The chapter’s abstract: a trader attains much greater success at FOREX unless he is reading analytics by non-trading economists. Here’s some information for meditation below:
What useful can one be taught by FOREX reviews, cooked up by analytical economists, who are incapable of teaching themselves to be FOREX successful?
FOREX economic indicators (released news statistics) are compiled the way required to be interpreted by analysts, who, by the end of the day, may explain any rates travel as the only naturally determined one.
Important objective economic indicators (GDP, Balance of payments, etc.) are leveled up with the subjective ones (University of Michigan, Chicago sentiment, etc.) which in no way may be checked up.
Economic statistics is frequently forged even at the supreme level.
Here is my attitude as a trader towards FOREX fundamental analysis and to its impact upon exchange rates dynamics.
At the outset, we’ll get to scrutinize the gambling done by FOREX analytical economists, who are striving to convince traders in exchange rates being tied up to some ersatz fundamental analysis data, viz. to economic indicators being released under daily streaming news.
We will also present technique background used by the banks’ Consortium to manipulate news and forecasts the way to vector the rates as any certain day requisite.
The earlier example dated April, 01, 2005 (when the trend has reversed against the logics of all the news released that day). The situation is an absolutely typical occurrence at FOREX, where in 50% cases rates are going DOWN the news vector while in 50% cases – AGAINST the news released. Any analysts’ venture to far-fetch the fundamental analysis to FOREX rate quotes has long caused me nothing but smile.
The FOREX analysts’ logics is as follows: as soon as the rates reverse against the news, next day they have the explanation that nothing unexpected has occurred with the market having already been anticipating the news, and these news have already been accounted for by traders in current quotes.
Or, else, the market (or traders or other) spotted in the news release not at all what it has read earlier in the streaming news. As a result, the rates by, normal logics, staged a sharp swivel to move in sort of a wrong direction.
But, my God, are traders really in need of the above analysts’ para-economic freaks on fundamental or other analysis, once THE RATES HAVE ALREADY MADE THEIR WAY in the said wrong direction?
And why, during uptrend, no analyst has recommended going short on a currency instead of going long in case actual news is superior to the estimate? I have never come across the case.
Analysts should have better derived a simple mathematical formula (hopefully they did have studied at universities) as to a FOREX pair average points travel prior and post critical news (National Bank percent rate hike, Balance of payments, etc.).
By virtue of this formula we, traders, could do some calculations to estimate whether either everything is already accounted for in the current rates or further 100-200 pts grow/decline is to be expected.
But there’s nothing of the kind!
And now, here’s my standpoint as a FOREX trader on why traders will never end up by being supplied with the above mathematical prognosis formula by analysts. I will also provide backgrounds of when pro-news and counter-news entries should be effected.
Fundamental Analysis CRITERIA BIASED INOBJECTIVE NATURE. Fundamental Analysis BEING ABANDONED IN FAVOR OF DAILY NEWS SUBSTITUTE.
1. All the Fundamental Analysis economic indicators are made a muddle of. See, for instance, 54 US economic indicators, ABC-arranged by analysts instead of being USD importance-rated http://www.forexite.com/forex_for_ beginners/us_economic_indicators.html
2. No difference is made between Fundamental Analysis, the state monetary policy and ersatz fundamental data-related current news (viz.: Chicago business activity index, Michigan University consumer sentiment index, National Managers’ Association business activity index, etc.). But, in what way is the Michigan University consumer sentiment index relevant to the US economy Fundamental Analysis? Is there any other name to be applied to this index besides the name of an ersatz Fundamental Analysis?
3. A portion of economic indicators organic to the above ersatz Fundamental Analysis evoke my personal uncertainty as regards their figures’ objective nature and as regards not being tailored to order of those supplying quotations to the FOREX market.
Let us go attentively once again look into these indices with the view to clarify their manipulation capability with no exposition danger.
- PHILADELPHIA FED INDEX constitutes the polling results of Philadelphia manufacturers as to their sentiment towards the current economic situation:
- Why Philadelphia, not California or Texas.
- May there be any difference in obtained figures depending upon the type of manufacturers being interrogated?
- Is there anyone in position to verify and confirm the above manufacturers’ polling results?
- Consumer price index (CPI), reflects consumer price level per a “basket” of goods and services. But the CPI may be properly built up, if prices differ supermarket to supermarket, from supermarket to conventional shop, from shop in the center and shop in an outskirt, from shop in a capital to shop in a province, from sell off period to new articles presentation period, etc.?
Is it imaginable, how figures can be manipulated in favor of those, requiring them so badly? Or is there anyone to convince me that it’s very hard to change 0.4% into 0.2% or 0.6% depending upon a customer’s demand at any given moment?
