Chapter 7
Moving Averages
An object continues in a state of rest, or in a state of motion at a constant speed along a straight line, unless compelled to change that state by a net force.
—Sir Isaac Newton
Newton's law of inertia is something that most people should know. I absolutely was not a science guy in high school or college (I was more of a jock), but Newton's First Law was something that stuck with me. The law made sense to me. It could be demonstrated. A ball on a table was not going to move unless I pushed it, blew on it, swatted at it—did something to it. You exert a force on it, and it moves. The “state of motion” part was a bit more difficult to get my arms around. After all, if I put a ball in motion, it would eventually stop rolling. Of course, the stopping was because of friction. However, since I could not see friction, I had a more difficult time comprehending what that meant. I learned that just because you do not see something does not mean you cannot imagine what it should do. When I think of the movement—or lack of movement—of the currency market, I think of Newton's law. Maybe Physics class in high school had some relevance in my life after all.
I have a trading law, which is my cornerstone for anticipating a currency trend. That law states: “There are two types of markets: trending and nontrending. A nontrending market transitions into trending market. A trending market transitions into nontrending market.”
That sounds a little like Newton's First Law. ...
