dancingphil wrote:babalu4u wrote:fxarun wrote:skeptics suggest that if we plot enough lines on a chart, prices will reverse at some simply by way of coincidence.
With regards,
Arun
The level of support and resistance - this value price, the intersection of which interfere with some force. This may be the forces caused by psychological mark, the impact of any major players or a lot of stop-loss near this level. It is quite clear that the quotes will cross this line much less than all the other lines that are not support levels. Confirmation of this fact can be found in a lot of literature.
The human brain is a "pattern recognition, predictive memory storage and recall system with its architecture having more feedback loops than decision processing points". Actually quite similar to transistors and their "logic gates" controlled by the input feedback loop, but with many feedback loops, not just one.
The brain's Master and Control Center gives a hard wired massive power to its emotional controls, allowing emotions the ability to process billions of pieces of data at the same time.
Emotions enable us to appreciate the intimate nuances of great music or the feelings we experience from the billions of pixels of a sunset and its beauty. Having vastly more feedback loops into our mental processing creates the flood of emotions which further reinforce what we are feeling.
Logic would have our brain report "I've heard that song before" and "the sun goes down every day" because it can barely process 4-6 pieces of data at a time, with men being able to process less logic than women most of time, because men tend to be myopic and are not wired to multitask.
Our brain is controlled by our emotions; our logic is a slave and a tool for our emotions; despite what Plato argues as the right thing to value more in humans and what should be used as the foundation of our legal system etc.
This is why people smoke when all empirical evidence proves it is killing them; their emotional needs and desires far outweigh their rational mind.
This is why people believe in God when all evidence says such notions are entirely fantasy. And it's why wars are fought sometimes over hundreds of years in contests of "my God is better than your God" (the Crusades); which is all very odd when looked at rationally - all religions have at their core "thou shall not kill".
Psychological/emotional notions in the market are held by the big traders as much as they are by the masses. I may refer to the large banks and corporates as rodents, but in fact they are no less human than we are.
And so when the collective (emotional) mood of big and small traders align, we have a herd mentality stampeding price action and the fundamentals of the market; the rational thinking gets ignored and run over.
Large round number price points, fibs, and pivots are all emotional constructs creating their own reality because big and small money all take them into account. The emotional balance of the market at any one moment in time is easily tipped in favor of price moving one way or the other; almost entirely independent of logical considerations. The fundamentals mean less than the mood.
10.3 works NOT because it is some mystical insight into the inner workings of the market. Rather it works with the long term statistical probability of what normally does happen most days.
Statistically, price really does tend to go the same way it did yesterday, until that day it does not. Statistically it really does tend to move to a fib or pivot point level most of the time.
And price is impacted by fibs and pivots because of the collective emotional decision making of the masses (big money and small). They are a reality we are embracing as having statistical probability in our favor.
All Forex activity is an "AGREEMENT on PRICE, and a DISAGREEMENT on VALUE".
Both sides of every trade have agreed on what price to trade at. Both sides disagree on the value of such a trade; one side committed to beliefs it will go up and the other side committed to beliefs it will go down.
Price is the rational logic component of every trade. The perception of value is the emotional component. Emotions are the driving force as it controls all human brain activity, especially perceptions of "value".
And with 10.3 we don't care.
10.3 seeks out the statistical probability of what is likely to happen; and it tightly manages what to do when it doesn't happen.
Phil
