The Trading Channel
The YouTuber presents a simple trading strategy that has a 100% win rate since 2005. However, he also points out the importance of the frequency of trades. He suggests testing the strategy on different currency pairs or smaller time frames. He then introduces another strategy with a 70% win rate, which has a higher frequency of trades. He advises traders to pay attention to frequency when developing a trading strategy.
The Importance of Frequency in Trading Strategy Development
Introduction
As a trader, your success relies on your ability to develop strategies that are both highly accurate and frequent enough to generate a consistent profit. The challenge is finding the sweet spot where a strategy is accurate enough to produce reliable results, but also frequent enough to offer ample opportunity for trades. In this article, we’ll explore the importance of frequency in trading strategy development. Specifically, we’ll examine a strategy that has won every trade since 2005, and why it may not be the best choice for profitable trading. We’ll also introduce a strategy that offers a high chance of winning trades, while also providing more frequent trading opportunities.
The 100/200 Strategy
The 100/200 strategy is a simple yet highly accurate strategy that has won every trade since 2005. It involves looking for 100 candles or bars that have not touched the 200 period moving average (EMA). Once this condition is met, the trader waits for a test of the 200 EMA and an entry signal, which is a close above the high of the previous candle. The context of this strategy revolves around being above the 200 period moving average for 100 days or more, as this indicates an uptrend. By buying after a deep retracement to the 200 EMA, the trader is essentially taking advantage of a significant pullback in a bullish trend.
Frequency as a Consideration
While the 100/200 strategy is undoubtedly accurate, its frequency of occurrence may not be sufficient for profitable trading. In the 15 years since 2005, there have only been seven trades based on this strategy. To put that into perspective, a trader who relies on this strategy alone would have had fewer than one trade per year, on average. This infrequent occurrence can cause issues for traders, as it may be inefficient or unprofitable to rely on a strategy that produces so few opportunities for trades.
Alternative Strategies: The 70% Win Rate Strategy
To address the issue of frequency, traders can look to alternative strategies that offer a high chance of winning trades while also providing more frequent trading opportunities. The 70% win rate strategy is a good example of such a strategy. While it doesn’t have the same level of accuracy as the 100/200 strategy, it does allow for more frequent trades. The strategy involves taking trades in the direction of the trend when the price breaks above or below a key level of support or resistance. This level can be identified using various technical analysis tools such as trend lines, moving averages, or Fibonacci retracements.
Why the 70% Win Rate Strategy is a Better Choice
The 70% win rate strategy is a better choice for several reasons. Firstly, it allows for more frequent trades, which means more opportunity for profit. Secondly, it relies on the trend, which is a more reliable factor than a specific condition such as the number of bars that have not touched the 200 EMA. Finally, it can be applied to a variety of currency pairs, time frames, and markets, making it more versatile than the 100/200 strategy.
Conclusion
In conclusion, while accuracy is an essential part of trading strategy development, frequency of occurrence is equally important. A highly accurate strategy that produces few opportunities for trading may not be the best choice for profitable trading. Traders should instead look to alternative strategies that offer a high chance of winning trades while also providing more frequent trading opportunities. The 70% win rate strategy is a good example of such a strategy, as it allows for more frequent trades and is more versatile than the 100/200 strategy. As with any trading strategy, traders should thoroughly test and analyze their chosen approach before committing real funds.
