Okay, maybe that title sounds a bit harsh. But I wanted to get your attention and make some REALLY simple points here. I'm not going to talk about the mathematics and theorems behind the FX Power Hedge (www.FXPowerHedge.com). I want to talk about some REAL basics that you can combine with the pretty simple method of analysis available through the FX Power Hedge, and how you should really almost have to WORK to screw it up.
So okay, here are some basic rules.
1. Look for the fundamental indicators of a trend as detailed in my system (you get those only when you buy the system -- but it's a lot more easy to spot a trend with my system than through something as complex as technical analysis, plus this is a LOT more accurate since we don't predict the future -- we're looking for statistical probabilities).
2. So, you close one side of the power hedge (the losing side) and you seek to earn profit on the winning side AFTER you identify what you believe is a relatively short term trend (15 minute time chart). Yes, it could be a long term trend, but we want to trade based on information from the 15 minute chart, and then work our trade in the 1 minute or 5 minute charts.
3. What to do if you're wrong. Goodness. Maybe you identified a trend and then it reverses against you IMMEDIATELY after you close the losing side. Well, it happens. The more you work with the two key variables we teach you to track in the FX Power Hedge system, the better you will get at being accurate in identifying real trends -- even short term trends. But, okay, you could get one wrong. What do you do?
EXIT IF YOU LOSE 5 PIPS MAX -- NO QUESTIONS, NO DOUBTS, NO HESITATION. GET OUT IF YOU LOSE 4 - 5 PIPS. IT'S OVER. TAKE THE LOSS. THAT IS A RULE. PERIOD.
4. Next step? You open a NEW power hedge and REMEMBER the information that led you to make the initial move. You "thought" you had identified a trend. So, now that you're working the system and even though the currency went against you, open a NEW power hedge. (Yeah, it's costing you a spread -- but you'll make it up. Trust me.) So you open a new power hedge. I promise you, about 90% of the time, you will find you were actually RIGHT the first time! The trend will soon likely RETURN and you will close out the losing side with MORE confidence, and this is where you can quickly pick up 10, 20, 30 pips. So do NOT worry about losing 5 pips if a currency goes against you at first. Just WATCH THE TWO KEY VARIABLES WE TEACH YOU TO FOLLOW IN ORDER TO IDENTIFY A TREND!!!!
5. What if you're right? Well, you capture a LOT of pips worth of profit. This is not rocket science. Ride the trend. With the FX Power Hedge, you are ALREADY in the move when it happens. Technical traders will just be jumping INTO the move when YOU have already captured the bulk of your profits. THIS is the core advantage of the FX Power Hedge.
6. Don't start thinking like a technical trader. A guy asked me this morning and I get the question routinely, "Why do I need to open a buy and a sell, when I can just watch the two key variables, identify a trend, and then simply open a trade on the winning side." The reason is because you will be LATE getting into the trend. It's that simple. And being LATE means you LOSE PIPS THAT COULD HAVE BEEN PROFITS!!!!
In today's market, everything is happening fast. We're not looking for long term trends in 2010. We're looking for 15 - 60 minute trends. That's it. I'm happy to win 20 pips over a period of 10 minutes. That's the perfect and most routine scenario for me. I don't play long. I don't stay exposed more than minutes with one half of a power hedge still live after closing a losing side. Things change too fast in today's market.
So if you're not capturing profits, get out.
7. What if the currency goes sideways? I'm not losing pips but I'm not winning pips. CLOSE THE TRADE AT BREAK EVEN OR A SMALL LOSS. If the currency goes sideways for more than one minute -- SIXTY SECONDS -- get out. But THEN, open a NEW power hedge. Accept the loss of the spread. Too many people whine to me, "But I'll lose the spread." Okay. Small price to win MORE MORE MORE pips. If you spend your trading life worried about the spread, you will get nowhere. This is about winning pips in batches -- good size wins of 10+ pips per trade. You must NOT worry about the spread. Make your broker happy. It's a win win. But NEVER stay in a trade hoping and praying it will turn around or stop going sideways and move in your favor. Do not trust what can happen in the next few seconds. A 5 pip loss can almost instantly turn into a 20 pip loss -- in literally SECONDS! A sideways condition that extends for 60 seconds or more is TELLING YOU there is uncertainty in the market. And that means there's NOT a lot of forex trader confidence that the direction you "thought" the price was moving will continue. It means you "could" see a real quick reverse and it could happen to the tune of 20 pips all in seconds.
When in doubt or when losing small, get out. Otherwise, you risk losing big.
