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Trading Myths and Some Forex Math

  • #161
  • Aug 29, 2018 11:42pm Aug 29, 2018 11:42pm
Quoting SunTrader
Here is an example of price NOT being random. Elliott Wave 5th top right into fib cluster (380 range). Then drop right down into another fib cluster (200 range) bottom. Retracement back up to a 3rd fib cluster (300 range). Oh you say fibs and EW work because they are widely known, used and self-reinforcing. The chart is of the stock market crash of Dow in ..................... 1929! BTW note Elliott came up with his theory for the Dow. Not for forex or commodities or options etc. And the rules are not rules but guidelines and not as exact or unbreakable...

nice chart...
Look Sharp/Trade Tight
  • #162
  • Aug 30, 2018 2:48am Aug 30, 2018 2:48am
Quoting jmn5611
{quote} Well then Eco, you just admitted that it is indeed not 100%. There is an element of randomness. {quote}
Randomness is "the quality or state of lacking a pattern or principle of organization". If 8 times out of 10 price behaves as expected then you have a pattern. What you are trying to imply is the classification becomes random because the odd instance changes sentiment as a result of another news event. to put it another way, If you break it down we have an event followed by a reaction and if the event always causes a reaction regardless of the timing of those events then you have a pattern which is the opposite of random.
  • #163
  • Aug 30, 2018 3:29am Aug 30, 2018 3:29am
Quoting AntiCre
=== The myth of risk:reward ratios === I guess everybody who starts studying the markets may have heard one platitude: "Only open trades with high rewards and low risks!" What does it mean? It means that you should only enter a trade where your predefined prize target is more distant to your entry than your exit level. Sounds great, doesn't it? I mean, you will always win more than you lose. Not bad?! Hell no! Let's analyze it. Although this may be not the full truth, let's consider that the market is random, i.e. you have no idea on where/when...
By predicting the major turning points.
'For the market to work, it needs people who think that they can beat it.'
  • #164
  • Aug 30, 2018 4:17am Aug 30, 2018 4:17am
I would be interested to find out if any trader on here had a way of entering the market that was much better than a random entry?
  • #165
  • Aug 30, 2018 4:41am Aug 30, 2018 4:41am
I can say winRate of 60% with R:R = 1:1 is way too small to trade. I had found system which gives about 58% winRate after costs, and an average 1p per trade. And after 14 years backtesting the results were AllReturn/MaxDrawdown = 10:1. So with the maxDrawdown of 20%, you would double your account in 14 years. Of course, maxDrawdown can get bigger with time. You can get better results with renting and without that risk. So trade system must have of minimum 80+ win% with R:R= 1:1(of course win% and R:R can vary, and can not be constants), that drawdown wouldn't kill your profits and be worth to trade.
  • #166
  • Aug 30, 2018 5:04am Aug 30, 2018 5:04am
Just to add ... A win rate of > 50 % doesn't neccessarily mean that the market is not random. There can be profitable systems for random and deterministic markets ...
  • #167
  • Aug 30, 2018 5:34am Aug 30, 2018 5:34am
Quoting PayTheLimit
{quote} nice chart...
Thanks though seems it's a bit over most people's head since it generated no other comment. Oh well, kinda what I thought.
  • #168
  • Aug 30, 2018 10:30am Aug 30, 2018 10:30am
Quoting Bushy
The market isn't random.
Of course if you talk about spikes (statistical outliers). They do happen but go and trade them! Volatility, liquidity, spreads, execution - everything is against you this time. Trades made other times are basically an attempt to play against noise
  • #169
  • Edited 10:11pm Aug 30, 2018 1:23pm | Edited 10:11pm
Quoting jmn5611
{quote} Well then Eco, you just admitted that it is indeed not 100%. There is an element of randomness. {quote} Okay V, I stand corrected on that one. It just appeared that have this special super secret method about TIME that you were going on about. If you are willing to say that you are not a successful trader I will accept that. But, I do not understand it because you have all the info you need. You spoke with PipEasy in real time. I am not clear on why you are not a successful trader.
VeeFX: Perspective on Successful Trader versus Profitable Trader

I am a net profitable trader till date but definitely NOT a successful trader. Here's my view of how I distinguish between the two. The devil is always in the details so one has to document or define our own goals and objectives of what we want from trading. In principle, this logic should apply to everyone.

