FOREX TICKER

17 May 2012

How I see the beast in the market that has a nasty bite

Well to start with it is important to realise and admit to one's self that the market is an error correcting system. I would follow up this statement by also stating that the trading signals that we often rely upon for our entry or exit are NOT at fault as often as we think.Will all accept that it is unwise to act apon just a single buy or sell singal, confluence is more ideal, for once it is found then it is a type of confirmation that the origional signal is correct. However this logic become undermined if the confluence is confirming a false signal. It is the market data that is in error and that triggers your indicators. As they say "two wrongs don't make it right". It is quite easy for me to demonstrate and for you to see evidence of the market correcting it's own errors. If you are an observent trader you would have seen examples of the market correcting it's own errors at one time or another. If you havn't witnessed this occurence then I can give many examples to study. I have often heard traders complain that they had been stopped out of good trades by market moves that don't show up in the trading range within any time frame. However there broker will tell them that the market did spike a one point and triggered there stop loss. If your stop loss was hit and you cannot find a candle in any timeframe that would have triggered it, then it was triggered in error but since the market is an ECS then it's just the nature of the beast that you have to deal with. Finally markets are not continuious, they are discontinious and hence so is the data that is generated buy the market. The error sneaks in and often triggers false signals through all levels of trading platforms even your brokers system is effected. So play it safe and don't move your stop loss to quickly or to close to the action even if you feel it's a safe position. THINK TWICE for you own sake.