How To Use Fuzzy Logic In Currency Trading?

16 December 2016, 12:23
Ahmad Hassam

Boolean logic gives crisp answer for each question. Either it is a TRUE or FALSE.

In real life we know nothing is black and white rather we are dealing with shades of grey.

The same applies to trading. All technical indicators are grey and vague. You have no clear cut answer.

Take the example of candlesticks. Candlestick patterns are vague and imprecise.

Overall accuracy of these candlestick patterns is low when you back test them.

So where is the problem. Problem is in our modelling.

We are using Boolean Logic for things that are not black and white in nature.

Read this blog post in which I show how Fuzzy Logic can solve most of our problems in trading.

Of course the end result depend on how you make the model.

We can model candlestick patterns using fuzzy logic.

We can model technical indicators like MACD, RSI, Stochastic etc using fuzzy logic.

If you are a system developer you should try Neurofuzzy models.

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