Forex price - should it be predicted to generate income?
Forex price changes according to a complex law.
The price of the Forex market at first glance moves erratically. But with careful consideration of the schedule, some patterns can be revealed. Does a trader need to know these patterns in order to make a profit?
If you aim at the long term of trading and, when opening a position, choose the direction of trade at random, it turns out that in half the cases the trader will guess the direction. Since there are only two directions of Forex movement, up or down, the probability of guessing the price is 50%.
And then the classical law comes into force - to keep profits and close unprofitable positions. That is, if a trader has guessed the direction of the price movement - to hold a position to get more profit. If you have not guessed, immediately close the losing position.
Then the process of generating income for a long-term trader can be described by the formula:
- I - total income,
- Pavr - the average profit for a period of time,
- Lavr - the average loss over a period of time.
The time span is meant from several months to several years. I prefer to draw some conclusions after 3 years of trading, not earlier.
Thus, it is true that a trader does not have to know the direction of the Forex price movement. The main thing is to be able to minimize losses and maximize profits. But not so simple. I will try to write about this in the next post.
Do you have a different opinion? Write about it in the comments!