In this piece we would be looking at how statistics can help a broker make more informed decision. Now, what is statistics? It is the collection, classification, presentation, interpretation and analysis of data. Sounds familiar? The lot who lose their money fail to grasp this simple concept forex trading is statistics not short term but long term. Forex market is overall unpredictable it’s a market of likelihoods and not certainties but nevertheless predictable under certain conditions. What is true for long term picture might not be true for short term and usually this is the way things are. Statistics when used as a tool is meant to give the user an edge when trading forex. This is not a write up about statistics, but an article to show how statistics can influence forex trading principles & decisions.
STATISTICS AS A GUIDE TO MAKING A SALE OR BUYING IN FOREX
1. Overall market movements can’t be predicted but under certain circumstances some movements can’t be predicted, that’s how profits are made you work with what is tangible facts even though sometimes the uncertainties can’t be totally eliminated it should be reduced to a negligible percentage. Of course 95% of traders lose their money but this happens only because they have no clue of what trading really is. Trading is statistics
- “Today EURUSD will go up” – this is a fundamental wrong statement, under any circumstances cause in forex trading there is no certainty.
- “EURUSD is likely to go up today” – this is the right statement. In forex we are not dealing with certitudes, we are only dealing with probabilities.
2. History tends to repeat itself. Studying precedence helps guide a trader and points him in the right direction this is because the most basic rule of technical analysis. In fact, if this hadn’t been true, nobody, and I mean nobody would have made profits from forex market. But fortunately, in trading unlike gambling history tends to repeat itself. The past doesn’t repeat, but some aspects of it repeat over and over again. It’s up to us to spot them.
3. Any system over a long period of time: Even the most stupid system can be very profitable for a day or two but of course it fails miserably over a long period of time. And now is the time for the law or large numbers to be explained. According to its definition Law of large numbers “is a theorem that describes the result of performing the same experiment a large number of times the more the attempts the expected value should be closer, as more trials are performed.”
4. Number of trades mirrors the strength of the framework. Number of trades itself isn't pertinent if taken outside of any relevant connection to the subject at hand. For instance, suppose we have a framework that makes 1,000 trades for each year. Is it a powerful framework? The appropriate response is "we don't have the foggiest idea" regardless of whether the quantity of trades is huge. Why? Since amid one year it didn't go through all market viewpoints.
i. If it makes 13,000 trades amid 13 years and stays gainful by 13 x $X then yes, it's a decent framework.
b. If it makes 13,000 trades amid 13 years without benefits, at that point it's not a decent framework. It survives however its bend fitted for a solitary market angle as it were.
5. If it makes 3,000 trades amid 13 years and stays productive it's as yet a terrible framework. Why? Since in the event that it didn't exchange amid an obscure economic situation, at that point it is bend fitted for a solitary market perspective as it were.
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