Why in the world would any trading setup work? | Forex Factory

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Why in the world would any trading setup work?

  • #1
  • First Post: Apr 2, 2019 8:59am Apr 2, 2019 8:59am
A simple and straightforward question. Why in the world would any trading setup/edge/ pattern/ rule work? It does not matter if it is a systematic or discretionary method. The very logical expectation is that if there is any trading setup that really has a positive expectancy and can give a trading edge, then sooner or later it should be exploited and arbitraged away by other traders. This does not apply to value investing since you can really find undervalued companies despite massive effort exerted by other investors/ traders to make a advantage of every piece of information they can find. It is just the way the market works. But in the world of technical trading, pretty much every trading approach you come up with is already known by others i.e., there is nothing new here. So why do you think you have a trading edge over the market when so many others can do exactly the same as you do and even with much greater capital available to them.
  • #2
  • Apr 2, 2019 12:30pm Apr 2, 2019 12:30pm
Keeping much of your trading strategy secret is a key factor.

Trade safe and prosper.

KP

Quoting lolo123
A simple and straightforward question. Why in the world would any trading setup/edge/ pattern/ rule work? It does not matter if it is a systematic or discretionary method. The very logical expectation is that if there is any trading setup that really has a positive expectancy and can give a trading edge, then sooner or later it should be exploited and arbitraged away by other traders. This does not apply to value investing since you can really find undervalued companies despite massive effort exerted by other investors/ traders to make a advantage...
Do your homework, follow the footprints of smart money
  • #3
  • Edited 7:59pm Apr 2, 2019 7:43pm | Edited 7:59pm
An honest question and a great one!! Your statement brings up the very reason why certain technical systems will eventually all fail. We attribute this the "changing market conditions". But as you said someone eventually will figure out the antithesis to any trading system and use it to their advantage. But even these will fail as soon as those arbitrage methods are discovered.

However what does work consistently is the understanding that markets are made up of people. People each with their own pressures and emotions. Even the computer algos and quant programs are designed and built by people. And those people, consciously or subconsciously project their prejudices and pressures onto their "work". Sooner or later the emotions and pressures win...be it greed, or fear. They cause people to second guess or override the computer program, or their system. Or they simply engage in (at some point) emotional response action/transaction.

This response leaves foot prints behind in order flow/volume flow and can be gauged by how price response to these in/out flows. They are most certainly random enough to avoid any mathematical basis for prediction but can by "read" by the vigilant and knowledgeable observer who is waiting in the grass like a leopard. Many technicians call these "inefficiencies". I call them typical and predictable human emotions. In the end...trading is more like a graphical representation of minds studied by Freud and Jung. Understanding basic human needs and responses yields far more consistency than Math.

"The pendulum of the mind oscillates between sense and nonsense..." Carl Jung
"Neurosis is the inability to tolerate ambiguity..." Sigmund Freud
@xxxx§|[::::::::::::::::>
  • #4
  • Apr 2, 2019 9:33pm Apr 2, 2019 9:33pm
There are mathematical imbalance in the price that manifest every time.. back from the 70s to this day over and over again and they are RIGHT IN FRONT OF YOU kind of setup.. and they work everytime

Sorry if not everyone is aware of them, still doesnt make them "non existent"
  • #5
  • Apr 2, 2019 9:48pm Apr 2, 2019 9:48pm
setups do and don't work..... its the trader that can make it happen!
  • #6
  • Apr 2, 2019 9:55pm Apr 2, 2019 9:55pm
“The market can stay irrational longer than we can stay solvent” ... but there will be times when the market moves rationally, and we just have to wait for it patiently ...
Market is not random but unpredictable
  • #7
  • Edited Apr 3, 2019 4:50pm Apr 2, 2019 10:18pm | Edited Apr 3, 2019 4:50pm
We all see the same price action. What changes is peoples perception of the price action and what your belief system is. You have to let go of your belief system and raise your level of consciousness. How you achieve this depends if you are a left brain dominant or a right brain dominant critical thinker. So, now you need to do your own research and find out what changes you need to make to achieve the outcome that you are seeking. If you continue to repeat the same behaviour, don't expect to get different results.

Ask yourself these questions. What do I see ? What does it mean ? What do I do ? Once you can answer those questions then your decision making process should bring you to this conclusion............... Between stimulus and response lies our freedom to choose.
Don't wait for the wind, take to the oars.
  • #8
  • Apr 2, 2019 11:33pm Apr 2, 2019 11:33pm
Quoting lolo123
This does not apply to value investing since you can really find undervalued companies despite massive effort exerted by other investors/ traders to make a advantage of every piece of information they can find. It is just the way the market works.
Same with FX. Some nation's economies can be undervalued/overvalued and so we buy/sell their currency. In the end it is the productive members of each country who pay the FX speculator's way. The FX speculator is also needed to keep the markets liquid. So come on, have a go!
  • #9
  • Apr 2, 2019 11:38pm Apr 2, 2019 11:38pm
it is zero sum game sir..

the different between win and loser is the information
Made in Malaysia <3
  • #10
  • Apr 4, 2019 2:24am Apr 4, 2019 2:24am
Quoting lolo123
A simple and straightforward question. Why in the world would any trading setup/edge/ pattern/ rule work? It does not matter if it is a systematic or discretionary method. The very logical expectation is that if there is any trading setup that really has a positive expectancy and can give a trading edge, then sooner or later it should be exploited and arbitraged away by other traders. This does not apply to value investing since you can really find undervalued companies despite massive effort exerted by other investors/ traders to make a advantage...

Its a rational viewpoint - if we all have the same data, we should all make the same decisions. But in practice this is incorrect - market participants have different time-framed objectives, different preferred strategies, different responses to FA and TA events, different preferred markets, different risk tolerances and in fact different levels of data.

