Discretionary Trading - Take Your Trading To The Next Level | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

MT5 indicators that will take your trading to the next level 4 replies

my new discretionary trading system 4 replies

Systematic Trading vs. Discretionary Trading 14 replies

Discretionary Trading for all pairs. 11 replies

Discretionary Traders - Don't Talk About Your Open Positions 10 replies

Discretionary Trading - Take Your Trading To The Next Level

  • #1
  • First Post: Edited 5:39pm Jul 8, 2017 1:42pm | Edited 5:39pm
Notice one annoying thing with any trading system that you use in the market?
- You perform well in one setup, and do badly another day in another identical setup. Any decent trading systems will appear to go through a period of good performance followed by a period of bad performance. Every losing trade eats up your profits no matter how small they are, often resulting in a small return or a small net loss, even if you followed your trade plan, managed your trades and risk well.

As traders, I feel that it is important to do whatever it takes to maximise profits and minimize losses, while keeping the risk in check.

The following concept is good for traders who are already proficient in mechanical trading.

The market tends to change its price pattern movement every day/week/month/year/decade. Same chart pattern/setup does not ensure same price pattern movement all the time!

If you think over your last few trades, how often is it that you get winning streaks using the same trading system on the same setup? Rarely so!

Mechanical trading, following your plan and rules, is essential to trading success. But if you can get in tune with the market's flow, it will lead to potentially better performance.

The smart thing to do is adopt the contrarian approach:
Once your system perform well on one trade. The next time you see your favourite setup, be extra careful. Be prepared that the market might do something this time round. Either reduce your position size more than usual; don't trade; or even consider trading against your own system [eg. switch from range trading to breakout trading (or vice-versa)]. You might find your trading performance improves.

You trade the market like a smart thinking trader (like playing a game of high level chess), rather than a person who does the exact same thing everyday without thinking (using the same strategy rarely works twice in a row against a strong opponent in chess).

Some people say that good trading is boring because it's all about trading your system systematically and following every rule. I beg to differ. If you mix in some discretionary trading with sharp trading instincts, trading might potentially become just as stimulating a game to play as a good game of chess.
'For the market to work, it needs people who think that they can beat it.'
  • #2
  • Jul 8, 2017 2:50pm Jul 8, 2017 2:50pm
If a trader has an edge, why would he deviate from that? If a trader doesn't have an edge, no matter how he varies his strategy, he won't make money on the long run.

Your way of reasoning is called the gambler's fallacy:

https://www.logicallyfallacious.com/...bler-s-Fallacy

Varying your strategy based on gut feeling, or because "it worked last time, so it has lower chance of working this time" has nothing to do with instinct, or professional trading behaviour.
Price and volume reveals everything. The market moves on supply and demand.
  • #3
  • Edited 6:00pm Jul 8, 2017 4:09pm | Edited 6:00pm
Quoting Darastonius
If a trader has an edge, why would he deviate from that? .
What you mean by an edge? The trader himself or the system, or both?

Quoting Darastonius
If a trader doesn't have an edge, no matter how he varies his strategy, he won't make money on the long run.
Again, same as first reply.

Quoting Darastonius
https://www.logicallyfallacious.com/...bler-s-Fallacy
Geez... Are you actually implying discretionary traders are gamblers??

Gambler's fallacy: if something happens more frequently than normal during some period, it will happen less frequently in the future

.... has nothing to do with discretionary trading. Can't believe you actually brought this into the discussion. You don't know traders with gambler's fallacy issue are usually very bad traders?

Discretionary trading is trading based on one's observation or experience of/on the market (not just lazy habit of: 'whenever I see this chart pattern/the price hit this level, I buy/sell here/there'). It's a more dynamite way of trading than pure mechanical trading. Fusing mechanical and discretionary trading would be ideal in my opinion.

Discretionary trading is a more advanced way of trading, and should only be used by traders who are very proficient at the key elements to good trading: position sizing, managing trades, risk and emotions...

