Clemmo's Trading Odyssey

Well, I had to wait nearly a whole month [edit: and a half]. Losing it.

That'll do, pig, that'll do.


AUDJPY H4 AUDNZD H4
AUDCAD H4
AUDUSD H4 CADJPY H4
CHFJPY H4
EURGBP H4
EURJPY H4
EURUSD H4
EURCAD H4 (and so forth for 15 more pairs)
It took me nearly five years to get to this point, BUT... (continued)

For some reason these ones

AUDCHF H4
CADCHF H4 EURNZD H4 GBPCAD H4

and only these ones, are not winners. They lose less than the winners, but still, losing, not neutral (EN almost is). What is it about these particular currencies that is so different from the other 24? I was thinking that they each pair is a relatively low dimension currency with a relatively higher dimension one, but then I'd expect something like GBPNZD to lose in a similar way, and it doesn't at all. GBPNZD H4

It's not necessarily vital to solve mysteries like this one, but if you don't, how can you call yourself a professional?

You are onto something, Clemmo.
Good trading to you.

Still RenTeh did it 30+ years in a row with average 70% profits before taxes.

For me seems there should exist maths behind to provide that consistency.

I play with neural networks. Think thats not the case here. I dont view that as stable.

Like your thinking a lot. Good comment from you.

Yes, Renaissance Tech and Jim Simons. Two very interesting (and enigmatic) entities. We may never know the real truth behind it all since he follows the good trader's advice - 'keep your mouth shut'. And RT enforces that silence with an ironclad legal agreement as I understand.

Neural networks are VERY interesting. It seems to me if you can teach a computer how to talk (check out OpenAI and Jason Rohrer's Project December, or something like AIDungeon) then you can probably teach it how to trade. Yet, to my knowledge, neural nets haven't taken over the financial world just yet. I have theories about that, but they'll have to wait for later.

What I wanted to talk about today is a favorite FX topic. SCAMS.

If you see something that boldly claims it is NOT a scam. It probably is.

Oh look, a functional, and STABLE trading robot that is only $250! (but not for long - dev is threatening to raise the price to a whopping $400! USD!)
And it's NOT a scam. Good deal right?!

Well this particular robot has barely any inputs to configure (convenient!) and it only works on EURUSD so there's nothing to think about. Just load it up and..wait a second. If this robot works on EURUSD it should work on just about anything, right?

Quick backtests
audusd
usdchf

eurgbp etc. etc.

However on EURUSD (as advertised)
All roses.

Well, so just run it on EURUSD and forget about those other pairs, right?

Wrong. This is classic curve-fitting. Whenever a dev tells you their robot is designed to work on one instrument, they are (probably) selling you a scam, because there's no reason for a system to work on one more or less generic piece of data, and not on another. Forex pairs can be somewhat different, but they are not that different, and especially not over longer horizons. What they really mean is that they have curve-fit the settings so that it produces a profitable result (in the MT4 strategy tester no less, which is basically itself a tool for curve-fitting and nothing more) going back as far as most people have data for that instrument. So it looks great there, but lousy everywhere else. And sure, this robot might work for a week, heck, maybe a couple of months but eventually it will start to look like the rest of these charts thanks to good old standard deviation.

But heck, this is nothing new in the old Forex Casino so why even mention it?

The reason, good reader is because this particular dev is no common scammer, but actually, one of the smartest people I've ever encountered. I noticed his new sideline because I follow him. He regularly features in Metaquotes articles talking about advanced topics, including neural nets, Mandelbrotian finance (one of my favorites) and other advanced mathematical sidelines like decision forests, reinforcement learning, cointegration, etc.

He had at least a couple of other EAs published on the MQL marketplace including a neural net and another EA that produced a statistical arbitrage trade from any 3 instruments, but those are gone and instead there's ... this. So what is the deal??
Why does a smart guy like this need to resort to such low tactics?!
I mean, I know things are tough everywhere, especially in Mother Russia, but this just seems...sad. Very sad.
If you have the chops to produce catboost algorithms and a python bridge to MT4, why would you need to stoop to this level? Just why? I'm honestly asking. Is it quite profitable to sell useless EAs on the marketplace?

Personally I can't understand who buys trading robots from MQL or anywhere else without being able to examine what's under the hood. You get a black box and no guarantees. Most of those bots don't even have a live demo account for verification. Who sees that, and goes, "that's for me"! Bottom fishing.

This came up in Avery Horton's TRO group on Facebook and I started watching it fully prepared to be disappointed but then he said, "Losing is the key to trading", and that's basically the first post in this journal. So now I'm in for the duration.



Ok, key take-aways.

