A personal note

A personal note from Stefan Steinemann, Technical Analyst at Dolefin

It is my experience that many people expect me to have a clear market opinion at any time. Certainly, my job is to establish every day market-scenarios based on technical analysis. But the user of the result of my technical research should keep in mind the following: The probability distribution concerning my "favoured scenario" does not always offer a favourable trading opportunity! For a better understanding of what I mean, consider the following simplified situation.

My favoured scenario indicates a good chance that a just tested support zone will provoke a rebound of 2 figures. However, if I can put a reasonable stop loss only 1 figure below the current spot price, the strategy implies a potential profit to loss ratio of 2:1. The expected reward is not attractive enough in relation to the potential loss. In other words, the favoured scenario does not offer a convincing trading opportunity.

Good trading opportunities arise at times when most of my technical indicators point in the same direction, offering a potential reward at least three times as big as a potential loss. These are occasions where one can trade comfortably not only to make up for losing trades that have been cut short in the past but to add substantial value over the long run. In this respect I could imagine that the reader of my researches would like to see a level of confidence in form of a rating attached to the published scenario. This is not an easy task because the weighting for the different technical indicators remains a subjective endeavour and is therefore difficult to quantify.

On our FX-Comments page, we publish our favoured scenario on a daily basis even at times when it does not offer good trading opportunities. On Dolefin's unique "Hot Spots" page, however, we only publish FX-scenarios that we believe show a high level of confidence and attractive risk-reward ratios when and as they develop.

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