A Probabilistic Approach to Diversified Trading Strategy: A Focus on the London Session

Forex London Session

As a seasoned trader, my approach to the market has evolved through years of experience, losses, wins, and understanding the power of probabilities. This article is an attempt to pull back the curtain on my specific trading strategy that hinges on the principles of probabilities, portfolio diversification, and targeting the dynamic London trading session. It’s a methodology that relies on bar charts without the clutter of indicators, with trades spanning the 4-hour plus time frame. 


Understanding Probabilities in Trading

Forex trading, at its core, is a game of probabilities. A single trade may win or lose, but over a series of trades, patterns begin to emerge that inform the trader of likely outcomes. When I place a trade, I don't view it in isolation but as a part of a larger series of trades. This mindset allows me to detach emotionally from the individual trades and focus on the long game. 

Every trade is like a coin flip with probabilities attached. The aim is not to be right on every single trade, but to ensure that over a series of trades, the ones you get right outweigh the ones you get wrong - both in number and in volume.


Creating a Diverse Portfolio

For me, diversification isn’t just about mitigating risk; it’s an active strategy to maximize opportunities. I diversify my portfolio across different currency pairs and, sometimes, various asset classes. This diversification helps me spread risk, exploit numerous market conditions, and avoid overexposure to a single currency or asset.


Trading the London Session

The London session, renowned for its volatility and high liquidity, is where I have focused my trading attention. It opens a vast opportunity for making significant gains because the European market overlaps with both the Asian and North American markets. 

Every trading day, I open five or more trades right at the London open. The sheer volume and volatility at this time provide ample opportunities for these trades.


The Bar Chart Strategy

The simplicity of a bar chart is its most significant advantage. It represents price action in its rawest form, which is all I need. I don’t cloud my analysis with various indicators. I focus on understanding market trends, support and resistance levels, price patterns, and other formations that the bar chart reveals.

I usually operate on a 4-hour (or more extended) timeframe. This longer timeframe allows me to sidestep the 'noise' associated with lower timeframes and catch more substantial, meaningful market movements.


Profits, Position Management, and Exit Strategy

Managing open positions is crucial. To do this, I have a set profit target for my total open positions. Once this overall profit target is hit, regardless of individual trade performances, I close all trades. This exit strategy is based on the principle that the market is unpredictable, and it's better to secure profits when you have them rather than aiming for the perfect exit on every trade.


In conclusion, my trading strategy leans on the mathematical concept of probabilities, portfolio diversification, exploiting the volatility of the London trading session, the simplicity of bar charts, and a sound exit strategy. This strategy may not be perfect for every trader, but it has been a product of many years of market experience and testing. Always remember, the heart of successful trading lies in risk management and consistent execution of your strategy. Stay disciplined, stay patient, and the market can reward you in ways unimaginable.

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