Top Strategies to Ace Math in Middle School
For work in the Forex market are actively used strategies based on calculations that allow to predict to some extent the probability of the occurrence of an event. Such strategies are based, first of all, on statistical calculations, which give an idea of the probability level, and also apply quite complex formulas, with the help of which they work on statistics. In this article, we will consider advantages and disadvantages of mathematical strategies and give examples of the most common forecasting methods based on probability calculations.
Among the traders who make transactions with currency pairs on a daily basis, there are those who consider market events to be random processes, which, however, have a tendency to repeat themselves. And these repetitions can be predicted by using calculations based on historical data. The adherents of such strategies, first of all, are interested in the strategy statistical correlation of signals that lead to profitable and loss-making operations. This ratio is quite easy to determine using historical data.
Theoretically, in order to get a stable profit, it is enough to get a ratio where the number of profitable trades at least slightly exceeds the 50% level. And statistics can tell a lot, and if you filter data for a certain period (at least six months), you can get, for example, the following information:
- the time frame in which there were most signals for profitable operations (time of day, day of week, etc.);
- type of financial instrument (currency pair, shares, other assets);
- conditions for making profit (calm market, pronounced trend, sharp movements, etc.).
In this way, you can determine the basic conditions for creating (or modifying) a strategy. For example, a trader deciding to refrain from trading at certain hours and in certain situations (for example, before the news release) and limiting the number of assets in use can significantly increase profitability.
How do the calculations work?
Naturally, in order to make the appropriate calculations, it is necessary to have some statistics on price movements for a certain period. The necessary data can be obtained completely free of charge from a Forex broker, the simplest method of obtaining statistics is to install the trading platform, which contains the statistics.
Now the data need to be processed, for which the broker also provides the appropriate tools. Such tools are indicators, which are also built into the trading platform. Indicators are a program that processes data according to the embedded algorithms. The algorithms, in their turn, are based on mathematical formulas.
The indicator program simply takes the historical data, runs it through its own algorithms (calculated using formulas), and then gives the result. This result within the price chart on the trading platform is displayed graphically, in the form of lines, bars, levels, as well as additional windows that contain parabolas, a series of areas, painted in different colors. The graphical display makes the analysis much easier, allowing you to visually correlate different areas and determine patterns. At present, several hundreds of different indicators are used for forecasting by traders. Go to the site and find out morehttps://argoprep.com/blog/20-top-math-strategies-to-ace-math-in-middle-school/
Mathematics and Deposit
However, mathematical methods are suitable not only for the analysis of price history, but also to calculate the probability of a series of profitable transactions based on the chart of increasing and decreasing the amount on deposit. However, this requires statistics of real trades.
Considering the fact that market trading can be represented as a set of trades with a random outcome, but this outcome is repeated periodically, one can even try to predict with a certain degree of probability whether the next trade will be profitable or losing. Such a prediction can be useful in determining the amount of investment that will be involved in the next trade.
The article on mathematical strategies at Forex would be incomplete if we had not mentioned Martingale’s strategy. This strategy can also be used for predicting most random events (casino games, betting). The methodology is based on the statement that as the duration of a losing streak increases, the likelihood that the series will continue decreases.
That is, a rare trader, regardless of his experience and qualifications will manage to lose ten or more deals in a row. It’s like trying to flip a coin ten times, and the coin will lie down with the eagle up each time. In theory, if you continue the series of flips long enough, you may meet a series of three or four identical outcomes in a row. And with the length of the period, the probability of a longer series increases. Thus, if you continue to flip a coin within a year, you may accidentally come across a series of 7-8 consecutive identical outcomes.
Mathematics at Forex
Mathematical analysis of probabilities can undoubtedly be used to increase the profitability of a trader’s work, but this method can hardly be considered as a basis for forecasting. Statistical analysis and building a trading strategy on its basis involves a high percentage of error, which is caused by various factors. First of all, these are economic events, the appearance of which is the main reason for price fluctuations, and these events cannot be predicted by mathematical method.
In addition, much depends on the human factor. When a trader receives signals within a mathematical strategy, he or she must operate with a set of input signals – this is the value of the investment amount, the distance from the input point, within which the stop-loss and take profit limit orders must be set. Even if the strategy gives clear input signals, there may be some problems with the moment of exit. Here comes the human factor, the trader can consider the profit too small to close the order, as a result of which the price turns in the opposite direction, and the trader receives a loss instead of profit.
That is, allowing the presence of a mathematical strategy, which clearly enough indicates the moments to enter the market, the absence of other methods of analysis and forecasting makes this strategy unprofitable. Thus, the lack of understanding of support and resistance levels, lack of experience in how the price behaves in often repeated market situations, does not allow using a mathematical strategy in its purest form.
Forex Math Strategy
It has already been mentioned that the analysis of statistics is an invaluable advantage for a trader, so almost all operations on the currency market are predicted using mathematical systems. It is rare to find a trader who does not rely on indicators, support/resistance levels – all these instruments are based on statistical analysis of market prices for a certain period. Besides, man-management (rules of trading deposit funds management) is also based on the probabilities that determine the possible ratio of profitable and loss-making transactions.
But it is difficult to assert that trading on the basis of a forecast made with the help of technical instruments (software solutions) alone will be profitable. One of the main factors of price changes still remains macroeconomic events that determine demand, supply, and, accordingly, the prices of market assets. Fundamental analysis of the market situation remains the main instrument that allows forecasting price changes. This tool is the main one for institutional traders, for large investors, as well as for exporters who buy or sell large lots of currencies.
Choosing an individual investor
However, the use of fundamental analysis requires significant resources, it is a thorough knowledge of the interdependence of each asset on the factors that may affect it at a given time. In addition, continuous monitoring of the news background is required, which makes it possible to determine in time the occurrence of an event that may change the trend. In investment companies, such issues are handled by whole departments of employees, all available news resources are used, and even sometimes insider information is extracted.
It is logical that a single trader has nothing to oppose such powerful players, so he can not claim to make a forecast based on fundamental data, a forecast of the same quality that is used by large investors in their daily work. Therefore, a trader who trades at Forex faces a choice – to work daily on the analysis of a single financial instrument (there will not be enough strength or time for more) or just follow the market, which sets the tone for the big players.
More often than not, the decision to simply follow the market allows to provide good profitability. That is, you can use strategies based on wave analysis or other forecasting methods, and this approach allows you to move away from long-term deals associated with the “freezing” of capital for a long time. By choosing a trading system that includes elements of mathematical analysis, a trader can reduce the time of a deal to a few days, successfully trade within a day and close positions on Friday, avoiding sharp price spikes at the beginning of the session on Monday.
So, summing up the above, we can conclude that mathematical strategies are one of the ways to predict the price at Forex, but in the pure form are used very rarely. In any case, such a strategy, even if it shows good profitability, will be unprofitable in the hands of a beginner who has a rather vague idea about the nature of price movement of a particular financial instrument.