Magic - page 3

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I was planning to make the next video this week but I am bit depressed after reading a book recommended by a friend, it’s called Hedge Hogging some of the stories appeal to me and reminded me with the losses I had in my first trading years, it’s a feeling I forgot but when I read the book I got those feeling back again. I am sorry I am off the subject but being in the winning side for a long time made me forget those feelings.

One of the reasons I am trying to pass the little knowledge I have learned is help new traders avoid those feelings, anyhow I will continue this thread in the next few days when I feel better.

elitecamper : Your question was supposed to be answered in the next video but I will give you the answer now since you came and asked.

First of all, if you ever heard of the term self a fulfilling prophecy, that why Fibonacci works!!

Fibonacci is the biggest lie in forex but since more and more people believed in it then the lie becomes true.

Let me explain:

supposed that this Fibonacci level is formed over a long period of time , and it certainly is , it was formed over weeks and months , so a lot of people has been following this situation , lot of people has the opportunity to draw the same line , on the main traders desk around the world , all of the has draw the same lines and they came up with the same Fibonacci levels .

So everybody assumes there will be support at 38.2% level what they are going to do when the price reaches there? they are going to buy and if there is enough buying pressure at that point , that will cause the price to go back up  , and this will be the self fulfilling prophecy.

In other words in a sense ,the support was formed because enough people believed there will be a support line over there , and place their orders accordingly , that could be one explanation for it.

No magic in here , but Fibonacci is part of the culture of Forex market its very widely followed , and anything is widely followed is easy predictable

About your second question in the US economy, EVERY down would be followed by an up this is how the market works, the reasons for the weak US dollar is well known, and I will just put some facts about the US dollar

US Dollar

- Largest Economic power in the world

- 40% of capital market assets from foreign investments

- 90% of all currency transactions involve the US dollar

- Gold and US dollar has inverse relationship

- Highly influenced by US Stock and Bond Market ( when the Bond and stock market of a country starts to heat up , that means more money flowing into that country which means strength of the country currency)

- Can be changed with the oil price ( inverse relationship)

If you want to understand how an economy of a country works, look at the flow of the money, if the money flow into the country ( Japan, US ) then there will be boost in the economy , interest rates, stocks , currency ect. If the money is running away from the country ( where there is war ) then the economy is falling apart

Now lets put some facts

Trade flows :

Negative: Import outweigh export ( US )

Positive: Export outweigh import ( Japan )

Capital flows:

Negative: Domestic outflows exceed foreign inflows

Positive: Foreign inflows exceed domestic outflows ( US , lots of money flows in to the US market to take advantage of the country economy )

Balance of Payments

Trade flows + Capital flows

Positive = Appreciation of the currency

Negative = Depreciation of the currency

Back to US, in the last couple of years the manufacturing sector was boosted because of the security sector not the service sector, at the same time the dollar lost its value cause the nation is jumping from one war to another, at the same time the Bush administration wanted the dollar to lose its weight so they can export more products, and import less, however the Chinese and Japanese products found a good market in US and the US government understand the threat coming from the far east. The only way around this problem was to enforce higher taxes at imports, anyhow the factors that played the rule to lower the value of the US dollar are weaker now and after the Gulf war, US is considered the world number one major power in the world, that means people will put their trust US dollar.

Now even though the US government wants a lower value for the US dollar they can’t escape the fact that more than 90% of currency transactions are in US dollar, the immigration issue gives the US even more power since now it’s a democratic country , the guys comming from the iraq war who were well paid now wants to get married and buy houses, this in my opinion gives more power to the US as a nation and as a currency.

I think the next war for the US is in China, I am trying to make an ending to my long answer but I can’t it’s a long debated issues; each person has his own opinion about it. in short I think it’s the era where the US dollar will gain its power back

 

quick and very thorough response MiniMe!! im glad i asked u those questions hehe.

 
elitecamper:
quick and very thorough response MiniMe!! im glad i asked u those questions hehe.

Your welcome elitecamper, very nice link you had in the previous post, I may just refer to it and rest doing nothing. I have seen part of it and seems very good

 

Hi minime,

Thanks for sharing with us ....i am now still following your this thread...

Hope all of us here can get more consistence winning PIPS

Judy

 

Your welcome Judylim

in post 16 I said "

The trick is that (80% of the times) central banks revel their intensions way before their meetings and before they issues any statements, hoping this will push the currency to the level they want when they publish their decisions / statements "

two years ago when the dollar was falling down we heard lots of statements from big banks on thier intesion to move thier reserve from US to EU, those statements supported the down move for the US, now I want you guys to follow up with the statements we will see in the next few months, this is a good site to see the news, and its a good time to understand the news:

http://www.bloomberg.com/index.html?Intro=intro3

you will notice more statements from the big boys to support thier moves and postions.

rumors has a small effect in forex but it shows the direction of the currency move, especially if those rumors and reports came from the big guys the do it to support thier positions and we have to understand that those guys look for long trading so thier moves will add weight to the market.

