You can spend months, many months, sometimes even years chasing the fallacy and dreams of following price action to success. There’s a few flaws in this approach and regardless, 95% of traders fail to recognize the flaw(s).
Here’s a theory to sink your teeth into. Consider walking into an auction house for prized art work, or in our case a commodity exchange for gold bullion. Prices fluctuate and drift lower and you recognize this. You hear the trading pit getting louder as you notice the visual activity of known buyers running into the pits to place their buy orders, some aggressive some more passive but the buyers have in fact shown their intent.
Meanwhile, sellers are in fact retreating, which as a result causes prices to move higher off the aggression of buyers.
The result on your screen is the price action as a result of the buyers and sellers incoming and outgoing aggression.
But for FX traders, we must recognize the efficiency the market has. It’s no longer a dollar/gold exchange rate, its a EUR/USD a GBP/USD a USD/CHF a USD/CAD exchange rate. The net pressures from ALL currencies give us a transparent read of cross border money flow and that is what governs exchange rate fluctuations on the micro-structure level.
So take the efficiency of FX markets, centralized or not and absent arbitrage opportunities the price action merely follows the flow of cross border movement which is tick based ‘sentiment’ as it leads price ticks 30-60 seconds ahead of price movement all day long. Once we see the aggression through arrays of analysis with the focus on the underlying currencies we can extract this leading sentiment. This is exactly what George Soros discussed in Alchemy of Finance and reactionary measures of the markets. But here, it’s exposed. The end result is price action follows sentiment as a reaction to cross border movements that the institutions trigger. It’s granular and has more precision than most traders have ever contemplated.
If you’re trading prop funds focus on this. I’ve focused on it for 29 years now and when I turn the faucet of trading on a few days a week the returns come in.
I teach this approach freely and have offered it freely in the weeks past. With the condition of the economy and political uncertainty, it’s my duty to expose the how, why and when markets move with precision. When you experience it, you’ll look back on the markets and have two reactions 1) You’ll be pissed you wasted so much effort without proper focus and 2) You will be shocked at how easy trading really becomes.
Again, the market is efficient, the cross border movement of capital is recognizable, it’s the opportunities that the institutions are after and as a result, our trades are made profitable by the existence of those opportunities and knowing them before the institutions do.
Where else can you leverage knowledge and extract routine profits from unscrupulous brokerage (prop funds are merely brokers) who attempt to take advantage of you not knowing the micro-structure that governs how exchange rates move in the first place.