Monday, March 8, 2010

Forex Advanced: No Stop No Limit And Bayes' Theorem

A lot of my FX Power Hedge traders ( 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'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 (, 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.


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