Definition of a Profitable Trader:
This is simple. You are a profitable trader if

  1. You have ZERO open positions in your account(s) i.e. your account equity is the same as your account balance (in MT4 terms)
  2. Net Trading Capital (Total Deposits, Total Withdrawals) is less than your Ending Account Balance
  3. You are measuring profits in absolute terms which includes costs of trading that is reflective in your trading platform. You could also factor in your outside normal costs of internet service, energy, software fees etc.
  4. The net profits is what you report and pay taxes on at year-end

Definition of a Successful Trader:
Success in any endeavor lies in the eyes of the beholder. It is based on your unique life experiences, how you view yourself in absolute and relative terms, how others view yourself etc etc. It can be very simple or extremely complex. I will use the simpler version. To come to a conclusion whether you have achieved success, I look at myself and assess my own self's potential worth, what I can achieve financially (outside of trading), how much I can gain from my talent and education and workplace productivity. In my attempt to break it down into simpler terms, here are two possible approaches

  1. Define my "true value" of worthiness against income potential. This could be average income (total income via paychecks throughout your life divided by yrs to come to average hourly wage OR take your current income/wage that you wish to replace with trading income and come up with the hourly wage to "earn" from trading activities.
  2. Calculate your total Net Worth (especially if you are a business owner) till date and divide by your total adult years (after your graduation or whatever) and come up with your annual income potential.

With the above two options, I divide my annual "potential" by 2080 hours to come up with my hourly wage. This means, every hour I am thinking about trading, writing articles like this one, forum time, chart time, chit-chat time, time taken away from my family and friends, research work, testing etc etc... all that should go towards TIME AND EFFORT spent on Trading activities. By this measure, I am NOT successful nor do I consider myself Profitable ! Replacing my actual monthly income from Trading would require a tremendous amount of capital (atleast 500K to earn 5% per month and we all know 5% per month is an astronomical task on a consistent basis) and one can only guess the number of hours I have put into trading, researching over the years since 2006. By this measure alone, I am a complete LOSER !

Staying in my lane...
  • #170
  • Aug 30, 2018 4:38pm Aug 30, 2018 4:38pm
Quoting VEEFX
Future Topics currently brewing in my head but waiting for the right moment to bookmark on my profile.... Anatomy of a Single Currency Pair Comparison of Traditional "Pairs Trading" in a stock market versus a Single Currency Pair Comparison of Sector/Index Trading versus Currency Strength/Index Correlations and Money Flows Randomness in Price Versus Randomness in Market behavior?
Hi VEEFX
You always have magic and fascinating writings,
if possible, Please Say something about Anatomy of a Single Currency Pair... At least a few lines

be healthy and wealthy
be healthy and wealthy... Ceeport
  • #171
  • Aug 30, 2018 4:40pm Aug 30, 2018 4:40pm
Here's a thought. Start another topic for all of these points ... that are not mostly about trading myths.
  • #172
  • Aug 30, 2018 4:57pm Aug 30, 2018 4:57pm
Quoting VEEFX
{quote} VeeFX: Perspective on Successful Trader versus Profitable Trader ....
Successful trader definiton is simple:

if your living expenses are 100% from forex trading; then you are successful.
  • #173
  • Aug 30, 2018 6:47pm Aug 30, 2018 6:47pm
Quoting VEEFX
{quote} It is associated with the common myth advertised out here on forums that "Generating 100% Full Time Income from Retail Spot FX is simple/easy/possible/doable" alphadude- Even a homeless can easily generate 100% full time income from panhandling 8hours a day. Does it make him a succesful person? Only he has the right to judge his own success and no one else but if he comes on forums and brags how well he can collect millions of pennies every day, he better come here with some evidence for anyone to believe his story.
what does homeless begging has to do with forex trading? not comparable at all.

