FX and Medicine – Part 3: Verifying the Logic

This is Geko.

Continuing from last time, this is about hypothesis testing work.

Last time we talked about medical hypothesis testing work.

So what is hypothesis testing work in FX? That is the theme this time.

First, the fundamental premise is,

"Why do FX trading at all?"

That’s a question that’s obvious, isn’t it?

To win and make profits, right?

Of course!

You might push back, but looking around, there are cases where actual actions don’t align with it.

Perhaps you’ve had experiences like this?

• Because it seems like it will go up (or down), you buy (or sell).
• Just to hold a position, you buy (or sell).
• Because a tool’s signal appeared, you hold a position (or exit).

If you’ve had such experiences, take a moment to reflect.

Was that trading rule tested to win?

As a developer of EA, when I think of a trading rule, I implement it in a programming language to create an automated trading system (EA), and perform backtesting based on historical data to verify it.

Sometimes I also aim to automate sign tools I’m tempted to purchase, testing them as much as possible with EA.

While the market world you can know about the past, the future remains a未知 (unknown) realm.

That’s precisely why we verify with past data and compare consistency with the past through forward testing.

Form a logical hypothesis, implement it as EA if possible (manually if not), verify with backtesting, and continue measuring with future data.

I believe this hypothesis testing work is the best approach to win in FX and generate profits.