The function to solve is: this is the valuation of this pair right now, what is its valuation in the future. That isn't a function though in this market. The real function is: this is your valuation, how do I make this incorrect - that's what the market says.
This market will not grow your valuation like the Dow should, except in artificial circumstances, like the run in EUR/USD up till the crisis. But those valuations get massively retraced. Why that is the case, this blog has explored.
It is thus not a matter of difficulty, it is simply not soluble. All of us would all be happy to spend 150 hour weeks, if it paid off, in the way 150 hour weeks pay off for programming (you make a great programs). This insolubility means you will lose money in it. And there is evidence it is a zero sum game. That means everybody will in theory average out to zero over time (or less).
So how do you do forex ? Find a method based on templates (patterns, regularities) and find a way of financing your trading when those signaled pattern become something else and spend or invest the wins when those patterns happen to appear and you happen to have got in on their appearance. Remember you need both a signal and a formation.
Expect the losses including maybe the cost to trade to cancel out the wins over time, even with money management at (near) best. That is the big mystery statement of forex, which cannot be proved one way or another. But it means you finance your losses from your wins over time, at best.
There is no method you can impose on forex, it will break all methods, that is why it is insoluble, it is not a function with a solution for you. It is a market designed to value against you, not with you. The only solution is to be with that market, unless you are big.
But it is a hard market to be with, it is designed not to be with you. A tiny percentage may well have an intuitive sense of market turns. That's how you may make money over time because you do not need an unreliable signal, so you remove the losses from those wrong signals.
This intuition is backed up by experience and the capacity to read the market with indicators, instead of imposing an indicator onto the market. That is the real number one reason you lose money, (mis)use of indicators, they indicate in indistinct and unclear ways, they do not direct and they do not really signal.
Entering the market because there is a trend happening (using the market as a signal), is usually a recipe for getting stuck near a top, if you enter long. This blog has explored reasons why this is the case.
But that intuitive process is like research programming, you put the function into the magic of the human mind, that creative marvel that can feel structure and find near impossible solutions, it is still worth spending a lot of time on it.
But that is a tiny percentage, because that percentage who make money is small. I am assuming here that ability overcomes the zero sum game. This still may not be the case over time.
I find it an intellectual challenge, like blue sky AI system programming it is partly why I am still here and I am interested in more efficient uses of indicators. But a major contributor to this as well is a sea change in forex beginning after the crisis. After the crisis it seemed like forex itself might disappear.
However that would be possible is unclear, but that does not stop political decisions after a crisis. But it did not, but a series of things sprang up and a series of developments happened which began to put principle into it. Forex becoming like equities (low leverage) is also forex disappearing, but it seems another way has been found for now.
It is to me, forex with principal, but still being about money in its purest sense, that is why it is even more exciting than AI. Put it this way, forex interested me when it was still somewhat wild west, but it interests me even more as it becomes more principled.
At the very least it helps removes some of those artificial biases against the trader, which made it very hard to deal with. It may be those biases were in the market structure itself and perhaps a new fairness will be beneficial for profits.
© 2010 Guy Barry - All Rights Reserved.
