Irrelevant Indicators

If you've been grappling with the forex market for some time now, no doubt you've come to realize that its movements are mysterious to say the least. It fails to conform, especially to technical indicators. Over the three years or so that I've been trading it, I've come to believe that all of the indicators available (the thousands of indicators) are mostly useless.

Last week I was reading an article that made me realize that the market today is not the market I read about in all the books. It talked about an investment firm that traded heavily in the forex market that was being investigated for unfair practices. The core of the article explained that this firm was about 70% I.T programmers, and about 30% actual traders. They had custom built trading software that would place orders into the interbank market at the speed of nanoseconds so that orders could be placed and withdrawn in order to test the reaction from other institutions automated trading software.

This was called "bullying up the market"... Regulators were questioning whether this had left the realm of trading and was into something else but the investment firms hit back that they were not breaking any rules as such - they were just more sophisticated, and should they really be penalized for that?

At a more macro level the point was that trading is becoming now more of a battle between programmers than a battle between traders. Welcome to the future. The programmer is now more important than the pit trader.

Consider then that most of the indicators you have at your disposal and attempt to apply to this ultra-modern maket were invented in the 80's and 90's when were were all using Sinclair Spectrums and Commodore 64's... And the plethora of new indicators being dreamed up on the forums are usually derivatives of these old indicators or fancy graphical depictions of the same.

To the modern forex trading firm, this stuff is about as relevant as the skills needed to fix the wheels on a horse and cart. The average independant forex trader is fully locked out from certain levels of market sophistication and so trying to use technology (especially old outdated technology) is unlikely to produce results. To quote H.G.Wells, your MACD and RSI are "bows and arrows against the lightening".

However some things still work - bigger fundamental things, classic trading rules that will last for all time. Go back to those and try to fathom their inner meaning.