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Perceiving Forex Volatility via Descriptive Statistics… Deriving Trending and Reversals − Part 2

Thu, Feb 5 2009, 11:45 GMT
by Mark Whistler

WallStreetRockStar.com


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.


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Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.

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