contradicts the opinion widely held by traders that the side trend of mar
ket movement is a kind of third direction. However, on close examination,
this side trend only occurs when there are alternating oscillations: up or
down. The paradox is that the majority of traders cannot use that simple
phenomenon to benefit from it. However, if you think about it, an acceptable
trade strategy can be developed on the basis of this statement alone.
Some inferences from the first postulate turn out to be very important
in benefiting from market rate fluctuations. Let us use common sense and
elementary logic to formulate and then analyze some of these inferences
according to their primary practical importance.
I consider the fact that there are only two possible directions of market
movement very important because this limits the market options of
reducing a trader’s money. At any given moment, the trader has a minimum
50 percent statistical probability opening a new position in the right
direction.
Here, I have to make a brief detour and somehow explain my position
about a skeptic’s opposite point of view about the same fact. Why should
we consider the 50 percent probability of market movement in either direction
as a negative factor, whereas the same probability about the trader
is taken as positive? The reason for this seemingly contradiction is very
simple. We consider the market behavior as primary and the trader reaction
as secondary because, in making decisions and taking positions, the
trader only responds to market changes.
So denying the assumption that trader activity causes market rate
fluctuations, I suggest considering the market as spontaneously changing
under the influence of factors unknown and unrecognized by us. Then, it
can be concluded that a trader could survive in this environment only if he
adjusts to these conditions. He should not try to dictate his will to the
market, but only explore the ability to benefit from some of the market’s
features. One of these features is the market’s ability to move in either of
just two possible directions.
If this statement is taken as a starting point, one thing is clear. For a
speculative trade on the FOREX or on any other market, it is necessary to
know that the statistical probability of all trade results should exceed 50
percent to the trader’s benefit in order for the final result to be positive.
(This assumes the condition that the average profit per any successful
trade exceeds the average loss per any unsuccessful trade). In fact, it
would be reasonable to conclude that, to get generally positive statistical
results, the initial probability of achieving success from any new position
opened by the trader should exceed 50 percent. Positive statistical results
need an effective evaluation method for this objective probability calculation
at any given moment. For the development of such a probability evaluation
system, the following statements (which are the basis of this
method) are of primary importance.
Read More : THERE ARE ONLY TWO POSSIBLE DIRECTIONS OF A MARKET MOVEMENT
