There may be an argument that each time one prepares for a trade, in effect, one is starting a new game. That is one cannot assign probabilities relative to previous trades. This is followed in practice by those traders who painstakingly prepare for each trade.
In effect one is only looking for micro-regularities that appear at the time one makes the trade. It might be said the more painstaking, the less one relies on repeatability, or at least recognizes that repeatability is unpredictable.
I might suggest that human driven trading is like this, or becomes like this, it is the search for micro-regularities appearing there and then, but without the express recognition of this given by high speed trading, with at least this exception, that one might assume the human mind can find order a program cannot or does not even try to.
This is in effect a recognition that there is no structure by which certain formations can be judged as likely or not to appear. It is saying that forex is a random system.
However I do believe that it is not, that there is a determinism of valuation, and of the role forex plays in more deterministic systems, that is equities and to an extent metals and commodities. The problem is that the determinism of valuation is not linearly directional, so the effect is random.
If you try and follow its non-linearity, one gets chopped about in such a way that risk increases as well as costs, whether by the markets valuation or by unpredictable inputs into it. Because these inputs are unpredictable, there is a moment when it is very hard to value them, namely their appearance.
But they do get valued. It may be that they are accurately valued at the moment of their appearance. For example, in news trading the input time can be known and the input value can be guessed.
So why does not the market do what you expect it to do. Because the forex market values in patterns, or is expressed in charting this way, it cannot express a valuation instantly, but it can express this valuation in both momentum and initial directionality, and seems to.
In certain circumstances one may get the directionality one expects, but to get this one seems to need a market expressly valuing something else, that is, stuck in another set of patterns.
But one can say that 15-30 min reduces the chopping effect, it is true, but at this time frame one is in effect avoiding the determinism of valuation, unless it saturates this time frame (high speed trading wants that chop, and tend to feel it can deal with it).
There is perhaps less reason to believe that 15-30 min defines an order of directionality that one can enter in on in shorter time frames, I might say with some controversy. It would tend to assume there is some directionality inputted into the market from this time frame, which is unlikely as this would assume that the market does not value on patterns.
As one extends out into 1 hour and longer one is searching for an investing order. On 1 month there may be an order, defined by the functionality of a pair, but this may change over time. One very short time frames, the order may be defined by the regularities themselves, that is they are independent phenomenon, which take place at this time frame
It suggests in certain cases one may find an optimization over time frames for certain kinds of order in the market, though this may change with time, which brings unpredictability into longer term investing decisions.
This suggests one can strip away the time frame in a sense and just look for the regularities, which is what does happen.
It may be the case that the market needs to be in congruence with these regularities. That is a probability, except it is unpredictable and needs inspection there and then.
It is in news trading when the market is valuing something else and snaps to the required valuation, which is good if you have a position on in the right direction, before the snap.
That is, the underlying structure, not the numerical value, is what is important, if you have a position on, which is another matter.
This suggests that this kind of structure may be independent of time frames. Time frames analysis I might suggest can add to confusion in forex analysis. But it need not, if it is grounded in the market. So is there an argument for looking at 15-30min.
I believe there may be stronger arguments for looking at longer time frames, because those flash orderings that can exist in forex may show up there, that is the ordering which reference longer term valuation patters.
The argument here is that those patterns which forex values on have a greater stability over time, but probably no more predictability than those at shorter time frames. If such order does not exist in shorter time frames, one might as well look at the 5 min or shorter time frame, where order flow rules, with the drawbacks and benefits of doing this, i.e. the tendency to be grounded by the market.
In all events at 15min and out, one is at least looking for potentially more stable regularities, but whose appearance is still unpredictable and one can bring into play trading on assumption of regularity, that is the imposition of order from this time frame to the market. To do this one though in effect looks for the appearance of this regularity, and scratches those trades which are not congruent with this.
This suggests that for large positions, longer chart time frames may be more optimal, as long as one does not look for the behavior of valuation in equity bull markets, rather that of bear markets, especially this one, where the instability to value, creates valuations like forex valuations, but probably not the same.
Are bear markets always like this, possibly not, as past bear markets tended to be valuations in recessions, where there was little except valuations ranging about present asset values.
As this blog has noted many times, there is no apparent recession in tech, rather asset expansion, it looks a bit like a gold rush sometimes, but those assets either are hard to value or value like ranging forex valuations, with huge extended spikes up and sometimes down.
That stability in asset valuation does exist, but it seems that companies have yet to take their equity valuations to that point again, as it tends to be a stability of future valuations in a bull market, else they range about present asset valuations of some kind.
Again it is a spike but it is stable because it is based on future valuation expectations which seem more stable than present valuations either because of recession impaired earnings or because assets are hard to value, which is like a forex valuation, except perhaps with less order.
The spike in the case of future valuations only becomes such, when the market itself, which in some sense as an aggregate behaves like forex at high volume, crashes. Otherwise it is the spur which drives the market forward. After the crash the market ranges but perhaps later more than movements about asset valuations, namely ranges to find another way to express future valuations.
© 2011 Guy Barry - All Rights Reserved.