Quoting Darastonius
Varying your strategy based on gut feeling, or because "it worked last time, so it has lower chance of working this time" has nothing to do with instinct, or professional trading behaviour.
Varying strategy because you see this WLLLLWLLLLLW for example. W=Profit L=Loss

If you see such performance repeat itself long enough. It's not difficult to understand why toning down is not a bad idea when you see your favourite setup again after you made money with your setup from a previous trade.

UNLESS you are a scalper with high win rate, which has nothing to do with bad win rate anymore.

Discretionary trading is trading based on instinct and experience (and be right slightly more often because one's instinct is right more than half the time)

Gamblers place bets/trades based on hunches or systems/chart patterns/indicators overly used by retail traders.

On the contracy, I would say trading a setup the same way with the exact same strategy with the same position size every time is extremely risky, because you refuse to address the possibility that the market might do something different in the same setup you made profit from in the previous trade, and would rather risk getting into a bad trade.

Which implies, for example, say your win of $1000 from your first trade will be reduced to $200 net profit, after you take 4 consecutive losing trades with loss of $200 each. (All same setup) Seems like a profitable system there. Sure, you did make net profit. But....
[Win, Loss, Loss, Loss, Loss]

If you used smart discretionary trading in the above example,
Option 1: Trade smaller size in the setup after your first win, your net profit would be $300 or more.
Option 2: Don't trade the setup after your first win, your net profit would be $400 or more.

Your net profits would be even better, if you purposely skip 3 or 4 setups and let patience pay you off with net profit of $800 or $1000. Sure, you might miss good trades from not trading your setup, but I will choose the option of safe profit (from trading less or being more selective) over risking away my profits any day!

Quoting Darastonius
Varying your strategy based on gut feeling, .
Not gut feeling. It's based on long term observation of one's trading system's performance.

I mentioned lowering position size or not trading as the first 2 main options.

Varying strategies, the third option, is a even more advanced level than simple toning down (should be only attempted only if you are very good in this area). If you play chess, you will get why it is important to have different strategies at your disposal. If your opponent (the market, the big players/professional traders) know what you are going to do - that is placing the exact same trade as the previous setup you made money from, he/it sure knows how to take money away from you for sure, by making the market price take on the exact opposite pattern/direction!

Quoting Darastonius
or because "it worked last time, so it has lower chance of working this time" has nothing to do with instinct, or professional trading behaviour.
I mentioned it's based on observation of one's trading system's performance. It is smart trading. But this way of trading is not suitable for traders who can't even mechanically trade properly.

Note: There are many other types of discretionary trading. I am talking about a way of trading I find very useful in improving performance.
'For the market to work, it needs people who think that they can beat it.'
  • #4
  • Jul 8, 2017 5:32pm Jul 8, 2017 5:32pm
Thx A for starting this thread.
I totally understand what you mean here and its nice to see fresh ideas. That's how you go out of the loser mentality of trying to do the same as all the other losers are doing.
All this makes me think a lot about the idea of being contrarian in trading lagging indicators. let me explain: Your nice blinking indicators tell you that your favorite pair is super bullish right now. Indeed! You just missed the big move. So you get long since your stochasshit shows you a nice bullish crossover and you see the market turning on you immediately and you get it deep in the a**. So for sure, when you await for a move which actually happens in your favor, there is a big chance that it reverses after that, our that it goes in range mode. No matter what, you can't expect to get the same move and take the same trade successfully after the retrace.
So yes I totally see your point. It has more to me to do with understanding the market mechanics than to gambling. For me doing always the same because you think you have a mechanical edge, that it's what I call gambling.
Good luck with your new thread my friend,
Peace,
C
  • #5
  • Jul 8, 2017 7:49pm Jul 8, 2017 7:49pm
Quoting Carlton
All this makes me think a lot about the idea of being contrarian in trading lagging indicators.
Indicators do not lag. Indicators recalculate as price changes with new incoming tick data, there is no delay so no lag.

dkrock, I don't think Carlton understands anything about that buffer cycle examples. Lol

Discretionary decisions with specific rules is also part of a mechanical method.

