As the prices are formed in the FOREX market

As the prices are formed in the FOREX market

On the short-period scan time (intraday trading) within the same cycle in the process .- pricing in the FOREX market there is a systematic bias. How can it be effectively used in trading - is told in the article.
On the fractality and the efficiency of the market
As is known, the processes of price formation in FOREX can be described using fractal theory of the market, which was the logical extension of understanding of the theory of efficient market [1-4]. Let me remind you that in this theory is compared (estimated) price of the asset to its market price. The problem is how much and how often the market may underestimate or overestimate a particular asset. Trader, who discovered the undervaluation or re-market the asset would risk the possibility of making a profit. Efficient markets hypothesis tells us that this is impossible. In fact, aware of the investigated asset provided virtually all the market participants to access information. Hence, the observed exchange rate fluctuations should occur randomly, and no one can predict the market prices. The existence of the market as a stable system with the liquid assets necessary to carry out its bidding. Foreign Exchange Market, with its fractal structure of the normal probability distribution of price changes on the selected intervalevremeni depending on market volatility, and regardless of the depth of the investment horizon - is a stable, self-regulated system.

As the market involving a lot of investors with different investment horizons, the collapse or panic in one investment horizon will be absorbed by and smoothed at the expense of other horizons. Each market participant has an investment horizon and makes decisions according to its duration and the expected behavior of the market at this time interval.

However, if the market had the same investment horizon, it would become unstable and illiquid. Lack of liquidity in the market leads to panic. Thus, the source of the liquidity of the market - investors with different investment horizons, different conclusions on technical analysis (or poraznomu interpret basic information) and, therefore, have a different understanding of the investigated asset prices.

Since market prices are constantly experiencing fluctuations, the Soros, market equilibrium in life there is very rarely [5]. The curves of supply and demand are correlated not only among themselves but also with the mindset of market participants, which may, in turn, significantly affect these same curves.

Decisions on purchases or sales made on the basis of forecasts of future prices, which, strangely enough, is largely determined by these decisions in real time. All this greatly resembles the work of the amplifier with positive feedback. Projections and actions of market participants to "Random> price fluctuations serve as a self-fulfilling prophecy.

Expectations and the amplitude of fluctuations of prices
The role of expectations in recent years has increased, because the traders an opportunity to work with a large bank at the side of many segments of the financial market. The amplitudes of fluctuations of prices have increased due to the possibility of almost instantaneously to attract significant capital markets and manage in intraday trade. In this situation, there is no guarantee that the drivers manage and settle such fluctuational price hikes.

From the physics is known that near the equilibrium of the second law of thermodynamics leads to a gradual attenuation of fluctuations. Equilibrium system is usually described in terms of average values, because the equilibrium is stable on the various fluctuations and noise, which are constantly outraged these averages.

And what happens to the fluctuations in a strongly nonequilibrium system? In such a system, the fluctuations may not be just noise and can be a factor in guiding the global evolution of the system. Close to equilibrium, as a rule, the cause-effect relationships are more or less regularly. But the system is considerably deviate from the equilibrium position, as the very reason for the evolution of becoming a victim of circumstances. In this sluchae we can deal only with probabilities, with no increase in knowledge will not allow to restore the breach of a causal link and to predict what the total will come this system.

On the other hand, the fluctuations of prices at some specific time interval may be the emergence of the trend in the other, much smaller time scales. Such re-народившемуся trend primknet mass of speculators, to open a position on this trend and thus modifying the conditions of supply and demand, which until then had relied on the fundamental laws. As a result, the market may become highly nonequilibrium with deviation from the average price of four or more sigma (the standard deviation prices researched currency). In this case, understanding the dynamics of a course of motion the asset is possible only from the standpoint of application of fractal geometry to analyze the market.

A "long-memory market
The hypothesis of fractal financial market explains the existence in the financial market, the non-linear stochastic process. This process, in turn, generate long-range effects - effects Market (longmemory process). Its essence is that when prices are random walk, it is nevertheless quite a long time (substantially more than the theoretically estimated time horizon the market) keeps in memory of its past values and the process evolution does is focused on them .

Indeed, the market is constantly occur in various combinations, proportions and combinations that allow fairly successfully predict the subsequent development of the market, despite the chaotic process of pricing in the shallow horizons of investment. I have no time to not only demonstrate the existence of long-range effects, but also shows the possibility of measuring its length (including bars). And this - a direct way to test your technical indicators to the true and false signals [1, 4].

The key issue of pricing in the market of FOREX - whether accidental prices of basic, highly liquid financial instruments? Trader- often explores the historical behavior of selected asset to verify a technical indicator, for example, MACD, which he uses in the real auction. In this case, it must be sure that the correct prediction made using the MACD, not random, but based on the ability of an indicator to predict emerging Facing or correction of the market.

How in practice to distinguish between random walk prices of non-random? At first glance, one can conclude that if the market there is a pronounced trend, this is a sign of non-random price movements. Or, in other words, the long curves of moving averages with random walk rate asset must be horizontal, since averaging over a large ensemble of random variables, as a rule, gives zero. But if this is the case in reality? More precisely one can say that the dynamics of the foreign exchange market from a position of trading can be quite random, if the historical share price is close to the trajectory of the sequence of numbers issued by the generator of random numbers at regular intervals.