governments of
leading countries of the world, etc., how will you conduct yourself on
the eve of the news issue? For instance, after the publication of
Michigan University Index, USD can "go up" by 150-200 points with
respect to all national currencies. That is, in several hours dozens
of milliards of USD will be redistributed. Somebody will earn the
money, whereas somebody will lose it because of the difference in
rates of exchange (quotations).
What will you do in the place of the biggest financial groupings?
Would you just be sitting and taking sedative pills? Would you just be
trying to guess what steps will be taken by professors of a Michigan
University? Will 0.3% be added to the index previous value (91.4) or
subtracted from it? What's important, this "difference" makes
milliards of USD - for somebody! Possessing such capitals, would you
just be sitting idly and waiting for God knows what? More probably,
you will try to make this process controllable and predictable. Rather
you will do your best to gain profit with the help of such indices and
news. I think you will try to let the others lose their money.
' What does the theory of "chaos" at Forex represent by itself if
Organizer of the "game" has trained all traders to act according to
the stereotype?
a). To place stop-losses and postponed orders at the same places.
b). If the issued news are better than the prognostication, one must
stake on "buy". Otherwise (if the news are worse than the
prognostication), it is necessary to stake on "sell".
c). If a quicker moving average crosses the slower one upwards, the
order must be opened on "buy". In the case of the downward crossover,
the order must be opened on "sell".
d). In the case of divergence, one must try to work against the trend.
B. Williams and other "classics" at least had to mention that it was
basically absurd to work like this at the beginning of the trend and
in the middle of it.
This is why the given chapter is named "Anti-trading chaos" - to be
more precise, it is the anti-trading system.
Further I'll not dwell on absurdity of the chaos theory by B. Williams
when applied to Forex . I hope it is quite clear. Any trader can find
a lot of evidences of the fact that Forex is a controllable market.
There are also many examples that prove fallacy of B. Williams's
conclusion that traders form a trend and "push" it.
As I get it, the "game" of Forex and its rules in their essence are
the following.
1. There is Organizer of the financial game (the Alligator) and
participants (victims).
2. Organizer always tries to demonstrate: a). objectivity and honesty
of the rules established by himself; b). simplicity of the analysis,
predictability of the situations and the possibility of earning money
easily and regularly by one of the numerous methods of the analysis
(FA, TA, etc.).
3. All participants of the "game" are subjected to the same
psychological treatment by Brokers, authors of numerical "classical"
works on Forex and analysts via their sites and prognoses. That is,
such specialists teach every trader to work as all others in the world
do.
As the result, Organizer beforehand knows the traders' line of conduct
in these or those situations. The percentage of "players"-losers is
stable - about 90%.
4. A rapid growth in the number of fraudulent machinations developed
by Brokers has become a logical continuation of the above-enumerated
rules of the given game. Economists from Brokers have quickly grasped
that the number 90% of traders-loses is very close to the figure 100%.
What for will they send clients' transactions to the foreign market
(the market-maker bank)? In fact, traders will lose all the same!
Besides, it is possible to slightly "help" traders in their losing by
"knocking down" stop-losses - all traders keep their stop-losses
approximately at the same place. In addition, the following tricks can
be done as well: the "slippage" (opening of transactions at a price
much worse than the price at which the trader wanted to open the
deal); computer "pending" at the beginning of the heavy movement in
currency pairs. One can give many analogous examples - up to the
undisguised fraudulent nonpayment of earned profits to traders.
These centers are also protected from the viewpoint of finances. If in
flats the sums of orders of the traders who open transactions on "buy"
and "sell" are approximately equal, Brokers can always hedge the
difference between "buy" and "sell" with a market-maker under the
condition of a heavy trend.
The only thing that cheats from Brokers are afraid of is the unmasking
of methods of their work. Really, this will put an end to the afflux
of new "victims"!
There are several sure signs of a fraudulent Brokers. In my
educational course I enumerate some of such indications. However, here
I give only one characteristic (traders should think about it well).
If Brokers has one point of spread, you should calculate expenses on
the marginal trade, in detail described in all "classical" manuals of
Forex . For instance, let it be thought that you open the order for
one lot. Forex Brokers supposedly buys EURO to the sum of $ 100
thousands for you. When you close the order, Forex Brokers supposedly
transfer EURO to USD again. Thus, if you open 10 deals with EURO/USD
pair during a day, your Forex Brokers is supposed to send money abroad
and get it back 10 times, buying EURO for USD and v.v. All these
transactions must be made exceptionally for you! Is it realistic?
In a next-door bank you should ask the conditions for the transfer of
$100 thousands abroad and back. You will learn the cost of the
commission for such services and the time required for this
transaction (in half a day, the next day, etc.). Here I do not mention
the papers that must be prepared for each transfer. I also say nothing
about the time required for collecting all signatures.
I wonder, during this period of time what changes will occur in EURO/
USD rate as the latter is altering every second?
