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Why are 98% of Forex strategies ineffective?


This question is probably asked by every novice trader. Almost every information resource on the subject of financial markets provides a separate section on trading strategies. On YouTube you can also find examples of trading and descriptions of various methods of earning in the Forex market. Most of these strategies seem quite successful, but it comes to practice, a trader sees only the increase in losses. Why is this happening? Now let's try to figure it out.

Why forex strategies don't work?

There are several reasons why most of the trading systems presented on the network do not meet the expectations of traders:

Quite often, novice traders make a number of mistakes that impede the achievement of the desired financial result. These include:

Important information! As practice shows, most novice traders prefer to use indicators when working with price charts. This can be explained by the availability of trading signals. Along with standard indicators integrated by developers into the set of analytical tools of the MetaTrader platform, and most other platforms, custom indicators and oscillators are actively used today. It is important to understand that up to 98% of them are based on the algorithm of standard tools and differ from the counterparts just visually. The only exception is the adaptive moving average, the construction of which is significantly different from the standard version.

Custom indicators have one unpleasant, commercial feature - they can be redrawn. This is provided by the developers in order to convince a potential buyer of the high efficiency of the analytical tool. In fact, the use of such indicators practically guarantees a loss of deposit due to the frequent generation of false signals. Therefore, supporters of computer analysis are strongly encouraged to refrain from using third-party, analytical software.

Why are standard MetaTrader terminal indicators ineffective?

This is actually not the case. Each tool provided by the developers of the mentioned platform can significantly improve trading results. For this, it is important to choose the right asset and specify the correct settings. In fact, the standard MT4 indicators can rightfully be considered one of the most effective analytical tools, especially if we talk about complex application. To make sure of this, pay attention to the Puria Method strategy developed at the end of the 20th century.

Briefly about the rules:

Now pay attention to the effectiveness of trading using the Puria method:

Now pay attention to the effectiveness of trading using the Puria method

The graph segment shown in the chart displays the dynamics of the asset pricing within 2 days. During this period, 3 trading signals were generated, among which there were no false ones. This confirms the high effectiveness of the strategy. It is important to understand that when trading using the Puria method, losing trades will still occur, but their number will not exceed 30%. The main thing is to follow the rules of the strategy and the rules of money management.

In addition to computer analysis, traders use technical analytics methods as well as Price Action candlestick patterns to determine the potential value of an asset. Beginners mainly avoid such methods of working with price charts, since they doubt their effectiveness. In fact, technical analysis and candlestick pattern trading can be called the most effective online trading tools. To verify this from personal experience, you will need to follow a fairly simple rule, but first pay attention to a few examples:

The Price Action reversal patterns are highlighted in the chart

The Price Action reversal patterns are highlighted in the chart, indicating a change in the current trend in asset pricing. An important condition is that such signals should be considered only if they are formed at the local level. As it is not difficult to notice from the presented image, all the patterns met expectations.

Now it is worth noting the support / resistance levels. The screenshot shows that the chart crossed the support line twice, but each breakdown turned out to be false. Pin bars formed in each case warn about an undesirable opening of a trading position. In addition, it is not worth responding to overcoming the price level of support with a downtrend.

This chart shows a sideways trend. After the breakdown of the support level, the trend changed to a downward one

This chart shows a sideways trend. After the breakdown of the support level, the trend changed to a downward one. As you can see, breakdown trading strategies are also quite effective. What's the secret? As mentioned earlier, market noise impedes the correct operation of analytical tools. The above charts show the dynamics of the pricing of the EUR / USD pair with D1 timeframe. When working with this timeframe, traders will need to open medium-term and long-term positions with a minimum trading volume, which will affect the level of potential profit. In return, the user will gain confidence in the trading signals.

Attention! According to unofficial statistics, most traders are supporters of intraday trading (M5, M15, M30, H1 timeframes). Perhaps that is why 97% of them lose money invested in trade? According to a study by Forbes magazine, among supporters of long-term and medium-term trading, only 10% of traders are steadily losing investment. This confirms that standard indicators and technical analysis tools are still effective. They just need to be used on higher timeframes to get accurate trading signals.

Author: Zixin Wang, Forex-Ratings.com

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