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FX-Strategy

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The Need for a Structured Trading Method
Success in Forex requires a systematic way of making trading decisions. I have traded Forex for 25 years, first as a bank trader, and later as an independent trader with my own trading portfolio. As an independent trader I have had to develop methods to manage my market exposure and control my trading risk without the support of a trading team.

These two challenges led me to Technical Analysis -- the study of the relationship of indicator and/or price patterns and price movement. A basic premise of T.A. is that "history repeats itself".

Most technical analysts look for repetitive price or indicator patterns on currency price charts. Patterns that anticipate price movement. The assumption is that when a recognized, repetitive pattern appears it will likely precede a certain associated price movement, thus giving the trader the information he/she needs to place a successful trade.

With Technical Analysis I began to develop an objective method for getting into and out of currency positions.

To consistently make money in the Forex market you want to have a set of trading rules that you follow. This will separate you from the market gamblers and give you the structure to become a professional trader.

Without a set of trading rules it is difficult to repeat successful trades on a consistent basis. If you can identify market conditions associated with winning trades, find a way to describe them, and quantify and test out your theories then you will have the opportunity to build on your previous success.

The Rorschach Problem
Why do we need Trading Rules? Interpretation of indicators and price patterns should not be left until the trading moment, when emotions can bias perception.

Have you heard of the Rorschach Ink Blot Test? It is a psychological diagnostic test, developed in 1921 by a gentleman named Rorschach.

The test involves showing an image or "ink blot", like the one below.



As you can imagine different people will have different interpretations of this image. Looking at prices and indicators can be quite similar. In fact, the same trader can have different interpretations of the same price pattern, depending on his or her emotional state at the time.

Do your recent trading results ever influence how you interpret the markets?

 

Here is another shape that is open to interpretation. Is it lying down or standing up?
Every trader has winning streaks and losing streaks that can destabilize their trading decisions.

During a losing streak traders can become disheartened and overly cautious, and as a result reject trades that they otherwise would have taken.

During a winning streak traders can become overconfident and rush into trades that they would have otherwise held back from taking.

Strategy traders minimize the impact of negative emotions - the Rorschach problem of interpretation - by creating a set of Trading Rules that they focus on implementing.

 



The Benefits of Trading Systems

A Trading System or Strategy allows you to:

- Backtest your trading idea before putting your money at risk.

Trading Forex is a risky business.
There is no reason to risk money on a trading theory that has not
been tested.

- Know how a Trading System has performed in the past.

You can repeat what has worked and avoid was hasnít.

- Keep your emotion at bay.

Knowing in advance the performance numbers of a system prepares you for the winning and losing streaks that are part of any trading experience.

- Limit Market Exposure.

Basing your position size on historical performance data will enable you to survive expected losing streaks, profit from winning streaks, AND increase your chances of making money over time.

- Turn Trading from a Hobby into a Business.

Gamblers take risk with the hope of return.
Strategy traders take financial risk for the right expected return.

Instinctive "seat of the pants" traders guess where the market is going
Systems traders react to winning patterns they have tested

What is one of the most important benefits of trading with a system?

It keeps you honest.

o A system provides you with rules prior to getting into or out of any trade.
o A checklist to follow before you place a trade.

Believe me if you have not experienced this yet ; In the heat of trading it is a lot easier to refer to a written checklist than to leftover intentions from the last trade.

In my own trading I have come to appreciate these benefits. I know of no better way to improve trading results than to implement trading systems that you understand and which suit your risk/reward objectives. The goal of our training is to help you accomplish this.

Best Regards,

 




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GVI Trading. Potential Price Risk Scale
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Mon 27 May 2019
AAGB/US- Holiday
Tue 28 May 2019
A 14:00 US- Consumer Confidence
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A 12:30 US- Personal Income, Spending, Deflator
AA 14:00 US- Final Univ of Michigan


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Forex trading and analysis including currency trading and foreign exchange trading. Forex forum is our specialty, Forex trading our business. We deal with foreign exchange and currency trading.