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The Black Swan Experiment

  • #21
  • Dec 4, 2017 4:07am Dec 4, 2017 4:07am
Quoting Piquant
{quote} I am still learning as we speak, but I'm happy that I've realized this simple truth - RR matters !!! keep your TP open and SL fixed move your SL to BE and keep your trade running until there's an indication that price is going to reverse - price leaves marks if it wants to reverse , random moves against your position wiping out your SL rarely happens if you're trading with the momentum and have placed your SL at an optimum point.
Hi Piquant,
You are absolutely right and the experience you've gained is truly invaluable, a fundamental truth of trading, I believe.
You can be profitable with average profit less than average loss but it puts a tremendous strain on keeping up the trade success rate; and any losing streak hits really hard simply because the average losses are bigger than the winners.

The problem is that it is so comfortable to take small profit after small profit, generally ending the day net up. Equally, it is so difficult to forego small profits over and over, then watch them disappear. If only I had taken them! But you just have to condition yourself to do this, to allow the winners really pay for you. Then the strain is off your required success rate and any losing streak is more easily recovered. On the other side of the equation, you also have to be very disciplined on the stop loss, keep the losers small and manageable.

I do believe it is this basic challenge that makes trading so difficult for so many, and it is far more emotional/psychological than the detail of the trading system you employ. It is why the mental side of trading is so important.
  • #22
  • Dec 4, 2017 4:25am Dec 4, 2017 4:25am
Quoting Rennaissance
Fourth option, Take your 400 bucks and run. Highly recommended
Certainly the only reasonable option..... you completly ignore that you can lose far more than your balance with CFD contracts.

If you are in the market with 500 leverage in case of a significant market event p.e. like the SNB event on Jan 2015 you have ruined not just your account, you will owe the broker a lot of money, because you will have a hudge negative balance. Forget your stop loss, it won't work in such a case.

Forget about garanteed stop loss or negative balance protection. No serious broker would offer such a thing at 500:1 Leverage, and if so, he will be broke soon or is anyway such an extrem bucket shop that your money is already gone by the moment you transfer it on your "brokerage account".

Gambling with 500:1 leverage is just outright stupid in every possible aspect and a sure way to lose and get ruined hard and fast.
There is nothing more to say about this.
  • #23
  • Dec 4, 2017 9:10am Dec 4, 2017 9:10am
Quoting HudithePfupf
{quote} Certainly the only reasonable option..... you completly ignore that you can lose far more than your balance with CFD contracts. If you are in the market with 500 leverage in case of a significant market event p.e. like the SNB event on Jan 2015 you have ruined not just your account, you will owe the broker a lot of money, because you will hav a hudge negative balance. Forget your stop loss, it won't work in such a case. Forget about garanteed stop loss or negative balance protection. No serious broker would offer such a thing at 500:1 Leverage,...
Your input has been duly noted.

Moving on...
  • #24
  • Dec 4, 2017 10:50am Dec 4, 2017 10:50am
Quoting HudithePfupf
{quote} Certainly the only reasonable option..... you completly ignore that you can lose far more than your balance with CFD contracts. If you are in the market with 500 leverage in case of a significant market event p.e. like the SNB event on Jan 2015 you have ruined not just your account, you will owe the broker a lot of money, because you will have a hudge negative balance. Forget your stop loss, it won't work in such a case. Forget about garanteed stop loss or negative balance protection. No serious broker would offer such a thing at 500:1 Leverage,...
They never want to learn, don't know what 400$ is for you buddy but either case that is a dinner at a fancy restaurant with your family. Don't throw us money that easily. The most important thing in trading is protecting your capital. That being said never, ever , ever , ever , never ,ever take a trade where the risk is higher than your expected return. Second rule never risk a substantial amount of your capital on a single trade.cheers
When you see it, BET big.
  • #25
  • Edited 8:10pm Dec 4, 2017 12:30pm | Edited 8:10pm
Quoting Nico1359
how would you proceed?
Without any market analysis, your mathematical expectancy is always zero minus costs, no matter what you do with the money in your account. Hence no one decision is objectively better than any other, and unless you can calculate the probability of your "black swan" occurring, it's simply a matter of how far you're personally willing to push your luck to reach whatever monetary goal you have in mind.
  • #26
  • Dec 4, 2017 1:22pm Dec 4, 2017 1:22pm
Quoting hanover
... unless you can calculate the probability of the black swan occurring...
Per definition if you can attribute a-priori a non-zero probability to an event it is not a black swan. Therefore the probability of a black swan event is zero.
It is only after it happened that it is recognized as a feasible event. Only once you have witnessed the black swan you can adjust your model. You can even include the possibility of blue or green swans. Your model will fail the day you encounter a four-winged swan. Event for which you didn't even consider attaching a probability to.
No greed. No fear. Just maths.
  • #27
  • Dec 4, 2017 2:13pm Dec 4, 2017 2:13pm
Quoting Rennaissance
{quote} They never want to learn, don't know what 400$ is for you buddy but either case that is a dinner at a fancy restaurant with your family. Don't throw us money that easily. The most important thing in trading is protecting your capital. That being said never, ever , ever , ever , never ,ever take a trade where the risk is higher than your expected return. Second rule never risk a substantial amount of your capital on a single trade.cheers
I probably should’ve made it clear at the beginning that this is not my primary method of trading. I had hoped that my designation of this as an “experiment” would make that clear. As such, the hard and fast rules that would apply to your primary account do not necessarily need to apply to the experiment.... that’s the whole point of it being an experiment - to use an approach that is outside of your normal mode of operation.
  • #28
  • Dec 4, 2017 2:17pm Dec 4, 2017 2:17pm
Actually this is the experiment how I found out to be profitable. Think outside the box, turn it around and maybe you will see how to catch the inevitable black swan. Good luck.
  • #29
  • Dec 4, 2017 8:23pm Dec 4, 2017 8:23pm
Quoting PipMeUp
Per definition if you can attribute a-priori a non-zero probability to an event it is not a black swan......
Agreed; my definition of a black swan is much the same as yours. However, for the sake of his experiment the OP defines a "black swan" as "One losing trade of 40-50 pips [that] will wipe out the account". FWIW I've edited my post to read 'your "black swan"' rather than 'the black swan', because I was attempting to discuss on his terms, rather than mine, and hopefully this makes it clearer.

