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System Diluting

  • #1
  • First Post: Aug 1, 2006 9:02pm Aug 1, 2006 9:02pm
Ive been to various forex seminars (when I was a noob) where the instructor would teach some of his trading techniques and methods. Then they would insist on signing non-disclosure agreements because "the more people use this techinque (ie simple MA cross, or doji candle. crap anyone can learn on there own) will dilute the signal"

The instructor would claim that the more people who followed a certain technique the less it would work. Was this a way of fooling the noobie attendees in thinking that this was something great and needed to be kept a secret or is the instructors statement valid ?

I thought that if you were buying, and others bought too, it would add rather than take away from direction.
  • #2
  • Aug 2, 2006 4:41am Aug 2, 2006 4:41am
Quoting iceburg501
The instructor would claim that the more people who followed a certain technique the less it would work. Was this a way of fooling the noobie attendees in thinking that this was something great and needed to be kept a secret or is the instructors statement valid ?
I think that main purpose of non-disclosure agreement is to allow instructors to sell their systems to as many people as they could do. If information is freely available than who will pay for it?

Quote
I thought that if you were buying, and others bought too, it would add rather than take away from direction.

It depends on two factors - 1) the concrete strategy rules and 2) the liquidity of market the strategy is going to be applied at.
  • #3
  • Aug 2, 2006 4:46am Aug 2, 2006 4:46am
Never buy a system......its a waste of money.

I would pay more for risk management course, then a system. Risk Management is the key to the game. Finding low risk, high reward situations is the key.Don't feel you need to be in the market at all times. Only when it is opportune.
Price is the only indicator.
  • #4
  • Aug 2, 2006 5:03am Aug 2, 2006 5:03am
it was also because they didn't want their material to be free to others, but most important was because the more people trade the same system the less effective it becomes. That's a known fact as a lot of systems became absolete because the people using them could not make profits and keep their mouths shut. Think about it: what happenes if more and more people use the same strategy and enter a buy or sell at the same times? If you sell apples alone, you make a lot of profits. If hundreds start selling along side you, less profits as the demand weakens. Apples, stock, currency pairs, trading is trading. The most succesfull traders wont be posting in forums, they are too busy making money and they know to shut their mouths about how they did it.
  • #5
  • Aug 2, 2006 6:33am Aug 2, 2006 6:33am
Come on now. Retail traders dont really move the market that much. If a few hundred traders trade the same system it wont affect the market that much either..unless they each have hundreds of thousands of dollars and trade at the same time.
  • #6
  • Aug 2, 2006 8:04am Aug 2, 2006 8:04am
Quoting Yardie
Come on now. Retail traders dont really move the market that much. If a few hundred traders trade the same system it wont affect the market that much either..unless they each have hundreds of thousands of dollars and trade at the same time.
Yes they do. The traders move the market that the broker show you. They do not move the interbank market, the big boys do that, but the market you and I and retail traders have access to is moved by the brokers and by little retail traders. Or did you think that we actually get on the interbank market like the broker advertise?
  • #7
  • Aug 2, 2006 8:08am Aug 2, 2006 8:08am
Stop hunting etc.

So many traders place their stops at the same points (Just out of recent support or resistance), that it's profitable for those with the information on order numbers to take advantage of them.

The same could be said of a system/method becoming extremely popular.
Someone would find a way to take advantage of all these sheep following each other.

,Bundy
Bundy's status today: "Waiting..."
  • #8
  • Aug 2, 2006 11:38am Aug 2, 2006 11:38am
But think about this:

A large group of people trading the same system with a market maker all go long at the same time. In order to hedge the exposure created by this buying, the market maker takes a short of equal size in the interbank market. This then causes prices to fall in the interbank market and this fall is quoted by their platform.

.
  • #9
  • Aug 2, 2006 11:47am Aug 2, 2006 11:47am
Quoting Enroth
But think about this:

A large group of people trading the same system with a market maker all go long at the same time. In order to hedge the exposure created by this buying, the market maker takes a short of equal size in the interbank market. This then causes prices to fall in the interbank market and this fall is quoted by their platform.

.
If a Mkt Mkr hedges a large group of people trading the same system all going long by taking a short of equal size in the interbank market - He wont be a Mkt Mkr for long.

He's already Short with his Clients. Shorting the Interbank would double his exposure.

To Hedge, he would be a Buyer @ Interbank. Offsetting his Short Position with his Clients.

Just a point of information. Not a comment on Dilution.
  • #10
  • Apr 26, 2020 7:31pm Apr 26, 2020 7:31pm
Does this theory hold any water?
  • #11
  • Apr 26, 2020 7:45pm Apr 26, 2020 7:45pm
Good discussion but will be moved from trading systems very soon

Riddle me this, as you know, or hopefully aware, the advice to every new trader is "find what works for YOU"

Now, how many traders are there? Millions? Hundreds of millions?

And everyone has to find "what works for them"

And this thing that is so special that it works for them, including those that go on to be professional...

Cannot be communicated in any way, shape or form that it could ever work for anyone else?

Or, so it seems to me
It takes a lot for me to IGNORE you, but you can try.
  • #12
  • Apr 27, 2020 2:54am Apr 27, 2020 2:54am
Non-disclosure agreements and suchlike constraints against private retail traders taking up and using trading systems are BS. They are designed to protect the vendor's revenue from selling that system and also to enhance a feeling that the buyer is getting something really powerful, secret, hated by the industry, suppressed, hidden etc. etc.

Pure BS.
  • #13
  • Last Post: Apr 27, 2020 2:57am Apr 27, 2020 2:57am
PS: The vendors also want to make it hard for anyone to compare their system to anyone else's system or performance - so you have to trust what they say when told it will make you a fortune......
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