Whereas discretionary system without set rules makes it guessing and the extent of guessing content depends on how structured it is and if with/without rules/parameters.
  • #6
  • Edited 11:28pm Jul 8, 2017 11:13pm | Edited 11:28pm
Quoting AlastorFate
Notice one annoying thing with any trading system that you use in the market? - You perform well in one setup, and do badly another day in another identical setup. Any decent trading systems will appear to go through a period of good performance followed by a period of bad performance. Every losing trade eats up your profits no matter how small they are, often resulting in a small return or a small net loss, even if you followed your trade plan, managed your trades and risk well. As traders, I feel that it is important to do whatever it takes to...

I agree and another good example is for the trader to recognize that the best trading comes from when they are on the right side of the order flow and then finding ways of incorporating that knowledge and information into their trading and system.
Never said I was Batman,all I'm saying is you'll never see us together.
  • #7
  • Jul 9, 2017 1:00am Jul 9, 2017 1:00am
Quoting AlastorFate
Notice one annoying thing with any trading system that you use in the market? - You perform well in one setup, and do badly another day in another identical setup. Any decent trading systems will appear to go through a period of good performance followed by a period of bad performance. Every losing trade eats up your profits no matter how small they are, often resulting in a small return or a small net loss, even if you followed your trade plan, managed your trades and risk well. As traders, I feel that it is important to do whatever it takes to...
Wow. Great stuff. I started a topic not long ago about similar approach. Posting to remember to read this again and think about it, but so far my two cents will be that different systems fit better in different market conditions, and it is very important to use proper tools, i.e. bet on breaking s/r in trends and bouncing off s/r in ranging markets. Distincting trending market from ranging market is a million dollar question thou.
Qqq Return Today: 0.7%
  • #8
  • Edited 11:52am Jul 9, 2017 1:06am | Edited 11:52am
Quoting dkrock
Once you have your edge, you have to just do it. .
No problem with clicking the trade button to long or short. It's more of a concern about reducing losses that can be reduced.

The question is, does the trader really have an edge or did he merely 'believe' he has an edge?

If a trader has been profitable with his trading every year for years, yeah sure, he probably has a solid edge. If not, no.

Quoting dkrock
Prior to risking money, you would have practiced it and modified it to provide profit at the end of your XX:XX trading period. .
Very tough to get a good result if you trade every setup based on the idea that the market has to react the same way for you to make profit.

If you are happy with the results you get from trading your system, trading every single setup every time it meets your criteria and pure mechanical trading alone, which I mentioned is great, cool.

Quoting dkrock
If you want to play around with guessing, you will eventually start hesitating, or even become paralyzed and just end up watching, like you advised people to do...sit out, LOL. If you were right, then you chastise yourself. If you were wrong, then you feel relieved. .
You are mistaken. It is the setup right after a winning trade that is the main focus.

The market tends to react in a different way (pattern/direction) on a setup, after you get a winning trade from a prior identical setup. A lot of traders don't watch out for this, and get a losing trade for nothing.

Nothing to do with fear or guessing.

For example, last Friday's NFP, the price pattern which the market took on is a big move in the direction of the main trend on the 4H charts on US pairs. In the next NFP, the market is likely to do something completely different. Traders who trade NFP and expect the market to react in similar way will be screwed.

Same thing goes for chart patterns and setups.

Quoting dkrock
Either way, you are not risking money, so what is the point of wasting your time? At this point, you might as well quit trading. .
Totally disagreed. No risk is most of the time better than taking a big risk. It takes on the form of trading only when you see your setup according to your system.

If you have already made profit with your setup. I don't see why it is such a big problem to skip your setup ONE TIME after a win, if based on your tests, your setup will fail right after a win.

