George Lane Trading Strategy
The biography of any successful trader is full of curiosities and interesting moments that completely predetermined his life.
This probably happens to every extraordinary person, because you must admit that achieving such enormous heights and financial position is not given to ordinary people.
George Lane, his fate would have turned out differently if he had not accidentally ended up on the stock exchange.
A simple student, dreaming of continuing the family dynasty of doctors, suddenly gave up everything and became a trader.
However, while almost everyone can get acquainted with his biography, there is practically no information about his trading strategy, money management models and actually working techniques.
Ask why? Yes, because his strategies for Forex are banal and simple, moreover, many of you involuntarily applied them in real trading.
This is what he actually did throughout his entire career as a trader, since most of his positions were speculative and closed within the trading day.
Lane’s strategy is truly simple and universal, and in his interview with one of the financial newspapers, Lane personally pointed out that his strategy can be applied to absolutely any asset and time frame.
Therefore, it is perfect for both speculators and long-term investors. But the most interesting thing is that anyone can master it, since it is an indicator type.
Introduction to the Basics of George Lane's Strategy
George Lane did not go down in history because of his enormous capital. No, such sharks as Buffet and Soros have long since surpassed him by amassing billions of dollars.
The fact is that George made his enormous contribution to technical analysis, since he created the well-known stochastic oscillator, or a more well-known name in the language of traders “Stochastic».
If we talk about the basic principle of the stochastic oscillator, which actually became the basis of Lane’s strategy, we can state the fact that this is the most impulsive and at the same time reversal approach.
Even Lane himself gave an example of a rocket, which, having reached its maximum height before falling, must necessarily slow down, smoothly indicating to us that his indicator is interesting in that it finds overbought and oversold levels.
The most interesting thing is that of all the variations of the use of stochastics, which are described on various resources dedicated to stock exchange topics, Lane used only two, and always in pairs, namely Divergence and overbought and oversold.
It is worth noting that the stochastic oscillator at this stage is present by default in any platform, and the desktop with the tool applied looks like this:
Strategy signals.
Divergence George Lane, when trading his own oscillator, relied purely on divergences, arguing that this type of indicator signal is the strongest.
It should be understood that divergence is a reversal signal that most often appears at the peak of the market, and trading on it always occurs against the trend in the hope of catching the reversal.
If we talk about the practical plane, then the divergence of the stochastic is manifested in the discrepancy between these indicator lines and the actual price behavior.
A classic example of divergence in a bullish trend is the moment when the stochastic oscillator records a new price high as lower than the previous one, which in reality is not the case.
An example of bearish divergence usually appears in a situation where the stochastic lines show that the new price low of the trend is higher than the previous one, which is not the case in reality.
It is worth noting that divergences for George Lane were only powerful if they appeared in overbought or oversold zones.
So, let's look at the signals for buying and selling. Signal to buy:
1. The stochastic line is in the oversold zone (below level 20);
2. On stochastics, when it is in the oversold zone, a bearish divergence is recorded.
Example:
Signal to sell:
1. The stochastic line is in the overbought zone (above level 80);
2. On stochastics, when it is in the overbought zone, a bullish divergence is recorded.
Example:
George Lane always used a stop order in his strategy, and made sure that it was much smaller than the potential profit from a reversal.
In one of his interviews, he said that the only thing a trader can definitely influence in the market is the size of his own loss.