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Thread: Do you have to validate your trading ideas?

  1. #1
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    Do you have to validate your trading ideas?

    Hi, traders!

    This is Value trader, I’m back from vacation and I want to start my activity on the forum with the article on pretty interesting thing that is rarely spoken about.

    How do traders find their trading ideas? Process of finding any trading idea or building algorithm consists of several steps – first they find idea, then they test it on historical data, calculate profit-factor and other parameters (if they aren’t satisfied with). In other words, they validate their hypothesis – they find confirmation for their ideas in the past. This type of thinking is very popular and wide spreaded, though it might not be very efficient – markets rarely provide good setups with linear correlation between event and outcome.

    The opposite type of thinking is to find events that don’t happen or happen very rarely and bet against them. Our brain might be confused with that – we are taught to find repetitive patterns and validate them with historical examination. But once you find a good pattern, you may notice that its' efficacy decreases over time. The more and more traders will notice a pattern and good opportunity will disappear or become less profitable as more traders try to benefit from a pattern. It is especially true when we talk about very popular currency pairs (or other trading instruments), for example – EURUSD, this pair attracts many traders and is often very overcrowded.

    It’s harder to think in terms of what will not happen rather than in terms of what will happen.

    Let me provide you couple of examples.

    Many traders like to trade-off possible reversals. If we see price that we consider as «high», we tend to seek for possible reversals whereas it is very tough to identify exact moment when price is starting to move in the counter-trend direction.
    If you would like to validate the idea of reversal, you would have to seek for possible reversal patterns that may look like this:

    Attachment 10883

    But if you examine real price action using strategy tester in MT4 trading platform or any other software that allows you to simulate historical data, you would recognize that it’s pretty tough to spot a reversal – you would have approximately 4 losing trades in a series of 5 trades. Of course, if you keep your losses small and gains bigger, you can eventually trade with a profit. But if you start to think in terms of what will unlikely happen, your view has to become completely different. You may examine fake reversals and find most of reversal patterns can provide you good entries in the direction of the existing trend. You may have more modest profit/loss ratio in this case, but nevertheless you can achieve 2/1 or greater. And what is important – you will have probabilities on your side.

    I have put fake reversal patterns in the screenshot below with possible continuations. I employ them in my own trading, so can you.

    Attachment 10884

    When it comes to reading real market context, we could have seen very obvious situation on GBPUSD so far. Strong trend could allow you to trade in the direction of existing trend at least 2 times:

    Attachment 10885

    Those trades may not seem very attractive, moves are modest, but after all, you build your account out of winning trades, not of losing ones, don’t you? Two winning trades are better than two losing ones, that’s obvious.

    Good luck!

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  2. #21
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    Quote Originally Posted by nsawork View Post
    Using the Pattern analysis is being considered as the best trading by many traders since they are able to see where the markets are heading and then they can make use of this knowledge in their trading to gain income. We also know that both Trend identification as well as Trend validation are important for us.

    And deciding on the time frames for our trades is what we have to learn and take advantage of
    You are right dear that identification of trend is more important for every traders. In the Forex business when we are facing loss that many times we are disable to understand trend condition of market. With the help of validating chart patter and wave pattern we are able to detect of trend condition of market also able to making better trade from this business.

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  3. #22
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    The best way is to get an EA that trades automatically and leave it alone. There are many EA's online but most are not profitable. I would suggest that you get your own EA programmed using your own strategy. I used MQL-Programming.com before to make my EA and it works great. If you trade yourself, sooner or later then you will probably screw something up. Greed can take over and make you do stupid things.

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  4. #23
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    Quote Originally Posted by thenight View Post
    When we are seeing market movement then there are 2 possible choice. Market will continue the trend or it will start to reverse. It means we must validate it first in order to follow the movement. If we already sure about market direction then we still need to find the best timing to open order. The last step is about when we must close the position and getting maximum profit.
    We can not consider when the market move with two possible choice. When the market is on the move, market is going to an exact direction, there is no marke will instantly reverse in when trend movement. Market will offer us two possible move when market is on the support and resistance area.

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  5. #24
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    Knowledge and skills is very very important in forex trading to achieve and to make profits in our life. so i decided to validate with trading ideas is to use one of the best indicators for those who are beginners and professional traders in forex trading markets to maintain easy way to understand and easy tools with user friendly manner. get experienced with demo account for more knowledge in forex trading.

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  6. #25
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    Basically, the trading knowledge of the trades can be very good, but I ma sure that there is still limitation to what the brain of the trader can handle in what they know. No that I will bot be able to get the right direction, but there are still some hidden facts and information that should be unlocked, this will now get the best out of the trader`s result.

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  7. #26
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    Validating our trading ideas is very much critical for the traders success. In cases if the traders are not obtaining the desired benefits out of their trading process, then they need to make sure that they double check their trading ideas and validate rather calibrate until they reach the profit zone.

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  8. #27
    Trader taqiniazi's Avatar
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    In the Currency dealing system verifying the graph is so much familiar by investors. It is so much powerful position in the Currency dealing system. Some investors briefed that it is also more dynamic then trend design. There are more investors using this trend design. They are explain that trend design is less secure than verifying graph design.

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  9. #28
    Registered user Quid's Avatar
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    Quote Originally Posted by taqiniazi View Post
    In the Currency dealing system verifying the graph is so much familiar by investors. It is so much powerful position in the Currency dealing system. Some investors briefed that it is also more dynamic then trend design. There are more investors using this trend design. They are explain that trend design is less secure than verifying graph design.
    I know about that very well,verifying the trading,now on the story telling like this,i am innocent,i make the trading in many ways for me profitable,and that is the reason why i learn about that,sure you are trapping me in that way to validate the trading like that while you are not at all a good man who can trade well,you are a sinner in forex market then you make your acc moving like a twister in front of many investors in your acc like that why you can not just trade the way without distracting anyone.

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  10. #29
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    There are many things that will be working for traders if there is a great trading system for use by the trader. In the light of this, it is more important to do it with great validating principles, this will help the trader to look deep in the market before acting on final trading. It is great to trade with market insight, so you will get better direction with it.

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  11. #30
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    Quote Originally Posted by tapas View Post
    traders can get huge success by Validating there trading ideas in a better way by validating the chart pattern or by counting all the waves.So validation give a huge chance to get the success or profit in trading. traders can really gain lot of knowledge and experience from Validating .
    I feel about forex that it is a most use ful business for every one. Forex can be important high-risk companies. It is a rich company that is always fast. Try to enrich a healthy person of well set when fully adapted quickly. But after you've fed funds for proper education just to compare with any other companies can create extra.

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