Ask any quant on Wall Street (the extremely geeky math and physics PhDs who develop complicated algorithmic trading techniques) why there is no “holy grail” indicator, approach, or system that consistently generates profits.
You will probably be given two reasons:
1. You can’t predict the future.
Is it possible to predict what a central banker would say during a speech?
Or what a well-known investor or hedge fund manager says in a random TV interview?
Do you know when the next terrorist strike will occur, causing fear of the unknown?
What about a natural calamity such as an earthquake or tsunami?
The list of unanticipated market-moving catalysts is endless, and when they occur, they can shake the markets as well as your forex trading strategy.
Understand that this is a normal element of trading, and the best you can do is plan to minimise your losses if they occur.
Prepare to have your world turned upside down. And we don’t mean it in the way you might assume.
2. Data doesn’t move the market. Humans do.
There will be occasions when data or market trends do not coincide with price behavior.
Why is this the case?
Maybe the outcome was already priced in? Perhaps forex traders were not paying attention to the data that was released?
Perhaps there was a large institution covering a large position on the wrong side of the market?
Would every market participant react the same way to an unexpected catalyst?
Whatever the price behavior, the decisions that cause a trader to act aren’t always reasonable or consistent with the information available.
When you increase this by the millions of individuals, each with their own goals/strategies and trading accounts of varying sizes, it becomes impossible to predict where the overall market will move every single time.
To entirely eliminate risk, you cannot define or calculate human behavior and uncertain future occurrences into an elegant mathematical equation.
There will always be some degree of uncertainty, and you will occasionally be on the wrong side of a currency market move.
Actually, you will be on the wrong side of a currency market move many times.
Perfectionists should probably avoid it.
We must warn those of you who are constantly concerned with being correct.
Nobody can perfectly predict the market every single time.
All hope is not lost though if you decide to stubbornly not listen and continue your search for the Holy Grail.
Rumor has it that if you can find a pink unicorn standing under a rainbow, you will come across an invisible leprechaun who will give you the Holy Grail. Good luck.