The Holy Grail - Found

Quoting hanover

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Digimix, IMHO you are spot on. The key number is expectancy (or "profit factor", "PF"), which is the product of win rate and win size (or "return/risk", "RR"). Everything else being equal, setting our targets closer than our stoplosses will generally mean a higher win rate, but lower RR. And vice versa. Of course the RR dynamics change as the stoploss is moved to breakeven and/or trailed. Then it's necessary to analyze the stats of a trade sample, to get much the same info, i.e. dollars won (return) divided by dollars lost (drawdown). That gives us $$$ won for each $ placed at risk.

Saying that a system is generating X pips or X% p.a. is, by itself meaningless, because we can (for example) double the value of X by simply doubling position size, triple X by tripling position size, and so on. But increasing position size increases drawdown in like proportion. Hence PF gives us a true measure of efficiency, independent of position size. [Of course this is all basic MM, covered in detail elsewhere by Diallist, PeterFM, Fijitrader, Darkstar, and many others. But it's surprising how many (supposedly experienced) traders harm their credibility (IMHO) by quoting win rate without win size, return without drawdown, etc.]

Having tried unsuccessfully myself for 6 years, and being very wary of the claims made by vendors and salesmen, I'm extremely skeptical: it takes a lot to convince me. JohnW's post attracted me not because of any hype, but (as Angler points out – post #51) because a 97.5% win rate across 240 trades goes beyond "successful trading": it is exceptional! Of course his RR may well be very low. We can only wonder what size dent the 6 losses made in the 234 wins, and, moreover, how indicative – or sustainable – his performance in the first 6 months is likely to be. Having said that, 240 trades is a reasonable sample size, carrying an error (at a 95% confidence level) of around 6.5%. In other words, we can say with 95% assurance that his future win rate will be 97.5% +/– 6.5% (although a win rate > 100% might be difficult, LOL).

More importantly, his post also caught my attention because it paralleled the struggles I've had, my growing skepticism toward sophisticated TA approaches, and because I also feel similarly about vendors and mentors.

There's some typically negative stuff being posted here. Perhaps some post out of envy of a 97.5% win rate, perhaps some post out of a genuine motive to warn newbies that consistent profitability is not that easy (I can relate to that!). One thing I have learned, trading panders to two of the greatest human fragilities: being right, and making money. Anyway, whatever, each individual knows their own motive.

So why does JohnW need to generate attention if he's not intending to sell his system, or mentorship? The message in his original post seems to be that, if one perseveres long enough using PA-based techniques, there is light at the end of the tunnel.

Quite the contrary of deserving criticism, I view any offer of free mentorship as being extraordinarily generous. I also see it as the ultimate recommendation, because in order to offer his/her services for free, the mentor is apparently making his/her livelihood from trading itself! Having said that, I don't have a problem with genuinely successful people charging for their time, if they choose to. Of course it's the buyer's decision as to whether to proceed with or without first seeing independently audited proof of trading performance.

In post #42, Angler says: "if it seems to good to be true, it usually is". I can certainly second that, primarily because I believe that the best it's possible for any method to achieve is to select and exploit whatever small measure of predictability does exist. So let's at least reserve judgment long enough give JohnW the opportunity to post his Word doc, if he generously decides to do so. We have nothing to lose: at the very least, it may contribute some ideas suitable for some FF patrons to incorporate into their trading systems.

David

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Quoting Angler

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hi all


SKUNNY........Well from this statement please enlighten us all...

Quote:
"Appreciate the clarity Angler, but to be even clearer there is a way to trade the market and almost never lose. You and some others seem to suggest it isn't possible when it is, this is a huge disservice to new traders."

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Quoting tunera

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This thread is very interesting, so.. the holy grail exist
I was sure!

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Quoting blueruby

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Now, if there is a BIG player for example, with a very big limit order to sell the GBP/USD at 2.0300 or 310, then you'll get something like what we saw on 12/5 and 12/6. When price reaches that level, market orders are filled at that (market) price, and until that big limit order is fully filled, price can not go above that level.

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Quoting blueruby

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Take a look at the bottom of the page here.

Check out the "Holy Grail" thread by aqibsherwani.

It doesn't take long to read the whole thread. It goes about like most. Except for one thing.

The originator of the thread makes 2 exceptional calls. Then he disappears after the usual criticism from the usual criticizers. No arguing. No bragging. Just gone. Why bother?