1. Learn how to lose (feel it, take responsibility, let it go)
2. Focus on the next trade (making good trades) and nothing else
3. Divorce yourself money (get away from daily accounting)
4. Believe in Yourself
5. Don't lose all your money - Stay in the game
6. Work on your observational skills -- I'm not convinced the market can tell you much by looking at it, but I do think situational awareness (the kind of skill that serves spies, firemen, cops) is probably crucial
7. Don't grow too fast
8. Forget about trying to anticipate market moves
9. Challenge your brain
10. (Futures) Trading is glorified gambling
11. This is all in the Book Club thread.

Most people get EA's in my mind because they don't want to go to work. A lot of people lack work ethic, and they think that trading is not work. When they find out that they actually have to do something, then they go looking for a robot. Can't cut losers short and manage winning trades if they don't come to work.

If a trader shows up to work every day it is pretty hard to lose money.

The funny thing is EAs are a LOT of work. Like, probably more. First you have to build it, then you have to test, and then you have to monitor it. All of that does not come without having to have learned how to trade AND having learned (or paid someone) to CODE. So, maybe there is an eventual payoff with an EA, but it's not a front-loaded advantage. It might pay off years later, and probably just in time savings, not necessarily earnings.

I have time audit software on my computer so I know how much time spending on EAs development when started fx journey - on average about 100h per month. To get my 1st EAs working spent about 1.5 years. So it's about 1800 hours invested.

But if you get a working EA that has about 2-3 years of consistent profits (40-60% yearly) history then possible to attract investors. I see in Roboforex and in Darwinex several good accounts (not mine...) attracted 3-5mil usd of investors capital.

Your situation is different, you wrote your EA. Most people cannot be bothered. They are just looking for the trading robot. I have purchased packs of indies from TRO in the past because he always sends the source code, and I learned a great deal from him on how to code mt4. I had to develop a platform independent method of trading because MetaQuotes have been threatening for 10 years that they are going to pull the plug on mt4. I no longer believe that now.

Clem, coders are usually decent traders because they code, and coding is grinding work as you alluded to. It is probably a mental block, but I just can't bring myself to trust an EA. Even the ones I wrote myself, how crazy is that?

It is not crazy at all. Whenever I have put faith into someone else's (name it)

1. idea,
2. system,
3. EA,
4. process,
5. thinking,
6. forecasts,
7. signals,
   etc, etc, I have got BURNED. I decided I would never again believe anyone but myself. Not Elon Musk (look how well that turned out for crypto-fans, and I have a high certainty he's eventually going to burn shareholders in one of his other companies), not Soros, just me. Of course, I try to learn from everyone, not just what to do but what NOT to do. Now I think the only real payoff from trading is learning. If you can pay your bills and buy Christmas presents with it, that's great, but the real payment is in self-reliance and knowledge.
   
   Now, having learned who I am I know for sure that a robot (properly made) will always perform better than I can, but I must monitor it closely, like my wife in the same room as Matthew McConaughey close. lol

I went in for some 'minor' surgery last week and so the week before I was rushing to get all my EAs uploaded onto a VPS so that they could continue trading during my recovery or, prepared for the worst, continue to generate some income for my surviving family. It's a strange thing to try to come up with a combination of systems that could potentially work for years into the future in a variety of conditions. It's probably futile. My wife isn't very interested in my work and so I doubt she would be checking more than annually if that, so I tried to get risk down as low as I possibly could and tried to avoid anticipating trends. Just looked at reducing swap fees and having very modest growth expectations, no more than 20% per year, if that.

It came down the wire, but I was assisted by Kirill Emerenko's VPS course on Udemy. I recommend it, as well as the one on money management. The one on MQL is worth skipping as it barely even scratches the surface.

As you can see I survived (or did I???)

Now that I have my low-risk bots trading on a VPS that is paid for well into the 2030s I wonder if I should just let my little experiment continue without interference. It frees my time for other things, not trading manually and not really checking in more than a couple of times a day for a couple of minutes, and really, only out of curiosity.

The question is what's next in my forex journey? Is this the logical conclusion? Do I get anything out of posting here on FF anymore? I'm not sure. I think it is good to have a record of my progress, somewhere, that I can consult on a whim. Should I make more videos and continue the book club? I think about it but rarely have the motivation. It seems unlikely anyone will ever care because I'm so damn boring and without the drama and personality conflicts that fuel other threads, there will never really be any interest. Also it's obvious that trying to get retail traders to focus on what's important is equally futile.

I've thought about sharing some of my earlier work, as that would undoubtedly interest some newer traders, but I'm reluctant as it's basically misleading. "Here's what I don't use anymore and what I have lost confidence in - enjoy my cast-offs?" Who does that? Of course, someone might get something out of it, maybe see something I overlooked. I could do it with a big disclaimer, but disclaimers won't stop fools from rushing in.

