High-Probability Techniques for Trading Forex

[expiated]

My impression, based on memory, is that my local library does not have a great selection of books on the topic of Forex trading. About the only other one I recall seeing was this one, High-Probability Techniques for Trading Forex, by Anthony Prescott PhD.

According to the back cover, Dr. Prescott has a distinguished twenty-plus-year career as an author and trading educator. Nonetheless, I was unable to track down a single bit of information as to why any of us should give a care as to what this guy has to say.

Then why bother with looking at this publication? (You might justifiably ask.)

It's primarily because over 90% of what I do on this forum is for my own growth and edification as a retail trader, and I find value in contrasting what I (a common Joe and self-educated schmuck) do in comparison with others who supposedly have some expertise in the field.

Then why not just record this information in my own personal notes?

Well, for one thing, there might be one or two members out there who find something I write of interest or helpful. Also, I find it easier to track down my posts from the past using Google search (and sometimes the ET search tool) than finding things in my personal files, where I have a multiplicity of additional and unrelated documents. And finally, I consider having to transfer all my files every time I have to buy or to switch to a different computer to be a real pain, which I don't have to do if I can find them online.

So, for anyone bothered by my creating this tread…please, feel free to ignore it.

 

[expiated]

PART I

Prescott begins his book by listing his top ten trading rules, which are pretty much the standard fare, such as: never let a winner turn into a loser; never risk more than 2% per trade; logic wins, impulse kills; always pair strong with weak; etc.

So, rather than review these topics, which one can certainly find summarized on the Internet, let me jump right over them and skip to the rest of the book, most of which describes his eight high-probability trade setups.

In doing so, I can be accused as guilty of doing the very thing that I dislike about the contributions of a significant percentage of ET members, which is to almost lie in wait for any and every opportunity to be negative or write something critical.

However, the difference is that I am not saying that any of Anthony’s techniques won't work. I am merely comparing them with my own and pointing out what I prefer about my own system. I am NOT saying my way is better, but simply that it is better FOR ME, and Prescott certainly has a right to his own opinions. And finally, I am NOT going to call the professor names should we happen to disagree.

Why would I? If I feel confident about my own point of view, there's no need. I don't know why so many people do this (unless it is because they have emotional or psychological problems, which is probably a very real possibility when you're interacting with faceless individuals in an arena marked by anonymity and a sort of virtual reality).

That said, the first technique I will consider (in my next post) is what the author calls: "The Five-Minute 'Momo' Trade..."

 

[M.W.]

None of what you listed from the book describes an edge, but merely risk management. The issue of risk management is considered a solved problem. It's the edge where understandably every book fails.

PART I

Prescott begins his book by listing his top ten trading rules, which are pretty much the standard fare, such as: never let a winner turn into a loser; never risk more than 2% per trade; logic wins, impulse kills; always pair strong with weak; etc.

So, rather than review these topics, which one can certainly find summarized on the Internet, let me jump right over them and skip to the rest of the book, most of which describes his eight high-probability trade setups.

In doing so, I can be accused as guilty of doing the very thing that I dislike about the contributions of a significant percentage of ET members, which is to almost lie in wait for any and every opportunity to be negative or write something critical.

However, the difference is that I am not saying that any of Anthony’s techniques won't work. I am merely comparing them with my own and pointing out what I prefer about my own system. I am NOT saying my way is better, but simply that it is better FOR ME, and Prescott certainly has a right to his own opinions. And finally, I am NOT going to call the professor names should we happen to disagree.

Why would I? If I feel confident about my own point of view, there's no need. I don't know why so many people do this (unless it is because they have emotional or psychological problems, which is probably a very real possibility when you're interacting with faceless individuals in an arena marked by anonymity and a sort of virtual reality).

That said, the first technique I will consider (in my next post) is what the author calls: "The Five-Minute 'Momo' Trade..."

 

[Sekiyo]

Risk / ( Risk + Reward ) = Implied Probability

1 / ( 1 + 1 ) = 50%
2 / ( 2 + 1 ) = 67%
3 / ( 3 + 1 ) = 75%
4 / ( 4 + 1 ) = 80%
5 / ( 5 + 1 ) = 83%
6 / ( 6 + 1 ) = 86%
…

Easy to win more often than not.
Aka … High probability setups.
Harder to have an edge.
Beat the implied odds.