Taking less trades and timing one's usage of one's system doesn't make one a bad trader.

How bad could your performance get, if you do the following?

1. See setup first time, buy. Win
2. See setup second time, Stop taking ONE TRADE -> if here, you get potential loss based on your tests, why must the trader force himself to trade this?
3. See setup third time, buy.
....

Quoting dkrock
You have spooked yourself into a fearful emotional state. .
Nothing to do with fear. More like an idea for people who encounter losing streak in their trading. It's worth trying this than dump a whole system altogether out of frustration.

Statistically, 9 out of 10 traders are losing traders. I don't have a single doubt that a good number of them take their trading seriously. Most traders don't understand why they get negative results no matter what system they use, and a lot blame it on their system (or the market). Then in trying to solve the issue, they might make changes to their system here and there to fit historical price pattern, which professionals know is a huge bias mistake itself. Or they dump their system and try to find a new one which most likely will fail too.

Quoting dkrock
As for me, I try ranges, so I am very systematic..
All styles of trading are fine. Some people want to go for discretionary style or mix it with mechanical trading.

Quite obvious every traders ought to think independently for themselves, and ultimately decide how they want to trade the market. External ideas are just what they are - just ideas - take what you find might work, dump those that you find don't work. Quite straightforward.

Quoting dkrock
Guessing means I am better than my math, which is never true. But hey, you can do whatever you want.
I mentioned it's not guessing.

Quoting dkrock
The traders you seem to be referring to in Post 1, obviously do not need your advice. We have done our homework, built our method, and performed hundreds of trades. ..
If no one needs advice new ideas, it probably implies there aren't any losing traders. On the other hand, I do not actually implore traders to seek advice, but rather pick up new ideas and learn to think for themselves - not to be spoon fed - far from it.

Quoting dkrock
If you are just trying to sort your own thoughts, then okay, but I certainly don't need advice about trading consistency, LOL.
Threads are directed at people who are interested in their topics. I never mention it's an advice to you or anyone in particular.

If it is not obvious, it is directed to people who are having a tough time getting good results with trading / their systems.

I assume you are already a consistently profitable trader with years of profitable results under your belt. Naturally, the content in this thread is totally redundant to great traders like you.

Quoting dkrock
The discretionary scenario (theory) of lowering risk after a win, might just pertain to you??
Lowering risk after a win is common sense. It's just like scaling out in a winning position. Protecting your profits. Why would you think it's absolutely beneficial to risk taking a high probability full loss right after a win??

If one doesn't get in tune with the market flow / be prepared for the market's possible changing behaviours, very likely the end result is a losing trader or a mediocre trading performance.

---------------------------

Depends on your win-loss cycle.

It's very common to see a loss right after a win. If the risk reward ratio is 1:1. It means you take 2 trades, risk two potential losses, and get nothing out of them.

Obviously, if the performance of your trading system is typically something like WWLLWLWLWW, you don't have to skip any setup.


Quoting dkrock
The only discretionary area of my trading is whether or not I trade against a news release. It's either a trade, or it isn't.
Sure.
'For the market to work, it needs people who think that they can beat it.'
  • #9
  • Jul 9, 2017 5:38am Jul 9, 2017 5:38am
Quoting skyway
{quote} Indicators do not lag. Indicators recalculate as price changes with new incoming tick data, there is no delay so no lag. dkrock, I don't think Carlton understands anything about that buffer cycle examples. Lol Discretionary decisions with specific rules is also part of a mechanical method. Whereas discretionary system without set rules makes it guessing and the extent of guessing content depends on how structured it is and if with/without rules/parameters.
Quoting dkrock
{quote} Yeah I agree. I deleted the post about how buffers and time work.
Wow... So what you guys are saying is that you actually know beforehand than someone you don't know understands something or doesn't. Keep up with the loser's mentality then. You actually don't look at what's in front of you and you only see the projections of your mind. So you actually don't trade what you see, but what you believe.
Well my friend, please go on this way so I can go on living of the money you give me. Because Skyway when you buy on your bullish signal from your so said not lagging indicators, I am the one you are buying from because the move already happened and you just missed it .
  • #10
  • Jul 9, 2017 10:06am Jul 9, 2017 10:06am
How often does the trend change?

