When Forex traders get together and talk about their favorite trading systems invariably a certain topic will always come up. That topic is the search for the Holy Grail of trading indicators. These traders obsess about finding or developing that one perfect indicator that will assure them of continuous success with trading the Forex markets. This obsession is so great that some commercially available trading packages even come with pre-set indicators that are actually called "Holy Grail" indicators. This of course just adds to the mystique and lore of this form of Holy Grail. Alas, for good or bad the truth is that the search for the Holy Grail for anything is a futile one, and although the legend will not likely go away anytime soon, it cannot be stressed too firmly that there is no actual "Holy Grail" of Forex trading indicators or anything else for that matter. Now that this issue has been settled it's time for us to once again take up the quest for the next best thing because after all, what fun is there in being a trader if there is no quest to embark on?
The Real Holy Grail of Forex Trading Revealed
If perchance you are not already aware, the Forex markets as all markets do cycle between periods of low-volatility ranges and high-volatility ranges. If nothing else, this is one thing that you can truly rely on with respect to the markets, and in fact is part and parcel of a very well-guarded secret among the most heroic of the long-time trading professionals known throughout history. To be precise about it this secret is something that every would-be Forex trader should take careful note of, and goes like this" It is much easier to predict the future direction of market volatility, than it is to predict the future direction of the market itself.
Boiled down to its core philosophy this incredible bit of wisdom teaches us two important things:
1) In the short run market action is simply dictated by random events that are no more easy to make sense of than the next open air breeze that blows by, and at the same time is not worth the effort of trying to predict, and;
2) volatility is something important to pay attention to, and in contrast to short-term market action is not entirely random and is therefore something that can be predicted. The remainder of this article will go on to explain the nature of volatility and the benefits that accrue to those who undertake to study their underlying cycles and trends.
Periods of low volatility in the markets are always followed by periods of high volatility in the markets. Always. It is as certain as the four seasons where spring follows winter. The direction of the markets themselves may be or seem to be impossible to forecast short-term, but the degree of volatility that the markets are experiencing right now is not. Volatility is a condition that like the seasons transitions between different states. Periods of low volatility in the markets will always be followed by periods of high volatility. If the markets are too volatile for you at the present time, all you have to do is sit and wait. When the market is calm and seem to be doing nothing then you should know that this is a state which can only last so long before something happens, and when it does, the magnitude of the event will be commensurate with the amount of quiet time preceding the move. The longer you have to wait for the next big move, the bigger the move will be. You can bet on it. It is as if the market has built into it a coiled spring which winds up and stores energy while time goes by. The more time that goes by the more energy is wound into that spring, so when all that energy is finally released, it becomes unleashed all at once creating a major market move, only you just don't know which direction up or down it will be.
If we know that volatility comes and goes in cycles, and if we know that these cycles are predictable, then maybe there is a way we can profit from this. If you knew that a major market move was imminent, and if you know how to place bets on either side of the market, then you can profit from this. All you need is a way to measure volatility so that you can tell when that cycle is about change, and a way to place bets that would pay off on a big move in the market even if you do not know which way the market is going to break. In Part Two if this article we will endeavor to show you exactly how to do both of these.
|Click Here| to go on to Part Two of: Forex Trading With The Holy Grail Of Indicators
Jeff Webb
forex conqueror
forexnewsmarket
forex_conqueror@twitter
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