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    1. #1
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      TRADING IN UNCERTAIN TIMES

      The problem of trading in uncertain times crept up on the Mentor Program Alumni forum and I have been thinking about my answer. The original answer I gave is shown below –

      I think one of the things you need to be able to do is to define what uncertainty is. If you opt for volatility as a proxy for uncertainty then you see something quite interesting. The VIX which is known as the fear index and should reflect uncertainty is actually at sitting somewhere near its long term average, indicating that the players who make up this index don’t actually see any uncertainty and are not asking for an increase in the risk premium they demand. The same is true if you look at the historic volatility in the Dow which is also sitting at a 9 year low. From my perspective is the issue is not uncertainty in markets but uncertainty in decision making that is brought about by listening to external sources. If you switched off the news and all the associated commentary and simply looked at markets what would they tell you?

      What has caused me to think further about this overnight is the notion of what actually is the uncertainty that is being referred to. Is it a true physical uncertainty or a psychological perception brought on by exposure to the narratives of others? I had a look at Wikipedia for a more formal definition of uncertainty and it gave the following –

      Uncertainty is a situation which involves imperfect and/or unknown information. However, “uncertainty is an unintelligible expression without a straightforward description”.[1] It arises in subtly different ways in a number of fields, including insurance, philosophy, physics, statistics, economics, finance, psychology, sociology, engineering, metrology, and information science. It applies to predictions of future events, to physical measurements that are already made, or to the unknown. Uncertainty arises in partially observable and/or stochastic environments, as well as due to ignorance and/or indolence.

      You will notice that the definition holds at its core the uncertainty inherent in predicting future events. In fact the science of probability is based around trying to deal with the fact that the universe is an uncertain place. However, uncertainty is the default setting in trading – the outcome of all trades is unknown until they are closed. It is this uncertainty that gives us the potential to be profitable, investments that have known or certain outcomes have no risk premium attached as such they offer little in the way of return (think bank deposit). This definition is therefore of little use in unpacking the notion of a change in traders uncertainty quotient. Granted we can respond to changes in volatility and we have tools to measure this but this is a reasonably common occurrence in trading and there are strategies that can be put in place to deal with this. In fact very basic position sizing and volatility based stops self-correct to deal with this sort of problem.

      So I am drawn back to the idea that what actually changes is the tone and intensity of the narratives that people surround themselves with. This ever increasing crescendo of noise is bound to take an effect on peoples psyche particularity at present when the world appears to be spinning out of control. However, notice I used the expression appears, I used this term because appearances and reality are not the same thing. What brings some equilibrium back to the noise of others is as always context, the markets tell a completely different story. Whilst the breathless gibbering that is the media may consider the present to be the most troubled time in history and need to shout about it at every opportunity neither that markets nor history itself would agree.

      This is the most salient point for traders with regards to what is considered uncertainty. Uncertainty is the environment within which we operate as a broad observation but beyond that it is actually the markets themselves that define what actually uncertainty is and they can do this by readily accessible metrics. When volatility and in turn risk premiums increase then we can say that uncertainty has increased. However, even here people try inject their own primitive narrative into events as the VIX which is a widely known measure of volatility is referred to as the fear index when it is nothing of the sort. However, this is the natural human desire for drama, we all have a friend or relative who is addicted to drama and those in the news media, particularly the financial arena and prime diva’s. So if you find yourself believing that uncertainty has increased but markets don’t agree then you will need to do something about what leaks into your brain.

      Author: Chris Tate

      Article reproduced with kind permission of: http://tradinggame.com.au


      Traders’ Mindset: http://www.advfnbooks.com/books/insights/index.html


      www.tallinex.com wants you to become a successful trader

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    3. #2
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      Re: TRADING IN UNCERTAIN TIMES

      Making profit on trading is not easy, and choose time for trading also important, like as trader they prefer on london session market because usually on these session has high average movement, but also as trader need trading on best timing to enter on the market, not all place will giving best time, and many trader choose support and resistance area because there are tendencies as strong area

    4. #3
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      Re: TRADING IN UNCERTAIN TIMES

      Life gives us so many surprises, so as in Forex. Nothing comes free and easy with Forex, we have to survive the risk of our money and knowledge to gain profit of investment. Not everyone is made for Forex but, we can train yourself for our work.

    5. #4
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      Re: TRADING IN UNCERTAIN TIMES

      Quote Originally Posted by AngelPips View Post
      Life gives us so many surprises, so as in Forex. Nothing comes free and easy with Forex, we have to survive the risk of our money and knowledge to gain profit of investment. Not everyone is made for Forex but, we can train yourself for our work.
      Yes forex trading is required process learning and not only at short time, but as long as still want to become better trader is required learning, if forex without learning can giving easiness making good profit, might will so many trader become rich from forex business without learning

    6. #5
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      Re: TRADING IN UNCERTAIN TIMES

      Quote Originally Posted by AngelPips View Post
      Life gives us so many surprises, so as in Forex. Nothing comes free and easy with Forex, we have to survive the risk of our money and knowledge to gain profit of investment. Not everyone is made for Forex but, we can train yourself for our work.
      Nothing good comes free for anything. This is the truth. If you want something good to happen in your life then work really hard for it. Don't expect it will come so easily.

    7. #6
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      Re: TRADING IN UNCERTAIN TIMES

      Quote Originally Posted by Sininfinity View Post
      Nothing good comes free for anything. This is the truth. If you want something good to happen in your life then work really hard for it. Don't expect it will come so easily.
      It's really that's mister, nothing is easy in this life, especially in forex business too, if trader want to get profit in this forex business, hence trader have to struggle and work hard as possible.

    8. #7
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      Re: TRADING IN UNCERTAIN TIMES

      Quote Originally Posted by chopetonk View Post
      It's really that's mister, nothing is easy in this life, especially in forex business too, if trader want to get profit in this forex business, hence trader have to struggle and work hard as possible.
      In fact forex market always become mystery, as trader only trying to analyze possibility movement trend ahead, but obviously movement price on the market depending with many factor like as news, and so many market partcipant on the market as the cause of movement and not all we know

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