Читать книгу The Foreign Exchange Matrix - Barbara Rockefeller - Страница 20

Like the addition of hitherto exogenous variables to the basic FX matrix, the spread of technical analysis is relatively new. While technical analysis has been used since right after the dollar was first floated in 1974 – as a remedy to mass confusion over the determinants of FX prices – it was the advent of the personal computer in the 1990s that made it widespread. Technical analysis is more efficient than fundamentals – you use three or four indicators on a single chart against a complicated, interactive matrix of fundamental and institutional factors.

Moreover, technical factors can drive and override fundamentals, at least sometimes, even if in the end the fundamentals always have the last word. Unlike in other securities fields, in FX there is no clear-cut dividing line between the fundamental and the technical. Fundamental and technical effects are as interactive with one another as fundamental and institutional factors. For example, once the euro bottomed in June 2010 and started rising, it had upward momentum and upward-pointing patterns that set a new stage for evaluating the later worsening of sovereign debt and the banking crisis.

This is called Bayesian analysis, wherein what you think you knew is changed by subsequent knowledge. You literally go back and remember your original thinking differently from what it really was at the time. In a nutshell, everything is relative. The first appearance of a crisis is more shocking (and causes a bigger price move) than a later worsening of the same crisis, when the effects of the first shock have worn off and the first shock has become part of the background environment. In the case of the euro, the second shock was buffered significantly by its healthy image, which was both cause and effect of the first rebound.

Pinpointing how multiple factors – fundamental and technical – interact is tricky because in FX there are no absolutes. We might postulate that at the beginning of a price move, fundamentals drive the technicals, but once the fundamental event is known, the technicals can lead. For instance, a key level will be resisted solely because the probability of a negative news release is high, even when traders don’t have anything specific in mind. The trader has an existing position to defend and therefore a bias against reversing from pessimism to optimism – unless and until it becomes profitable to drop the position.

Technical analysis is so important in FX trading that we can say that a FX market event gets some of its importance from what is happening on the chart at the time. Untangling what is technical and what is fundamental in any specific move thus becomes complex. Unlike the situation in equities, where price-earnings ratios are a fixed (if evolving) number, fundamental events do not have a fixed hierarchical ranking in FX but rather gain or lose power over the minds of traders depending on how the chart looks. A bad news release will be dismissed if a currency has just made a decisive upside breakout, but the same news may be fatal to an existing upmove if it comes when the price is already flirting with reversal.

It’s a mistake to dismiss technical analysis as some strange sideline of a minority. Professional traders bet hundreds of billions of dollars per day using technical analysis and they would not do that if technical analysis failed to help achieve profits and avoid losses. Virtually everyone in FX applies some concepts from the technical analysis world, even if they are not self-described techies; a trader who does not subscribe to technical analysis concepts will still be aware that others in the market are using them.

Every once in a while, you may meet a brilliant, intuitive trader who uses no technical indicators at all and yet succeeds in generating winning trades. He is almost certainly using the same ideas as the technical trader, just not measuring and labelling the ideas with the same terms. After all, most of the indicators in technical analysis derive from long-standing trading practices. Ask an intuitive trader why he changes from long to short, and he may say “I couldn’t see any more buyers out there – the bid was gone.” The technical trader will point to three or four indicators and say “It was overbought.” Same thing.