Even when traders embody substantial technical and fundamental knowledge, risk prevails without the proper understanding of the larger probability/volatility paradigm behind currency trading. Here, traders are encouraged to boldly challenge typical pre-conceived notions of charting, in an effort to see beyond the fallacy of technical analysis. In the end, traders who understand descriptive statistics will find greater clarity and perception of volatility, before it even appears.

Words of Caution

4. Within Forex, there is no “holy grail”, so please do not read this article thinking that what I am about to show you will solve any/all trading issues. What you are about to learn is an incredibly effective guidance tool that helps identify trending, volatility and at times, reversals; however, it must be used with common sense.

5. You are about to read about descriptive statistics, which within itself has many different approaches, methodologies and studies. I will not delve into the math underneath the model in this article. Instead I am presenting descriptive statistics from a simple, conceptual framework. However, there are many resources available to explain the empiricism of descriptive statistics; you will find several at the end of this article.

6. Never forget that economics and fundamentals rule all. Traders who do not take the time to properly uncover the true economic paradigm within the market – and the future possibilities of such – will likely often find themselves on the wrong side of the trade, especially those who hold for longer timeframes.

Technicals lie, fundamentals do not.