The Need For Intelligence In Trading To Make It Work
What is the use of what they call analytics without some kind of correlation of currency? Where are the correlations for the EUR/USD and the CHF/USD? Why do we use values that are correlated in the final trading?
The truth is that we use trading robots, which in most cases trade blindly in foreign exchange markets, to determine the value of our trades. These robots are not designed to make sound decisions. In fact, the lack of them has given currency markets the ability to move independent of humans.
What can a software program do when you look at the performance of the European market? Have you ever watched the European markets with the exception of the Swiss franc? You will see what I mean.
You will watch the EUR/CHF or the EUR/USD increase or decrease in value. This information does not make much sense. Why would the Swiss franc go up and down if it is going up all the time?
Let's consider that we have a simple indicator that can be used to determine the value of the European currency as it is traded. This would be the percent change in the value of the currency from one minute to the next. The result is called a "percent change" and it would be nice if we could use this indicator in real time, or even while the market is closed, but that is just too expensive.
Analytics is necessary to enhance the trader's willingness to accept risk. We need to be able to quantify the risk that a person takes on in the currency markets. All of us want to believe that our ability to trade is a sure thing. The problem is that humans have to decide how much risk to take.
We have to consider the fact that not all markets are equal. Sometimes we need a great deal of risk in order to make money. When you decide to invest in the stock market, there is always a risk involved.
There is always a risk involved in a currency investment. We have to decide what is too much risk. How much risk do we tolerate? Once we determine this, we can determine the amount of risk we are willing to take in the market.
If we're too risk averse, we won't allow ourselves to take on any risk at all. If we do that, then we won't be very good traders. If we take a conservative approach to analysis, we'll have much higher success rates.
We have to take the risks that we are willing to take. For most of us, our risk aversion is fairly high. We are willing to take a lot of risk in order to minimize the risk of failure. If we don't have the right tools, we have to make up the cost by taking less risk.
The analytical tools that are available to us to make it possible to make very accurate decisions about the risks we are willing to take and the trades that we are willing to take. The problem with the tools available to us is that we need to use them in the right situations. If we don't, we won't have much success in the markets.
This is good news for those of us who do use analytics. The tools make it easy to have a lot of success. We just have to be willing to take the right risks to do it.