TRADING STRATEGy
computer systems are often run on mainframes and cost a very large amount of money to develop and manage. Obviously, this type of trading is restricted to the large institutions who can justify the cost of developing and managing the systems.
Thirdly, and relatively new to the trading scene, is another type of computer trading – the PC based robotic trading programs – often referred to as “Bots”. These “Bots” are a varied lot, and their performance is open to great debate. We hear stories that are both complimentary and disparaging about these systems – but they seem to have established a sizable following.
That is our rather simple analysis of the competition we Forex traders must compete with when we trade any Forex market. Just about any way you look at it that is a lot of competition.
One might reasonable ask at this point, “why do you, just one little insignificant individual, think that you can successfully compete against all of that?’ Isn’t it a bit arrogant
to think that you can actually win such a contest?
Pardon us for being so arrogant – but one of the earliest stories we
and might, but by exploiting the competition’s weakness.
For those unfamiliar with the tale, Goliath was a giant warrior with much body armor who challenged anyone to fight him to the death. David was a young lad with only a sling shot – but he was very good with the sling shot. Stepping forward to face Goliath, on the
ever heard where the competition between a lowly individual and much a larger - more powerful competitor – was won by the lowly individual, was the story of David and Goliath. A classic tale of a competition won, not by size
FX
surface, looked a bit ridiculous – a young lad, without an ounce of armor facing a giant warrior fully armored. Well, make that almost fully armored David noticed that Goliath’s armor did not cover his forehead, and he promptly slung a stone into that vulnerable spot and felled the giant.
Our point in telling the above story is simple – know your competition – they may have a weakness that you can exploit to our advantage.
So what about our competition in
Forex
markets? Is there really a difference between the individuals, the institutions and the machines? We think the answer is both yes and no.
First, let’s discuss the “yes” part of our answer: individuals
are human
beings and act like such – unpredictable to an extent, but
predictable in a way, together
particularly when lumped in the aggregate of the
crowd. Mass psychology tends to be somewhat predictable. Both individual traders and institutional traders are human beings – but what about
the machines – the
computers that run the trading programs? We do not presume to claim that machines are humans –
but the programs that run the machines were written by FX TRADER MAGAZINE April - June 2013 67
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