On Finding Success Trading Forex
A 2014 research study carried out by the European Central Bank using information gathered from leading European brokerage firms reportedly found that close to 70% of retail Forex traders are losing money overall while trading foreign currency pairs.
Similarly, a survey conducted by Chris Davison of Trent University in London found that, according to the self-reporting of traders responding to his questionnaire, only 18% made a large profit over the previous six months with another 19.5% making a small profit.
Approximately 63% of those that remained said they either broke even, experienced a small loss, or suffered a large one. So why are 60% to 70% of all retail traders failing to thrive in the Forex market, and less than 20% reporting that they are realizing substantial gains?
When I settled on buying and selling foreign currency pairs as the means of making money via the Internet that had the greatest potential for returning significant revenue in exchange for the time and effort I would be putting into it, I chose to answer this question by adopting two biblical principles as my guide.
To unlock the secrets to success in the Forex market, I would test everything and hold fast to that which was good, as advised in first Thessalonians, chapter 5, verse 21.
I would also heed the lesson conveyed in the 16th chapter of Matthew, where the Messiah took the Sadducees and Pharisees to task for not being able to interpret the signs of the times. And as encountered again in the 12th chapter of Luke, where the Lord admonished a crowd for not knowing how to judge the times in which they were living.
Indeed, anyone attempting to trade foreign currency pairs without the ability to forecast what’s coming is almost guaranteed to meet with disappointment. I therefore made it my business to discover the Forex equivalent of a red sky, or a south wind, or clouds in the west; signs that would enable me to see beyond the horizon to know with some degree of certainty where price would most likely find itself at some point in the not-too-distant future.
Much to my surprise, this led me to reject many of the strategies wholeheartedly endorsed by any number of trading gurus, such as Elliott waves, Fibonacci ratios, harmonic patterns and the like.
Moreover, when strategies involving moving average convergence divergence, stochastic oscillators, the relative strength index and other indicators failed to live up to their reputations, I had no qualms about discarding them and searching elsewhere for the “signs of the times” which, if interpreted correctly, would result in market forecasts of unusual accuracy.
As it turns out, I found that the absolute best “atmospheric barometer” for predicting the direction in which an exchange rate might ultimately be headed was what’s known as a moving average. I therefore set about systematically evaluating all the potential moving averages one might use to forecast price action in a given time frame until I uncovered the single best measure uniquely suited for each of the respective temporal settings.
I later discovered that what I had done was develop what others refer to as a “baseline.”