Key Insights

Much is made of the astronomically high trading volume in the foreign exchange market. Investors intuitively "know" that wherever the action unfolds at such a high pitch, the market must be efficient - in other words, that market makers, buyers and sellers are acting to create prices that are rational.

At Olsen we have worked for more than 20 years to disprove this truism. Market moves often cannot be explained by common reactions to external information. But neither are these moves completely random.

Along with other analysts and researchers, we have chosen to investigate properties within the market that result in recognizable patterns.

Today it is easiest to make money by following trends - which are certainly obvious but not always easily recognizable patterns. Trends are certain knowledge only after the fact, and they represent only one of a number of forces that reflect traders' expectations and motives and, therefore, drive prices.

An oversimplification: if you deconstruct broad pricing flows (over a day or two months) into tick-by-tick price changes, and then overlay your analysis with a framework of who is trading and when and why, you can isolate critical moments of volatility that give rise to predictable patterns. This is no crystal ball, mind you, but a more scientific approach to explaining observable phenomena that are a direct function of how the market really works.

Read more about the cornerstones of market predictability