The simplest TA feature is a trend. Once a trend is established over a given time-frame, the most likely next occurrence for price in that trend is to continue on the direction of the trend. Since a trend can emerge from any TA feature, this alone suggests that these features have some profitably predictive quality.

But other features also have value as participant behaviour tends to be similar when these occur. So when a sudden upwards price spike occurs in the absence of major fundamental news, a majority of participants will see the new high price as unsustainable and sell into it without hesitation. This is the opposite sort of structure as a trend, yet both give repeatable (and repeating) market opportunities.
  • #11
  • Apr 4, 2019 2:44am Apr 4, 2019 2:44am
technicals = smoke and mirrors on it's own. The evidence for this, ESMA broker reports on client stats shows most traders fail and based on the sheer amount of pure technical strategies being used and discussed on forums like this, it is clear that most of them are only focusing on technicals.
  • #12
  • Apr 4, 2019 2:54am Apr 4, 2019 2:54am
Quoting EcoTrader
technicals = smoke and mirrors on it's own. The evidence for this, ESMA broker reports on client stats shows most traders fail and based on the sheer amount of pure technical strategies being used and discussed on forums like this, it is clear that most of them are only focusing on technicals.

Again, its a rational standpoint but wrong.

You're saying most new traders use TA and most new traders fail so TA is rubbish. There is insufficient evidence in the ESMA winners/losers percentages to draw any conclusion about TA.
  • #13
  • Apr 4, 2019 3:01am Apr 4, 2019 3:01am
The Problem with such stats that most people fail is that it counts every people that takes from 3 Trades to 1 Million in 1 Year for example. So every guy that founds Forex trading in the net and trys it the first time. Take 10 Trades crashes his account is in the statistic as a 100% loss. I think this are most of the costumers of brokers. So when 90% loose they dont mean trader with good money management and a strategy they mean people.
Everyday better.
  • #14
  • Apr 4, 2019 3:07am Apr 4, 2019 3:07am
Quoting tomorton
{quote} Again, its a rational standpoint but wrong. You're saying most new traders use TA and most new traders fail so TA is rubbish. There is insufficient evidence in the ESMA winners/losers percentages to draw any conclusion about TA.
I didn't mention a single thing about new traders, that is your assumption. It is pretty clear that ESMA reports is not representing the magnitude of failure as it is merely a snapshot of who is up and down at the time of the report. Traders can be lucky for a few weeks then fall off a cliff so if the reports were scoped at an account level and averaged over 3 months then it will show that over 90% fail. As it stands the reports show on average 76% of retail traders fail and it is obvious based on interactions on forums like this, that the majority of retail traders focus only on technicals. It is further obvious that the vast majority of online material, courses, and books, all focus on techncials so the market is ultimately saturated by content that excludes other factors that are critical to success.
  • #15
  • Apr 4, 2019 3:27am Apr 4, 2019 3:27am
Quoting EcoTrader
{quote} I didn't mention a single thing about new traders, that is your assumption. It is pretty clear that ESMA reports is not representing the magnitude of failure as it is merely a snapshot of who is up and down at the time of the report. Traders can be lucky for a few weeks then fall off a cliff so if the reports were scoped at an account level and averaged over 3 months then it will show that over 90% fail. As it stands the reports show on average 76% of retail traders fail and it is obvious based on interactions on forums like this, that the...

It has to be taken for granted that if such a high percentage of traders fail, then most currently active traders are new. Mathematically obvious.

But the ESMA data say nothing about what methods the losing traders used or how they used them or what markets they traded or how long it took them to become losers or what training if any they had received. Its a snap-shot and is only useful as a caution for prospective new clients that the probability of failure is high.

Then again the probability of failure if you jump out of an aeroplane without a parachute is also high but that doesn't prove anything about parachuting.
  • #16
  • Apr 4, 2019 3:33am Apr 4, 2019 3:33am
Quoting tomorton
{quote} It has to be taken for granted that if such a high percentage of traders fail, then most currently active traders are new. Mathematically obvious
All assumption, no maths to it unless you have tangible data that shows this to be true which doesn't exist because a 20 year veteran could open a new account and be classed as a new trader based on account age.


There is more evidence leading to my conclusion than your assumptions.
  • #17
  • Apr 4, 2019 3:38am Apr 4, 2019 3:38am
Quoting EcoTrader
{quote} All assumption, no maths to it unless you have tangible data that shows this to be true which doesn't exist because a 20 year veteran could open a new account and be classed as a new trader based on account age. There is more evidence leading to my conclusion than your assumptions.


Laughable wriggling.
  • #18
  • Apr 4, 2019 3:41am Apr 4, 2019 3:41am
Quoting tomorton
{quote} Laughable wriggling.
Last laugh is on you, i assure you.
  • #19
  • Apr 4, 2019 5:46am Apr 4, 2019 5:46am
there are over 15000 banks in the world and at any given time any one can sell anything

I think that this is a very paranoid forum

please for the love of god someone say something different or at least can be backed up with some fact
life is a reflection of what we allow ourselves to see
  • #20
  • Apr 4, 2019 6:49am Apr 4, 2019 6:49am
Quoting lolo123
A simple and straightforward question. Why in the world would any trading setup/edge/ pattern/ rule work? It does not matter if it is a systematic or discretionary method. The very logical expectation is that if there is any trading setup that really has a positive expectancy and can give a trading edge, then sooner or later it should be exploited and arbitraged away by other traders. This does not apply to value investing since you can really find undervalued companies despite massive effort exerted by other investors/ traders to make a advantage...
Good point. that's why I tend to invested no more than 10% of my savings. nowdays with this low volatility...even less. Looks like the market is becoming more and more competitive and I'm s***ing in my pants
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