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Originally Posted by TraderABC
Hi all.
Are currency markets random or do they have a non-random element. If so how much? TA signals are rarely super profitable, and most of them are too similiar to each other. The fact that some traders make money is not a proof of market predictability. There are millions of traders, some of them may simply get lucky.
...If there is a 100% can't fail model of price action if enough people use it it fails....
Any way to statistically measure if the market is random or not? I've heard something about hurst measurements. Am I supposed to use O H L C or OHLC/4 ?
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Hi Tom
Price action is made up of signal (the market telling you what it is likely to do next) and noise (the random bit). The Signal/Noise ratio gets greater as you move down the time frames and in (for example) a 30 second bar there is virtually all noise and no signal whereas on hourly and daily bars the signal/noise is good enough to trade (some might argue 15 min or even 5 min bars but I would differ).
> TA signals are rarely super profitable, and most of them are too similiar to each other
They are just tools. It is how you use them that makes them profitable. You'll find the breakout type signals work best when noise is high (on short time frames) and that trend type signals work best on longer frames. You can group just about any indicator into one or other of these two categories.
> ...If there is a 100% can't fail model of price action if enough people use it it fails....
I believe this. That's why you need to develop your own system rather than get one out of a book.
> Am I supposed to use O H L C or OHLC/4
Use what you feel is appropriate. I use C, H+C/2, H+L+C/2 and H+L+O+C/4 depending upon what I am trying to do and the logic behind the trading rules I am testing. A straight C works best in very short time frames as it is closes t to the action and a H+L+O+C/4 might be good for picking up smooth trends in longer averages and longer time frames.
It is possible to make good consistent profits out of Forex and this bunny is worth chasing (though you may have a long run ahead).
Have fun
Medran