 

Rosie O'Donnel leaves 'The View'?

 

i clicked on bloomberg professional and it took me to rosie o'donnel left the view! hehe. MiniMe i have a question, How can i spot the big boys in the news? thanks minime!

 
elitecamper:
i clicked on bloomberg professional and it took me to rosie o'donnel left the view! hehe. MiniMe i have a question, How can i spot the big boys in the news? thanks minime!

The above link was for the bloomberg news site, not for the view , on post 15 I have defined who will be considered as a big boy.

two years ago when I had a project in Dubai, we kept hearing on the news ( more than once ) that the Gulf Countries ( Oil producers ) will change big part of their reserve from US to EURO, at the same time there was the news from the China planning to break the link between their currency and the Dollar, also at the same time there was the oil shortage due to Iraq war ....etc all these bad dollar news

Now if we consider that the oil was overpriced and there is no demand for the Gold as the world is a safe haven (people buy gold and Swiss frank when there is war or disaster), and if we consider that the historical maximum price ( not the very max but one of the max turning points) was reached, all of which will indicate that its time for the US to gain power back.

Let suppose that the smart guys have already took a position when the EU/US reached 1.3679 by the end of April giving a double top on the 4H chart and double top on the monthly chart, now if I took that position my first target would be at 1.2959 then we might see the price calm down as this is the second fib level and a strong support line, now lets speculate more and say the price will go through this line then we will see another stop at 1.2427, further another stop at 1.1635 ( these are fib levels and historical support lines ) . This may sound crazy as I am drawing a chart for the price in the future, I am not a magician I just read the charts and I love the weekly and monthly charts, and when you spend so much time looking at the charts you see things you didn't see before, its like knowing what wrong with you car without looking under the hood.

Now suppose my theory was right ( again suppose ) that mean those guys don’t want to stop at these points, as we said earlier those guys look for long term traders they are not scalpers, therefore once we start seeing thier statements in the news, signaling their intensions to support the US dollar that will expose their positions in the market either long or short.

Those guys like what I said in post 15 can be big banks analysts, central banks, governments, big companies from EU buying small companies in US … etc

Now remember this is my personal point of view, and this is for long term trading and as I always say I might be right or I might be wrong it’s a very debated issue and is subject to lots of politics.

 

when I talk about Oil, Gold and Swiss I presume you know those have inverse relationship with the dollar.

How the above info could be useful to day trader ?

Trick:

Get the worst EA in forex ( but it has to work ) and set it to be short only in the next few months and see the performance.

 

Big guys are tricky

MiniMe:
Your welcome Judylim

in post 16 I said "

The trick is that (80% of the times) central banks revel their intensions way before their meetings and before they issues any statements, hoping this will push the currency to the level they want when they publish their decisions / statements "

two years ago when the dollar was falling down we heard lots of statements from big banks on thier intesion to move thier reserve from US to EU, those statements supported the down move for the US, now I want you guys to follow up with the statements we will see in the next few months, this is a good site to see the news, and its a good time to understand the news:

http://www.bloomberg.com/index.html?Intro=intro3

you will notice more statements from the big boys to support thier moves and postions.

rumors has a small effect in forex but it shows the direction of the currency move, especially if those rumors and reports came from the big guys the do it to support thier positions and we have to understand that those guys look for long trading so thier moves will add weight to the market.

Hi Minime,

You are right that the central banks,specially the ECB,though not so much the BOJ,usually prefer to be absolutely clear about their intentions since this helps them in "guiding " the player`s perceptions to align them with central bank`s perceived view of economic realities ..which is what they wanted in the beginning ..so,being transparent helps CBs objectives.

So,regarding central banks,with the exception of BOJ you are very right..I just would like to add my opinion to non CB big player`s comments..

There are other big players,some of them with unbelievable money mass and leverage behind them(multinational banks,hedge funds..) that are not so transparent,since what helps their objective is to misguide..if you are W.B, a very respected value investor ..and you have bought several billion $ equivalent in 2 year notes and other financial assets denominated in GBP,EUR..and want to unload in order to cash in your profits,your best interest is to point at $ weakness to attract enough(EUR,GBP..)short term buying volume that prices are supported in spite of your unloading..once you are out,who cares ..this case actually happened a few years ago..report of 10 January 2005

http://www.forbes.com/free_forbes/2005/0110/036.html

Now check what happened during the whole 2005 with EURUSD and GBPUSD(tip..1.3552 close of 31 Dec 04.. 1.1846 close 30 Dec 05 for EurUsd)

The sage of Omaha is sager than we thought..as it should be ..and we should learn to read between the lines for the most probable answer

The old latin question..CUI PRODEST? Contains the most probable answer

..cui prodest scelus, is fecit..who benefits from a crime ,did it

AVE

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