DislikedSo you can say that my strategy is bad, but please before try to understand and test it, only in this way our posts can be useful, maybe you're right , my strategy will lose, please can you say me why? can you prove me? or you just say me it's bad and stop?Ignored
I understand what you're saying.
Nobody knows the future. Therefore nobody can say with total assurance that your strategy won't work.
All I'm saying is that between 2-3 million traders are currently running MT4 (or so I read), many thousands have no doubt tried and failed, and there are others using different charting platforms. Hence I think it's safe to assume that every approach that can possibly be thought of, has been tried by somebody. Sure, there are variations upon variations, but how many broadbrush concepts are actually possible?
Big institutions continue to spend millions on the salaries of market analysts. If it was possible shortcut this, i.e. make money without performing some kind of (fundamental or technical) analysis, then I'm sure that they would do it.
IMO casino games are a good analogy to trading. Roulette can't be beaten unless you can find a physically biased wheel. It doesn't matter what strategy you use, or what MM, the house edge is always 2.70% (or 5.26% on wheels with 00) against you, and if you play for long enough, your performance will trend toward this mathematical expectancy. Of course you can get lucky by simply placing a few big bets, and then quit while you're ahead. There is no type of analysis that can beat roulette in the long term; the mechanics of the wheel, and house edge, remain the same no matter what you try.
Blackjack, by contrast, is potentially beatable mathematically, because the composition of the deck is constantly changing. If you place bigger bets when there are a greater percentage of high cards remaining in the deck, you can overturn the house edge (videos like this explain it in greater detail).
IMO much the same applies to forex. The 'rules' are more flexible (e.g. you can scale in, out of trades etc) but the same principles apply. For example:
1. Br0ker costs like spread and commission have exactly the same effect as the house edge.
2. Setting a TP and SL is just like deciding whether you'll place a 1:1 payoff or 36:1 payoff bet in roulette; if you take 1:1 RR trades (TP=SL), then over time you'll win approx twice as often as if you take 2:1 RR trades (TP=2xSL), because the market rises/falls on approx 50/50 basis. Hence there is no real edge in this: if you take low RR trades (SL>TP), you'll have a high win rate, but your losses will be commensurately bigger; if you take high RR trades (TP>SL), then you'll have a low win rate, but your wins will be commensurately bigger. If you want a 99% win rate, then simply have a SL that's 99x as far away from entry as your TP; you'll win almost all the time, but when the one loss comes along, it will wipe out the 99 wins.
3. You can use exactly the same MM strategies (anything from flat staking to martingale) with both casino games and forex.
4. It's possible to show mathematically that, if price rises/falls on exactly 50/50 basis, at every point in time, then ALL trading systems would have an expectancy of zero, and eventually fail due to costs. Just as with roulette.
So where can an edge in FX possibly come from? (In blackjack, if we could bet 0 units when the deck was unfavorable, and 1 unit when it was highly favorable, we would own half of Nevada in a few months. But this suspicious gameplay would have us banned, whereas with forex there are no pit bosses scrutinizing our play — we can do whatever we wish). The analogy with trading holds good, when markets are favorable we risk 1 unit; when they're not, we risk 0 units by not trading. So how do we know whether markets are favorable or not? The answer is proven, high quality analysis. We need to wait patiently for situations when imminent price movement is not 50/50, giving us a "directional bias"; or otherwise some kind of "behavioral bias" (e.g. we don't know which direction price will move, but it's currently highly congested, and a good size breakout is likely).
Anyway, those are the reasons why I believe that strategies that lack some kind of analysis will eventually fail, because they have no real edge to overcome the br0ker costs. Sure, we can tinker with win rate, by adjusting the RR of our trades; but if RR and win rate are approximately inversely proportional to one another, then (regardless of which strategy we use) our profit factor, ignoring costs, will always oscillate around 1. We need to find a way of breaking this equilibrium between RR and win rate, if we want a PF that's sufficiently greater than 1 to overcome costs.
We can also employ different types of MM (varying position size), but this gives us no real edge (see PipMeUp's mathematical proof here).
If you have a RR/win rate balance that gives you a 99% win rate (i.e. SL is 99xTP), then the strategy will be difficult to test, because losing trades will be very rare, possibly giving you misplaced overconfidence; but if you're unlucky enough to get 2 or 3 consecutive losses, then they can potentially cripple your account. And even if your exits are more complex than simply using a SL and TP, you can still calculate both win rate and average RR from your closed trades.
So my basis for questioning your strategy, without actually backtesting it myself, is that I don't see any analysis that's needed to break the RR/win rate equilibrium. But having said all this, with leverage and some luck, anything is possible, if you want to use forex as a vehicle for gambling, and quit while you're ahead. What I've been talking about is a long term edge.
But anyway, the best person to test your strategy is YOU. I wish you continued success.
Sorry if this post is garbled, it's 3:45am here in NZ and I'm hurrying it so that I can return to bed.
David