The reason why 95% of new traders consistantly lose money

so the most interesting thing about this thread is the stategy behind it, not so much why 95% fail...Unfortunately fxtitan will not present his details to us but im happy enough initially to think obout it by myself an hoping others will follow. so these are my first rough thoughts about it:

the big advantages of the hedge are first that you can relocate the loss to another time and second that it may turns out that both targets get hit in a volatile or ranging market.

when set the targets to the big expected turning points (both directions) there will be some retracement 38% or more. and this is the chance to get out of the losing trade after the winning trade realised.

so at a key position you can expect a retrace of 38% fib or more. this is the controlled exit out of the looser trade: winner-> 100p profit->exit
looser- minus100p ->hold
exit the looser in the retracement zone -> this is your total profit


alpiner

sorry my pictures (gifs) for that didnt upload

can someone tell my why i cant upload pictures?...

wow! i didn't think this thread would get so much attention...

To Zu. Remember, I am only using a hypothetical example when I say risk 1% of your account size. Have you considered using 0.5% and larger targets or 2% with smaller targets? Have you considered using an additional 5% to even 10% profit target in the direction of the larger trend? {weekly, if you can do that?}

I am using examples. It is up to all of you to work out ideal entry points {turning points?/ timeframes? etc}, trend profit targets, anti-trend profit targets and lot sizes/ gearing.

Do you enter a hedge trade with both orders the same lot size or different sizes? Similar profit targets or different size profit targets? Do you set 500p and 1000p long term targets to counter large drawdowns against your positions? I don't know... these are all untested possibilities.

I know how my formula works best, now you have to think a bit and design your own formula. Please don't do this on a whim on your live account before testing your idea first. I think by now we all know that and I don't have to say it anymore...

To bobblong. I have a problem with you insinuating that by designing a system that avoid losses I have some psycological issue. Do I need to take a loss to prove that I am a man? I have taken enough losses in my life to be more of a man than Rambo and I have big brass balls to prove it. Taking a {noble?} loss just shows that you have not figured out how to trade without them. Surely, if you can cut out half of your losses, your account would look much better? Why haven't you done that?

I will tell you. It is because you can only control what you do as a disciplined trader {M Douglas and others}, but whatever you do have no control over what the market can/ will do. Forex is so huge and so volatile and so dominated by huge central bank orders that do you really think a large hedge fund or bank will really care about a specific support/ resistance/ fib retracement level when they want to move $10-$100 billion from the US to UK before interest rates change?

I don't think so... and that disqualifies any trader that thinks he knows which way the market will go. If you don't know for sure which way the market will go, all you are doing is gambling with the odds hoping and praying that you have guessed correctly. How accurate are the odds really? Who tells you what the possible odds are? The media? The news service on your platform? In other words, people with a vested interest in you losing your money to them...

The point is, no-one knows how the market will react to sudden or predicted or extreme news and events around the world. Traders are taught to trade 5 - 15min charts with high gearing {10% +} with short stops and are set up to fail. I have learned this the hard way.

My system avoids losing, not because I have lost my mind or my balls, but because I have noticed that price will fluctuate around the same levels over time and even when the market really takes off, you build in a fail safe {no, not a big emergency stop}, but a long term open position for example that will counter the big loser{s} and which you would liquidate on a {large timeframe} major turning point.

There are many ways to skin this cat, but you need to stop listening to the "experts" and think for yourself.

I found this on the Net, pretty much same strategy just more detailed description. He puts SLs though, but I guess it could be a personal preference....

http://209.85.173.104/search?q=cache...nk&cd=26&gl=us

Another same style 400 pips hedge EUR/CHF strategy....

http://www.actionforex.com/technical...2007122133917/

I'm sorry, but I don't understand this, i.e. how the hedge provides any kind of advantage. With equal long and short positions open simultaneously in the same pair, the two positions offset each other exactly, which has the same effect as being out of the market altogether.

Also, I don't understand how the loss can be relocated to another time, although perhaps some brokers operate differently to mine. In my case, the net equity in my account always includes both realized (closed trades) and unrealized (currently open trades) gains / losses.

I stand by the points in my earlier post (#56), until somebody can explain clearly to me how the hedging offers any benefit. Thanks and kudos to anyone who can enlighten me. A detailed example would be good.

David

An answer to the Thread title can be found in this post.
http://www.forexfactory.com/showpost...24&postcount=6

surprisingly the upload did work, but didnt show me the picture. so here is the second picture with the conclusion of what is was all about...

Still doesn't make sense to me.

If long and short positions are open between between the blue and green dots, the net effect is the same as staying out of the market altogther (except with the positions open, you will - at least with my broker - paying the spread on both positions). So I'm worse off if I "hedge".

