Strategy Video: Setting Reasonable Objectives for EURUSD, GBPUSD, USDJPY

By DailyFx | Updated July 30, 2014 AAA

DailyFX.com -

Talking Points:

• There's a cognitive bias - exaggerated expectation - that leads traders to expect too much from each trade

• Filtering out good setups is only a first step, holding and exiting the trade is just as critical

• We discuss how technicals, fundamentals and market conditons shape the setups for EURUSD and the majors

Market conditions change, and our strategy should reflect those changes. We have coded the DailyFX-Plus strategies for Breakout, Range and Momentum to adapt to these market shifts.

How often do we see high order technical setups with thousands of pips in potential, and enter with the expectation to trade the entire breadth of the pattern? Trading is a probability game; and covering 100 percent of a range, reversing a full-scale trend or wringing every pip from an unaccounted fundamental theme is an exceptionally low probability. Continuing with some of the principles of yesterday's Strategy Video on 'potential' versus 'probability', we discuss establishing reasonable expectations and trading plans for individual opportunities. Then we apply this practice to EURUSD, GBPUSD, USDJPY and AUDUSD.

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