It is horrible to imagine what could happen to USD rate at the spontaneous market in this case. At the controllable market ofForexUSD rate would fall down just by 1-2%.
The Episode #2 . The hurricane “Katrina” and the flood in USA on September 7, 2005. USD rate stably increases. Chronicle of events.
As the result of the dam (dike) debacle, several states in USA become submerged. The industry, agriculture and transport network were destroyed. There started panic not only among common inhabitants but among officials of various ranks as well. Hundreds and thousands of people perished. There were cases of looting. Many looters (and, maybe, just desperately hungry and thirsty people) were shot by soldiers of USA army. The government of USA declared this hurricane to be a disaster on a national scale. For the first time a new plan of civic defense was introduced (see “BBC. The total chronicle of events”).
“Katrina” was bringing USA to ruin. Senators from Louisiana asked $250 milliards from the federal budget for getting over “Katrina” after-effects.
Thus, it is an illustrative example of the greatest natural cataclysms in USA in the last decades. Even the poorest country in the world – Haiti – provided the financial help for USA ($ 36 thousands). The help of Ukraine made 1 million of hrivnias , etc.
Chart 8.7. EURO/USD pair movement (For view picture see notes in end of article)
Chart 8.8. GBP/USD pair movement (For view picture see notes in end of article)
Brief conclusions for traders .
What are the conclusions, significant for traders, logically follow from these facts?
However, in practice, each of the techniques sometimes brings profits, whereas in other cases it is disadvantageous. And it does not matter, whether this technique is developed by B. Williams or by a not celebrated but a successful trader.
Conclusion #3. A trader must develop his own trading system. In order to gain profit, the following steps must be taken:
a. you choose just any technique developed by any author-trader (e.g., mine or B. Williams’s, or somebody’s else);
Any profitable business transits from the spontaneous to the controllable one. It is an objective stage in the evolution of business undertakings.
In each branch of a big and super profitable business the initial stage of the chaotic competitive straggle is already has been passed through (petroleum, gas, ferrous and non-ferrous metallurgy, precious metals, arms traffic, etc.). At present all these areas are definitely divided between the principal participants. That is, there exist certain financially-industrial groupings, well-controllable and protected from intrusion of a concurrent.
The same concerns the biggest and most conservative area of business – i.e., its financial branch, the world market of currency exchange included. Can it be otherwise? Can “Chaos” rule the market where the turnover exceeds $1 trillion per day? Can the biggest banks and governments depend on “Chaos” – i.e., be dependable of the “off-floor” traders – such as me and you? Can these organizations be worried about the direction in which we (traders) could turn the trend of all national currencies at this or that second? It is ridiculous to imagine!
2. B. Williams mentions the pair “trader + broker”. However, unconsciously or deliberately, he has omitted the third participant of this very process. This is banks and the world financial system in general. Surely, this organization will not just take a detached view of the traders’ arbitrary “game” with the basic world currencies (USD, EURO, GBP, CHF, etc.).
· How brokers and banks market-makers can pay off profits from traders’ deposits if the traders’ total earnings would be bigger than the market-maker’s profit in this period?
· Being in shoes of market-makers, National Banks, governments of leading countries of the world, etc., how will you conduct yourself on the eve of the news issue? For instance, after the publication of Michigan University Index, USD can “go up” by 150-200 points with respect to all national currencies. That is, in several hours dozens of milliards of USD will be redistributed. Somebody will earn the money, whereas somebody will lose it because of the difference in rates of exchange (quotations).
What will you do in the place of the biggest financial groupings? Would you just be sitting and taking sedative pills? Would you just be trying to guess what steps will be taken by professors of a Michigan University? Will 0.3% be added to the index previous value (91.4) or subtracted from it? What’s important, this “difference” makes milliards of USD – for somebody! Possessing such capitals, would you just be sitting idly and waiting for God knows what? More probably, you will try to make this process controllable and predictable. Rather you will do your best to gain profit with the help of such indices and news. I think you will try to let the others lose their money.
a). To place stop-losses and postponed orders at the same places.
b). If the issued news are better than the prognostication, one must stake on “buy”. Otherwise (if the news are worse than the prognostication), it is necessary to stake on “sell”.
c). If a quicker moving average crosses the slower one upwards, the order must be opened on “buy”. In the case of the downward crossover, the order must be opened on “sell”.
d). In the case of divergence, one must try to work against the trend. B. Williams and other “classics” at least had to mention that it was basically absurd to work like this at the beginning of the trend and in the middle of it.
This is why the given chapter is named “Anti-trading chaos” – to be more precise, it is the anti-trading system.
1. There is Organizer of the financial game (the Alligator) and participants (victims).
2. Organizer always tries to demonstrate: a). objectivity and honesty of the rules established by himself; b). simplicity of the analysis, predictability of the situations and the possibility of earning money easily and regularly by one of the numerous methods of the analysis (FA, TA, etc.).
As the result, Organizer beforehand knows the traders’ line of conduct in these or those situations. The percentage of “players”-losers is stable – about 90%.
4. A rapid growth in the number of fraudulent machinations developed by Brokers has become a logical continuation of the above-enumerated rules of the given game. Economists from Brokers have quickly grasped that the number 90% of traders-loses is very close to the figure 100%. What for will they send clients’ transactions to the foreign market (the market-maker bank)? In fact, traders will lose all the same! Besides, it is possible to slightly “help” traders in their losing by “knocking down” stop-losses – all traders keep their stop-losses approximately at the same place. In addition, the following tricks can be done as well: the “slippage” (opening of transactions at a price much worse than the price at which the trader wanted to open the deal); computer “pending” at the beginning of the heavy movement in currency pairs. One can give many analogous examples – up to the undisguised fraudulent nonpayment of earned profits to traders.