5. To earn regularly at Forex, you have to master yourself. That is, a
trading scheme must be developed. According to this scheme you will
work against "generally accepted" rules. As it is already mentioned,
these rules are popularized by Organizer of the game at Forex .
Sticking to these rules, more than 90% of traders all over the world
lose their money.
6. Developing my trading system, I have made use of numerous generally-
recognized techniques of the work at Forex (by B. Williams, etc.).
Surely, there is a kernel of good sense in any technique that enables
earning money - even if in 50% of cases. Therefore, the trader's task
is to differentiate the conditions, under which a given technique can
provide profit. It is also necessary to understand where, when and why
this technique yields a loss to the trader. Naturally, a trader must
use only this first part of the system, where one can gain profit.
7. For the development of your own trading system, you must do your
best to organically integrate different techniques, profitable at
Forex. Various methods of giving analysis to Forex from different
viewpoints do help us to more thoroughly and profoundly understand
this market and, consequently, to gain profit regularly.
8. The game of Forex is widely spread all over the world. In addition
to speculators, there are other participants in Forex - e.g.,
individuals who need to exchange currency for their business. All
these factors provide an objective opportunity to gain profits bigger
(and more regularly) than in any other financial game of the world.
9. Therefore, Forex gives a real opportunity to get into the
principally new financial market and to become a really independent.
Anybody can be engaged in trading at any point in the world. For sure,
a State, much as it would want it, cannot deprive a trader of his
production facilities because in this area gaining of profit depends
just on one's techniques and skill.
10. Forex gives you just a chance to earn money. However, not
everybody can learn how to gain real profit. Even after having
mastered the fundamentals of making money at Forex , a trader needs to
learn a lot of additional factors in order to transform his potential
abilities into real money. In this connection the following aspects
are very important.
a). the psychological stability (the absence of fear and hazard, the
ability to work automatically at the subconscious level, etc);
b). a reliable broker (the trader's profits, being virtual,
materialize only if you can convert it into real money at any second);
c). self-perfection via mastering new techniques of gaining profit,
learning from an experienced instructor and due to exchanging opinions
with other traders;
d). the possibility of obtaining money from the investor for the asset
management. This gives the opportunity to proceed from the level of
one's own deposit of several hundreds or thousands of USD to the
principally new level of the work at Forex. In this way one can
simultaneously reinvest a part of one's profits into the deposit and
to spend money on heightening of one's own well-being. There is a
simple example. At mini- Forex , many traders do not earn a lot of
money: even if a trader has doubled his deposit in a month, his profit
is small (e. g., by making $100 out of $50). Besides, a part of it he
must take off from the deposit for the daily needs. I'll not give
examples of large deposits because the tactics of work with them are
principally different - as well as the percentage of profit.
11. Not everybody can cover a distance from the chance (the dream) to
its realization - i.e., to making real money at Forex . As a trader,
here you work against Organizer of this game, who is the professional.
That is, to earn money regularly by taking it away from Organizer, one
must become the professional himself. Do not hurry to open a real
account at least till the time when you will learn to do the
following:
a). As B. Williams himself, in several minutes to clearly see two
possible alternatives of currency pair movement at the beginning of
each session. Correspondingly, you must develop two business plans,
where points of input into the market and output from it must be
clearly designated.
b). To work out one's own tactic of the work with the demo account at
Forex to perfection. The aim is to augment the demo account at least
2.5-3 times in a month.
c). To develop the long-term and intermediate strategies (not less
than a month and a week, respectively) - as well as the short-term
tactic (the intra-day trading session). Acquisition of this knowledge
will help you to gain profit.
d). After opening of the real account, at the beginning you must work
only with trends (under the conditions of flats you must deal with
demo accounts). It is necessary to clearly distinguish one from
another at the beginning of trading.
e). You must choose two ally currency pairs and work with them
continuously, accumulating experience.
12. There can be reasons why your demo account does not augment
regularly (in particular, maybe you are too busy at your main job). In
this case, you better forget about Forex ! You must not open a real
account there. It means that Forex is not intended for you.
By the way, there is completely nothing humiliating in the inability
to make money at Forex . Some people do not understand technology, or
literature. Others do not come to know fine arts, politics or sports,
etc. Does anybody consider oneself inferior because of this reason?
Surely, not at all!
Analogously, I perfectly well realize that the reaction to the last
two items of my vision of the game at Forex can be inadequate. It will
stimulate an immediate tide of slander and lies concerning me and my
book. The reason is that I'm not an employee of BROKER but a trader. I
try to understand recent rules of the game at Forex, its mechanisms
and to explain them to others.
Note:
Full text of this article and pictures of examples http://www.masterforex-v.su/
If you wish to be trained on Trading System Masterforex-V - one of new
and most effective techniques of trade on Forex in the world visit
http://www.masterforex-v.su/
How To Become A Successful Forex Trader: http://fxatrnde.key.to/
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