THE ULTIMATE BIG RULE THAT ALLOWS EVERYONE TO MAKE MONEY IN FOREX: Never lose big.
It doesn't get any simpler than this one. Don't lose big. Period. That's it. Follow this rule, and you'll only keep exposing yourself to opportunities where you can WIN big, and you NEVER lose big.
You can't possibly be wrong about trends ALL the time. So if you ONLY lose small, and you have a reasonable percentage of wise decisions where you win big -- then you will end up profitable.
That's why technical traders lose 60% of their trades (a common fact pretty widely known), but thanks to smart money management ("never losing big"), they still end up with net profits.
This is simple stuff, guys. And the BIG point here is that you've got a BETTER methodology to more consistently and more accurately identify winning trends thanks to the FX Power Hedge. We're using REAL TIME variables. We're NOT using the voodoo of chart patterns and misleading historical data. We're working in real time, right now, what's happening NOW.
You "should" be picking more winning trends than losers. So even if you hit 50% winning choices, and you keep your LOSSES SMALL and work to make your WINS BIG -- you will profit.
I'm not lecturing slow learners. I'm not trying to be condescending or offend anyone. I just want to share with people who have gotten into the FX Power Hedge that this is stuff you can make TOO complicated. I think part of my job as a teacher is to make sure people don't confuse themselves by thinking there is more to this than it is.
This is NOT rocket science. This is NOT beyond you in terms of intelligence. This is NOT something you need to offer me money to do for you (I don't trade other people's money regardless). YOU CAN DO IT! So relax. Just accept the stuff I tell you when we're exchanging e-mails, and do it. Practice and then trade with cash. And follow the simple rules of NEVER losing big and ALWAYS looking for trends ONLY with the two variables we teach as the cornerstones of the mathematics based FX Power Hedge.
If I can train a monkey to do this, I promise you I'll put that on You Tube. :-)
Thursday, March 18, 2010
Monday, March 8, 2010
Forex Advanced: No Stop No Limit And Bayes' Theorem
A lot of my FX Power Hedge traders (www.FXPowerHedge.com) have been learning a second methodology for implementation of the system we teach. I call it the "No Stop No Limit" method, and it's the best way to earn profits in today's highly consolidated market. There's simply so much global uncertainty due to worldwide economic instability, you don't see as many trends today as you did in months and years past.
So, what we did with the FX Power Hedge is modify execution of the trading system so that you can profit even in sideways conditions.
This involves using the power hedge more as an analytical tool versus a pure profit trading device. The information you gain by observing the two key variables in our system allows you to make decisions that consistently produce profits. This is a function of what's called Bayes' Theorem. (More on that one later.)
As I've told people many times, but will repeat here again, the FX Power Hedge is NOT an EA. It's not automated. It's always been and (unless we have a breakthrough)...likely always will be a manually traded system. That said, use of auto calculators has been a great way to earn profits since 2006. You get the calculators free when you buy the system, and it's cool to use them today. I am just trying to get people to trade the no stop no limit methodology more today because it captures profits even in the frequent sideways price movements we see.
What we're doing today is advancing a step beyond the fixed stop/limit methodology and getting into a way to trading with the power hedge that works in any of the three directions a currency's price can move: up, down or sideways.
Until now, the FX Power Hedge made profits with 97% statistical probability of success if a currency moved up or down. This was the original fixed stop/limit system, and it is still a viable way to trade. But it often takes more time than most people want to wait in order to earn profits on each trade.
It started testing my patience as well in 2009, and that's why I evolved the No Stop No Limit methodology.
There aren't as many absolutes in terms of fixed rules in this mode of trading the FX Power Hedge, but it is based on valid mathematical principles (Bayes' Theorum being the foundational concept).
In the most simple of terms (so I can avoid confusing everyone), no stop no limit trading involves watching for more pips worth of movement in shorter time periods.
I know this is somewhat non-specific, but I'm also not handing out every piece of information on the FX Power Hedge in this blog. I just want to help my existing traders and offer thinking to others getting into forex. Suffice to say, especially for those of you who have already purchased the system, you need to get into the prior couple hours of price movement and also look at other time frames required for each different price movement within the prior 24 hours.
It's in this way, given some consideration for the prior several days and even weeks of movement, you can make a determination on price movement direction in real time and it will have a high statistical probability of continuation until some other causal effect comes into play. This allows you to get into one minute time frames and make some money.
