Win At Forex By Flipping A Coin

I was talking recently with a fellow who just started trading my system (www.FXPowerHedge.com), which is fundamentally based on identifying trends with high statistical probability via mathematical calculations. I was teaching him an advanced method of trend identification that's part of my system, and he finally "got it" when I reduced my explanation to the simplest of examples relative to odds.

First, the simple reality is that no one can predict the future. This is the fatal flaw of technical analysis. It seeks to use historical chart patterns to predict future price behavior. The problem is that history does not repeat itself with such precision, especially in such unstable economic times as we see worldwide today. So, 80% or more of all the people who get into forex lose all their money thanks to the flawed nature of technical analysis. (Sadly, this is the technique taught to just about everyone who gets into forex.)

Instead, I teach a system that does not attempt to predict the future. Instead, it uses real time data to make real time trading decisions. In the simplest of terms, the FX Power Hedge (my system) identifies trends through the combination of price movement and time frames. By synthesizing these two real time variables, as they transpire, calculations of statistical probability can be made and trends can be identified with consistent success.

So I was explaining this to a new trader and he was having a hard time UN-learning technical analysis, so I reduced it to statistics at the most basic level. I explained that he could put the mathematics of my system aside and simply flip a coin, and STILL win more trades than the best professional technical traders.

The reality, as told to me by pro technical traders and brokers, is that the most skilled, veteran technical traders win no more than 40% of their trades at best. They make money (the veteran professionals make money)...they make money through money management. It's fundamentally just making sure you lose small, and win as much as possible when you're right.

This means you could literally open a small account and sit in front of your MT4 platform flipping a coin, and make net profits with smart money management. On the 50% of trades where you win, you ride the trend and capture as much profit as you can before the currency retraces. On the losing trade (where you buy or sell incorrectly thanks to the flip of the coin)...on the losing trade, you simply exit quickly with the smallest possible loss.

Trade after trade, even if your wins are only a relatively small margin larger than your losses, you will still end up with net profits. And, inevitably, you will hit a trend or two that turn into significant profits and that will create significant net profits. (Because you NEVER lose big.)

This means that all you need to know in order to profit in forex is how to flip a coin and make a 50/50 guess. That's it. With smart money management, you will end up with a net profit.

But, let's also say you have some measurable advantage in identifying trends. Oh my goodness. What could happen? Well, you could make ridiculous profits if you could identify trends accurately just 60% of the time. But what if you could hit 70%, 80%, 90% or even better statistics in terms of identifying trends correctly? Well, you would have far fewer small losses and a LOT of much bigger wins.

What's more, because you have a measure of empirical, real time data, you would also have a higher level of confidence in terms of sticking with the trend after you've identified it. If you worked the mathematics for any period of time, your confidence would grow and you'd stick with a trade even as it makes a small retrace.

I just wanted to write this today so I could hopefully inspire a few of you who trade and read this blog to get positive and stay active making trades. Always remember that money management is smart. It's fundamental. You NEVER lose big. And if you NEVER lose big, while always trying to maximize your wins, then you WILL end the day profitable.

When you subsequently incorporate a trend identification system, whether it's flipping a coin or using my math based FX Power Hedge system, you increase your odds of picking a trend correctly. What you need to do perhaps more than anything is to forget technical analysis. It's misleading, and it causes far too many traders to stick with losing trades. The focus on historical data actually increases the number of bad decisions.

I'm sorry to be so negative about technical analysis. It's just the reality of what I experienced myself and what I've been told by countless traders who have stumbled onto my system one way or the other. They've lost money with flawed technical analysis. Or, they've been misled by false promises of profits through some miracle EA (and please...there isn't one single EA that works consistently long term). And when I put mathematics of price movement and time frame analysis in front of people, it's almost so brutally obvious that people have a difficult time getting away from historical data as wrapped up in the voodoo of technical analysis.

So here's the deal. Try flipping a coin. Just try it. Take one week with a demo platform and focus on your money management skills. Flip a coin to make buy and sell decisions. Win as big as possible and NEVER lose big. Do that for one week and compare your results to technical analysis. I think you'll be amazed, and perhaps start wondering why you never pulled that penny out of your pocket before.

But then, after the miracle of flipping a coin, you might consider the advantage of power hedge mathematics. It works.