It’s one of our interesting article that how technical and fundamental analysis fail? Is market prediction possible? If these fail, then what to rely?
NOTE: Certainly we do not ignore importance of technical and fundamental analysis but point where I differ; These analysis should be used under fixed logic where entry/exit/timing of trades should be pre-defined and clearly based on fixed plan (historically verified) while traditional out dated analysis don’t provide as they should be. There are hundreds of examples from equities, commodities and indices where they simply fail and even cannot present historical performing report to realize its legitimacy.
How technical and fundamental analysis fail? Is market prediction possible?
The biggest disaster of unsuccessful trading is prediction & guess work which is based on those traditional analysis which have failed many times in recent history (evidences are available). 99% of traders do their trading based on predictions because most of them have no choice. Authentic prediction of market is not possible in long term but for a short time any individual even 10 years baby can make predictions because each prediction has 50/50 possibility of win/loss. If you follow greatest technology of prediction, even then you will find 50/50 or maximum 50/60 ratio of prediction, so according to my opinion we should not waste our time and energy to predict.
The point to consider is: markets have already 50/50 or 50/60 (in equities) success ratio by default but its credit is given to technical and fundamental analysis which is plain and easy to understand error if one perceives sensibly.
Do you know why prediction is impossible? Let me tell you reasons. There are hundreds of reasons which effective market move. At the same time many factors effects market move so we can’t judge which factor is acting in which direction. Some time there comes good news for any commodity or currency but still move goes against of it. How we can justify which element will work or not? It is impossible to predict in this situation.
Peoples who believe predictions are possible; actually this concept is a lack of knowledge in above said context. When they predict and market moves according to their predictions they think its due to their prediction expertise but you should never forget every prediction has 50/50 chances so anyone even taxi driver or labor person predict market because there is 50% chance of success already. We should not say it expertise.
Let me finalize if anyone who has great predictions and it is tested in 5-10 years back then I can think its good but I am sure nothing of prediction system in this entire world exist like this. Peoples who are successful for short term, actually they fail in long term. They gain from high risk money management systems like martingale (averaging in loss) and anti martingale. Martingale and anti martingale money management system are very famous in the world but have dangerous level of risks involved but traders feel lots of attraction to apply such a systems. Ultimately they loss their precious hard earned money or if they make money, they make with far higher risks, that cannot be said smart earning.
Fundamental and technical predictions failure
Almost 98% of the traders worldwide use fundamental and technical analysis to enhance their trading results. It would be wondering to know that all these analysis do not work at all. It is traditional way to understand the market. You can only get some heart & mental satisfaction but ground reality is that all these analysis do not give you profits in long term. Its open fact there is thousands of trading companies worldwide which are offering financial services. Almost all those use fundamental and technical analysis in their trading for prediction purpose. When anyone talks them to provide their financial statement as a proof and evidence they simply fail. Some of them provide theories & briefings based statements but professional traders understand all these tactics. They demand to check their trading results trade by trade which they fails to provide. When professionals ask and demand such a request, they don’t provide and they can’t provide because of not having it and relying on out dated traditional approach of analysis. If some provide, then it means they are good on practical levels and should be trusted.
It clearly shows 98% of these companies who uses fundamental and technical analysis in their trading, flop producing good results. If you want to test any company or individual who claims good results, ask him to provide statement proof or live test of their expertise. 99% will be run away and they can’t fulfill this merit. You can simply judge who is genuine and who is not genuine. We provide statement proof and as well as live test of our trading advices on daily basis. Anyone can join us by sending simple request.
How technical and fundamental analysis fail?
Technical & fundamental analysis are truly remarkable but to make imaginary form to understand market behaviors and it’s not enough for profitable trading. At a glance, the trader can view an incredible amount of information on the price movement of any given currency or any trading instrument. Moving average lines can give you an idea about either market is in trend or it is in range bound. Candlesticks report the relationship between the opening and closing prices. Bollinger bands give price targets and show the currency pair’s level of volatility. Oscillators like the MACD indicate entry and exit points for profitable trades. All this information is provided instantaneously. It’s the best invention since many years but all this analysis do not work professionally to keep your trades in profits. 99% of the traders are still using these analysis and losing their precious money. When anyone attempt and try again and again one thing and that thing gives loss and repeatedly loss, then I believe it should be thrown in basket forever but unfortunately traders have no choice because they don’t have alternate ideas and solutions. In this book I will give you professional choice with clear concept.
Below are some ways in which these analysis show its imperfections. These unpredictable events can cause currencies to move in unpredictable direction for a few hours, an entire day, or even a month or longer. The currency could move just long enough to hit the trader’s stop-loss order, thus closing a trade, or it could cause a complete trend reversal, lasting for weeks or months.
Sometimes, these events will cause currencies to move in your favor; sometimes not. The important point is that currencies can move contrary to what the indicators predicted — and every trader has to be prepared for these events. It is fact that most of time currencies or trading instrument move against the fundamental and technical analysis. Specially in this advanced century traders comes with lots of planes and every trader has its own unique approach so market move becomes so tricky and these analysis does not work at all and we should never think they can be reliable source in your trading decisions.
How these Analysis Fail?
Below are the five ways that technical analysis can fail.
Worldwide Political event
Any worldwide political event can move currencies. News that Iran intensified its nuclear program fueled the fall of the USD last April, 2007. On October 9, 2006, North Korea tested its first nuclear weapon, which moved the yen to triple gains for a day. Elections, OPEC decisions, and G7 statements can also move currencies. This news is not guarantee for any directional move. Market can behave totally unpredictable so relying of technical and fundamental analysis can be disaster for your trading life.
Economic Data & News
Any economic data news can cause currencies to move in either direction. Some of the most market-moving economic reports are the payroll figures, speeches made by central bank, GDP report, and the manufacturing reports. Interesting aspect is that sometimes these news move market according to announced figures and sometimes figures goes in fever of any trading instrument but move becomes against. I believe all these double standards are due to financial lobby which moves the market according to their will because they have plenty of money to move market. Major banks and global institutional are one of them.
Natural disasters and its Impacts on Commodity Trading
Earthquakes in Japan, drought in Australia (affecting wheat production), tsunamis in the Asia-Pacific region, or any natural occurrence that affects commodity supply can move currencies contrary to the technical forecast. Commodity-linked currencies like the Australian Dollar (AUD) are particularly sensitive to natural disasters.
Acts of Terrorism
Any act of terrorism can affect currencies. The Sept 11, 2001 attacks moved the USD quite dramatically downward. In July, 2005 terrorist attacks in London also moved the European currencies, particularly great British pond
Any war event between major countries can cause the market move. Suppose if USA announce war against Iran then oil prices can move dramatically.
Is Technical & fundamental Analysis helpful in Currency Trading?
Absolutely Not but yes for imaginary satisfaction somehow. In fact, a trader must have at least a basic understanding of technical analysis to trade financial markets effectively. This basic knowledge includes understanding simple moving averages, Bollinger Bands, and oscillators. With these three tools, a currency trader has the best possible tools available for profitable trading but still it can give you loss anytime and you cannot rely in long term.
Summary: we should not rely on fundamental and technical analysis. See, it is like gambling. Any attempt to predict future price actions is a form of guessing and gambling. They fail to see how drawing of trend lines here and there like little kids, and seeing technical indicators of past price actions, will give an idea. “Do not predict the market”. We should only adopt fixed logic certain mathematical solutions to cover market behave in both directions but how? I will explain in next articles or keep in touch with us.