If you had to take that many trades, its my hunch that you're overtrading.
  • #11
  • Edited 12:25pm Jul 9, 2017 11:22am | Edited 12:25pm
Quoting limzy
How often does the trend change?
It is very annoying when people make vague statements/questions like that.

Trend is a very complicated and subjective concept, how could you not know that as a trader?

There are uptrends and downtrends at any given time in every time frame chart of any given market.

Trend within trend. Uptrends within a downtrend. Downtrends within an uptrend...

If you want to talk about trend, please clarify the time frame and the trading style of the trader you are basing the idea on.

Quoting limzy
If you had to take that many trades, its my hunch that you're overtrading.
What quantifies as 'many trades'? Again, so vague and subjective.

The number of trades that YOU take is the official standard right amount of trades all traders should follow? Please...

Another thing, you don't understand the proper context of how the concept of overtrading should be used. Overtrading as a bad trading habit is usually applied to bad traders who take too many trades, many of which aren't necessarily trades that their systems dictate, commonly in the form of impulsive or revenge trading, resulting in bad trading performance. Which brings to another point - you will never know whether a trader is overtrading until you fully understand the details of his trading system, and how the trader typically trade during his live trading sessions. Keep that in mind!

Finally, never make wild guesses and assume you know what other people are doing. You don't.
'For the market to work, it needs people who think that they can beat it.'
  • #12
  • Edited Jul 10, 2017 2:00pm Jul 9, 2017 3:03pm | Edited Jul 10, 2017 2:00pm
'I still disagree because in my experience, you must take every signal'

A: Must take? Please... such a common idea from trading books/sites, every trader who has some basic trading knowledge knows about the idea to trade every setup. The issue is: does it work for the typical trader who is using a defective trading system? Trading every setup would mean blowing up accounts faster.





'because you do not know which trade is profitable and which is not.'

A: Wrong. I do know that the market tends to react differently with every consecutive setups, making a difference between a potential good/winning and a potential bad/losing trade. So from that, it is actually possible to know how well your setup will perform if the market takes on a different price pattern against your setup - a likely difficult/bad trade or a loss. It's statistical reasoning.





'For me, trading is an accumulation of probable trades that have an end-of-day profit. Whether or not an individual trade wins or loses has no effect on my overall profit. Why? Because I have a business plan that directs my trading. I do the same thing day after day.'

A: You made it sound like you make money from trading everyday. This is what I get from your statements. You need to be careful about how you say things so as not to give people the wrong idea of what you are trying to say.





If I want more profit, I simply teach another trader to do what I do and have all their trades copied to my account.

A: Teach? That trader you teach is probably a retail trader. Don't you know it takes many years to train a typical trader into a profitable one? And why would you trust a retail trader to trade well for you? - especially since he is 'made' to use another person's trading system which might not suit his style and personality. -





'When you understand compounding, and use it, then you don't "sit" out because the market did this or did that, and you want to feel cautious that the next time will be different.'

A: Almost every trader understand compounding. The idea of compounding is utterly useless to consistently losing traders. Why are you assuming traders are trading profitably when it is in fact very rare?





'Guess what? EVERY trade is different The names of the traders are different. The entries/exits points are different. The lot sizes are different. EVERY trade is unique, so if you get stuck assuming your hypothesis, then you are not risking money, so you don't make money.'

A: It's not even a hypothesis. Go interview any of the 90% losing traders.

If you are risking money, it means you might also lose money. You can make money or lose money from taking a risk (trade).

The proper mindset is know how much you can potentially lose in any given trade, not focus on how much you can potentially make. Protecting one's account is the number one rule. Profit is secondary.

