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It's Unreliable

  • #1
  • First Post: Edited 10:57am Nov 12, 2021 10:45am | Edited 10:57am
After much study of the Forex market, and the implementation of various strategies and indicators, I have come to the conclusion that most of what I have learned, and most of what is being taught, is unreliable.

Moving average crosses, supply and demand zones, volume profile, tick volume, MACD, RSI, channel trading, Bollinger bands, sentiment trading, psychological levels, most candlestick patterns, etc..., all seem to be unreliable when it comes to having a substantial win rate resulting in good profits by the end of the year.

The people marketing this stuff are likely making more money from selling their products than they are actually gaining from trading.

I have no doubt some people will strongly object to what I have stated here. For they are in love with their strategies and indicators. But what they need to prove to change my mind is their system must have a win rate greater than 50%, and isn't merely coincidental when it works. They should also be in profit at the end of the year. Otherwise, what they have is no more reliable than a flip of a coin.

What then is reliable?

Share your thoughts.
Learn from your mistakes and march on.
  • #2
  • Nov 12, 2021 11:11am Nov 12, 2021 11:11am
Well said mate, it's the same rude awakening I had. Fortunately, we had successful traders like Dkrock, Crucial point and Swisse who understood the business and how to profit. Sadly they are hardly around.
Market moves up or down
  • #3
  • Nov 12, 2021 11:24am Nov 12, 2021 11:24am
Yes, because indicators are "psychology boosters".

Nobody knows but since the price is oversold, there is a crossover of occult lines or waves or quantum physical manifestations, it should be more likely than a mere guess.
  • #4
  • Nov 12, 2021 11:39am Nov 12, 2021 11:39am
What is with the 50% hit rate? Why over and over i see the same false statement?
Seriously you can pretty well also with a system that has less as that number. All comes to the critical point. How do you manage your trades?
Perfection is the enemy of good enough!
  • #5
  • Nov 12, 2021 11:55am Nov 12, 2021 11:55am
Quoting MichaelSch
What is with the 50% hit rate? Why over and over i see the same false statement? Seriously you can pretty well also with a system that has less as that number. All comes to the critical point. How do you manage your trades?
It's good money management that makes a trader profitable, not some magic indicator. A win rate of more than 50% is needed to prove the winners were not mere luck.

If you flip a coin, you have a 50% chance of getting the direction of the trade right. Getting the right direction doesn't mean you will win. You need a solid money management strategy. If you have a solid money management strategy, you should come out ahead in the end.

In other words, it's not your indicators that give you an edge in the market, but your ability to manage your money well.

If your win rate is 50% or less, then why not just save yourself the trouble and flip a coin, and then apply a good money management strategy to the trade? Your strategy is obviously not giving you an edge if your win rate is 50% or less.
Learn from your mistakes and march on.
  • #6
  • Nov 12, 2021 12:25pm Nov 12, 2021 12:25pm
Quoting here2there
{quote} It's good money management that makes a trader profitable, not some magic indicator. A win rate of more than 50% is needed to prove the winners were not mere luck. If you flip a coin, you have a 50% chance of getting the direction of the trade right. Getting the right direction doesn't mean you will win. You need a solid money management strategy. If you have a solid money management strategy, you should come out ahead in the end. In other words, it's not your indicators that give you an edge in the market, but your ability to manage your...
Why in the world you want a strategy that is above 50 and if you found it, will it ever give you that result. Why stress searching golden egg machine? Take next strategy and turn it with suitable money management to that you want. Yes you can flip a coin if you want, trade random.
Perfection is the enemy of good enough!
  • #7
  • Nov 12, 2021 12:32pm Nov 12, 2021 12:32pm
Quoting MichaelSch
{quote} Why in the world you want a strategy that is above 50 and if you found it, will it ever give you that result. Why stress searching golden egg machine? Take next strategy and turn it with suitable money management to that you want. Yes you can flip a coin if you want, trade random.
You have missed the point.
Learn from your mistakes and march on.
  • #8
  • Nov 12, 2021 12:50pm Nov 12, 2021 12:50pm
Quoting here2there
{quote} You have missed the point.
You are off road. Hope you find a strategy minimum above 80 percent, with massive trades behind that you not need a clever money management. That is what are many dream from.
Perfection is the enemy of good enough!
  • #9
  • Nov 12, 2021 12:55pm Nov 12, 2021 12:55pm
Quoting MichaelSch
{quote} You are off road. Hope you find a strategy minimum above 80 percent, with massive trades behind that you not need a clever money management. That is what are many dream from.
Again, you are missing the point. My point is that it's not your indicators that give you an edge in the market, but your ability to manage your money well. If a person believes a specific indicator or combination of indicators is giving him an edge in the market, then I want to see results above 50%. Otherwise, this is no better than flipping a coin.
Learn from your mistakes and march on.
  • #10
  • Nov 12, 2021 1:00pm Nov 12, 2021 1:00pm
Hello...GREAT THREAD!!

