Markets Are Predictable Except When They’re Not

Here’s a simple thought:

When people design their forex system they are told that the market can only go in any of three directions: up, down or sideways, and to therefore design their system incorporating this as their foundation.

Unfortunately this is not the core foundation behind how markets operate. Sure, they go up, down and sideways, but designing a system that will incorporate every possible up, down and sideways movement will not work in every context.

The core foundation behind your system should be simpler, and not complex based on trying to incorporate every scenario.

In fact, it really only revolves around one factor, not three (up, down, sideways), or two (fear & greed). It is also a concept so simple most people overlook it.

So what is it?


That’s it, pure and simple.

What do you mean “change”?

You may have heard of the old axiom, there are two things guaranteed in life: one is death, and the other is taxes.

There is another, and most people don’t see it, and that is: change.

Nothing will ever be the same tomorrow, the next hour, or the next milli-milli-milli-second. We change. The markets also change.

Even if the price does stays the same, there is one factor that never will and that is time. That is why we are in a state of change even if everything in the markets stays the same.

Why sure they may exhibit similar behaviors, similar patterns, but if you design a system with a thousand indicators that in the past made 100% per year, then when the markets “change” your system will no longer operate as it once did.

You failed to incorporate change – and your bank account will soon reflect this (I know mine did twice!).

Unfortunately there is no black and white answer on whether you have incorporated change into your forex system. The only help I can offer is that the systems which seem to do well over time are simple and model human behaviour.

Think about that.

If your core foundation is to design your system around the simple concept of change, then why should your system have ultra specific entry gates? How many entry gates should you have? Are you over-optimising?

Smart programmers are beginning to design their trading systems by making the system analyse historical performance of their system over the last X periods, and then they incorporate the best variables to trade over the next Y periods.

These smart programmers understand the concept of change and are tweaking their system so that it automatically changes.

To help you with your forex trading here are some questions for you to consider:

  1. What is change?
  2. What is the average change?
  3. When will I know the market has changed?
  4. Why has the market changed (explore possibly the fundamental reasons)?
  5. How has the market changed (explore possibly the technical reasons)?
  6. Where has the market changed?
  7. What variables can I change with the way I trade?

Have fun exploring these questions, and don’t forget keep your system simple and stay flexible!

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