These centers are also protected from the viewpoint of finances. If in flats the sums of orders of the traders who open transactions on “buy” and “sell” are approximately equal, Brokers can always hedge the difference between “buy” and “sell” with a market-maker under the condition of a heavy trend.
The only thing that cheats from Brokers are afraid of is the unmasking of methods of their work. Really, this will put an end to the afflux of new “victims”!
In a next-door bank you should ask the conditions for the transfer of $100 thousands abroad and back. You will learn the cost of the commission for such services and the time required for this transaction (in half a day, the next day, etc.). Here I do not mention the papers that must be prepared for each transfer. I also say nothing about the time required for collecting all signatures.
I wonder, during this period of time what changes will occur in EURO/USD rate as the latter is altering every second?
6. Developing my trading system, I have made use of numerous generally-recognized techniques of the work at Forex (by B. Williams, etc.). Surely, there is a kernel of good sense in any technique that enables earning money – even if in 50% of cases. Therefore, the trader’s task is to differentiate the conditions, under which a given technique can provide profit. It is also necessary to understand where, when and why this technique yields a loss to the trader. Naturally, a trader must use only this first part of the system, where one can gain profit.
7. For the development of your own trading system, you must do your best to organically integrate different techniques, profitable at Forex. Various methods of giving analysis to Forex from different viewpoints do help us to more thoroughly and profoundly understand this market and, consequently, to gain profit regularly.
8. The game of Forex is widely spread all over the world. In addition to speculators, there are other participants in Forex – e.g., individuals who need to exchange currency for their business. All these factors provide an objective opportunity to gain profits bigger (and more regularly) than in any other financial game of the world.
9. Therefore, Forex gives a real opportunity to get into the principally new financial market and to become a really independent. Anybody can be engaged in trading at any point in the world. For sure, a State, much as it would want it, cannot deprive a trader of his production facilities because in this area gaining of profit depends just on one’s techniques and skill.
10. Forex gives you just a chance to earn money. However, not everybody can learn how to gain real profit. Even after having mastered the fundamentals of making money at Forex , a trader needs to learn a lot of additional factors in order to transform his potential abilities into real money. In this connection the following aspects are very important.
a). the psychological stability (the absence of fear and hazard, the ability to work automatically at the subconscious level, etc);
b). a reliable broker (the trader’s profits, being virtual, materialize only if you can convert it into real money at any second);
c). self-perfection via mastering new techniques of gaining profit, learning from an experienced instructor and due to exchanging opinions with other traders;
d). the possibility of obtaining money from the investor for the asset management. This gives the opportunity to proceed from the level of one’s own deposit of several hundreds or thousands of USD to the principally new level of the work at Forex. In this way one can simultaneously reinvest a part of one’s profits into the deposit and to spend money on heightening of one’s own well-being. There is a simple example. At mini- Forex , many traders do not earn a lot of money: even if a trader has doubled his deposit in a month, his profit is small (e. g., by making $100 out of $50). Besides, a part of it he must take off from the deposit for the daily needs. I’ll not give examples of large deposits because the tactics of work with them are principally different – as well as the percentage of profit.
11. Not everybody can cover a distance from the chance (the dream) to its realization – i.e., to making real money at Forex . As a trader, here you work against Organizer of this game, who is the professional. That is, to earn money regularly by taking it away from Organizer, one must become the professional himself. Do not hurry to open a real account at least till the time when you will learn to do the following:
a). As B. Williams himself, in several minutes to clearly see two possible alternatives of currency pair movement at the beginning of each session. Correspondingly, you must develop two business plans, where points of input into the market and output from it must be clearly designated.
b). To work out one’s own tactic of the work with the demo account at Forex to perfection. The aim is to augment the demo account at least 2.5-3 times in a month.
c). To develop the long-term and intermediate strategies (not less than a month and a week, respectively) – as well as the short-term tactic (the intra-day trading session). Acquisition of this knowledge will help you to gain profit.
d). After opening of the real account, at the beginning you must work only with trends (under the conditions of flats you must deal with demo accounts). It is necessary to clearly distinguish one from another at the beginning of trading.
e). You must choose two ally currency pairs and work with them continuously, accumulating experience.
12. There can be reasons why your demo account does not augment regularly (in particular, maybe you are too busy at your main job). In this case, you better forget about Forex ! You must not open a real account there. It means that Forex is not intended for you.
By the way, there is completely nothing humiliating in the inability to make money at Forex . Some people do not understand technology, or literature. Others do not come to know fine arts, politics or sports, etc. Does anybody consider oneself inferior because of this reason? Surely, not at all!
Analogously, I perfectly well realize that the reaction to the last two items of my vision of the game at Forex can be inadequate. It will stimulate an immediate tide of slander and lies concerning me and my book. The reason is that I’m not an employee of BROKER but a trader. I try to understand recent rules of the game at Forex, its mechanisms and to explain them to others.
Note:
Reference: http://www.forexstudy.net/2010/10/forex-secrets-developing-the-anti-chaos-trading-strategy-and-tactics-at-forex-market-part-ii/
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