“Trading for
a retail trader is the best job in the world, and if you can perform it without
holding a PhD in statistics… how much time you’ve saved!” – Professor
Emilio Tomasini
We’d like to announce a necessary but simple change in our trading
signals approach. With the new approach, a market direction for a relevant
trading instrument would be given, e.g. USDCAD = Sell. Then an interested
person would simply set a stop loss of 100 pips and a take profit of 200 pips
for the trade. The stop loss and take profit can be set before, or immediately
after a trade is opened.
This is necessary because effort has been made to improve the accuracy of
the signals, and therefore, the frequency of the signals will be increased. The
signals generated since September 19, 2014 have been reflecting the effort. We
can now look forward to better trading results on a quarterly basis (with
thousands of pips in some months).
For example, should it be seen that the CHF pairs might become weak,
there would be signals thus:
USDCHF = Buy
EURCHF = Buy
GBPCHF = Buy
AUDCHF = Buy
NZDCHF = Buy
CADCHF = Buy
CHFJPY = Sell
When the USD is very strong, almost every pair that has the USD as the
base currency would rise and any pair that has the USD as the counter currency
would fall. When the USD is very weak, almost every pair that has the USD as
the base currency would fall and any pair that has the USD as the counter
currency would rise.
Someone who predicted that the EUR would be strong around the middle of
September 2014 would have been somewhat correct in spite of the fact that the
EURUSD was weak throughout that month. Why? The EURAUD, the EURZND, and the
EURJPY rallied massively in September 2014 (the EURNZD alone rose by more than
800 pips). Therefore, EURUSD fell only because the USD was stronger than the
EUR.
Successful Forex trading is all about matching weak currencies with
strong currencies, and anyone that can do that effectively will always come out
ahead no matter what, when her/his results are evaluated on
monthly/quarterly/annual basis.
With improved hit rate, one may be tempted to bet big on each trade, but
it’s far better to bet very small. What cause big roll-downs are lot sizes that
are too big for a particular portfolio balance. For each trade, only 0.5%
should be risked. In trading, the less our risk per trade, the more money we
make in the long run. Another benefit is that 0.5% risk per trade isn’t only a
protection to our portfolios; it’s also a protection to our nerves. With this
kind of low risk, we’re naturally indifferent to the outcome of an individual
trade. Yes, we trade with peace of mind.
Since we use an RRR of 1:2, we simply have good chances of moving ahead.
It’s like risking 0.5% to gain 1% - risking $1 to gain $2. With seven trades,
we risk a total of 3.5% to gain a total of 7%. The forecasts come with about
70% potential accuracy, but with only 40% accuracy we’ll be ultimately
triumphant. In another instance, we make nice profits even when we win 9 trades
out of 21. We break even when we win only 7 trades out of 21.
Trade and risk management recommendations would accompany the signals.
The purpose of risk management is to keep our accounts permanently safe no
matter our trading results. Nevertheless, risk management can’t make us money –
only bold predictions will make us money. Bold predictions make our accounts
grow when we’re correct, and risk management keeps our accounts safe when our
predictions are wrong. This is one example of the beauty of trading.
Our breakthrough in the markets
begins in a new direction. Until you become a trader or an investor, you can’t
access the riches the markets offer.
This article is ended by the quote
below:
“Professional traders have a rare talent, and feel
fulfilled because they express their talent by trading profitably.” – Joe Ross
Source: www.tallinex.com
Learn from the Generals of the Markets: Market Generals
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