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Thursday, July 21, 2005

The 14 Fallacies

We're often tricked by the news/fundamentals when trading FX. Thus, I have tried to note down the 14 major fallacies that we meet everyday. This is from Jack Schwager's "A Complete Guide to the Futures Markets". 1. Viewing Fundamentals in a Vacuum 2. Viewing Old Information as New 3. One Year Comparisons 4. Using Fundamentals for Timing 5. Lack of Perspective 6. Ignoring Relevant Time Considerations 7. Assuming that Price Cannot Decline Significantly Below the Cost of Production 8. Improper Inferences 9. Comparing Nominal Price Levels 10. Ignoring Expectations 11. Ignoring Seasonal Considerations 12. Expecting Prices to Conform to Target Levels in World Trade Agreements 13. Drawing Conclusions on the Basis of Insufficient Data 14. Confusing the Concepts of Demand & Consumption


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