- Michigan consumer sentiment index constitutes the results of customers’ polling on current economic situation confidence. No comments, since it looks like interrogating no-one-knows whom on a no-one-knows subject.
- Consumer confidence. A doubtful attempt to measure consumers’ optimism.
-NAPM (National Association of Purchasing Managers) services index is representative of service managers polling results, purported at estimation of in-branch changes taking shape. Very often this index is dictated rather by psychological factors, than by actual state of affairs (???).
- Chicago PMI index. It is closely tracked due to being released shortly prior to NAPM. The index exerts strong authority over the market by prompting a real NAPM value to be released. Please, refer to NAPM above.
- Atlanta Fed index presents polling results of Atlanta industrials on current economic situation (???).
As understandable, the list of these ersatz Fundamental Analysis economic indicators may go on along with buildup of questions and doubts.
4. There’s a so-called factor of anonymous economists’ estimates in relation to economic indicators preceding values.
I wonder WHO are these anonymous economists, each time allegedly interviewed by Dow Jones on their expectations from news to be released the following calendar week? And WHY is THEIR opinion exactly presented to be the whole market’s anticipation of THAT data exactly, but not any other? Below are some sample potential manipulating the world traders’ opinion, frequently encountered by myself:
a frankly superior estimate leading to benign actual data being inferior to the prediction (I repeat, a no-one-knows whose prediction) and resulting in a sharp rates reversal by “disappointed” traders as later on indicated by analysts.
a frankly inferior estimate leading to malignant actual data being superior to the prediction, thus pushing the rates forward with no other market’s objective grounds.
TO SUM IT UP, leveled with objective economic indicators (GP, etc.) are ersatz Fundamental Analysis ones, manipulation by virtue whereof creates simulacrum of the rates being tied up to daily news and the state’s Fundamental Analysis. With prediction manipulation capability added hereto, it turns feasible to faultlessly project traders’ activities throughout the world. But is it accidental or not that worldwide traders’ training programs are as similar as 90-95% losers figures?
FUNDAMENTAL ANALYSIS CLASSICAL MACROECONOMIC INDICATORS
A true Fundamental Analysis, based on leading world economies comparative macroeconomic characteristics as well as on their currencies power/weakness, may be experienced not through indices of universities and various US managers’ associations, BUT through economic indicators, recognized by all the world leading economists. These are:
- GROSS DOMESTIC PRODUCT (GDP), the principle national economy condition reflector. According to economy development Keynesian model, GDP=C+ I + S + E – M, where: C is consumption, I is investments, S is state expenditures, E is exports, M is imports. GDP is expressed on terms of an index in relation to a previous period.
- STATE BUDGET, constituting a correlation between state’s incomes and expenditures.
- BALANCE OF PAYMENTS, correlating the country’s incoming and outgoing payments and falling into three major components: trade balance, balance of services and non-commercial payments (invisible transactions balance) and balance of capitals and creditors flow.
- UNEMPLOYMENT RATE in the country, being a 3D structure of:
frictional unemployment, related to higher remuneration job hunting or expectation after layoff (not a negative factor, since it leads to more rational labor resources allocation);
structural unemployment, emerging from labor demand decline in any industrial branch due, for instance, to technological development or change on consumer demand structure;
cyclic unemployment, arising during overall economic recessions.
- MONEY SUPPLY INDICES (M0, M1, M2, M3). M0 = cash circulation; M1 = M0 + cheque deposits; M2 = M1 + cheque less saving accounts + money market deposit accounts + minor deposits (less than USD100K) + money market mutual funds; M3 = M2 + large deposits (in excess of USD100K). These are practically no market influential.
- NON-FARM PAYROLLS.
- GOLD AND CURRENCY RESERVES, being a state’s gold and currency backup stored in central bank and in financial institutions, as well as state’s gold and currency assets with international creditors.
- NATIONAL DEBT, constituting state liabilities to physical persons, legal entities, foreign countries, international institutions and outstanding international law subjects.
- REFINANCING RATE, being percent rate utilized by the central bank in granting credits to commercial banks on a refinancing basis, etc.
MACROECONOMIC INDICATORS MANIPULATION ATTEMP AT FOREX.
Macroeconomic indicators are of objective nature, thus being “uncorrectable”, the way it may be done to various Chicago, Atlanta and Michigan indices.
That is why at FOREX we often come across surprising interpretations of the above objective indicators, recognized by the world’s leading economists.
1. Macroeconomic indicators are leveled with ersatz Fundamental Analysis ones, viz.: the University of Michigan one, as above indicated.