I've also thought about putting some real effort into the ForexRobotsClub. My MQL ability is still rudimentary and I still need to pay people to help me out in tight spots and I'd love to be more independent and try out new system ideas that can be automated, but doing it alone is daunting and boring. I was thinking about putting the EAs I've made so far, source and all, there, and levying a one-time, life-time fee that I wouldn't keep for myself but use to hire coders, create a stable of reliable freelancers, and then spend the rest of the time testing, testing, and reviewing. That seems like fun to me, and would undoubtedly be useful to a lot of people but I'm not very persuasive.

Of course maybe a separate website is a waste of time, and I should just start, yet another, thread here on FF but I can practically predict how that will go. Great for about 4 pages, then about page 5 the drama junkies will hijack the thread, the perennially unfocused will ask me to modify the EAs with indicators of their choice, and the thread will fill up with newbie questions, irrelevant files, flame wars between bored and clueless regulars and eventually I'll lose interest trying to regulate the chaos. It's much easier to do things essentially 'by invite' and if you are the sort who is willing to pony up the entrance fee then you're the sort who is willing to go the distance. Plus, a Wix site just gives me more control.
I dunno yet, leave a comment if you care.

I started folow you recently. Please continue, you are good. And I feel a lot similar like you.

Maybe start new thread and on page 5 switch red diamonds commenting only on. Then start another thread. And make a lot of 5-page wonderful threads.

A little experiment that is showing some promise.
The good:

1. very low relative and maximal dd
2. high win rate
3. more consecutive wins than losses
4. expected payoff is positive, if not huge
5. Nice steady curve with minor pitting

The bad:

1. Largest win is smaller than largest loss
2. Maximal consecutive win streak is smaller than loss streak - however knowing how this system works that's to be expected

The ugly:

1. PF for such a system should be over 2, meaning that probably the risk level is timid for the actual exposure
2. Sharpe ratio is, for the same reason, low

I'll let this run to the new year without optimizing for now, just to see if these numbers hold up.

Clemmo's Conjecture in action. The most popular downloads from my Finance Book Club thread are the products of a one-time spammer advertising their backtests in a set of Excel spreadsheets without even mentioning how the strategy works. They outnumber my most popular post by a factor of at least 10:1.

What I get from this is people are really curious about backtests no matter how little context they are given. Heck, maybe the less context they have the more intriguing they are. A bunch of meaningless numbers?! Who can resist that allure!

Well, here is a live account result. You'll likely not be interested in it as it's not a theoretical backtest, and I've doubled my relative DD to a whopping 2.7%. This EA targets 20% a year but is now on target for 33%.

I want to wax philosophical for a while but avoid rambling which is not going to be easy.

I'm going to try to restrict myself to two principles that I've invented for myself that may be of use to others, the second of which I'll introduce in this post or maybe the next one if this gets too long.

Clemmo's Conjecture
The first principle is 'Clemmo's Conjecture' which I've talked about a lot before. It started out as a joke but after doing more investigation and seeing the evidence pile up in favour of it I now think it's actually an important tactic for learning how to become a better trader. It's important because it teaches a simple way to be discriminating when evaluating new information. It is a simple and fast heuristic for avoiding BS and knowing what might be worth further investigation.

Clemmo's Conjecture states, the usefulness of a trading forum, thread, system, method, idea, author, book, website, video or the like is generally inverse to its popularity. In other words, the most visible and easily detected advice on the internet is also likely to be the worst. By contrast, the less popular and largely ignored material is generally better. This must mean, therefore, that traders, especially retail traders who don't have a professional standard of trading, naturally navigate towards the biggest wastes of time. I am very curious if this applies to other fields as well. I would guess it must vary a lot depending on the discipline. I am also curious what it is about trading that makes it so, but that's beyond the scope of this posting.

Now I've stated this conjecture several times but haven't really demonstrated it. It's a conjecture, not a theorem, because I haven't proved it, but much like Zipf's law, it is something for which quantitative and qualitative evidence can be accumulated, and so far the confirming evidence seems to be mounting. I admit I haven't worked as hard at finding counter-examples, and that's a source of bias.

Let's start with threads on this forum.
What are the most popular threads on ForexFactory? Generally, they are the threads in the 'interactive trading' section of the forum.


If I sort them by 'replies' we see that the threads about GBP and EUR trading are dominant. Other popular threads are about AUD and JPY. This is to be expected as these pairs are the most commonly traded. You can see the EUR thread is nearly at 1.2M replies! I've talked about the interactive trading threads before. I don't begrudge anyone participating in them as trading is a lonely business, especially manual trading where you are often waiting for something to happen. It's natural to want to connect with other traders and 'talk shop'. Heck that's at least part of the reason I'm here.

However is there any useful info in these threads? Let's see.


I'm cropping the usernames to avoid embarrassing anyone. The most recent post is about how a bollinger band is expanding which means volatility is increasing, and they're wondering if the price might rise higher, despite a downward trend evident. To be honest I don't even see an expansion of the band. They also remark that the market is dynamic. Yes it is. So what can we do with any of this? Nothing. It's typically vapid stream-of-consciousness masquerading as thought.