I couldn't agree more with your message at the beginning of this thread. Moving averages, indicators, oscillators, "systems" in general offer absolutely nothing more that just dumb luck to any serious trader. However, achieving anything greater that a 50% win rate ("hit rate") is a reasonable and achievable goal. But it is not done with the use of any of these afore mentioned mathematical indicators.

It is done by realizing, understanding and utilizing the true structure of the market. Time, Volume, Order flow, and Price. These are the elements that when understood and utilized correctly will allow any trader to produce consistently profitable trading results, 60%-80%, most of the time. This is not an unrealistic or bragging on my part...it is factual and provable.

I trade futures and Forex. I use the same techniques on both, except that in FX I trade daily and larger time frames, and in futures small tick charts. However I employ the same technique and skill set to achieve an overall 80% win rate. YES, I have losses, but for every dollar I lose, I make 14 back. I hold a typical trade about 30 minutes (on average) and a losing trade is about 1/2 that time. The overall expectancy of my trading is about 40 points (in futures) per trade and most often this is the result of a 3xRisk between winners and losers.

This is NOT fantasy, it is fact. However, I do NOT use any of the techniques you mention above. I simply look for order flow exhaustion on one side of the order flow/volume market structure to give me opportunities to enter going the other way...many here call that "swing trading". I hold for reasonable and achievable targets, (not those long trends). In fact I pay no attention to the concept of "trend". I simply view the market as it is in whatever state it currently is

As some form of verification to my claims I offer my actual trade log results so far this year. This is a copy of one page out of my spread sheet.
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I absolutely agree with you that the methods you mentioned are ineffective and leave you "chasing ghosts". However, I do NOT agree with you that trading as a profession is a losing game. Done correctly, it is a highly efficient and rewarding profession, leaving one with more of the one true asset no one can ever recover once gone...TIME.
@xxxx§|[::::::::::::::::>
  • #11
  • Nov 12, 2021 1:28pm Nov 12, 2021 1:28pm
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Trading breakouts 2 years.
  • #12
  • Nov 12, 2021 1:30pm Nov 12, 2021 1:30pm
Quoting joyny
{image} Trading breakouts 2 years.
This doesn't prove anything. Let us see your strategy at work in real time.
Learn from your mistakes and march on.
  • #13
  • Nov 12, 2021 1:36pm Nov 12, 2021 1:36pm
Quoting here2there
{quote} This doesn't prove anything. Let us see your strategy at work in real time.
It is real audited results. Here more info.
  • #14
  • Nov 12, 2021 1:40pm Nov 12, 2021 1:40pm
Quoting DonPato
I do NOT agree with you that trading as a profession is a losing game. Done correctly, it is a highly efficient and rewarding profession, leaving one with more of the one true asset no one can ever recover once gone...TIME.
Your results are apparently very good! But I question if it has more to do with you knowing how to mange your money well.

