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Beating the Forex Odds with Igrok Method
Written by | shaunspellman | 1:56 a.m., Oct 5, 2013
Often times the method of operation of a gambler is based heavily on using common sense. This same essence of common sense is captured in the ‘Igrok’ method of trading also called Igrok Discrete-Systematic Method. The method’s principle is to speculate successfully in the foreign exchange derivatives market through championing by traders of techniques that are based on natural and statistically justifiable patterns of market conduct. This helps in effective following of the market without the need of forecasting, on a side note some might feel the need to copy other traders, such as the copytrader strategies.
However, it can be stated that consistent and effective trading outcomes can be obtained by studying natural characteristics of the market and by employing statistical inference methods of market movement probability in a particular direction at any particular time.
The idea of technical analysis in derivatives trading is based on three elements; One) the market considers everything, Two) the market moves in accordance with trends and Three) the history repeats itself. The Igrok’s method further hypothesizes that there are only two possible directions of any market movement, that the market is in continuous motion and that the market forms a trading range daily. In essence, the three additional elements of the hypothesis supplement the existing three of technical trading. A detailed discussion on these three elements of hypothesis is as follows:
Only two possible directions of Market Movements: A majority of the foreign exchange derivatives traders do not fully understand this statement. For most, this statement opposes the belief held by them that a side trend in market movement is a type of third direction. Upon closer study, it can be noted that side trend occurs when there are alternating oscillations. With the help of some inferences based on this postulate, any trader can benefit from market fluctuations.
The thought that there are only two possible outcomes is very important because then a given market movement is limited in the options of trimming down an investor’s capital. According to few researches, at any given moment a trader has minimum 50% probability of going in a trade in the right direction. Most of the traders today consider market behavior as the chief element and a trader’s reaction as secondary because such traders believe that trader is only responding to market changes.
If the assumption that traders’ activity causes market fluctuation is sidetracked, and it is accepted that market moves on factors not recognized by us, then it is easy to conclude that a trader will survive only if he can adjust to this reality. If the trader can overcome, the urge to submit his will to market movement, then he can explore the ability to gain from some market features. And the prime feature of market is its knack to move in either of the two directions.
After taking this aspect in consideration, one thing becomes clear. A speculative trade can only be successful if it is known at the inception of the trade that the statistical probability of all trades will result in more than half the times in gains to the trader. Such probability evaluation system is not possible with other two elements.
Market in Constant Motion: The constant motion aspect means that the market never stops to moves. Well, unless it is closed for Christmas. It will be either moving up or down. Manipulating this movement returns best profits. If one does it often at different price levels, it may take only minutes to know the result of the trade. Through a simple experiment, it can be confirmed that if market movement is intelligently manipulated, a trader can make greater profits. At any given price chart of a currency, draw two parallel lines with 50-70 pips of difference above and below the price action. Every time the price moves above the upper line or below the lower line, enter in the relevant position. If the price goes above the upper line, go long and if goes below the lower line, go short; what happens next is that the trader starts to earn substantial and progressing profits.
The simplified situation here actually does not consider the possibility of draining a trading account with many turnovers; it just explains how constant market motion can be taken advantage of easily. Trading Range is Formed Daily: This third hypothesis is as relevant to above two postulates as it is to the market. It specifies that during any given day the market begins and culminates at a certain trading range. The range is calculable based on analyses of a currency rate’s conduct on the earlier trading session or day. This calculation helps in identifying the amplitude with which the currency’s rate moves. This amplitude varies between currency to currency and even for the same currency due to cyclic oscillations. However, this amplitude is relatively stable in intraday trading, and can be used to determine/ forecast range for the current day.
With help of the above explained theoretical background, it becomes clearer to formulate tactics and strategy for trading. The Igrok method does not deny the fundamental nature of exchange rate fluctuations; however, in practice it ignores it as it deems that speculative profit taking is not affected by it. Igrok method is based on the basis of a trader’s reaction to market signals. These basics are then used to develop market-trading models or templates that identify buy or sell signals. A trade takes place when a certain template matches the prevalent market conditions. Each template is essentially a collection of actions that are taken by traders in a certain order. These templates estimate market movement probability in either direction; money management factors and rules of technical analysis are utilized in estimating the probability.
With this method of trading, trader’s evaluate the probability of future market behavior. However, this method is also prone to giving false signals, therefore money managements and use of supporting technical tools is not disregarded. Igrok method helps the traders in their only major concern, and that is to remain on the right side of the market and at the right moment.