This is where no stop no limit trading really gets into Bayes' Theorem, which deals with interpretations of probability, conditional probabilities and probability density relative to the relationship between two variables...and we happen to have exactly two true variables at play in forex (price and time). So it's a perfect fit for our purposes. Again and not surprisingly, mathematics has the answer to all things in the universe including forex.
Now, instead of trying to fully explain Bayes' Theorem here, I will suggest that (if you wish) you should just Google "Bayes' Theorem" and read about it on the web. It's fascinating stuff and exceptionally relevant to the time/price movement pair of variables. It will help you appreciate that there's serious mathematical foundation for everything we're doing with this system, even as we evolve to next levels in order to continue earning profits in today's highly consolidated, sideways market conditions. At the least, this should enhance your confidence and hopefully drive you to spend a little more time getting into no stop no limit trading versus just being limited to the original fixed stop/limit methodology. I really want the family of FX Power Hedge traders to take this seriously. You NEED to learn no stop no limit trading! It is NOT guesswork. It is NOT predictive. It is a purely mathematical way to identify what is happening in the forex market in REAL TIME and determine statistical probabilities for movement in the subsequent minutes -- which allows you to capture profits.
More importantly, every power hedge trade you close out with a profit SHOULD lead you to yet another profitable power hedge, because this method of trading is cumulative. The knowledge you use in one trade should lead you to an even higher statistical probability of success on each subsequent trade in what should become a series of increasingly higher and higher profit/higher confidence power hedge trades.
This is another reason I so strongly urge that you should today trade just ONE currency pair. Learn that pair, and study its behavior in terms of price movement and time variables. (No technical analysis please...ONLY time and price movement.)
Since price movement AND the amount of time required for X price movement are the ONLY two absolute true things we ever know about forex, this is really worth learning.
Bottom line, the relationship between price movement and time required for X pips of price movement is a HUGE indicator as to what is happening in the market AS YOU ARE WATCHING IT MOVE!!!! This is NOT predictive like Technical Analysis. Once and for all, I beg everyone who seeks to master the FX Power Hedge to FORGET THE ALCHEMY OF TECHNICAL ANALYSIS!!!! This is the BS system brokers teach people and it's the reason no less than 80% of all new traders lose ALL THEIR MONEY! So don't get caught in the technical analysis hole -- it is a pit of financial loss from which few escape. Yet, because people can win about 40% of their trades, a lot of people get addicted. There's also the magic and wonder of spinning tops, channels, and all the other seemingly magical indicators. They're interesting to discuss, but none are definitive nor consistently accurate. Again, you cannot predict the future! Ask anyone. Honest. If we could predict the future, we'd all just go win a lottery and call it a day. So accept that absolute. Technical analysis must be erased from your mind.
Once you practice trading via the FX Power Hedge and you get into the routine of watching for price movement AND time as your two and ONLY two key variables, you won't need to know the mathematical reasons WHY you're winning trades...you'll just start winning. And yes, after purchasing my system, I'll work with you to learn no stop no limit without driving you crazy with mathematical principles related to statistical probabilities.
But you have to understand that statistical probabilities are all we have in forex. No one has a crystal ball. No one knows the future. Not even the biggest banks in the world nor the most veteran analysts can tell you what is definitely going to happen five minutes from now.
All anyone can do is make their best "guess" based on chart patterns (as technical traders do), or in the case of FX Power Hedge traders, you make you best "calculation" of statistical probability based on TRUE indicators (price and time).
THAT is the difference between this method of trading and every other means of forex analysis available to you. We're not predicting anything with the power hedge. What we're doing is calculating statistical probabilities with the ONLY two absolutely true variables in forex: price and time.
The better you get in seeing the relationship between total pip price movement and time (the two key variables clearly described in Bayes' Theorem), and once you understand how one interacts with the other almost to the point of inevitable revelation of truth, then the more successful you'll be in comprehending exactly what's happening at any given moment with the price movement of a currency pair and thus able to capture profits.
Where this no stop no limit methodology shines is in sideways conditions, which are so common today. It's our ability to identify prolonged periods of sideways price movement that allows us to see opportunities to win profits on BOTH sides of the power hedge. THAT is what I encourage FX Power Hedge traders to practice and perfect more than any focus on identifying up or down moving trends.
You can still use BOTH methodologies built into the FX Power Hedge System. You can set fixed stops and limits utilizing the calculators you get when you purchase the system (www.FXPowerHedge.com), and if the currency goes sideways (which happens a lot today) then you can STILL earn profits every 24 hours because you will be able to identify the sideways trend and capitalize on it in real time via the no stop no limit technology.