I would like to see your strategy in real time.

By the way, I am not saying trading as a profession is a losing game. I am simply saying it's not necessarily indicators that give a trader an edge in the market, but good money management. If a person's win rate is 50% or less using indicators, then the indicators are obviously not giving him an edge. If he is profitable, then it is his ability to manage his money well that is giving him an edge. The indicators really aren't needed.

But it looks like you have found a real edge. I will not deny your results. But I would like to see your strategy in action.
Learn from your mistakes and march on.
  • #15
  • Nov 12, 2021 1:54pm Nov 12, 2021 1:54pm
Quoting joyny
{quote} It is real audited results. Here more info.
I would need to see how you trade to be convinced that it's your strategy that is giving you an edge. It could be that you are very good at managing your money, and that this is what is really making it work for you. If that's the case, then there could be something you are basing your trading decisions on that really isn't needed. And who knows, you might have better results not using it. But I wouldn't be able to determine this without seeing you trade.
Learn from your mistakes and march on.
  • #16
  • Nov 12, 2021 2:01pm Nov 12, 2021 2:01pm
Quoting here2there
{quote} I would need to see how you trade to be convinced that it's your strategy that is giving you an edge. It could be that you are very good at managing your money, and that this is what is really making it work for you. If that's the case, then there could be something you are basing your trading decisions on that really isn't needed. And who knows, you might have better results not using it. But I wouldn't be able to determine this without seeing you trade.
Trading with fixed SL/TP. Darwinex newer would award me several times if my strategy would use some dangerous approach.
  • #17
  • Edited 2:24pm Nov 12, 2021 2:05pm | Edited 2:24pm
Quoting here2there
Your results are apparently very good! But I question if it has more to do with you knowing how to mange your money well...
That is certainly part of the overall methodology. Knowing when to cutoff a losing trade or enter at a price point where the downside is small, is a large part of producing a profitable trading style. However, as you can see from my notes there...some of my trades had large (in my opinion) stops but only had a "actual risk" of a fraction of that stop. In other words what I calculated as a stop was way more than what actually occurred...as in drawdown

Quoting here2there
...I would like to see your strategy in real time...
I have several threads that post trades I took on the right hand edge showing the entry, management and exit. I recently posted one on USD/MXN last week here: https://www.forexfactory.com/thread/...9#post13776509 This was NOT the entry per se as much as showing the reader what prompted it and how it resulted. In addition I will show a currently open short on NZD/USD that came frustratingly close to a take profit before pulling back today. So...next week maybe.
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Finally I'd like to point out that while "money management" (I prefer to call it "risk" management), is an extremely important factor is this business, it will NOT make the difference in a marginal methodology. It will only delay the inevitable ultimate failure, in the mean time giving the trader some illusion of success. I've also found that terminology and semantics make a difference in one ultimate "edge"...yourself. Calling something and "edge" or "system" for instance implies a certain gambling mentality where as simply calling it your "methodology" implies a well thought out and "methodical" approach to what one does, and thereby changes your actions to one of considered and carefully planned risk taking, as opposed to this is my "edge" and even though its losing...eventually it will win (given a large enough data sample). This "idea" is what forces most into irreversible ruin and economic failure.

If what you're doing wins more than 1/2 the time...it is not a "edge" per se it is a methodology that works well for you. Then all that remains is learning how to maximize those gains, and limit the losses...(without compromising gains). Is that good "money management" or just good sense?