Anyway, I don't believe that it's possible (especially without market analysis) to forecast when a 40-50 pip move is going to occur, hence (like I said previously) it merely comes down to how far the trader wants to push his luck.
  • #30
  • Dec 4, 2017 8:50pm Dec 4, 2017 8:50pm
I am aware the potential account-wiping trade is not an actual black swan. A defining factor of a black swan is that it is unexpected, which a loser in this case wouldn’t be too terribly unexpected.

I just thought it made a cool title for the most part
  • #31
  • Dec 5, 2017 8:22am Dec 5, 2017 8:22am
Well, I was fortunate enough to have a 3 pip trade take off and turn into a 30 pip trade. Last few trading days have been a little wild. Hoping to get back on a steady path from here on out
  • #32
  • Dec 7, 2017 12:45pm Dec 7, 2017 12:45pm
Completely lost my nerve on USD/CHF. Jumped in for a scalp long at around 8:40 EST. Saw price move down sharply and made the call to get out at around -17 pips. My thinking was if this was getting me back to breakeven, I may as well just get out now because the hourly looked like a major trend reversal in the making (large engulfing candle).

Of course, as fate would have it - I was wrong and price shot back up again after I closed for a loss. I would’ve hit my target had I just stayed the course.

Trading this way is not for the faint of heart!
  • #33
  • Dec 8, 2017 7:00pm Dec 8, 2017 7:00pm
Not much of an experiment. We all know the end result.

$200 certainly would've been a decent meal. It's a shame.
"The fun is in the hunt. Not the kill."
  • #34
  • Dec 10, 2017 9:25pm Dec 10, 2017 9:25pm
Quoting Redeflect
Not much of an experiment. We all know the end result. $200 certainly would've been a decent meal. It's a shame.
I've certainly had some setbacks... Of the three major losses, one was pure dumb luck given my fleeting market exposure (unforeseen news event), one, however, was a loss on a legit signal, and one was a bad entry that was simply a lack of discipline.

Under ideal circumstances, this would translate to one major loss instead of three. But that is not reality.

What I'm starting to learn from this is that when you employ a "go for broke" scalping approach, you really have to be supremely confident that you are picking the best entry possible. And this actually gets more difficult with success. When you've racked up a lot of small winners, you start to think "I'm only going for 2 pips. This entry doesn't look perfect, but it should be good enough to pick up 2 pips."

Apart from not having a plan at all, the inability to stick to a plan is probably the toughest weakness to overcome.

