If you are reading about Forex trading online, you will read many people writing about technical analysis who claim that it can predict the future with scientific accuracy but this is one of the biggest scams which you will see in Forex trading and here we will look at three so called scientific theories and why there scams.
There are many people who are intelligent and sensible in there everyday work life, who when they look at how to trade Forex suddenly, believe something which is obviously not true which is - currencies move to some scientific order.
Emotional Beings and Scientific Order
The idea is obviously not true and this is because it's a human market which means that if humans are involved, prices will never move to science. Humans are emotional beings and are never predictable and if you think about it, this fact is obviously not true but a huge number of traders believe in this myth.
Here I am going to look at the three most popular theories which use the science myth, to sell systems and courses to naïve traders. These traders are simply are not using common sense, when they consider using these strategies and let's start with the most popular of these theories – Fibonacci Forex trading strategies.
The Fibonacci Trading System Scam
Leonardo Fibonacci lived in 13th century Italy and simply worked out a theory which was to do with exponential growth and he did it by developing a theory which is based on rabbit reproduction. If a pair of rabbits, produces another pair of rabbits and after another month, the new pair of rabbits produces another pair of rabbits – you get the picture! You get an ever increasing number of rabbits – so what has this got to do with currency trading?
Well I have no idea and I am sure Leonardo Fibonacci, would be as bemused as me to why his number sequence is so popular in Forex trading. It's got absolutely nothing - to do with trading currencies! To my surprise, I have seen a huge number of traders, who believe that the sequence can make them money. The logic is you key off the retracement numbers and these are supposed to define support and resistance? Why laughably because there found through out the natural world – what's that got to do with Forex trading? Nothing at all.
You can run tests on Fibonacci retracements and sometimes they hold and sometimes they don't so if it's a natural law ( as Forex traders claim) they should be VALID all of the time and there not. I actually saw someone selling a software package on Fibonacci secrets for over $3,000 dollars and just goes to prove my view that – when people start to trade Forex, they suddenly lose common sense.
W D Gann Trading System Scams
WD Gann is dead but there are a huge number of vendors selling his secrets and they talk constantly about how Gann made hundred of millions of dollars with them but he didn't. His son confirmed this in an interview and also said his father had to sell courses, to make a living and support his family. If you look at his strategy, you will understand why.
At the heart of the strategy is the idea of course that Gann had found the law of investment and could predict the future with it and the strategy even contains some astrological inputs, as well as a huge number of subjective lines, the Fibonacci number sequence and the ridiculous concept, that the price of a financial instrument is measured in time. Not dollars or Pounds but time. Gann has a huge number of devotees but they never stop to think that, if Gann had discovered the universal law of trading why did he not win every trade and why are they not winning every trade as well? Would seem like a fair enough question to me.
Elliot Wave Scam
Nelson Elliot is dead just like Gann and Fibonacci but yet again is another hero to the wacky investment community. Elliot postulated that all financial markets are cyclical (We know that already but we need to time them) and there is a natural law, to predict the price movement of any currency or financial instrument – so do we get a scientific equation that does this?
No we get the Wave theory which are totally subjective peaks or troughs anyone using this theory has to work out for themselves which doesn't sound very scientific to me.
Reality V Fantasy
The idea that there is natural or scientific order to Forex prices is just off the wall and its OBVIOUS its not true - because humans, are free thinking emotional beings and cannot be predicted. If you think about it, if they could be predicted, there would be no volatility in currency pairs or any other financial instrument – why?
Because if we all knew what the price of a currency would be tomorrow – how would it move? It Wouldn't move
It should be pretty obvious to anyone, that a price of a currency moves up and down because - no one knows what will happen next not because we know what will happen next. Surely this is basic common sense? It's not like its an opinion its a FACT.
Fibonacci never claimed this theory was to do with Forex – it was devised back in the 13th century but its now been hugely popular as a theory of investment.
Gann and Elliot, both took the theory and put it in theirs and said they had found the universal law of market movement, as we have seen they didn't and neither made much money trading.
Today the gurus above are dead but their legacy lives on, as the disciplines continue to spread the word to Forex traders and the one think that is surprising is how many traders actually take these trading strategies seriously. Avoid these theories unless, you want to join the majority of losing currency traders.