UPDATE:
I was also reminded of this trade, Short-GBP/USD, that limited out this week, and provides an excellent example of what I mean by "reasonable and achievable" goals.
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A greedy person might still be holding this trade, where as I am now engaged in looking for the next (1) pull back for another short, or (2) Reversal into a new direction. Again I repeat...Trend, Schmend!!
@xxxx§|[::::::::::::::::>
  • #18
  • Nov 12, 2021 4:47pm Nov 12, 2021 4:47pm
Quoting here2there
After much study of the Forex market, and the implementation of various strategies and indicators, I have come to the conclusion that most of what I have learned, and most of what is being taught, is unreliable. Moving average crosses, supply and demand zones, volume profile, tick volume, MACD, RSI, channel trading, Bollinger bands, sentiment trading, psychological levels, most candlestick patterns, etc..., all seem to be unreliable when it comes to having a substantial win rate resulting in good profits by the end of the year. The people marketing...
Hi here2there,

It all rather comes down to an understanding of the word unreliable. The market itself is unreliable in the sense that it is certainly chaotic and unpredictable in nature. On the other hand, the market is the market and therefore by definition always right, so it is all our attempted analysis of it that is unreliable.

However, whatever the truth of all this, what is true is that it is hardly surprising that all your studies have not come up with anything reliable. If you had, within a very short period of time everyone would be using it and we would all be disgustingly rich from our reliable trading. As we don't see hordes of disgustingly rich traders all around us we can pretty safely conclude that, yes indeed, all methods are inherently unreliable.

It is only a small step from here to realise that you are very unlikely to ever find a method that is materially better than a coin flip. The clever bit is taking what is basically a coin flip and being able to make money from it consistently. Good traders manage this, unsuccessful ones don't. Good traders are not good because they have a more reliable insight than anyone else; they are good because they handle what is dealt to them better than the herd does.

That said, of course the market is not really that much like a coin flip. It is not an automatic 50:50 shot each time. Some situations are essentially a 50% coin flip but offer an asymmetrical payoff profile that allows a net profit to be extracted over time. Other setups may only offer a 1:1 risk:reward but if you are careful, disciplined and patient you can tip that coin flip to be a little better than 50% reliable and so again extract a net profit over time.

The market is a continuous opportunity (and risk) generating machine, albeit in an inherently unreliable way. Profitable trading is not about finding something wonderfully reliable, it is about managing those opportunities in a net profitable way. You do not need reliability, you need good trading skills.
  • #19
  • Edited 5:54pm Nov 12, 2021 5:27pm | Edited 5:54pm
We can’t control the win-rate of a strategy, but we can maintain a consistent risk-to-reward ratio.
A system is profitable if the percentage of “(average loss) / (average loss + average gain)” is lower than the win-rate.
Using the above formula as reference, I would recommend consistently risking a fixed percentage of your capital and using at least a 1:3-RRR on all your trades because any strategy that has a win-rate greater than 25% will be profitable …
Market is not random but unpredictable
  • #20
  • Nov 12, 2021 8:51pm Nov 12, 2021 8:51pm
Quoting here2there
{quote} It's good money management that makes a trader profitable, not some magic indicator. A win rate of more than 50% is needed to prove the winners were not mere luck. If you flip a coin, you have a 50% chance of getting the direction of the trade right. Getting the right direction doesn't mean you will win. You need a solid money management strategy. If you have a solid money management strategy, you should come out ahead in the end. In other words, it's not your indicators that give you an edge in the market, but your ability to manage your...
I find it funnily annoying to say it's good money management that is the ultimate game changer. What the hell exactly is money management anyway, that it magically turn negative odds into positive ones? The business of trading, i.e. placing bets, is dependant on having a positive win to loss ratio in the long run. (By win to loss I simply mean for this conversation win $ amount is bigger than loss amount, irrespective of your money management guidelines and strategy.) I'm not saying money management is not important but ultimately it is not the decisive factor as to whether or not you achieve this positive $ win/loss ratio. Don't think you can flip a coin for direction and apply some magic money management guidelines and turn a profit. Unless money management is rule bound by the chart at hands, then this is simply trading, not money management, thus you could skip the coin flip and look at the chart from the get-go.
No tree, it is said, can grow to heaven unless its roots reach down to hell
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