September 11

Market Movements: Next Piece in the Forex Trading Puzzle


I learned the secret about market movements on an October afternoon.

I received a call from Roger White the Oil trader from my previous email.

He graciously asked me if I would like to join him and his friend Burton Paige for dinner at Smith & Wollensky.

I quickly accepted as it was another opportunity to extract some trading knowledge on top of getting a fabulous steak and a few pints of my favorite German Hefe Weissbier Franziskaner on tap (for some strange reason I remember that thought quite clearly.)

Here’s one of the things Burton Paige shared with me during that dinner…

“Market Movements assemble themselves into a few conspicuous types of action that have a certain orderliness which may be regarded as of sufficient frequency to be governed by laws.”

Essentially, market movements aren’t mysterious even though they seem so at the time.  They’re predictable if you know where to look!

“So where do these laws originate from?” I asked

He said, “It’s the unchangeable fact that business reflects human nature. Fear, hope, and greed will always be the driving force of market movements Tom…ALWAYS!  It is your job to decipher at what point is a real bull run or bear raid!”

“How can I apply this to day trading systems in your opinion?” I asked.

“One of the best ways to get an idea of market sentiment for the day is to look at the open of the market compared to the previous day. Statistical studies have shown that the open and closing prices are often near one end of the range. Typically, the open will fall near one end of the range and close near the other. That is not to say you buy the open and sell the close of course… YOU MEASURE THE MOVEMENTS TO LOOK FOR EXHAUSTION OF THE BULL OR BEAR RUN.”

“Okay I can kind of understand that concept, it’s like being a contrarian, buying weakness and selling strength at certain levels with an escape point, correct?”

“Yes and No. Always be on the side of the longer-term trend watching for a reversal in trend.”

So I asked Burton to give me an example of this…

He said, “Let’s assume the market is in a bull move regardless of what time frame you are trading, we are talking about the Open, the market could move x points down fooling the naive traders into selling then the market reverses, yet if it goes Y points away that is the direction that it will likely trend for the day, however NOT necessarily right away.  There will be a lot of push and pull as the market hides itself. I have made an incredible number of low-risk trades with this one application of market law.”

This discussion led me to study market movements through percentages on the open.  I soon applied the theory to my trading with great success.

It was just one piece of the overall puzzle though.

If you’d like to discover how all the pieces fit together in my overall system, check out Forex Confidant at the link below…

Forex Confidant


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