Traditional Strategies For Forex Traders

To most traders, strategy is synonymous with trading techniques—one or more of
the many flavors of price charts or indicators such as oscillators and moving averages.
In GSIFTS, strategy refers to the three primary elements that define a trader:
trading techniques, money management, and the soft elements of market selection,

trader profile, tactics, and psychology. Together they compose a trader’s style.

A traditional trading strategy includes a charting technique such as point
and figure or candlestick charts, a number of technical indicators, and perhaps
a few other tools the trader has found useful in previous trading. Money management
is typically an ad hoc set of rules for limiting losses, maximizing gains,
and entering and exiting a trade. Most traditional strategies rarely consider
style, or soft elements, in any depth.
Traditional strategies represent a linear approach to trading. Each strategic
element is separate from the other. The elements don’t communicate very
well, if at all, with each other. The codex approach, introduced herein, applies a
process paradigm to the elements and to trading.

There is nothing inherently wrong with traditional strategies and the elements
approach. Some traders are very successful with them. A plethora of
print and online material currently exists for the traditional trader. But let’s
look at the facts. The FOREX market is not unlike other highly leveraged markets,
such as options or futures. The statistics are not pretty; nearly 90 percent
of new traders lose their initial account deposit in less than six months—most
of them using traditional strategies.

I recently attended a FOREX convention in Las Vegas. I observed someone
lecturing on chart support and resistance points. Useful information, to be
sure, but probably not in the way the lecturer intended. The vast majority of
traditional currency traders will be looking for the same or nearly the same support
and resistance points. The market never cooperates with the majority; if it
did, everyone would be a winner and it would soon cease to exist. To the codex
trader, the traditional support and resistance points are useful only to see what
other traders are thinking. The codex trader will seek to find the market’s true
stopping and turning points.
The Codex