How much different Is forex from the stock market

myminitrading · Apr 9, 2007

Quote from ThetaSpec:

Kiwi,

To determine a probable price movement one has to use rigorous statistical tests, staring at the charts and indicators is not the edge, and will not give a trader a positive expectancy.

I am working in FX & commodities risk management of the SP500 company, and because the slightest edge in FX or commodities markets will give the company millions of dollars in extra profits, we have tested all the technical indicators and found all of them useless. We have a great computing power, funds for research, as well as virtually unlimited man hours. We do occasionally find statistically significant patterns in FX and commodities markets, but one has to use multivariate statistics to find them.

Would you care to comment on your credentials? It seems that one who is calling people "stupid" must have something to show for himself?

ThetaSpec

I regards to mechanical trading systems using technical indicators your right, but dont tell tradestation. The guy with the biggest and fastest computer would have cornered the market long ago.

Discretionary traders who use technical analysis are more common winners.

secxces · Apr 9, 2007

Quote from ThetaSpec:

secXces,

Thank you for your reply. I guess I missed something in my research of technical indicators over the years. I will definetly try harder to learn and understand this field in the future, and hopefully will be able to to find an edge in technical analysis.

Best regards,

ThetaSpec

Look buddy, Im not trying to be a smart a** directly, its some what indirect. You have to understand, there are many, probably hundreds of noobies who come to this site preying for answers to there crazy million dollar dreams. The only thing you can do sometimes is to at least point them in the right direction. (No Pun intended to the original poster). Telling people, based upon your experience, that TA is useless is evident/obviously incorrect. However, you do seem like your words hold some merit. Im not bias to the comments, entirely, you were making. Im just bias against your comments about TA.

No hate hear buddy, just clarification, welcome to the forums btw, I look forward to some of your insights. Someone who is a professional in this world is always welcomed.

- secXces

TOM134 · Apr 9, 2007

Great question CRAZYTRADER1 !

You are so right BRABED: some people are close-minded.

SECXCES, good riddens and don't come back !!

The truth about the relationship between stock and fx trading:

1) It's a 50/50 crap shoot: the price will either go up or it will go down. A better game would be to play either the red or the black on the roulette wheel. Over time it really doesn't matter.

2) Somewhere along the way Dr. Greenspan told a Senate committee:

.... "When you are dealing with stock the possibilities of which are either, it's going to be valued at zero, or some huge number - you get a premium in that stock price which is exactly the same sort of price evaluation process that goes on in the lottery: following principles known to lottery managers for centuries."

3) .... "The chimp, known as Raven to his managers at the Internet Stock Review, threw 10 darts at a dartboard with the names of 133 internet companies to select the 'MonkeyDex' - a portfolio showing 50 per cent growth on a year-to-date basis, outstripping the Munder Net fund, with 32 per cent growth."

4) The only winner out there is the 'house': your local casino and your broker.

5) Save yourself a lot of time and effort: invest in an INDEX fund.

jack hershey · Apr 9, 2007

Quote from crazytrader1:

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?

The principles I use do.

Ezzy · Apr 9, 2007

For the FX, is there a way to use a substitute for volume? Maybe bar volatility as a proxy?

What about leading markets?

- EZ

Brabed · Apr 9, 2007

Bottom line here, gentleman, is this:

Theta made a broad statement that TA doesn't work and that got a lot of folk's attention. In my view, using statistics is a form of TA so therefore he made his own point moot. It comes down to semantics and I think that what Theta ultimately intended was that 'conventional TA' doesn't work.

A lot of 'conventional' TA does use regression models similar to what you are doing Theta, just as a point.

Knowing that the markets are NOT random walk, then we must conclude that all TA must work to some extent, some better than others. I don't believe that Theta was trying to make the point that markets were random, which if they were, his statistical models would not work either.

By the way, I'm reading a book where the author claims that the mere belief in Random Walk Theory disproves it's existence, ya, my head is still spinning from that.

Brabed · Apr 9, 2007

To answer the original question:

Yes, if you are a good technician in the stock market then you should do well in Forex, but you must learn it's nuances. The Forex market has so much more liquidity than stocks, that this brings with it stability and, to a point, predictability.

achilles28 · Apr 9, 2007

Conventional TA doesnt work?

First define 'conventional TA'.

Trendlines, channels, support and resistence work great in Forex.

Sorry if it didn't work for you.

Thats the bottom line.

late apex · Apr 9, 2007

Quote from achilles28:

Trendlines, channels, support and resistance work great in Forex.

They do. On multiple time frames, no less.

Coincidentally (or not...), those TA tools happen to present a considerably greater programming challenge when it comes to computer testing -- let alone ATS design -- than most indicator-type TA tools. However, they seem to be custom-made for a discretionary trader.

secxces · Apr 9, 2007

Quote from TOM134:

Great question CRAZYTRADER1 !

You are so right BRABED: some people are close-minded.

SECXCES, good riddens and don't come back !!

The truth about the relationship between stock and fx trading:

1) It's a 50/50 crap shoot: the price will either go up or it will go down. A better game would be to play either the red or the black on the roulette wheel. Over time it really doesn't matter.

2) Somewhere along the way Dr. Greenspan told a Senate committee:

.... "When you are dealing with stock the possibilities of which are either, it's going to be valued at zero, or some huge number - you get a premium in that stock price which is exactly the same sort of price evaluation process that goes on in the lottery: following principles known to lottery managers for centuries."

3) .... "The chimp, known as Raven to his managers at the Internet Stock Review, threw 10 darts at a dartboard with the names of 133 internet companies to select the 'MonkeyDex' - a portfolio showing 50 per cent growth on a year-to-date basis, outstripping the Munder Net fund, with 32 per cent growth."

4) The only winner out there is the 'house': your local casino and your broker.

5) Save yourself a lot of time and effort: invest in an INDEX fund.

LOL. Ok, Yeah im done on this one. Ill let others finish this one. Its too easy. *Shaking My Head*