Let me preface this by saying that I am not yet a consistently profitable trader. I mostly trade demo accounts or tiny lot-sizes. I've tried many systems, written numerous EAs and have most recently been developing a manual trading system of my own. This system appears, on my manual back-testing to be profitable, but I am hoping to code most of it so that its true efficacy can be tested without any allowance for human "curve-fitting". This brings me to my thoughts on the trader's edge.
There are some accepted "truths" in the forex world. One of which is that round numbers serve an important role in support and resistance. My challenge to anyone out there is - prove it.
You can draw any number of horizontal lines on a chart and price will appear to 'react' to these lines. There are so many turning points in price that anything, be they moving averages, trendlines, or price levels will appear to be 'respected' in some way by price movements.
Let's say that whatever system you're using suggests that a new trend is beginning, however a round number lies in your path. Is it best to avoid the trade because of the round number? Common trader knowledge would, I assert, be yes. Wait until the round number is breached before taking an entry. However, does this actually give us an edge - can we prove this is any way? If it truly is the case that round numbers provide a strong level of S&R then could we simply not, with a random entry EA, take what would be a 50% win rate, and improve the edge simply by adding a round number filter? If not, why not?
I guess my point can be boiled down to two things:
1. The 'truths' of the forex world are often taken for granted. What proof do we have that they are not just myths?
2. Price will appear to 'react' to whatever lines and MAs that you put on the chart. For every bounce off a round number, surely there's the same number of bounces off any other number.
There are some accepted "truths" in the forex world. One of which is that round numbers serve an important role in support and resistance. My challenge to anyone out there is - prove it.
You can draw any number of horizontal lines on a chart and price will appear to 'react' to these lines. There are so many turning points in price that anything, be they moving averages, trendlines, or price levels will appear to be 'respected' in some way by price movements.
Let's say that whatever system you're using suggests that a new trend is beginning, however a round number lies in your path. Is it best to avoid the trade because of the round number? Common trader knowledge would, I assert, be yes. Wait until the round number is breached before taking an entry. However, does this actually give us an edge - can we prove this is any way? If it truly is the case that round numbers provide a strong level of S&R then could we simply not, with a random entry EA, take what would be a 50% win rate, and improve the edge simply by adding a round number filter? If not, why not?
I guess my point can be boiled down to two things:
1. The 'truths' of the forex world are often taken for granted. What proof do we have that they are not just myths?
2. Price will appear to 'react' to whatever lines and MAs that you put on the chart. For every bounce off a round number, surely there's the same number of bounces off any other number.