2. Absolutely in objective criteria are selected to estimate macroeconomic indicators. For instance, weekly number of jobless claims is released instead of its monthly fluctuation dynamics analysis per its three aspects (frictional, cyclic and structural). This data s released on Thursdays, 08:30 EST, New-York with a disclaimer that “the figures are not always reflective of the actual situation”. The data is under frequent perversion due to short-term factors such, as federal or local holidays. The question is WHAT IS IT ALL FOR?
3. The macroeconomic indicators role is being undermined in every manner. See below:
State budget exerts but an insignificant authority over the market (?!). Curious to know WHY? Is it that the UMich index is more important in understanding the US economy prospects and its perspective currency rating?
Balance of payments is of limited influence on the market (??).
4. Totally different indicators are being quoted when analyzing the leading economies’. See:
the USA: M1, M2, M3 money supply, whereas M3 only for Germany with no indicator as such for the UK; the UK: PPI output, PPI input with no indicator as such for other countries.
RELATION BETWEEN Fundamental Analysis MACROECONOMIC INDICATORS AND FX RATES
Certainly, the relation between Fundamental Analysis and current FOREX rates does exist, however it is greater in depth and mediation, than presented to traders by the majority of analysts, starting from dealers’ basic training.
In my opinion, this DIRECT relation between Fundamental Analysis and FOREX trending finds manifestation on W1 and MN charts only.
Those, supplying us with FOREX quotes, may be “playing” and “fooling” traders within H1 and even H4. But changing trend at W1 and MN timeframes in favor of the USD and establishing the EUR price, say, cheaper than that of the USD in 2005 means going AGAINST depth fundamental data. Those will never be off to commit sort of a thing.
A currency price and that level of fundamental data are permanently coincident. This is not at all the ersatz Fundamental Analysis, whereto the Consortium has schooled the majority of traders (not the University of Michigan index, not the Chicago Managers Association index, not the last month Consumer Confidence index (?!), etc.), and by virtue whereof the aforesaid traders majority have got completely confused in a seemingly elementary issue of entry in favor of the news and against the news.
Hence, below is the USA and Europe macroeconomic indicator related PRACTICAL CONCLUSION for traders: data as of early summer, 2005 are definitely indicative of the incapacity of the long-term USD downtrend change for its uptrend (W1 and MN charts) within the year relative to the EUR, the GBP and outstanding “allies” (See chapter on “Which FOREX indicator is the most impartial and accurate. Ally and adversary currencies”).
Thus, following each short- or medium-term EUR’s recess, its new growth will be witnessed with earlier historic peaks potential breakthrough. The contrary option of the EUR being cheaper than the USD is a NO-NO, exactly due to fundamental macroeconomic indicators, where under European economies enjoy faster development than the USA.
RELATION BETWEEN ERSATZ Fundamental Analysis AND FOREX QUOTES.
Any ersatz Fundamental Analysis indicator data release (UMich, Chicago indices, etc.) is but the GROUND to urge currencies up-down reciprocation, as a function of tactical objectives of those supplying FOREX quotes.
A PRACTIAL CONCLUSION for traders: I claim no relation between ersatz Fundamental Analysis and FOREX quotes from the intraday trading standpoint.
Upon the above news the banks Consortium may drive the rates in any direction, whereas FOREX analytical economists will snatch on You proving and explaining that there is no unexpected occurrence and that the market with proper advance account has been long anticipating the news released, etc., etc, see aforesaid.
That’s the reason for no analyst to venture to recommend entry against the news prior to its release. NO ONE knows in advance where the rates will travel under the Consortium’s will after the news.
This is the level of technical analysis, not that of Fundamental Analysis.
Being a trader, I observe 3 rules when jobbing on news:
exit all positions prior to the news release; if not – then place pending orders behind resistance and support levels to be a stop-loss “safety cushion” as per B. Williams.
don’t enter upon the first candle after the news release;
enter immediately after the Consortium has definitely indicated the way it interprets the news released (see “Entry and exit manual” on entries and exits under the news released).
IN CONFIRMATION OF MY CONCLUSION ON POTENTIAL CURRENT NEWS AND OTHER STATISTIC DATA FORGERY, I refer to “Dawn of dollar empire and end of “Pax Americana”” by A.B. Kobyakov and M.L. Khazin, (“Veche” publishing house, 2003, 368 pages), see on http://paxamericana.narod.ru/book/paxamericana.zip.
