A Must Read

Get ahold of the Feb. 2010 “Futures” magazine and read pg. 42, “Failed setups: Inverse predictive power.” Don’t let the title scare you, pg. 42 will demonstrate what trading is all about and it does apply to forex. Concise and well written. You don’t even have to read pg. 43 but I recommend that you do. And no, you can’t borrow my copy!

Failed setups: Inverse predictive power - Financials - Futures Magazine

failures, then failed failures starts to seem too subjective as to what to do. Seems like they are saying you should chase price if it doesn’t go your way to begin with. I did that early on, if it didn’t go my way, I’d try to follow it the other way then it would whip back the original direction. Whipsaws to make yur neck hurt.

I will check it out when I get some time later on this weekend. Looking forward to reading it.

good article thanks

I think pg 42 is a newbie must ie the 1st 2 sentences in para. 3. I see newbies ask questions about this and here it is explained simply. I wish admin would contact “Futures” and seek permission to post pg. 42 as a Sticky. I know this info is available throughout the school but this is concise and well written. They can leave out the strategy part, it is the general information that is important. d.

When your analysis says one thing, and reality says another, reality is right every time. The best traders are able to switch from offense (taking a position) to defense (taking a loss) and back to offense (reversing your original position) without hesitation.

Another tactic is to restrict your trading to specific price setups. Until you see one of your selected setups, stay in cash. This limits your exposure to situations you already have studied and experienced. Trade only on ground of your choosing. Wait for price to trigger one of your setups; enter the market accordingly and take your profit.

When a price setup follows through as expected, flow with the follow through. When a price setup fails, flow with the failure.

Inverse predictive power teaches you to be mentally flexible and to come out on top regardless of how a market moves.

Good traders trust the predictive power of their trading models. They also are disciplined to take losses when those models fail. Instead of simply waiting for your next set up, there may be opportunity in that failure. If a setup fails, trust the inverse predictive power of the failed setup. Many models zero in important pivot areas and that is why they work. Consequently, when they don’t work it often sets up a move in the opposite direction. Combining the predictive power of price setups and the inverse predictive power of failed setups can make you a stronger trader.

My notes from the article.