The next (previous) trader comments to say they are waiting patiently. "Twiddling their thumbs." Yup, that's the nature of manual trading. I think it's largely a waste of time at this stage of my career. To each their own though.


The next trader has a red diamond so they must be wise, right?
They are cautiously censoring their volumes so we won't know how much this heavy hitter is influencing the market with their trades. "TSL" doesn't ring a bell for me. Maybe if I was following this person I'd know what that is. "right index finger at the button". They are getting ready to react to something I guess. They are selling even though price is above what looks like some kind of moving average. Ok, to each their own. Can I make use of this info? No.
And so it goes, this whole thread is basically a multitude of voices shouting into a void. Hardly anyone follows anyone else, and that's what the market at large is like too. Everyone is pursuing their own theories, following their own stimuli, creating what is largely a chaotic, but responsive organism.

This is the most popular offering of FF in a popular sub-section and it is just noise. You might think you can tap into some kind of sentiment if you scrape and distill all the opinions/moods of the collective, and maybe that's something Fair Economy (the company that owns FF) does. Good luck with that.

Ok, what about in the 'Trading Systems' threads?

The king of the systems threads is 'Trading Made Simple'. That's what we all want, right, a simple, easy way to make money.


This thread, started by eelfranz, is the template for popular forum posting. The 'Trading Made Simple' thread has spawned at least half a dozen imitators with titles like 'Trading Made Even Simpler' and I once thought about making a satirical thread called 'Trading Made Even More Simplest Ever!!!11'. The fact is you can make trading pretty damn simple but even that will be beyond the ken of many people, possibly a larger section of the trading population than you'd find in the general world population. See my conversation with HeyYou where I list the 4 known groups of retail traders. Only one group is really clever, and it's a small group.

Eelfranz walked away from FF in 2011, no longer getting what he wanted or getting frustrated trying to work against one of the conclusions of the Conjecture which is that you can't fix stupid.

His pitch is a classic trading sales pitch. I tried everything. I wasted and lost money, until one day...

His secret? The motherflippin' TDI - Trader's Dynamic Index, a modified RSI indicator, that even VP of NoNonsenseForex has discredited. This ignoble beginning has turned into the most long-running and popular thread on the Factory.

Of course it's mutated and changed course several times, getting 'taken over' by a new charismatic charlatan periodically. What's also interesting is that these gurus collaborate and flock together, just to makes sure the nonsense is concentrated and even easier to find.

The next most popular thread is Davit's pivot trading. Now, pivot trading by itself is honestly something I need to examine in more detail. I suspect it's based on a sound principle (momentum, as usual) but the indicator itself produces a lot of interesting, detailed, time-consuming, controversial debate, about just what setting we need to properly pivot trade. That added complexity is the main attraction, not the results. Davit, interstingly, used to use TDI but stopped using it. I guess he got tired of taking the advice of a fairy tale. However the main debate still seems to be what is needed to further filter signals that aren't sufficiently filtered by the pivot indi.
Whether Davit actually makes money trading is immaterial but he spends much of his time fending off detractors, debating them, and posting stoic philosophy. The rest of the time he treats the thread like a trading journal, more than an inquiry into the system. Is any of this useful? Yes - the stoic philosophy.

Ok, so that's a quick sample survey of one side of the Conjecture -but what about the other side? Where's the hidden gold? Well, the other day I came across this thread that had been necro'd for some silly reason.

https://www.forexfactory.com/thread/...ll-close-above

This thread was started by strbac who is still struggling to get his red diamond. He appears to be a disciple of CrucialPoint who also left FF after a while, and he zeroed in on something useful that CP said.

"95% of the time Price will close either above or below the opening price. Less than 5% of the time, Price will close at its opening price. Within this truth lies the pot of gold."

Such a simple statement, unsurprisingly provoked some confused outrage from a few people, a bit of solemn head-bobbing from a few people and then the thread died out as such threads do. It gets resurrected once in a while by CP fans, and at random, otherwise it would never have come across my radar.

So what makes this thread so great? As strbac points out, this simple idea is the basis for all momentum trading. CP tries to say this is the reason for the candlestick's invention. I don't know about that, but he's absolutely right about this:
"I would only draw a line. Anything above it I would buy. Anything below it I would sell.

If price is above the line, it is an uptrend. If price is below the line, it is a downtrend.

This is one of the best advice you will get: 1. Pick one side (buy or sell) 2. Find a reference point (only buy above and only sell below) 3. Only trade according to point 1.""
Of course you need to have a little extra armament to protect yourself when this inevitably doesn't work, but this is about as complex as trading ever need be, which brings me to my second principle, but let's first look at one more source of evidence for the Conjecture - the signals trading service of MQL5.com.