Long term, you will find the need to set fixed stops/limits unnecessary, because you'll be able to see upward and downward trends happening just as easily - more easily frankly - and that leads to consistent profitability.
I hope I have not confused anyone with this post. I just wanted to get into Bayes' Theorem, and hopefully encourage more of you to read about this mathematical principle. It deals with the relationship between two variables, and we just happen to have two and ONLY two absolutely true real time variables in forex: price and time.
So Bayes' Theorem is kind of a must read for FX Power Hedge traders. And if you don't fully comprehend every aspect of the mathematics, no worries. You do NOT have to be able to perform the calculations in order to understand the principle as it is executed in the FX Power Hedge. Hey, we're not calculating the trajectory for a rocket to the moon. We're only trying to determine the statistical probability of continued price movement in the closest time frame to prior price movement.
Once you have a general understanding of the mathematical foundation, however, then the things I explain to you as you practice implementation of the FX Power Hedge in no stop no limit will start to make a lot more sense, and we will be speaking the same language when exchanging e-mails as you perfect your trading expertise. So please check out Bayes' Theorem on the Internet, and I look forward to working with you soon.
Sparks
So, what we did with the FX Power Hedge is modify execution of the trading system so that you can profit even in sideways conditions.
This involves using the power hedge more as an analytical tool versus a pure profit trading device. The information you gain by observing the two key variables in our system allows you to make decisions that consistently produce profits. This is a function of what's called Bayes' Theorem. (More on that one later.)
As I've told people many times, but will repeat here again, the FX Power Hedge is NOT an EA. It's not automated. It's always been and (unless we have a breakthrough)...likely always will be a manually traded system. That said, use of auto calculators has been a great way to earn profits since 2006. You get the calculators free when you buy the system, and it's cool to use them today. I am just trying to get people to trade the no stop no limit methodology more today because it captures profits even in the frequent sideways price movements we see.
What we're doing today is advancing a step beyond the fixed stop/limit methodology and getting into a way to trading with the power hedge that works in any of the three directions a currency's price can move: up, down or sideways.
Until now, the FX Power Hedge made profits with 97% statistical probability of success if a currency moved up or down. This was the original fixed stop/limit system, and it is still a viable way to trade. But it often takes more time than most people want to wait in order to earn profits on each trade.
It started testing my patience as well in 2009, and that's why I evolved the No Stop No Limit methodology.
There aren't as many absolutes in terms of fixed rules in this mode of trading the FX Power Hedge, but it is based on valid mathematical principles (Bayes' Theorum being the foundational concept).
In the most simple of terms (so I can avoid confusing everyone), no stop no limit trading involves watching for more pips worth of movement in shorter time periods.
I know this is somewhat non-specific, but I'm also not handing out every piece of information on the FX Power Hedge in this blog. I just want to help my existing traders and offer thinking to others getting into forex. Suffice to say, especially for those of you who have already purchased the system, you need to get into the prior couple hours of price movement and also look at other time frames required for each different price movement within the prior 24 hours.
It's in this way, given some consideration for the prior several days and even weeks of movement, you can make a determination on price movement direction in real time and it will have a high statistical probability of continuation until some other causal effect comes into play. This allows you to get into one minute time frames and make some money.
This is where no stop no limit trading really gets into Bayes' Theorem, which deals with interpretations of probability, conditional probabilities and probability density relative to the relationship between two variables...and we happen to have exactly two true variables at play in forex (price and time). So it's a perfect fit for our purposes. Again and not surprisingly, mathematics has the answer to all things in the universe including forex.
Now, instead of trying to fully explain Bayes' Theorem here, I will suggest that (if you wish) you should just Google "Bayes' Theorem" and read about it on the web. It's fascinating stuff and exceptionally relevant to the time/price movement pair of variables. It will help you appreciate that there's serious mathematical foundation for everything we're doing with this system, even as we evolve to next levels in order to continue earning profits in today's highly consolidated, sideways market conditions. At the least, this should enhance your confidence and hopefully drive you to spend a little more time getting into no stop no limit trading versus just being limited to the original fixed stop/limit methodology. I really want the family of FX Power Hedge traders to take this seriously. You NEED to learn no stop no limit trading! It is NOT guesswork. It is NOT predictive. It is a purely mathematical way to identify what is happening in the forex market in REAL TIME and determine statistical probabilities for movement in the subsequent minutes -- which allows you to capture profits.
