Jeuro wrote:
I agree with the whole point that martingale do not make sound financial sense. In the other hand, averaging down with equal positions.. and thinking in the long term fundamentals of "forex" it is not a too crazy idea.
My thoughts are that stocks, bonds and commodities fundamentals are so much different then forex that principals could never be the same... trying to trade forex with same principals of stocks and using same theories and analysis like Gann, Elliot and others is a total mess. All those good annalists made all their works based in the stock market and completely unrelated to holding a a different currency then our own country or region.
It would be long going thru all the details but the main difference, and for all purposes is the volume.
Stocks will always have a volume decrease at certain price levels (high or low points). But forex, in spite we do not know the volume of the spot exchange every tick, it maintain almost a constant volume regardless of price. ( according to daily average reported by the Bank of settlements). As long as international commerce is not interrupted, currency exchange volume tends to be infinite constant.
There is no such thing as a currency to be oversold, overbought or whatever. The reality is the price reflects the perfect equilibrium and whatever the price "is" , "there" is were
it is not oversold/overbought.
Another aspect of the big difference is that a stock or bonds can only be redeemed/converted into the original currency used to purchase it and necessarily go again trough a NySE mafia exchange type.
Currency can be converted into other currencies or "things" and be converted anywhere is accepted. That is why volume remains somewhat constant.
Approximately 85% of the daily volume exchanged is non speculative...(absolute no intent to make money by the exchange) and all 85% most likely would be converted into a "tangible" or "intangible" from a different region... and after... that product would be converted into the local currency ... and ready to exchange again.
The idea that for every winner has to be a loser is a myth. In forex "all" speculator like us could be winners in a continuous basis , or "all" losers. Unlucky is the latest. ... could that be due to the lack of understanding what forex is and how it works?
btw... criminals, banks, big boys, or any other named in conspiracy theories are not the ones keeping our losses... that is another myth (mostly
).
Bottom line, I believe the principles are very, very different. .. and while averaging a loss and hedging is an absolute NO in stock and commodities, it is not so crazy in forex.
A stock could hit bottom price, Company goes BK and the stock is no more then a worthless piece of paper.
With currencies.. in a way if we would buy only 1:1 leverage in any currency ..say euros, and the euro drops like a rock.. we could (theoretically) pay the difference and take the euros out. Buy any product in Europe and our only loss would be the inflation that occurred from the time of purchase. ( I know is it an impractical illustration.. but place the "differences" in perspective.. that should be considered for proper forex analysis. )
J
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J.
I did not mean to be judgmental towards anybody, and apologise for coming across as if I was.