subject: A New Look At Forex And Trading [print this page] The writer gives forth his take on the psyche of the Foreign Exchange Market based on his research on professional traders and their viewpoints. An approach that he takes is to employ metaphors to differentiate the various views.
He says the main metaphors used by forex traders are a bazaar, machine, living beast, gambling, sports, war and the ocean. Such uses are not accidental. The metaphors function as a means by which the people sort out information and then construct their own sensitivities towards the market.
The main view of his research is that the attitude you use to comprehend the forex markets is itself a factor that influences your trading. The person who views the forex market as sports will look to winning trades as the main focus, but may become emotionally damaged when faced with a losing trade.
Whereas, anyone who thinks of the forex markets as an ocean will want to think in longer durations of time. Then there are those who think of it as a war, and form battle plans to win their trades accordingly.
The traders on the forex markets also bring in different views as per the lives they led. You find engineers modeling the market with equations and then making predictions. So too, doctors approach the market with the attitude of diagnosing the price movements.
The traders who have had exposure to the martial arts have their discipline and their training in handling emotions. What is best? Forex trading can actually equalize all of these viewpoints. In a nutshell, it varies from person to person.
One particular kind of background is there, although, that gives a good insight. This vocation is music , as markets too have rhythm and harmonies.
The English Language dictionaries define harmony as a pleasing arrangement of parts that infer congruity. Also, to say if some sounds are in harmony or if they are just plain noise, you don't have to be a music student.
As traders gain experience on the forex market, they begin to get a hang of the interior rhythm of the market itself. However, the new players on the trading floor have to find a way to detect the innate harmony of the markets and often they look to technical analysis for answers. Analogies based on music can find you a way through the noisy data.
One trader uses only one type of time interval. It could be a day chart or a one hour chart.
The consult that particular chart and then employ a toolkit of analysis and methodologies to it to decide on a trade. This might be a legitimate way of evaluating the market but another good technique is to allow the time period to pick you.
Think of how you end up choosing radio station when you are driving. The scan button lets you hear bits and parts of each station till you come across the correct song.
You don't have to have a list of the songs that every station is going to churn out next. The forex market too churns out a range of patterns constantly.
Simple harmonic patterns might crop up to the engineer's eye , and he could then estimate the resonating frequency of the sinusoidal motion beneath it. He might even try to write an equation to project its path.
But, someone who has studied music closely can maybe notice the melody in the patterns and the recurring patterns without any equations. You don't need to know if the data came from a viola or a guitar or from some trades that took place between forex buyers and sellers to see that the values have clear self-similar characteristics and are definitely not random.
If you comprehend that the values of currencies are the products of human interactions and behavior you appreciate that they are inherently nonlinear, and this is fundamental in going beyond the linear outlook to trading. If you let your views regarding the market expand, you become predisposed to perceive the nested patterns, all recursive, within its domain.
If you want to get the trading edge that everyone talks about, you have to know that it depends on how you are seeking for it. It's best to look at patterns and hear the rhythms of the market.
