One can hope for more than the fact that everybody else is aware of these patterns of course and this biases it for you, but if we assume the forex market is about optimization, the underlying computation may override this at any time.
The structure of an optimization search in computation is interesting. It involves a kind of journey in the darkness led by some function, though it can be a brute force search as well, where you simply enumerate and test every possibility.
It involves as well solutions which while locally optimal are not globally optimal. This may be the structure of support/resistance, the waves from local to global to local again, that traps the trader and fakes them out. It is why you get trapped at support and resistance, because it makes sense to be there.
It is only after the fact that is really does not make sense. But again you may have intuitively been right and been well placed, but exited and who could blame you.
So really what perhaps one should do, is look at what one can use forex for. Using it as an ATM, well yes if one has really deep pockets, but if one has pockets that deep to ride out local retracements and you still might get hit by a global market change, the kind of money you make is may not be that significant, relatively speaking.
So let's look at what this blog has commented on about the underlying computational state of the markets and see if this can be used in some way.
This blog believes the computational state of the forex and equity markets are different. The forex market is about optimization, the equity market is about money flow, the way stocks can be pushed up and down, assuming a flow of cash, from unfortunately asset inflation or cheap dollars in recent times.
But the equity market is thankfully about more than this, it is about that special computation evolved maybe with the help of forex in recent times, to evolve companies to the potential of their financial statements. It is a kind of dynamic optimization of growth.
The essential problem with forex is that even if one is realistic about the returns you can make, it may help to send them to a market where the magic of compounding works more securely, where there is less chance of that zero sum game over time the optimization process of forex creates.
Fortunately such a market exists. The idea is to use forex, if and only if you make a profit, to boost your money supply for companies above a certain price level, stable companies which might catch into that growth structure in the US stock market (if it is working). That though is a hard optimization problem in and of itself. The other thing to use is the fact that you can precisely and exactly limit your losses in forex.
The problem right now is the equity market is not entirely functional, but this blog believes in a future where it will be again. The other problem as well is defining what a profit means in forex.
© 2010 Guy Barry - All Rights Reserved.