when you withdraw $$$ from your account for your monthly expenses; that is pure success
  • #174
  • Aug 30, 2018 6:57pm Aug 30, 2018 6:57pm
Quoting SunTrader
Here is an example of price NOT being random. Elliott Wave 5th top right into fib cluster (380 range). Then drop right down into another fib cluster (200 range) bottom. Retracement back up to a 3rd fib cluster (300 range). Oh you say fibs and EW work because they are widely known, used and self-reinforcing. The chart is of the stock market crash of Dow in ..................... 1929! BTW note Elliott came up with his theory for the Dow. Not for forex or commodities or options etc. And the rules are not rules but guidelines and not as exact or unbreakable...
Hi could you please link me some useful info on how to learn this kind ok analysis? Thanks
  • #175
  • Aug 30, 2018 7:04pm Aug 30, 2018 7:04pm
Quoting emicovi
{quote} Hi could you please link me some useful info on how to learn this kind ok analysis? Thanks
There is no link to 20+ years of learning it but
www.babypips.com probably a good place for you to start.
  • #176
  • Aug 30, 2018 7:07pm Aug 30, 2018 7:07pm
Quoting VEEFX
{quote} It is associated with the common myth advertised out here on forums that "Generating 100% Full Time Income from Retail Spot FX is simple/easy/possible/doable"...
You made that point and then went on and on and on.

If you've got others points about other myths, let's "hear" them.

But a how to do it as told by you, like a Evangelical Church Preacher, I for one will pass.
Though I might be in the minority - just like in trading.
  • #177
  • Aug 30, 2018 7:31pm Aug 30, 2018 7:31pm
Quoting VEEFX
{quote} VeeFX: Perspective on Successful Trader versus Profitable Trader I am a net profitable trader till date but definitely NOT a successful trader. Here's my view of how I distinguish between the two. The devil is always in the details so one has to document or define our own goals and objectives of what we want from trading. In principle, this logic should apply to everyone. Definition of a Profitable Trader: This is simple. You are a profitable trader if You have ZERO open positions in your account(s) i.e. your account equity is the same as...
My personal perspective of a successful forex trader in term strictly on monetary gains trading on standard lot is he should be able to pull in 250.000-500,000 annually on the first 18 months and his gain will increase exponentially up to 2-5mill from the 24 months onward. Once he hits 50mill from the fifth year onward then he will automatically become a fund manager in forex and other asset classes and he'll be on his way to be on forbes list. Hehe the dream is on...

Cheers
  • #178
  • Aug 30, 2018 8:44pm Aug 30, 2018 8:44pm
Quoting Stillearnin
{quote} Also, i've never said that the market is random or not, unlike some people here.
Head or Tail - you are the winner, just open buy and sell positions without stop loss.
  • #179
  • Aug 30, 2018 9:00pm Aug 30, 2018 9:00pm
Quoting genghistar
I came back with a last post here to keep my promise of sticking in one more live call on EU after price crosses back up to 11707 lvl by buying @11685 sl @11660 with minimum tp at 11741. RR>2. Happy trading all.
Games over because you trade forex based on PRICE.
Not price BUT time - timing - 10 hrs from now sell all USD major - EURUSD, AUDUSD, GBPUSD....
  • #180
  • Aug 30, 2018 9:50pm Aug 30, 2018 9:50pm
Quoting failinforex
{quote} Games over because you trade forex based on PRICE. Not price BUT time - timing - 10 hrs from now sell all USD major - EURUSD, AUDUSD, GBPUSD....
Yes I took a 20pips loss and I am none the worse about it. And loss like this is quite normal and within my RRR parameter.
I don't do ambiguous buy here and sell there kind of trade call even if it is a norm here becos I am very specific about my entry/sl/tp which is open to everyone to see.
Timing in my experience is mostly driven by news and geopol events which is my weakest link and something I cannot control.
And if you judge that somehow you have a better and more superior method than mine then I welcome you to also make the live trade calls here to prove your point.
The ball is now in your court.

Hehe
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