It may be tough to win a race by going slow and steady unless the race took place in financial markets, that is at least our opinion. Trading forex takes great patience and excellent execution to profit on a consistent basis.
Unfortunately, the proliferation of unregulated brokers and prop firms has increased speculation in forex and futures markets over the last 5 years. These entities have provided elevated levels of margin and ‘trading challenges’ which encouraged traders to take on more trades per day and wager much more than they had to lose.
On Time Frames
Most retail traders are quick to mention that there’s more ‘opportunity’ (relating to technicals) for trading forex in lower time frames such as those between 5 – 30mins but there is also that much more risk. In lower time frames there is a plethora of noise and false moves as currencies try to digest daily orders to find their equilibrium. In addition, due to the noise pollution of lower time frames, positions held tend to be of shorter duration and thus of smaller profit potential (day trading).
Higher time frames offer much more stability and momentum at the expense of velocity of trading opportunities (swing trading). Put simply, higher time frames offer greater accuracy in identifying a trend while increasing profit potential but those opportunities will be few and far in between. If success in trading were defined by the number of trades one makes in a day, “ALT” (our algorithm) might come in as unsuccessful but we believe in accuracy. It’s better to hit profit on 2 of 3 trades in a week rather than 10/20, again, that’s just our opinion.
On “ALT”
“ALT” is a trading algorithm based on price action that is validated by sequences of events. Originally it was used to identify price pressures in stocks to the upside or downside for use in options trading. Since then it has been adapted to trade in the forex market where it has proved to be much more accurate in the 4H and 1D time frames. This indicator and potential trade analysis is provided in ‘Intraday Trader Voice Notes‘ for premium subscribers only.
As of right now, “ALT” provides buy and sell indicators based on sequences of events in the USD/CAD and EUR/USD trading pairs. Each trading pair has approx. 4 sequences of events for each time frame although there are 17 total across both pairs, see below for clarification.
- 4H USD/CAD: 4 Sequences (Avg accuracy across all sequences: 65.5%. Highest: 73%. Lowest: 58%.)
- 1D USD/CAD: 4 Sequences (Avg accuracy across all sequences: 65%. Highest: 75%. Lowest: 50%.)
- 4H EUR/USD: 5 Sequences (Avg accuracy across all sequences: 62.75%. Highest: 76%. Lowest: 53%.)
- 1D EUR/USD: 4 Sequences (Avg accuracy across all sequences: 69.6%. Highest: 77%. Lowest: 63%)
*Data was compiled over the past 5 years. On average, there were approx. 17 trading opportunities per month, equating to nearly 4 per week.
Looking forward, we expect to continue to analyze, trade, and report on ALT’s effectiveness as we move through 2024. The majority of the last 5 years has been a move from a low interest rate environment to a high rate environment, 2024 (and forward) will likely be a declining rate environment. In this case, ALT will be monitored to ensure that it holds its accuracy in the new market ahead.
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