High Probability Trading Strategies – Is There Such A Thing?
People often talk about high probability trading strategies. The term has been loosely used and abused extensively by traders yet no one seems to really come up with a definitive explanation of what it really is. Many have ventured to explain it through trading strategies that purportedly can pick up trades that have higher chances of generating profits. But again, nothing is clear about such a claim. In the first place, what do they mean by higher chances of profits? Is it 50%, 70%, or 90% of all the trades made? Everyone seems to be non-committal about this aspect. This reduces the strategy to a mere figment of the imagination.
Let us not fool ourselves with profound sounding terminologies. The bottom line is there is neither Holy Grail nor silver bullet in forex trading. If there one is one, whoever owns it must be keeping it close to his chest. With the unpredictability and volatility of the foreign currency markets it would be impossible for retail forex traders to string consecutive winning trades using the same trading strategy let alone high probability trading strategies because the odds are definitely going to catch up on him.
Besides, if you have been paying attention, different traders have different strategies in coming up with what they call as high probability trades. What one trader deems as high probability trades using his trading methodology may be viewed as wanting in many aspects by other traders. High probability trading strategies is a relative terminology. It depends on who views it and what analytical method is being used. But then again, they are vague when it comes to the chances of turning trades into profits and they vary from one trader to the other.
Theoretically, the market follows only one route and that is whereever the supply and demand equation currently rests. But what adds up to the confusion is the fact the a lot of traders trade on the basis of their perception on where the supply and demand equation will be in the future and not on its current level. This is what adds up to the market volatility and ergo more confusing to the inexperienced traders. Add to that the fact that market makers or ECN brokers need to quote prices every now and then against existing fundamentals to attract buyers and sellers to enter the market at various price levels. This makes the forex market more volatile and confusing resulting in whip saw losses.
The only real high probability trading strategies that exist are those that go along and are sensitive to the direction of the majority trades. This may be viewed by many as being easier said than done but the truth is, the real underlying sentiment of majority of the traders can be captured with a great degree of accuracy and there are basically two methods to do it. One is with the use of the Japanese Candlestick charting technique and the other is the use of the Ichimoku cloud.
The Japanese Candlestick charts captures the market’s underlying sentiment with clarity but falls short of giving exact entry and exit points for each trade. The Ichimoku cloud on the other hand tries to inject what is lacking on the candlesticks and incorporate volume studies to balance the sentiment projected by the candlesticks. It may require some learning curve but once you get the hang of it you’d be able to trade often in the direction where the market is definitely headed.
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