When you make a statement, please do not leave out important facts, just because they do not help your argument.





'then you are not risking money, so you don't make money' 'If you don't want to make money, that is okay.'

A: Most traders do not have reliable trading systems and are consistently losing money from trading.

Keep your statement to yourself and please add to that statement 'only if you are good at trading and have a profitable trading system.' Otherwise, it's just a very bad advice.





'I just don't know why you are telling the globe to sit out because the next trade will be different??'

A: If you anticipate the next trade will be bad, why take it? Your reasoning is very bad.





'LOL. Doesn't make any sense to me.'

A: Okay, I will get traders who lose their second trade to bill you.





Traders know that having profitable trading systems is very important. That's why trading courses and books sell so well. Free information on the net and you tube are also very popular. But what they get are usually unreliable trading systems that blow up accounts in the long run.

I used to be one of them. I thought that as long as I get professional information and work hard, I would get good at trading. How terribly wrong I was. No matter how hard I tried following my rules and system, I keep getting net losses. After years and years of trying and lost capital, and lots and lots of soul searching and thinking, I finally realise that the only chance to success is to force myself to think and act differently from the typical losing traders who are brainwashed with useless conventional ideas/theories. I set about to create new trading systems that go against conventional ideas (technical analysis, stop loss concepts and stuffs). I am fairly sure very few people trade the same way as I do - my system, my rules, my perspective on the market, ideas and stuffs. And it actually starts to pay off.





Final note, all your ideas are common sense for traders who have profitable systems and have been doing well for quite a well. I am not sure how many of the people reading this thread actually belong to that category.

Your words of advice, which can be easily found in trading books and the internet, isn't going to help anyone here.
'For the market to work, it needs people who think that they can beat it.'
  • #13
  • Jul 9, 2017 4:09pm Jul 9, 2017 4:09pm
Quoting AlastorFate
{quote} Otherwise, how to explain the 90% losing traders, many of whom even though take trading seriously and adopt popular ideas from trading sites/books/videos/gurus continue losing consistently???
Easy. What 90% is doing, just doesn't work. Also if they would do the opposite, that wouldn't work either. In my opinion it is even higher than 90%, more like 99%. What is taught by teachers, by books, by this forum, the heavy majority of these just doesn't work. When somebody has a winner or a series of winners with any of these things, it is just a coincidence. In the long run it doesn't matter how the person varies it.

I am a discreationary trader by the way, I always was, the method I learnt from the start is very heavily discretionary.

But let's discuss the following. If i have 3 winners for example, why is the 4th trade has higher chance to be a loser, than a winner? If I have 3 losers in a row, why is it higher chance to have a winner? By the way, do you also increase lotsize after a series of losses?

A coin toss has 50% chance to be heads or tails (so let's say it can't land on its edge). If you toss a coin 10 times in a row, and you get 9 heads after each other, what are the chances of the last coin toss to be tails? Is it still 50%? Or less than 50%? Why?

And this is why your reasoning is the gambler's fallacy. If you have positive expectancy overall, every time you decrease the lotsize after a winner, you decrease the money you could earn, thus you decrease your edge, whatever it is. What if you would have 10 winners in a row, but you would start decreasing lotsize after the 2nd winner? You'd win much less, than keeping the original lots. You don't know beforehand, that your 3rd trade is gonna be a loss or a winner.

Why would the 3rd, 4th or whatever trade have more chance to be a loser, than a winner? Why would the opposite setup have higher chance to be a winner, than doing the original setup.

The answer is, there isn't a higher chance for a loser after a series of wins. You also don't have a higher chance to have a winner after a series of losses. You try to see patterns where isn't one.

