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Quant analytics: Why doesn’t market data ever become contaminated?

(Last Updated On: March 7, 2012)

Quant analytics: Why doesn’t market data ever become contaminated?

If traders around the world are aware of Fibonacci and Elliott Wave, why doesn’t the data become contaminated? The market continues to produce support & resistance, targets, retracements to the pip? 38.2% of this and 1.618% of that, some people can’t even see it, so why does it work?

Think about the tens of thousands of traders, $4 trl a day, long term, scalpers, random news, the market should trade like a roulette wheel in Vegas, and yet, to the trained eye, there are high probable trade set ups?

Think of a high number of people in a room trying to agree on something, or organise something, it’s a mess 9 times out of 10, and yet, put $4 trl a day into the market, and we see perfect geometric proportions, why is that?

 

Noise != contamination.

With more participation, illiquidity becomes less of a problem, and thus prices don’t run far through technical levels. The broad and deep heterogeneity of FX market participation is the reason price data forms behavioral patterns which are identifiable and to a certain extent tradable. What you describe as a problem is, in fact, the FX market’s greatest virtue.

I cant see where I have described it as a problem, it is a question of why

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Well, just to the extent you were wondering why all this participation doesn’t create problems. I’m trying to point out that the large number of participants is a source of strength. A dearth of participation would create an environment ripe for manipulation or contamination of some sort.

 

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

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