Timing the Forex Markets

Financial markets have all the appearance of being totally random. First they chop one way then the other before taking off in the opposite direction to what you expect. It seems almost impossible to make any money by picking the turns so most traders resign themselves to following the trend.

But trend followers are still faced with the problem of when to enter and exit the market. Assuming that they have a successful entry and the market begins trending in accord with their position, trend followers have the problem of deciding when to take a profit. Get it right and they are more than happy, get it wrong and they give back significant profits. If only they knew when to exit.

Some traders look to astrology for answers. Having studied planetary motion and its relationship to markets I can say that there is a lot to recommend this approach. The main problem though is that there are many different kinds of astrology and numerous planetary bodies that may have an effect. The learning curve is long and steep and there are very few who master it well enough to consistently take profits from the market. I'm not saying it can't be done just that traders preparing to use this approach must study long and hard before reliable results come.

There is a well publicized astrological cycle in the S&P 500 that works well enough although it is far from perfect. There is also a strong case for observing cycles of the moon and planets changing sign. If you aware of these phenomena then you need to back test for reliability. Common sense though suggests that an astrology trader should also be looking to other indicators for confirmation before taking a position. For me though astrology requires too much work to be useful for trading when they are much easier ways to calculate turning points.

If you believe that moves in the Forex market relate to previous moves in terms of both time and price you are on to the great secret that the markets are not random at all. If you are technical trader you will also believe that all the information you need to trade successfully is on the chart itself. These notions are anathema to fundamental traders and hard core rationalists so I may be subjected to ridicule from these groups for making these suggestions. Such is life.

But the evidence is overwhelming if you know where and how to look. Financial markets including Forex give clear mathematical signals when the trend is about to change. Certain time counts in yearly, monthly, weekly, daily, hourly and even one minute charts point to trend changes. Last year the New Zealand Dollar made a significant high on one of these yearly number counts from the day the dollar was introduced, exact to the day.

In comparing previous time and price moves with current time and price, trend changes occur when certain significant ratios are present. Some of these are based on Fibonacci ratios while others are not. Some of these ratios are seen time and time again. For some markets they are almost like a signature. If something happens once there is a good chance of it happening again.

In my own trading I use a combination of two indicators designed to give overbought and oversold readings. It's uncanny how many times market turns occur at extremes as measured by this duo of indicators. But I don't take trades at random. I wait until I have a timing and price ratio coinciding with an overbought/oversold reading. There's considerably more to my method than this but that is the basic outline.

Traders wanting to uncover the hidden ratios in the markets should measure and compare everything. Measure price of one swing and compare with another. Measure the time for each swing to complete and compare with other swings. Diligent and thorough research will help with timing your trades enormously. Good luck and happy trading!