And this is why this is the gambler's fallacy. If the trading you do, doesn't have positive expectancy, no matter how you churn the methods around, ON THE LONG RUN, you won't make money.
Price and volume reveals everything. The market moves on supply and demand.
  • #14
  • Jul 9, 2017 5:14pm Jul 9, 2017 5:14pm
I'm using the coin toss example as showing, that as you said each trade is unique, just as each toin coss is unique. There is no influence of past trades/coin tosses on the recent trade/toss.

Your chance in coin toss is 50%. Your chance in trading is whatever your strategy allows.

If you have 10 coin tosses, and you have 9 heads in a row, you chances for tails is still 50% at the 10th toss.

If you have 10 trades, and you have 9 winners in a row, your chances for a winner, is still the same whatever your strategy allows.

This is why the OPs theory is gambler's fallacy. Unfortunately it seems like he didn't even take time to understand what the fallacy is about. Just when he saw the word gambler, he instantly got triggered.
Price and volume reveals everything. The market moves on supply and demand.
  • #15
  • Jul 9, 2017 11:54pm Jul 9, 2017 11:54pm
Quoting Darastonius
I'm using the coin toss example as showing, that as you said each trade is unique, just as each toin coss is unique. There is no influence of past trades/coin tosses on the recent trade/toss. Your chance in coin toss is 50%. Your chance in trading is whatever your strategy allows. If you have 10 coin tosses, and you have 9 heads in a row, you chances for tails is still 50% at the 10th toss. If you have 10 trades, and you have 9 winners in a row, your chances for a winner, is still the same whatever your strategy allows. This is why the OPs theory...
I dont see this as true for trading. Your statement about the coin toss with 50% chance is true and indeed gambling.
However, the market movements are different because, under normal conditions, the more one instrument moves in one direction, the more it becomes likely to stop and reverse.
  • #16
  • Edited 12:38pm Jul 10, 2017 1:32am | Edited 12:38pm
'What 90% is doing, just doesn't work. Also if they would do the opposite, that wouldn't work either.'

A: Correct. Because most setups don't have a high win rate. i.e. typically 30-60% success rate in the market. Except for scalping, which isn't that great either too in the long run for the average trader.





'When somebody has a winner or a series of winners with any of these things, it is just a coincidence.'

A: More like one's overall results depend on one's trading skills and the market behaviours over time.





'If i have 3 winners for example, why is the 4th trade has higher chance to be a loser, than a winner?'

A: Setup success rate is a better way to put it.

It ultimately being a winner or loser depends on the trader's skills and trade management style - what the traders decide to do in the trade - take profit, scale out, take loss, wait and see, average down, add to a winning position, move stop loss...?

What is more measurable in terms of probability that is the market price pattern in the 4th trade will very likely be different from the market price pattern in the 3rd trade, which I have stress many time is the main concept in the topic of this thread. Success rate, win/loss are secondary.





'If I have 3 losers in a row, why is it higher chance to have a winner?'

A: Same thing as above.





'By the way, do you also increase lot size after a series of losses?'

A: Position sizing should be clearly defined in one's trade plan.





'A coin toss has 50% chance to be heads or tails (so let's say it can't land on its edge). If you toss a coin 10 times in a row, and you get 9 heads after each other, what are the chances of the last coin toss to be tails? Is it still 50%? Or less than 50%? Why?'

A: If there is manipulation involved, it will not be 50%. Go google 'Coin Manipulation'.

There is manipulation involved in the market (and also in soccer matches), so the idea that any given setup has a chance of success as simple as 50% in live market condition is a flawed biased concept.





'And this is why your reasoning is the gambler's fallacy.

A: Your theory - Bias of assuming past results have effects on future results. eg. if red happens now, the next one is more likely to be black.

My theory: Markets behave differently in consecutive setups

Why your bias theory can't be applies to mine?

Focus sorely on the market price move. No systems, no trading involved. Just the market itself.

Take one day's trading chart, and then compare with another day's trading chart of the same market. Did the market move the same way or differently?

It is different market price pattern every day/week/month/year/decade. Meaning it is a fact. So the fallacy you are talking about can't be applied to it.

