I read Bill's interview again just a couple of days ago. There's lots of interesting info in there, yet his big time was quite a while ago, when not so many people were using TA, and a lot of things in the industry relied on "superior information". Also, please don't forget he was trading literally Billions of Dollars in single positions. He had to be "right" in terms of "sentiment" for a slightly longer than short term. He had to find a direction and then, quite literally, set that direction. He talks about how powerful it is to have such buying power to drive the market and change it the way you want to. Yes, it can be very advantageous having huge size in ForEx - but you better be on the "right" side, i.e. you better read the news right and underline them with your huge position. Now THAT is why Lipschutz talks about information flow and stuff. I mean, hey, how about his stories of poker-games and "counter-intelligence gathering" with his competitive firms? Mate, if you have such an account to look after, you have to take care of the intelligence and information side of things. On the flipside, if you're a little piker like any of us on this board, not exactly making the Dollar climb 4% just because you got up this morning and decided to go long $5 Billion, then, in my opinion, you don't have to worry about it. If you are small as we are, you will have virtually no slippage, and you can enter and exit wherever and whenever you like. It's too easy. You can just use a super-simple system, like an MA crossover system, and make decent money, even day trading it, because no slippage sabotages your returns. However, now, how do we, as the little pikers we are, interpret the information flow / news properly. LOL Baruch, are you kidding? You talk about buying horses in moonshine. I tell you what man, when it comes to the forex markets' reaction to news and information, you couldn't tell a horse from a Friesian cow - and nor could I! Therefore, decidedly, I leave the guesswork to the true experts / pro's / big dick swingers in the market. Now, that's the fundamental reasoning. I simply don't believe in news: I follow the chart. The chart usually has the news already factored in to some extent, often long before the actual news get released. Just look at the how the market behaves before news, you might notice it. Perhaps some information leaks out, perhaps it's just that the news usually reinforce a direction instead of negating it. Here are some honest words: I have traded intraday for over 3 years, and I have not used any news in that time. In the very beginning, I thought news were important, then ditched them. I am subscribed to no news feed or site, have often no idea what the news are, will be, could be, were, and usually never cared. Even on big eco#'s and things, I'd usually not give a hoot. I'm dead serious. The whole news thing is total hype and a waste of focus IMO. Not to mention it's totally non-backtestable. I have, in the past couple of months, upon the wide discussion of subject and pressing by trading friends (like in the chatroom) reluctantly looked at news or bothered looking what announcements come out when. Has it helped? Not at all. I think it's made things worse. The reason is simply that you can't trade news because you can't know how people will react to news. It's as simple as that. There was a great point brought on news by Jack Hershey (Grob109) once about news; He said when news are to come, people disappear from the depth, and it gets really thin. You're forewarned. Now you only have to look at depth and evaluate which side is thinner and more rewarding, and you can gun it down, for stop running. That's what happens on news; Stop gunning. Stops will run like scared rabbits through the garden, until the thing is over, and it goes the other way, to run the whole thing over again. I could not possibly agree anymore with Jack's words. That's what happens on news. Watch the depth, and you don't need a newsfeed or crap like that anyway. The news, sentiment etc are all just relative opinion stuff. The tape is the only thing that really counts, because it's the only thing that actually reflects truth. The tape, and only the tape is truth - amen. I have attached a story below which is from a great trading ebook I got a while ago, it's from the "Market Myths" chapter, and supposed to illustrate and debunk the common fallacies people commit when considering news in context with their trading. Most people get the meaning of news totally wrong. Now, all the above are mostly my "fundamental" reasons for my reluctance to consider news. Now comes the technical reason: Backtesting: How are you going to backtest a system that's based on simple rules like MA crossover, and backtest it with news in consideration? Do you backtest a system for a year and consider the news (and it's impact) each day / trade you have? And if so, what are the hard-fast rules for applying news to your trading system? The answers are: "Can't", "No", "No", "Too problematic", "Not realistic", "No"... No system backtest in the world takes news into consideration. And particularly, it doesn't need it, and even if it wanted to, it couldn't (because news interpretation is totally relative). Does this make sense? Now Baruch, if above makes sense, then tell me, how do you want to use news in your system? Didn't you say you have a system with simple rules, and it worked well in the backtest? On page 1, there is no mention of news in your system rules, right? So, the backtest was 100% without consideration of news, I assume? Or did you analyze the news for every day's trades in the past for the purpose of backtest? I'm sure the answer is no. If the answer is no, the fact is that your system has done very well without consideration of news. If your system has done very well without consideration of news, what is the point in considering or trying to interpret news? And IF there is a point in considering / interpreting news, then how do you interpret news, and/or how do you quantify such interpretation? If it cannot be objectively quantified, it is a useless system parameter. If a computer can't understand it, it's not logical. If it's not logical, it's illogical. If it's illogical, it's non-rational and has the potential to jeopardize any system based on logical rules. Unless you can quantify your reaction to news and honestly backtest such (IMO that is impossible), you are effectively endangering the performance of your mechanical system. So, all this said, could you please answer us / yourself all these questions honestly, and honestly make a statement as to the importance and validity of interpreting news within the framework of your system? Many thanks in advance. ------------------------------------------------------------------ I do not speak up very often, because what I write usually totally contradicts with 98% of people on this board and often caused unnecessary battles of opinion. However, in the case of this ongoing news-myth, I just felt like I had to make a statement. Enjoy the attached story on the meaning of news... Best Regards, Scientist
My understanding is the Forex market would be the One particular market that is Not subject to insider (information)/trading rules.
that such a simple system is making money in currency trading, because currency trends. A ten year old kid can do same thing. The warning is looking at your system many people thing trading is easy and they will bust like dotcom trading in the past. I know in the future this will not continue, it will become like es with no volatility. Then only the best will survive. I trade scalping method from support and resistance and also depend on time and news trade breakout, and counter trade when the big wave is over. Goodluck to your trading.
Hi Scientist, OK, and thank you for the story. I just made a very long comment to you, but when I tried to post it, I could'nt because there was no connection. So here is just a smal comment: I watch the news - the information flow - because I love to do that. I also love to look at the charts, but it would be very boring only to do that the whole day. News and charts are a good combination. If you don't know what happening, it's much more difficult to let your profit run, to keep your position, when the market goes against you (and eat parts of your profit). I don't want to trade, if I don't know what's happening.
I suppose it's legal with insider trading in all commodity markets. The insiders use the markets to hedge.
Hi manzGG, Welcome in the club. As a economist I suppose you know at lot of things, but I don't believe we will se less or no volatiliity. The currencies will always trend (most of the time). And there will always be big moves. Only the best will survive - yes, I agree. It will not change. And I suppose the best still wil be doing the right - but difficult - thing: Keep it simple. Follow the trend. Try to catch the big moves. Cut your losses. Let your profit run.