Complex Observation

Case Study: There will be future updates to each of the case below to provide more details information to greater understanding of the Forex market movement.

Even after careful observation of the Forex market movement over the years, there are still no 100% definite answers to when, where, and how much volumes it makes when the market moves. These are the three questions that if we are able to provide answers will bring greater success in Forex trading. The followings are some common factors that might hold the key to the answers.

  1. Technical Indicators (MACD + Stochastic) - Determine possible direction of the market
  2. Support / Resistance point - Determine possibility target of the market move thus determining volume of pips. Sometimes MACD and Stochastic failed determine the market movement especially on corrective actions, therefore the support / resistance level becoming a significant indicator where the market tend to correct itself when it reaches certain level.
  3. Financial data (news) - Significant economic data would trigger the market movement i.e. Non Farm payroll. No technical indicators is capable of predicting the movement of the Non-Farm payroll will only luck will save you.
  4. Overbought / Oversold position - Take advantage of this situation to make the most out of the correction as well as to avoid being caught out of the trading range.
  5. Chart formation: Another significant movement determine by the chart formation such as the Flag, Wedges, Head & Shoulder, Double Top or Double Bottoms. Note that sometimes technical indicators like MACD + Stochastic failed to determine the market movement because of its abnormal behavior and unclear line graph. Apart from that it also provide a clear picture of one chunk of chart how it will behave. Chart formation is based on the idea that history always repeat itself and in Forex market this concept is 90% true.
  6. Currency correlations can also affect the market movement and volumes. 
  7. Out of all the above Price Actions rule - its everything that made up point 1 to 5.
Overall because how traders play the forex is based on emotional practice, there is no definitive answer when, where, and how much the market makes when it moves. However technically (point 1 and 2), historically (point 6), Fundamentally (Point 3), instinctively (Point 7) it is predictable although not always correct. Every moment is unique of each own.

Possibility why the Forex market is unique every moment
  1. Each traders using different setting of technical indicators as a result they see from different perspective of where and how much the market will move
  2. Emotion also plays a role in market movement (emotional sentiments)
  3. The amount of trades at every moment are different not always the same

All strategies that have its success and downfall

1. MACD + Stochastic combination
2. MACD + Stochastic + Candlestick Count
3. Support / Resistance
4. Fibonacci Retracement
5. Currency Correlation
6. Economic Data (Fundamental)
7. Overbought/Oversold.
8. Market sentiments (Broker Open position)
9. Chart Formation

**In unique situation sometimes the market moves way beyond the unexpected target of overbought/oversold position in certain time frames. What could be the factor driven this condition? The following are possibilities

1. Consistent economic data record
2. Speculators belief
3. Weak opposition from either buyers/sellers
4. Financial market manipulation from big players

**Many losses comes from this simple circumstance, the unexpected overbought/oversold positions and yet it happens time and again and nobody can stop it. Everyone have to experience this and in fact many has fallen unable to cope with the situation.

What are the unknowns and the possible tools to guess it's output?

  • Economic future data - Guess from past consistent records and overall interest rates value
  • Overbought/Oversold - MACD + Stochastic / Support + Resistance
  • Next direction (in details) - Use overall direction in larger time frames
  • Crowds direction - Open Position Ratio from various brokers

The Governor Bank of England's idea that will affect the increment in interest rates. Reference Mark Carney says UK housing market in widespread recovery
  • Sustainable growth in jobs
  • Sustainable growth in income
  • Sustainable growth in spending
When the GBP-USD | EUR-USD | AUD-CAD goes down the USD/CAD also goes down (when it should goes up) - This is due to the GBP-CAD | EUR-CAD | AUD-CAD goes down more than the rate of the first

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