----

The flaw behind dk's reasoning: he was making trading theories based on his own unique results, without acknowledging that tons of traders do follow their system and are losing money. He is basically basing all his theories based on the result of the system which he sorely use, a personalized style of trading and a system not used by anyone else on this planet.

Even if a system has been profitable for months, it does not necessarily make it a profitable system. Can it really produce positive result for several years?

I doubt traders who claim they are profitable or their system are profitable, have tested their system for several years.

If you ask me, I will never believe a trader has a profitable system until he verify his results with at least several months of real P/L statement. I was being very polite, in that I pretended to believe and assume he is consistently profitable without asking for any proof.

Another very important thing he did not cover is how incredibly difficult it is to create a profitable system that will yield positive results for years.

MOST TRADERS are trading despite not having a profitable system.

-coughs- the 90% losing traders -

either they are bad traders or they do not have profitable systems.

So from DK's logic, what should these losing traders do?

Keep demo trading / trading small accounts, keep dumping systems and finding new ones? And still continue losing...

One of the biggest problems is what a trader should do if he does not have a profitable system.





'If the trading you do, doesn't have positive expectancy, no matter how you churn the methods around, ON THE LONG RUN, you won't make money.'

A: Trading skills and trade management makes a big difference. The trader (how he trade, his skills...) is the key ingredient to success, the trading system comes next (secondary).
'For the market to work, it needs people who think that they can beat it.'
  • #17
  • Jul 10, 2017 9:18am Jul 10, 2017 9:18am
Quoting Carlton
{quote} {quote} Wow... So what you guys are saying is that you actually know beforehand than someone you don't know understands something or doesn't. Keep up with the loser's mentality then. You actually don't look at what's in front of you and you only see the projections of your mind. So you actually don't trade what you see, but what you believe. Well my friend, please go on this way so I can go on living of the money you give me. Because Skyway when you buy on your bullish signal from your so said not lagging indicators, I am the one you are...
Your initial statement about indicators is false, I was pointing that out. If you need to know the FACTS talk to a competent coder about indicators, get educated.
  • #18
  • Edited 12:26pm Jul 10, 2017 12:12pm | Edited 12:26pm
Quoting skyway
{quote} Your initial statement about indicators is false, I was pointing that out. If you need to know the FACTS talk to a competent coder about indicators, get educated.
Right. Because you have coders making indicators returning values based on a comparison between incoming ticks and price movements in the futur. Can you please leave the space for the OP to share what he wants to share and stop polluting the thread?
Thx.
  • #19
  • Jul 10, 2017 12:20pm Jul 10, 2017 12:20pm
reading the posts, made me think about...
would coin toss work with commodities?
math would say it is 50-50% going up or down ( lets omit staying the same price over long time).
an example
so, say OIL is trading at 45$.
coin toss math says you have 50-50% chance going up or down.
Sure, this probably the case at going up/down 1$...2$...10$...
but wait!
coin toss math gives the exact same probability too going updown 40$...44$...45$
after all, having 100 coin toss it mathematically just as possible to have head 100, tail 0...
but then is this correct equation to OIL?
math would suggest it should be the same probability then!
can this possible be correct?!
coin tossing with OIL, would mean the same probability to go from 45$ to 0$...vs 45$ to 90$...
and there comes the fun...
but OIL could go from 45$ to 91$...100$...120$...etc...vs. it wont go from 45$ to -2$, or -10$...
what?!

just thought for fun, play with the idea a bit, and the possible implications of it, how the coin toss can work on paper and mathematician's mind, and how it cant really apply to everything 1:1 in real life.
there is always, always another trade!!
  • #20
  • Jul 10, 2017 3:37pm Jul 10, 2017 3:37pm
Darastonius is right, the gambler's fallacy is about "anticipating the next move because we lost or win x times". I can get 5 consecutive wins with a rr of 1:3..
0 traders viewing now