While not a subject fully answerable in such a small space, let us first understand that forex, equities, options and the whole raft of other financial instruments that get traded are done so by PROFESSIONALS, and these pros think very much alike (naturally , THATS the way theyre taught to think)
Not only do they think alike, they also make phone calls to each other, information I forward just in case youve never been in a trading room to see the deals being made.
Now, once you are "tuned in" to how they are thinking, you begin to understand what appears "random" is usually not --- in fact, I will state that it IS NOT RANDOM in any way shape or form ! One only needs to be trading a 15 min chart, reach a good resistance point, watch ALL trading STOP DEAD, and understand the phone calls moving back and forth across the world, essentially asking "so, what you gonna do ?"
From my experience, the majority of the pros are using the H1 as a "trend" timeframe and to establish tops and bottoms for the day --- then they trade the smaller timeframes, "working" the repeated ups and downs that produce the increased profit over just "buying and holding" and theoretically at least, preventing any drawdowns while constantly increasing profit. If one were to simply hold a long, let us say, for a 24 hour period, there would be periods where you were making money and periods where you were losing, simply because currency moves up and down during the day as the banks make and take profit, playing long and short, or buying the dips or whatever particular method they wish to use that moment !
If the currency is trending UP, is now the time to take profit and then short the dip ? These things happen at repeatable times of the day, essentially like clockwork, so if somethings going up, and its a few minutes to noon, est --- either get your profit or go short to counter your long which will sit for a while before its taken out tonight in the Japanese session, or when the euro opens --- but ill bet dollars to a cops doughnuts, it gets taken out BECAUSE THATS WHAT THE BANKS WANT ~ and that was the trend direction they were working with all day, just moving up and down to make more money in the day trade market !
to understand what I say, one must have full support and resistance on their charts, an understanding of the one hour (and daily) trend, its seperate moving average resistance points, and just WHAT the banks are trying to achieve.
I use something called the Linear Regression Channel, which is simply a top, bottom and middle trend line for a particular timezone for a particular currency pair --- this shows topmost, bottom most and middle support and resistance points, and is RARELY violated in any way, as that would ALTER the trend that the banks have already figured in.
by laying an LRC on any timeframe chart (but the longer ones show trends better, of course !) one is able to "see" what the banks are up to with amazing clarity, especially if one is looking at a weekly chart !
Ive attached a jpeg, just to give you an idea of what i speak, but to get to the point where you "think" like a trader normally just requires experience and a "greedy" disposition, and is not the world of the right-brained and careing person !
One can learn to trade in a relatively short period of time (well, a year is minimum and usually much too short) but to become a true SOB might very well not be possible for some --- at least I hope so ! (see the movie "wall street" for additional research into the subject !)
thinking like a pro trader requires mastery of "if this happens, then this is the result", and as only applied to money and greed -- good luck if you wish to lose your soul for the money but get the maserati, 2 million dollar house, trophy wife or husband and the rest of the percs !
yet another edit --- if youre worried about getting past the "spread hit" you take on your initial trade, why not investigate the ECN's, which usually work on one pip spread for most everything --- I personally use EFX, but have no problems with any of the others ! (and being an ECN, they dont trade against you in any way, shape or manner !) LOL
another subject -- what about news and its effects on the price ? The trader's analysists spend every day searching for what the fed will release the following week, and got a pretty danged good idea of what will be released, so watch your currency a week before news release --- if the news is anticipated to be good, the currency will most likely drop (there is one reason not to happen, but for a later time) as the banks short the currency for the first profit, and then have a large amount of upside movement to handle the news., of course, reverse for bad news !
trade well and enjoy
mp
[quote=nvpliers;13029]
But - ignoring all those wonderful mathematical indicators like Bollinger, MACD, etc. - if the theory of "every move is random" is true, why is it that some actually make money in this market? All I can figure is that someone has to have that "edge" to overcome the inherent disadvantage we all have in overcoming the accumulated hit from the spread-costs. Is that edge the mathematical indicators? Fundamentals? Perhaps. We need something to overcome the ultimate, consistent winner in this game, and that is "The House".