His line below his (or her) picture says "$1,000,000 by May 2008"

If he continued making calls like those two, he's probably already there.

We may never know. We'll probably never get the benefit of what knowledge he could have imparted. He's gone, probably for good.

I'm sure that's what I'd do if I had a system that was making me rich, I tried to share, people started in with all the same old crap, "prove it", "what are you selling", "too good to be true", etc., etc., etc., ad infinitum.

I'd take my system and my money and say "goodbye, losers. I hope a few of you manage to find your holy grail despite all the naysayers who will keep you earthbound forever if they have their way. I've got better things to do now."

Lately I've discovered a few things that have made a profound impact on my trading. I thought about posting them, I was just so happy to figure them out.

But, if I did, responses would be as follows:

1. Reader doesn't understand it without having experienced it enough times in real time, and won't until.

2. "Duh. How could you be so stupid as to not know that a long time ago".

3. That can't possibly work because.....

etc....

I'd bet the quality of mentorship-type posts here on FF and the advice therein would vastly improve if the small minority of negative people were weeded out.

I'd even go so far as to say that most of the originators with genuinely good systems and truly altruistic motives are very quickly driven away. Those are the type of people who wouldn't hang around for negativity.

I hope this thread doesn't turn out that way.

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Quoting Ohka

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think a moment about HOW the really big players place these very large orders and what this could mean for price action...

Ohka

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Quoting Ohka

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think a moment about HOW the really big players place these very large orders and what this could mean for price action...

Ohka

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Quoting blueruby

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Not sure where you're going. Tell us what you know. Some are receptive and wise enough to benefit from your advice and experience.

Others will criticise and insult you for trying to help, and they will get no benefit.

I guess it all works out right then, doesn't it?

Unless you don't tell us.

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Quoting billbss

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I agree.
The guy hasn't done anything wrong. He isn't trying to sell anything.

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Quoting hanover

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TC, I'm only guessing here, but I think what JohnW might be saying is that (if we assume that technicals are his only road map) there is a way (momentum?, velocity?, timing? inherent in the PA) of determining who (commercials, heavyweight institutions, retail traders, etc) is moving price toward S/R points, and consequently who is most likely to move them away. Supposedly the "who" somehow gives a clue - perhaps when combined with the context of the daily trend - as to the probable result (reversal/breakout?, strength/speed of the move?).

Just a guess - it's all voodoo to me.

David

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Quoting Ohka

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Hi BB,

what I was alluding at is that the biggest dogs (canis major?), those that are able to shape short- and midterm price action, are placing such large orders that they don't place them in a single order, but place multiple orders instead, each at slightly differing price levels. There might be a time difference between those individual order placements as well.

Now, what does this do for price action when these orders get filled?

Ohka

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Quoting hanover

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When one compares this performance of the very best managed funds – who presumably employ top analysts – a 97% win rate is unprecedented, and I would say unbelievable, except that the rest of his post sounds so genuine.

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Quoting hanover

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But, even if JohnW was willing to sell, the satisfaction surely lies in solving the puzzle for oneself. There are some great minds, and experienced traders, who trawl this forum. Folk who understand the way markets, institutions and brokers operate: the dynamics that underlie price movement.

So let's think about what JohnW is telling us. He says that he's "no genius" and that his method is "both profoundly logical and simple.... way more logical than anything I have ever seen".

He has made 240 trades in 6 months, which averages out at about 2 per day. That should give us a clue as to which timeframes he is trading. Unless his trades overlap, he must be trading intraday.

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Quoting hanover

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He says that (his own emphasis) "PA is king", and that the key is that "the market is made up of traders with varying strength" and that most (inferior) systems "ignore the simple truth of who drives prices and they attempt to predict price movement".

He uses only one technical indicator, and advises clearing everything else from the chart. In his next post (#6 in this thread), he states that he gives no credence to pin bars or candle patterns, and that indicators in themselves have no predictive value.

From this process of reduction, all we are apparently left with is tick data (raw price action), and S/R. Volume is largely irrelevant in forex, and dismissing it further simplifies our task. Surely a puzzle with very few pieces can't be that difficult to solve.

"Ask yourself this: when price goes to a certain level and stops (forming an S/R level), why did it stop there? Who moved it there? Who will move it away from tha S/R level? And how does this all fit in with the long term trend?"

