People sometimes say that a 100% successful trading system is impossible. However, I already know of several. (Note - we can only speak of the past performance of trading systems, not the future performance, which is unknown, and can only be estimated. ) Masterful, conservative announcement trading can be 100% successful. Only the occasional economic announcement (about 1 out of 10) has the power to move the market with 100% reliability (based on past performance) - and only when there is a substantial variance between the anticipated number, and the actual number, and the subsequent price movement is only predictable over the ensuing 30 minutes or so. The challenge with this style of trading is to obtain the announcement results fast enough and to get a good order fill without slippage. Masterful technical trading can be 100% successful employing a variety of valid models. I know of three indicator based systems which have allegedly done 200 winning trades in a row. There are other systems that have allegedly done 75% to 85% winning trades in the past.
Why do people say that it is impossible to make 100% accurate predictions in the Forex market? There are no logical or empirical arguments that could support this assertion. This is therefore an unprovable statement. One can prove a positive statement, but not a negative one such as "such and such has never been done, and can never be done". It is nothing but prejudice - the elevation of ignorance to dogma. One cannot prove a negative statement such as "it is impossible to fly" or "it is impossible to go to the moon" or "no one will ever recover from such and such medical condition". Even one exception disproves such a assertion. If the statement is framed in an empirical format -"no one has ever walked on water" or "no one has ever won 200 trades in a row" or "no one has ever stood on the moon", then this is a far weaker form of statement, but these are also generally unprovable, because it would be necessary to prove what everyone in the world has ever done to prove the assertion. That, of course, is generally impossible.
The Forex market is a very large financial redistribution system with fixed rules. There are millions of participants, and the vast majority of the capital belongs to institutions. Institutions trade according to mechanical protocols, relying heavily on computerised trading programs. The world is governed by laws, regular behavior, structured systems, and system properties. There are many regular, inevitable patterns of movement within the Forex market, as in any highly complex, structured system. What might appear like chaos to the naive observer is full of order to the sophisticated analyst. One thing is certain, those people who refuse to acknowledge the existence of regular patterns in the financial markets (or anywhere else) are highly unlikely to discover them. Even if they are shown them, they will probably not acknowledge their existence. Preconceived beliefs condition our perceptions, and reaction to new ideas.
One simple example: Imagine that GBP/JPY is range bound for four weeks in a narrow range. It has previously ascended 2,000 pips based on certain economic realities and expectations. Something changes making the carry trade very dangerous. Perhaps an economic meltdown in the USA. Or perhaps China revalues its currency. GBP/JPY breaks through a long term support level, accelerates rapidly, and starts plummeting at a very high rate. 100 pips below this trend line, it is possible to say with 100% certainty that GBP/JPY will travel at least 100 pips more south before it reverses and breaks up through the top of the previous consolidation range.
Another example. It is generally expected that the FOMC will raise the US interest rates .25%, due to inflation and other recent economic data. The interest rate announcement is a surprise - the interest rates are kept constant. The market has already factored a .25% hike into the GBP/USD exchange rate. The price of GBP/USD is at the bottom of a range, and has completed 100% of an Elliott Wave pattern. It has already declined 500 pips in the previous five days in expectation of a US interest rate hike, and is bumping up against a strong support level. When the shocking announcement is released, there is a 100% chance that GBP/USD exchange rate will increase at least 100 pips, and probably alot more, before it falls 100 pips.
There are many, many similar, though less striking situations where the probability of a 10, 25, 50, 100 and even 300 pip move in a particular direction before meeting a target fairly far off in the opposite direction is virtually 100%.
Why do people say that it is impossible to make 100% accurate predictions in the Forex market? There are no logical or empirical arguments that could support this assertion. This is therefore an unprovable statement. One can prove a positive statement, but not a negative one such as "such and such has never been done, and can never be done". It is nothing but prejudice - the elevation of ignorance to dogma. One cannot prove a negative statement such as "it is impossible to fly" or "it is impossible to go to the moon" or "no one will ever recover from such and such medical condition". Even one exception disproves such a assertion. If the statement is framed in an empirical format -"no one has ever walked on water" or "no one has ever won 200 trades in a row" or "no one has ever stood on the moon", then this is a far weaker form of statement, but these are also generally unprovable, because it would be necessary to prove what everyone in the world has ever done to prove the assertion. That, of course, is generally impossible.
The Forex market is a very large financial redistribution system with fixed rules. There are millions of participants, and the vast majority of the capital belongs to institutions. Institutions trade according to mechanical protocols, relying heavily on computerised trading programs. The world is governed by laws, regular behavior, structured systems, and system properties. There are many regular, inevitable patterns of movement within the Forex market, as in any highly complex, structured system. What might appear like chaos to the naive observer is full of order to the sophisticated analyst. One thing is certain, those people who refuse to acknowledge the existence of regular patterns in the financial markets (or anywhere else) are highly unlikely to discover them. Even if they are shown them, they will probably not acknowledge their existence. Preconceived beliefs condition our perceptions, and reaction to new ideas.
One simple example: Imagine that GBP/JPY is range bound for four weeks in a narrow range. It has previously ascended 2,000 pips based on certain economic realities and expectations. Something changes making the carry trade very dangerous. Perhaps an economic meltdown in the USA. Or perhaps China revalues its currency. GBP/JPY breaks through a long term support level, accelerates rapidly, and starts plummeting at a very high rate. 100 pips below this trend line, it is possible to say with 100% certainty that GBP/JPY will travel at least 100 pips more south before it reverses and breaks up through the top of the previous consolidation range.
Another example. It is generally expected that the FOMC will raise the US interest rates .25%, due to inflation and other recent economic data. The interest rate announcement is a surprise - the interest rates are kept constant. The market has already factored a .25% hike into the GBP/USD exchange rate. The price of GBP/USD is at the bottom of a range, and has completed 100% of an Elliott Wave pattern. It has already declined 500 pips in the previous five days in expectation of a US interest rate hike, and is bumping up against a strong support level. When the shocking announcement is released, there is a 100% chance that GBP/USD exchange rate will increase at least 100 pips, and probably alot more, before it falls 100 pips.
There are many, many similar, though less striking situations where the probability of a 10, 25, 50, 100 and even 300 pip move in a particular direction before meeting a target fairly far off in the opposite direction is virtually 100%.