The definition of risk can be altered according to the way you perceive it. Hence, you can choose to define it in multiple ways. This same concept can be applied by individuals in order to comprehend the reason for classifying moving average-strategies as risk elements.
Volatility is synonymous with risk and incomparison with the market; moving average-strategies are considered to contain lower risk factor. But they are affected by another variation of risk which deals with calculating the time period the strategy stays underwater.
From this perspective, you can conclude that moving average-strategies are indeed full of risk. Even under the presence of favorable conditions, there have been instances of the best moving average strategies underperforming below the market expectations and that too for a long period of time which can stretch to several decades.
Step 1: European Session (London) as trading time
In the first step I will choose right time for trading. As the trading day progresses, the European session takes over the responsibility of keeping the currency market active as soon as the Asian trading hours come to a stop. The FX time zone is pretty condens…