On the shifting paradigm of prediction: A Countinghouse primer

The Market Can Remain Irrational Longer Than You Can Remain Solvent.

-John Maynard Keynes

In bygone trading eras, characterised by issuing instructions to your broker via telephone, swing trading and a positively languid pace of market movement when compared to the present, one could certainly be forgiven in thinking they could predict the medium long term movement of the market. It is a method that gave birth to price action strategies, where one could glean patterns amidst the candlesticks and overlays that are still popular with novice traders today. Not to be caustic, but those traders will remain novice if they subsist on such measures.

No trader I know today will yield acceptable returns following archaic methodology that is not apace with modern market speed, and more importantly, the market’s vulnerability to the impact of algorithmic trades and strategies. Automated trading and deep learning strategies have shifted the paradigm of market prediction, altering what can be deciphered from charts in a significant manner.

A trading system does not have to be automated. Manually executing orders is still an efficacious trading input, especially suited to traders that have not yet delved into learning to program strategies. More often than not, however, manual trading is accompanied by simple price action strategies designed to predict market direction, often in day trading settings. This method is vulnerable to markets responding to algorithms/bots that will respond to different criteria than what day traders are predicting, or more accurately, hoping will happen. This is not an uncommon approach, in fact the Countinghouse traders employed tried and true price action strategies when they were learning the market.

Evolution, reflexivity and a penchant for three dimensional mathematical solutions formed the rungs of the ladder in which we slowly climbed above conventional trading methods and started seeing far more stable and significant return on investment. Prediction is, traditionally speaking, out the window. Entries and exits are signalled via criteria generated through algorithmic input, not visual representation of volatility and arbitrary durations of time.

Trading signals based on the application of statistical models as well as fully automated chaos theory-based algorithms are offered by Countinghouse, with the former catering to professional investors looking to capitalise on Forex volatility without needing the larger initial investment that our algorithmic approach requires. Contact us to tailor a solution to your investment needs.