Such surges can signal a move upwards, as traders follow the lead and trust the new valuations (usually Asia follows the lead of NY on this), but they can fizzle out and the main trend with the fundamentals behind it can reassert itself, with accompanying volatility.
This is all about the issue everybody who enters forex finds in front of them, which can be expressed as the information content of forex. Investing is hard, but when you come to forex in comparison it seems easier. It is what blinds you in the face of candles which are not moving that quickly.
It is either a lack of information in this market, for which there is research evidence, the forex market may not have the long term information carrying structures equities have (or had) or it is a form of information the human brain cannot easily deal with.
In equity investing you can quite easily ignore technical analysis, but in forex there seems no alternative but to immerse yourself in it. This is because everybody is hanging on to these indicators, it is one of the few structures which make sense because you have them there in front of you. The problem is, these indicators make the market but they probably do not reflect it.
I feel there is a deeper computational structure there, but computational structures, as used by digital computers, are alien to the human brain. The most convincing explanations of the computational methods the mind uses I have seen, take them out of the realm of algorithmic computation.
What I mean by all this is that feeling you get of having nothing to hold onto despite loads of work is real. You are dealing with something which is not like your mind.
But news trading for those who want information, who want some basis to make a decision in forex is actually the best place. It is so clear what has happened, or at least at a level of clarity above anything else. This is why I like it.
© 2011 Guy Barry - All Rights Reserved.