 

[SunTrader]

Technical Analysis of the Currency Market: Classic Techniques for Profiting from Market Swings and Trader Sentiment 1st Edition

by Boris Schlossberg

 

[expiated]

It's the edge where understandably every book fails.

I will neither agree nor disagree with M.W.’s statements. But, the fact that s/he made them prompted me to ask Google: "What is an edge in trading?"

According to Investopedia…

"A trading edge is a technique, observation or approach that creates a cash advantage over other market players."

Similarly, Build Alpha states that…

"In financial markets, trading edge is a temporary advantage over other market participants. Having an edge in trading can exist in many different forms, but the two most common are information edge and price edge.

"Information edge would be insider trading or material non-public information. Price edge exists from research and data analysis and is a far more common way to build a trading career."

However, I could not have cared less about how I performed in comparison with other market players. On the contrary, my goal was to discover techniques, observations and approaches that enabled me to anticipate, with a better than 50% probability, where price would go in the not-too-distant future, and with as close to 100% accuracy as possible.

So then, the three primary aspects of NPP that I believe provided me with (what I personally would define as) an edge include:

1. Rather than use moving averages based on periods, NPP uses this type of indicator based on time, so that traders know exactly which measures tell how far and how fast price is moving each minute, hour, day, week, month, etc. (thereby removing all ambiguity as to whether price is actually rising or falling).
2. Rather than track trends using moving averages, NPP does so using price ranges, so that traders have a picture not only of the directional tendency of price, but also of the entire breadth of values price might assume at any given point in time, thus enhancing the process of pinpointing approximately where rates are likely to reverse direction within the entire domain of possible values.
3. Not only does NPP identify price ranges in terms of deviation from key central tendencies, but also in terms of time, adding a temporal dimension to the process of anticipating approximately where rates are likely to reverse direction within the entire domain of possible values.

 

[traider]

do you have trading results?

 

[M.W.]

You have a lot to learn. Lots of market and asset classes are zero sum games. If you perform better than your counterparts then that means you make money.

What is NPP? Are you trying to sell us something?

I will neither agree nor disagree with M.W.’s statements. But, the fact that s/he made them prompted me to ask Google: "What is an edge in trading?"

According to Investopedia…

"A trading edge is a technique, observation or approach that creates a cash advantage over other market players."

Similarly, Build Alpha states that…

"In financial markets, trading edge is a temporary advantage over other market participants. Having an edge in trading can exist in many different forms, but the two most common are information edge and price edge.

"Information edge would be insider trading or material non-public information. Price edge exists from research and data analysis and is a far more common way to build a trading career."

However, I could not have cared less about how I performed in comparison with other market players. On the contrary, my goal was to discover techniques, observations and approaches that enabled me to anticipate, with a better than 50% probability, where price would go in the not-too-distant future, and with as close to 100% accuracy as possible.

So then, the three primary aspects of NPP that I believe provided me with (what I personally would define as) an edge include:

1. Rather than use moving averages based on periods, NPP uses this type of indicator based on time, so that traders know exactly which measures tell how far and how fast price is moving each minute, hour, day, week, month, etc. (thereby removing all ambiguity as to whether price is actually rising or falling).
2. Rather than track trends using moving averages, NPP does so using price ranges, so that traders have a picture not only of the directional tendency of price, but also of the entire breadth of values price might assume at any given point in time, thus enhancing the process of pinpointing approximately where rates are likely to reverse direction within the entire domain of possible values.
3. Not only does NPP identify price ranges in terms of deviation from key central tendencies, but also in terms of time, adding a temporal dimension to the process of anticipating approximately where rates are likely to reverse direction within the entire domain of possible values.

 

[expiated]

do you have trading results?

I no longer bother sharing trading results with ET members, because I could theoretically show amazing results and somebody will inevitably write something like... "Yeah, but you need ten years of back testing to REALLY confirm the validity of your system," or "Your strategy is doomed to fail eventually because all you're doing is curve fitting."

I used to post daily results when I was developing my approach, but having finished that process, I no longer find it helpful; and again, the primary motivation for my posts is to record entries that further my own personal growth and edification as a trader. I try to keep stuff that people are going to want to argue about to a minimum.

 

[expiated]

What is NPP? Are you trying to sell us something?

NPP is my own proprietary system of Forex trading. If I'm trying to sell it, I'm doing a terrible job at it, seeing as how you had to ask me what it was.