Fairly recently I've immersed myself in the problem of trading EUR/USD profitably. There are several reasons why Forex is more difficult than Futures contracts. First of all, in futures, there's a Time and Sales. Also, there's a "real" DOM showing aggregate quotes. Now, in Forex you don't have either one. No Time and Sales, so you can't calculate accumulation and distribution in buying/selling patterns. Also in Forex, an ECN is a very poor substitute for a Globex DOM. So my solution is to analyze market direction in 6E Futures markets, and then apply that analysis to trading in EUR/USD Forex. This hybrid approach seems strange, but here's the reason. First of all, analytics in Futures are "richer" than Forex can be. Secondly, Forex allows for 1/100th the risk for a given stake than a single futures contract, if you compare the futures 6E contract to mini or micro lots in EUR/USD. I wouldn't be able to trade Forex if I had only Forex market data for the analytics. I guess this is why so many Expert Advisors in MetaTrader simply can't make money. The analytics are not rich enough to make a determination of market direction, other than watching Price predicting Price ! and Price describes Price, but it doesn't predict where Price is headed... everyone's watching the price, you need some deeper analytics other than just watching and reacting to price movement. Chasing price doesn't get you very far, except "whipsawed" over and over again. Everybody's watching price, and everybody's "chasing" price hoping for momentum.
I laugh when people point out how much liquidity there is in Forex. Liquidity ain't the problem. It's knowing how to trade profitably that is the problem...
That's the thing, sometimes the more closely watched crosses are not the best opportunities. I would have had a good opportunity in EURSEK the other day, but in the evening the spread was over 50 pips and during the morning in NY it is often 20 pips. Everyone and their brother watches EURUSD. I watch it too, but trading other crosses is more appealing. The more a price pattern is watched by speculators, the higher the chances of false signals.
FutureScalper As you are starting to figure out FX is different. Price is all that you need. FX forces you to learn how. I have heard the opinion that stock traders can not trade FX, but FX traders can trade stocks. Of course if you can trade successfully on price why would you want to trade stocks? So dump your prior biased views and start the learning process. As for EAs, the EA crowd has it backwards. Very difficult to create successful EAs before you learn to trade. Need to learn how to trade successfully then automate. Since the best EAs are created this way, you can understand why they are not in the public domain.
Well, I know Forex offers only price. And that's not good enough, in my opinion. Everybody watches price, cuz that's all there is. Maybe you have an ECN to look at but it's a poor substitute for a real DOM. You seem to think price is enough. Tell me, just how do you trade price profitably? The Forex market is so huge that I doubt revealing a secret or two would really change anything. Can you reveal the main principle involved? Is it just Support and Resistance? Is it trend following? My interest is the EUR/USD. Thanks!
How bad do you want it? I spent more than two possibly more than three thousand hours studying naked charts and just watching one minute charts build. At this point of my never ending development - the answer to support/resistance vs. trend following is BOTH! The market/price action tells me which to use. Yes, do yourself a favor and believe that. It will open up your mind to the possibilities. Either method will work, but neither will work all of the time! To repeat - either method will work, but neither will work all of the time! Furthermore at times neither will work. You can use either method very successfully, just make sure that you learn when and how to use it. That is a big reason why so many EA writers fail. They are so busy playing with their toy that they fail to invest the time necessary to understand the market. But it doesn't matter specifically what I do. I know several successful FX traders and we all do it differently. As an example, I am a complete failure using sub one minute time frames. I understand some effective techniques, but it seems to conflict with who I am. One of my friends loves it. The common theme is that we pursued a method that was natural for us as individuals and we committed to dedicating ourselves to learning. So my advice is to expand to more pairs. I currently trade EURUSD, AUDUSD, GBPUSD, GBPJPY, EURJPY and EURAUD. Choose your own favorites and you do not need six. Just get several currencies involved say EURUSD, GBPJPY and maybe an AUD or one to tie the first two together. Print out several binders full of naked charts. Five minute charts would be a good start for exposure to lots of examples and to see the differences between how the Asians, Europeans and Americans trade. I used a spreadsheet so that the scale was the same for each chart and each chart had 140 bars (candles take too much space) since autoscaling is very deceptive. I believe that I chose 00:00, 08:00, and 16:00 NY time for end times. Then study them, study them, and study them. As you advance, think about why certain price movements are happening. Not all price moves are as random as you believe!
I gave it some thought and realized that if you are concerned about the FX not having a DOM, you are probably a scalper needing a way to identify price exhaustion. Try seriously watching the charts build for a couple of weeks. Not trading, just watching. You should be able to reasonably identify price exhaustion happening (even I can do that). Then through further observation define the best entry/exit zones so that you can be selective. You should already know enough about market mechanics and the needs of the "house". You should be fine trading FX! Just remember: Be Selective!!! I wouldn't use/trust a DOM if you gave it to me. I do not believe that it is necessary. But then again, from my posts you can see that I am a very visual trader. Back to my prior post, you have to find a method that matches who you are. If you are not a visual trader very little about what I do will help you.