However, I did this once and I don't believe it was a fluke. There's no reason that I can't do it again, so long as I stick to my approach and don't settle for entries that "look good enough."
  • #35
  • Dec 10, 2017 9:29pm Dec 10, 2017 9:29pm
Quoting Nico1359
{quote} I've certainly had some setbacks... Of the three major losses, one was pure dumb luck given my fleeting market exposure (unforeseen news event), one, however, was a loss on a legit signal, and one was a bad entry that was simply a lack of discipline. Under ideal circumstances, this would translate to one major loss instead of three. But that is not reality. What I'm starting to learn from this is that when you employ a "go for broke" scalping approach, you really have to be supremely confident that you are picking the best entry possible....
"What you're starting to learn from this" is correct. Which is why traders try not to go for broke; it's very rare that you can be supremely confident.
"The fun is in the hunt. Not the kill."
  • #36
  • Dec 10, 2017 9:43pm Dec 10, 2017 9:43pm
Quoting Redeflect
{quote} "What you're starting to learn from this" is correct. Which is why traders try not to go for broke; it's very rare that you can be supremely confident.
Well, yeah, obviously.

That's why this thread was titled as an experiment and it was done with an insignificant sum of money. It's not meant to be a primary method of trading.

And I agree, it is very rare to have that level of confidence in a trade. But I can think back to that initial run and I can recall a few entries out of the 23 winners in a row that just felt like total slam dunks. There weren't many of them, but the few there were really stick out in my mind upon reflection. That's what you have to be focused on. I think you have to eliminate every other entry and focus on just those. Easier said than done, obviously.
  • #37
  • Dec 11, 2017 1:23am Dec 11, 2017 1:23am
Quoting Nico1359
{quote} Well, yeah, obviously. That's why this thread was titled as an experiment and it was done with an insignificant sum of money. It's not meant to be a primary method of trading. And I agree, it is very rare to have that level of confidence in a trade. But I can think back to that initial run and I can recall a few entries out of the 23 winners in a row that just felt like total slam dunks. There weren't many of them, but the few there were really stick out in my mind upon reflection. That's what you have to be focused on. I think you have...
The problem isn't that you're missing slam dunks. It's that you're making nothing off the slam dunks and letting small moves against you blow you out of the water. You have to stay solvent long enough to find the real slam dunks and let them reach their potential. It's the only way.

Even the best traders are only right about 55% of the time.
"The fun is in the hunt. Not the kill."
  • #38
  • Dec 11, 2017 1:43am Dec 11, 2017 1:43am
Quoting Redeflect
{quote} The problem isn't that you're missing slam dunks. It's that you're making nothing off the slam dunks and letting small moves against you blow you out of the water. You have to stay solvent long enough to find the real slam dunks and let them reach their potential. It's the only way. Even the best traders are only right about 55% of the time.
As I mentioned before - this is not considered to be a "primary method of trading." This is an experimental, unconventional approach. What you're describing is a conventional approach - cut losers short, let winners run, 2:1 r/r, etc... Which I also trade. But that isn't the point of this particular account/thread.

The idea is to only trade off "slam dunk" entries for 2 pips and avoid the moves against you altogether. I understand that it is somewhat of a pipe dream to do that all of the time. But that's the whole point of this thread
  • #39
  • Dec 11, 2017 2:14am Dec 11, 2017 2:14am
Quoting Nico1359
{quote} As I mentioned before - this is not considered to be a "primary method of trading." This is an experimental, unconventional approach. What you're describing is a conventional approach - cut losers short, let winners run, 2:1 r/r, etc... Which I also trade. But that isn't the point of this particular account/thread. The idea is to only trade off "slam dunk" entries for 2 pips and avoid the moves against you altogether. I understand that it is somewhat of a pipe dream to do that all of the time. But that's the whole point of this thread ...
If you say so... but it's, conventionally, what every new trader tries first. It's 'unconventional' because it doesn't work and anyone that tries it loses their account. Crucial Point has his system calibrated almost perfectly to catch any slam dunks that could appear with this method and his system only works because he cuts the losers immediately. I've put a few thousand hours into scalping 1m and tick-charts. Slam dunks only exist in retrospect. A flash crash will wipe out any scalper who starts off his trades full-tilt.

I'm just telling the truth of the matter. The experiment will always fail.
"The fun is in the hunt. Not the kill."
  • #40
  • Dec 11, 2017 7:28am Dec 11, 2017 7:28am
Your aproach its right and wrong at the same time man: you need consistency in your entrys and at least 1:1 with a high hit rate in order to pull this off, thats all

and reliable entry that gives you and unbalance in your favor (whatever the amount in pips doesnt matter, what matters its to go positive at least 1:1, if more great but dont expect it)

With price based chart (not the stupid/unreliable time based "candlestick") I trade 1 pattern in 1 specific condition and nothing else; it gives me enough confidence to put 20/30% per trade and have a high hit rate with a 1:1 ratio, i rarely lose (mostly break even or win) if i want more like 1:2 my hit rate gets lower, etc etc.. not worth it

Rethink your aproach and try again man, the people that say its not possible is stuck and they put in practice the same way of thinking, trying the same idea, using the same "tools", charts/crap, etc etc, of course they cant have positive results !!
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