The Debate On Which Strategy Is The Best Has Finally Settled

To understand strategies, we must look at the origins of why they were created.

The earliest times of trading date back to 1602 with the Amsterdam stock exchange, and 1792 when the New York Stock Exchange (NYSE) started. Forex (Foreign exchange) has been around for thousands of years because of its nature of simply being a conversion of two currencies. It was only formalised in 1875 with the Gold Standard, and finally, in 1973, it became the market we know today.

Since the earliest signs of the forex market and other markets, the main strategy people were using was studying what the asset has fundamentally. In forex, the best way is to look at a country and see how well the country is doing compared to the other country in the pair. For example, looking at how well the USA is doing compared to the UK, then deciding whether you will buy or sell GBP/USD, selling indicates you believe USD will get stronger over the UK and vice versa for buying.

Now, this of course meant that intraday trading (Opening and closing positions within the same trading day) was much less common than it is today, simply because day to day it is very hard to determine which country has better fundamentals. It only starts to get clear once you look at 2-4 week performances. This meant that most traders were swing trader,s and lower time frame trading was seen as more “risky”.

Now, around this time, technical analysis, the study of price action, had existed, but it was not mainstream yet; it was seen as a gamble. Many traders believed that you cant just look at a price chart and know where it will go next, you must look at the fundamentals.

As time went on, many of these technical traders started making a lot of money and thats when it started to become more mainstream for most traders.

In those days, the biggest problem traders were facing was blowing their account (Losing all their capital) from 1 or 2 losing trades, or 1 to 2 trading days. This meant that in those days, traders had very bad psychology in the markets and had little to no self-control. Jesse Livermore is a good example; he was a really good trader but lost it all in a few years due to a lack of self-control.

Traders like Mark Douglas were some of the first to notice this, he started teaching and eventually helped many traders make the shift from technical analysis towards mental analysis, which had the goal of studying yourself and improving your self control in the markets.

After that came the 2000s, and the internet was booming; this made trading a much more mainstream business where anyone could get into it. This also meant that we saw an influx of new strategies coming from everywhere, and ultimately started the debate of which strategy is the best.

Fundamental traders vs Technical Traders vs Every other strategy, one has to be correct, right? No, in fact, all of them can be correct.

To put it simply, for a strategy to be considered correct, it must have a long-term edge in the market (Be profitable). If it has a long-term edge, that proves it is a working or correct strategy. Almost every strategy in today's market has the ability to work, and a strategy incorporated with mental analysis means you could be profitable.

The forex market is certainly difficult and very complex, which is why so many different strategies can work.

If you have a strategy, make sure to pair it with some good psychological study of yourself and your chances at succeeding will improve exponentially!