Your thoughts on taking "Perfect Storm" trades? | Forex Factory

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Your thoughts on taking "Perfect Storm" trades?

  • #1
  • First Post: Oct 19, 2006 11:56am Oct 19, 2006 11:56am
I'm by no means a "collector" of trading systems, but I do have about 5-6 that I follow. I'm sure most of you do as well. They don't really give signals all that often, so I scan through them every day or so looking for a signal or two. Most of the time, when a system gives a trade signal, it's the only one that does so in my arsenal. However, sometimes I'll have 2-3 systems giving a trade signal all at the same time. For example, if I look at EURUSD on a 4H chart, the Vegas 4H Tunnel might be giving a buy signal, "Mouteki's" method might be giving a buy signal, my own method might be giving a buy signal, etc.

How do you guys treat these trades? Do you just trade like normal, with the normal amount of lots and risk, or would trade more lots/risk? For example, if you normally trade 5 lots on a signal, would you trade 6 or 7 when the three systems are in agreement? Similarly if you're about to enter a trade based on one of your systems, would you trade fewer lots if another system gives the opposite signal?

I usually just trade like normal, but I'm wondering if in your experience it's better to increase/decrease your position. I know what the mathematics say the correct answer is, but the markets don't exactly follow mathematics otherwise they would be ripe for the picking.
  • #2
  • Oct 19, 2006 12:37pm Oct 19, 2006 12:37pm
you shouldn't trade more lots just because these 'signals' are all in sync. All these systems cannot predict the future of prices. So more or less, they all are based on similar concepts of taking 'previous' data into the system. If more than one system giving you the same signals, it just means that all these systems are finally in sync with one another. But the fact is, you can't predict the future, so take these signals as one and trade as normal.

Be aware that using multiple systems is just a way for traders to satisfy their inner need to be right. So they 'justify' multiple systems when you only need one. Then work on consistency and psychology
  • #3
  • Oct 19, 2006 12:48pm Oct 19, 2006 12:48pm
Quoting hilmy83
you shouldn't trade more lots just because these 'signals' are all in sync. All these systems cannot predict the future of prices. So more or less, they all are based on similar concepts of taking 'previous' data into the system. If more than one system giving you the same signals, it just means that all these systems are finally in sync with one another. But the fact is, you can't predict the future, so take these signals as one and trade as normal.

Be aware that using multiple systems is just a way for traders to satisfy their inner need to be right. So they 'justify' multiple systems when you only need one. Then work on consistency and psychology
Couldn't say it any better. Price can only go one of two ways, up or down. If they are all in sync, all that it means is that they will al be right or all be wrong. I used to use many systems and it really f---'d me up. Now I just trade on coin flips and it seems to be working well thus far. All joking aside, I call my setup the coin flip, not because it is random, but because it focuses on moments when the market makes no sense, and trades in the direction of sense once everybody just chills out. Last 35 trades all wins, 1st time I have ever done this. I will share this here soon enough.
  • #4
  • Oct 19, 2006 1:56pm Oct 19, 2006 1:56pm
Quoting hilmy83
you shouldn't trade more lots just because these 'signals' are all in sync. All these systems cannot predict the future of prices. So more or less, they all are based on similar concepts of taking 'previous' data into the system. If more than one system giving you the same signals, it just means that all these systems are finally in sync with one another. But the fact is, you can't predict the future, so take these signals as one and trade as normal.

Be aware that using multiple systems is just a way for traders to satisfy their inner need to be right. So they 'justify' multiple systems when you only need one. Then work on consistency and psychology
That's one side of the argument, and the one that I've been generally adhering to. You however seem to make the assumption that there is a random number generator that determines the price of the Euro in relation to the USD based on the time between spontaneous radioactive decay in a cesium atom. There is not a big black box that determines the prices, it's people all around the world. If people are caught short in a rapidly rising market, the will buy to cover (thus fueling the trend) regardless of if they're an institutional investor, a day trader in Bejing, or a small speculator in high-school. If people see a trend they will tend to jump on, again without regard their status as a trader. Trading systems are designed around the movements of the masses, and these are somewhat predictable. Not enough to risk your life on, but certainly enough to place some money on.

As I said in my original post, I tend to trade the same regardless of the number of signals generated, but treating the market as though a coin-flip determines the direction means that you shouldnt' be trading at all because it means all trading systems are inherently worthless and the best you could possibly hope for is to break even.
  • #5
  • Last Post: Oct 19, 2006 2:28pm Oct 19, 2006 2:28pm
Quoting Loki
That's one side of the argument, and the one that I've been generally adhering to. You however seem to make the assumption that there is a random number generator that determines the price of the Euro in relation to the USD based on the time between spontaneous radioactive decay in a cesium atom. There is not a big black box that determines the prices, it's people all around the world. If people are caught short in a rapidly rising market, the will buy to cover (thus fueling the trend) regardless of if they're an institutional investor, a day trader in Bejing, or a small speculator in high-school. If people see a trend they will tend to jump on, again without regard their status as a trader. Trading systems are designed around the movements of the masses, and these are somewhat predictable. Not enough to risk your life on, but certainly enough to place some money on.

As I said in my original post, I tend to trade the same regardless of the number of signals generated, but treating the market as though a coin-flip determines the direction means that you shouldnt' be trading at all because it means all trading systems are inherently worthless and the best you could possibly hope for is to break even.
I suggest you read up on Mark Douglas' 'Trading in the Zone' It was very good book on trader's psychology that determines success. Not so much systeem
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