I’d like to document an experiment I’ve started
But first, some background - I’ve been involved in Forex for about a year and a half on and off. With various minimal successes trying system after system after system (and so on).
I am not entirely convinced there is an “edge” in technical analysis. I’ve been “Fooled by randomness” perhaps, as the title of Taleb’s book goes.
I’ve tried to find edges on various timeframes, using candles and patterns - realistically, none worked for me. Indicators? Nope - didn’t have much joy with those either.
I was out of FX for some months, and started reading about fundamentals and how they move the markets. How hints of direction of each countries currencies can move with statements and policies of each respective central bank. Perhaps following the direction of “money” moved by fundamentals can tame this beast?
I could go on, but here are the simple rules of my system:
-
Minimal technical analysis. I am aware of the prices on charts, and how they “move” - but really I’m just using the chart as a guide to whether we’re up or down.
-
Fundamentals. I’ll pay heed to the underlying fundamental currents moving the market.
-
I’m betting against retail. I’ve noted that when currencies are rising - retail are short and vice versa. Ill be on the other side of retail.
-
Position trading. I don’t trust my entries enough to be able to enter with pinpoint accuracy. So, when the conditions are right I’ll enter and with a wide SL allow the market to sort out my entry.
>>
With that in mind, lets do some trading.
Trade 1 - Short EURUSD
Fundamentally, it looks like (or so I’ve read) that the fed are looking to raise rates in the US next year. With that in mind - we’ll continue to see a flow out of Europe’s moribund economy into the US.
Technically - the chart is down (ie. price action is occurring in the bottom right hand side of my chart)
Retail - retail are net long.
Entry rules:
Price has approached or is breaking a decent level (we’ve just broken through 1.2271)
Stop Loss
Position trading - so 5 times the 20 day ATR
So - I’m in - Short EURUSD @ 1.2227 - SL @ 1.2702