7. Information Management and Analysis
The trading strategy that is outlined in the previous chapter is quite a conservative approach in that there are quite a lot of stages for a market to pass before it can be traded. But this is necessary as we must always remember that our goal is to increase our win rate. Don’t worry if it seems a bit complex at first as it will become very familiar very quickly for anyone using the approach.
At its core is the premise that we never know what any market is going to do and so we try to eliminate from consideration markets that do not look like they are going to move in a particular direction. One result of this process is that it can generate quite a lot of information. This is particularly the case in relation to longer timeframes where we are eliminating a large number of markets in favour of a few that hold promise.
We need a way to capture the results of this analysis – an information management system for our trading. After all, information is only useful if it is available when needed, can be interpreted properly and can be used. A trader will have to record the results of the analysis of markets in such a way that it will be available later. The problem is that if it is written in summary form then it can be open to mis-interpretation whereas long written reports will not be read. Just try it! If you write something today and return to it tomorrow or the next day you will not read it properly, especially if you have a number of such reports to read each day. Mistakes creep in.
How a trader manages the information that is generated by the analysis undertaken is a very fundamental issue to be addressed but is seldom discussed. One way is to try to replace data with colours. So, for example, if a particular market is suitable for trading then rather than writing this out simply have a way to colour references to it.
This is basically what is done by the 4x4 BOSS – Binary Options Strategy & Setups. This spreadsheet-type software is used by BinaryOptions4x4.com members to record the results of the analysis they undertake. The beauty of the BOSS is that on one page it can be instantly seen for any particular market, or up to 10 markets:
Therefore, it can instantly be seen if there is an opportunity to trade the market and, while this does not yet tell us to enter a trade, the BOSS map tells us which set-ups should be used should a trade be taken. There is no need for long-winded written reports, no need to read and reread text, and no room for misinterpretation. Here is an extract from a BOSS report3
It is possible to see, at a glance, which markets have a hot trend – they have more red cells under the Screens and Strength columns. The direction of the trend is also immediately obvious as is the direction in which a trade will be taken, should a trade be taken. The Extended? And Diverge?’ column indicate if there are concerns about the trend that might prevent you from trading. Finally,. The BOSS shows which setups should be considered if a trade is taken. In effect, if a setup is indicated then the market is worthy of further analysis to see if a trade should be entered.
When this analysis was produced, the EURUSD was displaying quite a strong downtrend with a number of possible setups indicated. However, there were much weaker trends on GBPUSD and Gold. The trends in USDJPY, S&P500 and Oil are all strong but there are concerns about these markets being overly extended or having technical weaknesses that could make them prone to a pullback. Some set-ups could still be considered, but caution is advised.
The BOSS provides all this analysis for both the daily timeframe (shown above) and the 4 hour timeframe. Having this information to hand means that a trader can assess at a glance which market offers the best opportunities for trading and should therefore be analysed further. It also means that the results of the analysis are clear afterwards, even if the analysis is put aside for a period of time. BinaryOptions4x4.com members are provided with all the information that is required to undertake the analysis in connection with the BOSS, as well as how to read and understand the chart.
