The Myth of Random
Market
Initially, I believed that the market has its own mind. Billions of transactions across the world, by millions of different people for thousands of different reasons cannot be a possible environment for a predictable market. Demand and supply could be so unpredictable and volatile that it would be impossible to predict the price movement.
Very true, until I realized that the billions of transactions do not create the fluctuations in the market, for they simply follow a fixed rate of exchange in their transactions. But it is the deliberate movement of exchange rates by a handful of market makers which create the demand and supply, for others to follow. These demand and supply variations are used for manipulating various other factors which are out of the scope of this article. Only so much, that news, in every form, is used to promote or suppress, demand or supply, at will.
This deliberate movement of exchange rates are so precise that it can be measured with Fibonacci retracements scale to the accuracy of the decimals. Obviously the standard Fibonacci scales provided in the terminals are not complete and there are many modifications to be done in its use. For example, if the high and low of the Fibonacci scale is wrong, then all the other corresponding levels would be wrong. In many instances, even the standard Fibonacci scale would be accurate if the high and low are correctly interpreted.
It is in search of this potential high and low that I started testing many different Zigzag settings. With a combination of Zigzag indicators, moving averages and modified Fibonacci scale, it became easier to follow the price movements. While it is easier to analyse the price movement and price levels in hind sight, the probability of success, in predicting the price movements in advance, is progressively better with practise.
Being an outsider, surely, it is impossible to predict every price movement, but when I appreciated the accuracy in the movement of prices, it is hugely helpful in predicting at least a few of them, correctly. There are a few potential moving averages, fibo and zigzag that the price levels keep touching in the course of a trend and retracement. Of course, the effectiveness of any price prediction is a huge function of the psychological skill set of trading.
While, the premise of a perfect market, helped me improvise the Zigzag, moving averages and Fibonacci scale, hopefully, it helps you develop an alternate perspective and tool modifications, for the market. Where I seem to have missed out on this realisation in the earlier stages, was probably because of the focus on trading plan in the scale of minutes and hours. On the other hand, the trading plan of the market makers seem to be in the scale of decades and centuries. It is much beyond the capabilities of our short term memories and long term perseverance.