More importantly, every power hedge trade you close out with a profit SHOULD lead you to yet another profitable power hedge, because this method of trading is cumulative. The knowledge you use in one trade should lead you to an even higher statistical probability of success on each subsequent trade in what should become a series of increasingly higher and higher profit/higher confidence power hedge trades.
This is another reason I so strongly urge that you should today trade just ONE currency pair. Learn that pair, and study its behavior in terms of price movement and time variables. (No technical analysis please...ONLY time and price movement.)
Since price movement AND the amount of time required for X price movement are the ONLY two absolute true things we ever know about forex, this is really worth learning.
Bottom line, the relationship between price movement and time required for X pips of price movement is a HUGE indicator as to what is happening in the market AS YOU ARE WATCHING IT MOVE!!!! This is NOT predictive like Technical Analysis. Once and for all, I beg everyone who seeks to master the FX Power Hedge to FORGET THE ALCHEMY OF TECHNICAL ANALYSIS!!!! This is the BS system brokers teach people and it's the reason no less than 80% of all new traders lose ALL THEIR MONEY! So don't get caught in the technical analysis hole -- it is a pit of financial loss from which few escape. Yet, because people can win about 40% of their trades, a lot of people get addicted. There's also the magic and wonder of spinning tops, channels, and all the other seemingly magical indicators. They're interesting to discuss, but none are definitive nor consistently accurate. Again, you cannot predict the future! Ask anyone. Honest. If we could predict the future, we'd all just go win a lottery and call it a day. So accept that absolute. Technical analysis must be erased from your mind.
Once you practice trading via the FX Power Hedge and you get into the routine of watching for price movement AND time as your two and ONLY two key variables, you won't need to know the mathematical reasons WHY you're winning trades...you'll just start winning. And yes, after purchasing my system, I'll work with you to learn no stop no limit without driving you crazy with mathematical principles related to statistical probabilities.
But you have to understand that statistical probabilities are all we have in forex. No one has a crystal ball. No one knows the future. Not even the biggest banks in the world nor the most veteran analysts can tell you what is definitely going to happen five minutes from now.
All anyone can do is make their best "guess" based on chart patterns (as technical traders do), or in the case of FX Power Hedge traders, you make you best "calculation" of statistical probability based on TRUE indicators (price and time).
THAT is the difference between this method of trading and every other means of forex analysis available to you. We're not predicting anything with the power hedge. What we're doing is calculating statistical probabilities with the ONLY two absolutely true variables in forex: price and time.
The better you get in seeing the relationship between total pip price movement and time (the two key variables clearly described in Bayes' Theorem), and once you understand how one interacts with the other almost to the point of inevitable revelation of truth, then the more successful you'll be in comprehending exactly what's happening at any given moment with the price movement of a currency pair and thus able to capture profits.
Where this no stop no limit methodology shines is in sideways conditions, which are so common today. It's our ability to identify prolonged periods of sideways price movement that allows us to see opportunities to win profits on BOTH sides of the power hedge. THAT is what I encourage FX Power Hedge traders to practice and perfect more than any focus on identifying up or down moving trends.
You can still use BOTH methodologies built into the FX Power Hedge System. You can set fixed stops and limits utilizing the calculators you get when you purchase the system (www.FXPowerHedge.com), and if the currency goes sideways (which happens a lot today) then you can STILL earn profits every 24 hours because you will be able to identify the sideways trend and capitalize on it in real time via the no stop no limit technology.
Long term, you will find the need to set fixed stops/limits unnecessary, because you'll be able to see upward and downward trends happening just as easily - more easily frankly - and that leads to consistent profitability.
I hope I have not confused anyone with this post. I just wanted to get into Bayes' Theorem, and hopefully encourage more of you to read about this mathematical principle. It deals with the relationship between two variables, and we just happen to have two and ONLY two absolutely true real time variables in forex: price and time.
So Bayes' Theorem is kind of a must read for FX Power Hedge traders. And if you don't fully comprehend every aspect of the mathematics, no worries. You do NOT have to be able to perform the calculations in order to understand the principle as it is executed in the FX Power Hedge. Hey, we're not calculating the trajectory for a rocket to the moon. We're only trying to determine the statistical probability of continued price movement in the closest time frame to prior price movement.
Once you have a general understanding of the mathematical foundation, however, then the things I explain to you as you practice implementation of the FX Power Hedge in no stop no limit will start to make a lot more sense, and we will be speaking the same language when exchanging e-mails as you perfect your trading expertise. So please check out Bayes' Theorem on the Internet, and I look forward to working with you soon.
Sparks
Subscribe to:
Posts (Atom)
