Brief Note on Developing a “Variant Perception” by Sam Eder

Variant perception is a term coined (to the best of my knowledge) by famous hedge fund manager Michael Steinhardt. It means having an idea with an edge that is different to the consensus.

For example, when the Fed started printing money for QE, the mainstream was preaching hyperinflation. The variant perception was that due to demographics, deflation, and the slowing velocity of money, the USD would eventually strengthen instead of weaken. This is an idea you can trade.

For Steinhardt it was an idea that a stock should be a different price because “the street” is not pricing in market information correctly, or does not know something about the stock that he does. The trade that made Steinhart was based on the variant perception that interest rates on bonds would go down and not up as most widely followed analysts were suggesting.

Many good traders who consistently pick the market well are experts at variant perception, although they probably don’t describe themselves using such a fancy term. Developing a variant perception starts with asking questions. If you don’t have a variant perception about a currency pair, what can you do to develop it? How can you dig deeper, create new ideas, or build your support network in order to form a tradeable view?

Perhaps you have a variant perception on some currency pairs but not others. What would it take to widen that perception to different currency pairs? What data do you need to form a strong view that a currency pair is going to move in a certain direction, so that you have the confidence to stake a decent sum of money on it?

About the Author

Sam Eder is a currency trader and author of the Definitive Guide to Developing a Winning Forex Trading System and the Advanced Forex Course for Smart Traders. He is a part owner of Forex Signal Provider (You can get a free trial). If you like Sam’s writing you can subscribe to his newsletter for free.

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