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MetaQuotes Software Corp.
MetaQuotes Software Corp.  

New article Market Theory has been published on

A logically complete market theory that would cover all types and varieties of markets for goods and services, micro and macro markets like Forex, hasn't been available until now. This article covers the essence of a new market theory based on the profit analysis, reveals patterns of the current price change and the principle of the mechanism operation that allows the price to find its most optimal value by forming a chain of virtual prices that can develop the controlling influence on the actual price. Mechanisms of formation and change of market trends are also identified here.

Let's look at the market theories that are most well-known among traders who try to use them in order to gain a statistic advantage when organizing profitable trading and creating profitable trading strategies on the Forex market based on them. There are three main theories:

  1. Gann Theory is a product of practical study of the model, price and time ratios and their influence on the market.

  2. Elliott Wave — through practical research Mr. Elliott came to the conclusion that any trend consists of the same repeated basic models (sections) that are divided into two types:
    a) impulse section ("Impulse") that consists of 5 segments and acts as a moving section with a trend development;
    b) corrective section ("Correction") that consists of 3 segments and compensates for the previous impulse movement.

  3. Strategy based on the Ichimoku Indicator — associated with "Ichimoku cloud" which is a product of the author's practical research of 30 years.

They all have a common feature — the absence of a strong theoretic base showing the real connection to the process of real trading with goods and services. These theories are the result of practical investigations and assumptions of their authors. Furthermore, they are connected with a united idea, namely, the understanding that along the price movement there are some levels and powers affecting its pattern, and the authors have devoted their lives to the frantic search for regularities of forming the indicated levels and forces.

Applying indicated theories in the trading practice led to variable success, however, due to the lack of more reliable theories, the researchers aimed only at the positive results, regardless the convention of their application and the actual money loss, explaining this as the "wrong" interpretation on the trader's side or presenting it as the disadvantages of one or the other theory.

I am trying to convey the essence of the new market theory that doesn't have any disadvantages listed above. This theory is based on a strong theoretical foundation, with equal elegance it describes the process of real trading of goods and Forex trading on the basis of price interaction between three virtual price levels, that the brightest men dedicated their lives to find, but, unfortunately, never succeeded.

These are the levels:

  1. Current price level that can become bullish or bearish, depending on the situation. When the market is bullish, the price becomes bearish, and vice versa.

  2. Virtual price level is formed by the market, and, like the current price, may turn bullish and bearish, depending on the circumstances.

  3. Virtual managing level of the optimal market price — lion level.

  4. Virtual managing level of the average market price — leopard level.

The figure shows real and virtual price levels based on the considered market theory over the years 2010 and 2011:

Author: Yousufkhodja Sultonov

Arian Cara
Arian Cara  
personally have some time following Mr.Elliott Wave and he is really great , he has a great "nose" and give super sugestions on indicators !
But it's very hard to catch the wave of Elliot, I think it's definitely not for a novice.
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