The authors thereof have arrived at conclusions still more aggravating for traders and quoted facts on STATISTICAL DATA FORGERY AT THE LEVEL OF THE USA STATE STATISTICS, see CHAPTER V. STATISTICS AT CURTESY OF ECONOMICS:
“The earlier published data summary maintained, that during seven years from 1995 to 2001 inclusive, the USA boasted positive balance of payments of USD203.2 BN, while the revised data uncovered negative balance of payments of USD89.8 BN (chart 24) within that period. With the account to Q1 2002 the above deficit amounted to USD100 BN already.
EVERYONE IS FREE TO READ IT IN GREATER DETAIL AND TO DRAW UP ONE’S OWN DEDUCTIONS!
A serious Russian “Novaya Gazeta” newspaper (08.09-11.09.2005, in “Writings on the water”, see p. 15) has reiterated on another stock market vivid instance, where for the sake to meet some national (or, probably, SOMEBODY’S) interest, the US governmental circles and information agencies have set on a worldwide advertising of a “greatest modern discovery of nanotechnology: a single-molecule transistor”.
The newspaper quotes: “Prospects were breath-taking. The “fourth wave” subject attained unusual fashion and attraction for investments. Nanotechnologies fell under the US government strictest attention being the issue of strategic importance. Hardly imaginable was the fact that all the sensation would end up in a classic “panama” or a shady enterprise similar to our default. Scientific companies share prices skyrocketed off-scale, whereas 30-yo Jan Hendrik Shone, the main publications author has been thought to be next year’s Noble Prize nominee. It all would have been sliding on smoothly, unless the results of over 100 Shone’s articles turned out to have not obtained confirmation. Tampering has been proved as regards three key reports on single-molecule transistor.
As a result Shone faced being fired along with sharp decline in scientific companies share rates. The companies have been stung for USD100BN approximately, the amount being suspiciously close to the Iraqi war (started only 3 months later) US government expenditures.
An infinite number of similar sample situations may be drawn, with statistics turning into a falsifier.
Hence, the question is natural: what’s the way of a trader using Fundamental Analysis statistics to build up FOREX strategies, provided that at least part of data is forged to someone’s benefit?
I don’t hold it reasonable to go deeper into the issue. A FOREX trader’s gains may not be facilitated by this issue’s deep study.
To get a comprehension of FOREX currencies logics, the simple knowledge is indispensable of WHO, HOW and BY WHAT REASON supplies FOREX quoted to traders. By far we have but only answered WHO are those Internet users to furnish quotes to traders.
Identically, no use sinking into the “BY WHAT REASON” the quotes are supplied at FOREX. Please, attempt yourself to answer by virtue of a counter-question: if You (not the Consortium) have invented a financial result-oriented game with clients – WHO IS SUPPOSED TO BE THE WINNER (the game organizer or clients)?
Hopefully, I have beaten off some green traders’ lust for instant gains at FOREX. You are facing a professionals market and becoming a profi yourself is the only way to earn money at this market.
The underlying chapters are concentrative of the attempt to elucidate the core question: HOW are the FOREX quotes presented, to enable the extra-exchange FOREX market traders to attain steady gains.
Below I will purportedly and repeatedly resort to examples from books by Viktor Suvorov (“Ice-breaker” et al.). Our target at FOREX is a twin sister of V. Suvorov’s one in history: to use official sources (i.e. absolutely verifiable materials) in legal understanding of what is camouflaged by the world’s richest market half-truth and falsehood in Fundamental Analysis and Technical Analysis methods, in published FOREX literature, in websites analytics and predictions, in actions of dealers making millions USD by means of their client traders’ accounts, etc.
Now, please, find below an intermediate conclusion being the starting point in understanding of currencies quote logics as well as in pinpointing of CORRECT and ERRONEOUS method of operation at FOREX proposed by Bill Williams and other scholars:
A trader is to be aware of one single thing – as different from stock markets, FOREX traders are not opposing each other, but they fight against the almighty FOREX Game Organizer – the world banks Consortium being capable of swiveling any national currency to any direction and at any moment by way of using numerous economic indicators, news releases, whose authenticity is not doomed to ever be verified by anyone.
Thus, how is one to realize, at a trend beginning, but not by its end, WHAT FOR and BY HOW MANY POINTS the Consortium is pushing currency rates?
Bearing the above in mind we will dedicate the following book chapters and the Masterforex-V Academy training to this issue exactly.
If you wish to be trained on Trading System Masterforex-V - one of new and most effective techniques of trade on Forex in the world visit http://www.masterforex-v.su/
Vyacheslav Vasilevich (Masterforex-V)
Professional Trader from 2000 year.
President of Masterforex-V Trading Academy
Author of Books:
1. Trade secrets by a professional trader or what B. Williams, A. Elder and J. Schwager not told about Forex to traders.
2. Technical analyses in Trading System MasterForex-V.
3. Entry and Exit Points at Forex Market