EURUSD Technical Analysis Views and Trading Paradigms
Updated
Let's take some notes on my experiments with my trading platform and my real account sessions, and post some meditations on that website, with the only hope and good intent to help others who really try hard to learn something precious about the relativity of the fx market.
What if we try to solve the following question:
Let's abstract ourselves from our successful trades, when we have hit the jackpot, and when we see our equity grow, when we may set some minimum requirement for tp, and just enjoy our day watching the fx rate. The problem comes, however, when we are on the other side. We've made a trade, but we see that the fx rate goes gradually into the opposite direction. How long should we wait in that uneasy situation, should we hurry to sl, or we should think of something more flexible, we should keep that position, no matter that its negative, and open another one, an opposite one, that will compensate the momentary fluctuations we experience...
[Continued...]
What if we try to solve the following question:
Let's abstract ourselves from our successful trades, when we have hit the jackpot, and when we see our equity grow, when we may set some minimum requirement for tp, and just enjoy our day watching the fx rate. The problem comes, however, when we are on the other side. We've made a trade, but we see that the fx rate goes gradually into the opposite direction. How long should we wait in that uneasy situation, should we hurry to sl, or we should think of something more flexible, we should keep that position, no matter that its negative, and open another one, an opposite one, that will compensate the momentary fluctuations we experience...
[Continued...]
Trade active
... If we manage to hit the right proportion between the sizes of the "mistaken trade" and the "opposite trade", we may not only manage to escape from unpleasant losses due to the tricky and frivolous behaviour of the financial market, we may also not only manage to compensate to a great extent the negative result that tortures our "mistaken trade", but we may successfully wait safe and sound until the reverse movement comes on stage, and then finish with our "mistaken trade" on the right side, and benefit from our adventure very pleasantly. Actually, I have the feeling that many people think that technical analysis makes their profits. The fact is that technical analysis is just analysis, it is not the real trade.
Technical analysis and all the other market analyses used for trading should give to us just general perceptions about directions, meaning general ideas about possible trends; and general ideas about possibility and relativity.
After we've considered the analyses and have come to our private perception about the most likely scenario for the future market development, however, it's time for the real trade, where ideas may bring or may lose money.
[Continued...]
Trade active
... The important thing then is that we enter as carefully our trading sessions in technical and mathematical terms, as we try to develop our technical analyses and our ideas about the market development perspectives. Actually, analyses are built on hypotheses, assumptions and logical conclusions. On the other hand, our trading is based on real actions - buy and sell.
Normally, and honestly speaking, we cannot really say we can be 100% correct when we draw logical conclusions that are based on theoretical hypotheses and scientific assumptions, and this is the reason why we always prefer to speak in broader terms, which are also quite vague and obscure in most times. We are spending hours in drawing some channels, we are looking for market development patterns with some geometrical form, we also use different subjective (private) interpretations about history-based statistical indicators, and we also rely on relatively remote virtual support and resistance lines that refer to common sense heuristics perceived in the behaviour of the fx rate we're following, and etc.
On the other hand, we must admit the fact that our trading session is precisely conditioned in accordance to very strict trading rules that work with very clearly defined mathematical equations... We may of course apply our logical conclusions and try to build up our trading strategy on theoretical hypothesis and assumptions that are based on scientific research and practical experience, but we can never beat the mathematical equations that stay behind our trading algorithms. Because our trading is actually an implied exogenous mathematical algorithm which is ruled by fixed equations, which may keep us alive and may help us survive.
But if we fall short from aligning our trading strategy with these exogenously implied trading equations, the system will momentarily simply kill our trading session, and leave our balance sheet exactly at the axis of equation.
We don't sell and buy our technical analysis. We only may use technical and the other types of market development analysis and research to improve our trading session in the continuity of time, as it may give us ideas of the bigger picture, or the so called consecutive waves in the progress of the market sentiments, as described by Elliot.
Nevertheless, most of us trade on an intraday basis, with very short-term trading horizon, because we usually don't have the time and also we don't have the financial resources to wait until our expectations for the bigger picture get true. Sometimes this may happen in 1 month, but even in 1-2 years, and only after significant and diverse market fluctuations.
And even if we can wait until then, a momentary and very volatile caprice of the market fx rate, due to some market shock, or due to the unexpected inception of a longer-term financial or economic crisis with local macroeconomic implications (for the currency pair) or with global dimensions, may kill our trading session just a moment before we reach our final destination.
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