Hello, in terms of technical analysis techniques, how much different is it? If a good stock market trader, who solely relies on technical analysis to make his trades became a forex trader, would he stand a good chance? I guess what i'm asking is, do many of the same principles apply?
First, a good stock market trader, well any market trader, will never rely on technical analysis. I use statistics in my trading, and each market exhibits different behavior as different forces drive different markets. Even with within FX market currencies behave differently ... Mexican Peso is completely different from Euro or Canadian dollar. I hope this helps. ThetaSpec
That is an interesting statement. I dont know anything else to rely on but maybe we have different definitions of technical analysis.
Chart-reading with no scientific substantiation (aka statistical analysis) is my definition of technical analysis. ThetaSpec
I guess my definition of technical analysis is very broad. When i mean technical analysis, it's everything but fundamentals.
I think the stock indices and forex certainly behave in similar fashion technically. It is rare to see statistical analysis and technical analysis being used in the same sentence! Statistical analysis of technical indicators makes for unpleasant reading: I have to admit I sometimes use Borders as a library, I read a book there (I am trying to find it on Amazon as I type) that ran 'Expert Advisors' over many years using RSI, Stochastics and MACD. All three indicators led to heavy losses. They didn't look a fibs. The only indicators that gave a constant edge were moving averages (around 56% wins). They calculated casinos have an edge around 53%. Art Collins has run 5 year 'Expert Advisors' on S&P500, Russell, NASDAQ, Yen, Euro and CHF on Trade Station, using a mixture of moving averages and chart patterns. With a 66% last 3 days average range as a stop he got the wins up to 63%. The currencies fared badly with stops. No system seemed to do well statistically if discretion traded. Only the purely mechanical technical systems seemed to work. Regards Morty
LMAO 1. Another n00b who defines technical analysis in its own special way to exclude its holy grail. Pretentious? 2. And then says "any market trader will never rely one ta" ... which by definition includes his holy grail. Unsane or perhaps just stupid? Defn: TA = the analysis of price or price and volume to determine probable future price movement (note avoidance of the predict, all, and is words sometime used in such definitions). Defn: TA Trading = trade entry and exit management based on understandings gained from the observation of price or price&volume. Filters such as indicators, market profile etc may or may not have been applied depending on the sect of the analyser.
Forex is different to the stock market in that volume is likely to have limited or different impacts on the market ... largely because you only ever see a fraction of it. Forex is not different to the stock market in that if a trader studies it diligently then many methods that work with stocks can be adapted to work with forex or vice versa.
Morty, as I'm sure a forex trader with your experience knows very well, % win rate is not what matters, when evaluating a particular method. (Other than psychologically, in terms of its fit with one's personality.) What matters is the probability distribution of various trade outcomes. Often simplified in popular discussion as "expectancy." crazytrader1: yes. Some of the largest currency hedge funds have been built on TA as a primary method.