So how does tick data, S/R and the long term trend tell us WHO is moving price? The only information I can see here is (1) the direction of the long term trend, (2) the "quality" of the S/R (how many times it's previously been rejected), and (3) the speed/strength of the move that reached it. Put all of this together and we can apparently determine WHO has the greatest bearing in moving price, i.e. supposedly commercials, heavyweight banks and institutions, or small retail traders.

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Quoting hanover

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A swift move toward, or away from, a point is represented by one or more long (high) candles. Does this mean that this move has been primarily caused by heavyweight players?

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Quoting hanover

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Performing a visual backtest, what is the most likely result if quality S/R is reached via long candles? Or short candles? With or against the direction of the longer term (daily?) trend? If price starts to move swiftly away from strong S/R, does this frequently herald the start of a big daily move? What about the way in which the S/R levels are clustered? Remember, we're looking for a pattern that generates an unbelievably high success rate, so it should stand out like a lighthouse. What about certain times of the day? Days of the week, or month? Patterns around certain news announcements? At what times are the key players participating, and what is their collective effect on price movement?

And which technical indicator does he use? From the theme in his post, I don't think it's necessarily a complex one, or if its identity even matters. Sounds like it might either be summarizing the long term trend direction, or the nature of the move toward, or away from, S/R. Unless of course, there's more that he's not telling us – but he says he's already given us the key.

He makes no mention of a specific currency pair. This suggests to me that this is a robust concept that can be universally applied, i.e. it's simply the way in which prices are moving toward, and/or away from, S/R. Detailed numbers (i.e. optimization) is therefore likewise unimportant.

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Quoting hanover

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I assume that if we can discover the pattern, then devising entry and exit rules won't be that difficult. A pattern that can potentially generate a 90%+ win rate leaves plenty of room for error.

I haven't a clue whether or not I'm thinking along the right lines. After reading gobs of material and looking at charts for 6 years, my head is totally scrambled.

What have I missed? Ideas, anybody?

David

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Quoting blueruby

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Yes, I see. It would do as it did during my example time period. I originally wrote 2.0310 and, after looking at the chart, went back and changed it to "2.0300 or 310".

So if this big dog was going short, and wanted to keep accumulating even when there were no buyers at 300, he would place it at 300, 310, 315, to keep shorting pressure on and keep flushing out buyers.

Also, a really huge order might stay for weeks, months, even longer perhaps.

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Quoting JohnW

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Craig -

Like many, I spent years looking for something that worked. My method uses primarily S/R levels and long term trends. S/R levels are determined by swings and trend lines. As David suggests, I trade intraday. I typically find 2 -4 trade setups per day, and sometimes all are triggered, sometimes none. I enter on the 30M exclusively. I never look at anything under 30M. I have been successful on all the major pairs (the 6 majors & EUR/JPY - I don't trade the GBP/JPY).

The golden truth is that trading with multiple indicators is doom. Multiple time frames are important. That's why I highly recommend taking off all indicators except maybe (big maybe) one or two moving averages to measure bias. My trigger is based soley on price action. PA & S/R IS ALL YOU NEED (plus common sense, courage, patience, and an eye on fundamentals/news items).

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Quoting JohnW

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You need courage to risk $$ (even my method has losses) and patience to wait for good setups. BTW, I NEVER EVER enter a market order (that's a clue). I use only stop orders.

When you look at a chart, do you need an indicator to tell you if its trending?

As I said in my post, reading many of the posts in this forum is great because they make you think. Take a look at any chart 30M or larger time frame. Ask yourself this: where will price NOT go? Why not? Where do you think the stop orders are?

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Quoting JohnW

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I could lay out exactly what I do, but here's the problem: its accepted by most that 2 people given the same method will have very different results. The fact is that there is no substitute for thinking and discovering what works in trading. This forum has tons of resources (folks like James16) that taken in context are very useful.

So throw out all the elegant colorful indicators. Get used to a "naked" chart and trade (demo) off it. You will probably find after a few weeks that indicators hide more than they reveal and that they can only be useful as weak guides.

I am now attempting to train 2 people in this method. I train them in person with my live account up and running. I don't believe that truly successful traders should charge for a method (I am not charging my students), and if they are successful, I will consider making a .DOC file available for those on this forum who are interested. In teaching my 2 students, I will learn which concepts are grasped readily and which are difficult. They have no prior trading experience.

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