The only real profit that's being made is when the trader is net short and price moves from the green to the red dot. That could be achieved by placing just the one order, i.e. a sell limit order at the green dot. Then one pays the spread on just the one position.

If the "hedged" position is held overnight, the broker will also make money on the rollover, beacuse both positions will be impacted by swap, and brokers generally charge more negative swap than they pay positive swap.

My conclusions are these:
#1. Hedging (in the same currency pair) offers no benefit whatsoever.
#2. Being able to hedge in the same currency pair is a ruse introduced by (some) brokers, to gain additional spread and swap from clients who don't understand point #1.

I'm still waiting for somebody to show me how being hedged offers more profit than simply staying out of the market.

David

I hope you are patient because i have a feeling it may take some time....

Hi David,

Firstly, would just like to say that I enjoy your posts immensly - always well thought out and written far more eloquently than I could ever hope to be.

You may or may not know that the whole essence of my method hinges on hedging GBPJPY. Since implementing the strategy last summer I haven't had an unprofitable month over 700+ trades.

So, in my case I have been far more profitable than if I had stayed out of the market since then. That's not to say I wouldn't have been more profitable trading in a more conventional manner over the same time but it's just the way I'm comfortable trading.

I'm not going to go into detail concerning my method as I've already documented this in my journal. I'm also not trying to convince anyone that what I do is the way to go, just that it can be done and done successfully - each to his/her own.

Kind Regards
Steve

Steve,

could you post a link to your system....
I was trying to search your journal by "complimentary system", "hedge", but doesn't seem can find anything regarding your hedge system.

It's especially interesting because GPB/JPY tends to be trending and wildly volatile. It likes to breakout too. So, from classic hedge point of view this pair is against all hedge systems rules (must be ranging and not to break out).

Orest

Hi Orest,

Journal link is...

http://www.forexfactory.com/showthread.php?t=10519

I believe a pretty comprehensive description of the strategy is around post 3052

Kind Regards
Steve

Steve, thanks very much for your reply, and your kind words.

I will definitely take a look at your journal some time soon.

Let me try to rephrase my question: during your GBPJPY hedges, you are presumably long and short equally (e.g. 1 lot each way) at various points. Can you explain how your account equity is growing during those times? Since your net position is zero, isn't that the same as being out of the market altogether?

Arctic4x, I think you understand where I'm coming from.

Thanks,
David

David,

Yes, there are times when I have the same amount of trades on long and short and effectively at those times am 'square of the market'.

As you correctly point out, at those times my net position is zero - just part of my strategy. Effectively I'm out of the market although as soon as the market decides which way to go I'm back in once a position hits take profit.

There are some disadvantages as you mentioned in your last post but it works very well for me.

Have a great weekend.

Kind regards
Steve

just one way not to use SL. i want po point out that my idea is by far not a strategy just a mechanism that works. the chance of this thread is to discus with people who contribute new ideas to help everyone who is interested find their own way...
unfortunately posts like the last one from mrgreen are just destructive, tryin to make it look ridiculous.

i dont know if fxtitan is right or not, if he just want to show off or making real money...but i DO know that his initially idea is a great STARTING POINT to think about. and its always better to share unfinished ideas because there is a chance that someone here put the crucial part to the puzzzle and we can move on to the next problem...

so correlation between moneymanagement and when to open a new possition could be the key to make loosertrades turn to winning trades over time.

There has been a nagging thought in the back of my head..

If you close one of the profitable trades, and not touch the other hedged position, your account equity would be still the same. This means there isnt any actual profit gained. Without closing of the losing hedged positions, your account equity will always remain at the original level. How is it possible to grow your account size so you can increase lot size?

Of course its obvious you have suceeded, and I'm very impressed. Just wondering how your broker actually calculates equity balance.

FXTitan,

I would just like to say that I agree with you on your original post. I have almost a 100% win ratio on my trades since I began my new method of trading. I invoke the power of hedging into my system. In response to Hanover, I want to say that hedging offers a whole new world of trading. Money management does have its benefits, it in itself is a big reason why a lot of traders lose.....overleveraging.

I don't use stops. Why?

1. It's not because I think broker's are "stop-hunting," first of all.....that would take an unprecedented amount of capital to move the market 46 pips to knock out your 45 pip stop loss. It's called a coincidence. If you had set your S/L to 47 pips, you would consider yourself smart for "picking the right value."

2. What exactly is a stop loss? The COMMON MISCONCEPTION is that a stop loss is a point where you LIMIT YOUR LOSS, what? Let me rephrase what it should say. A stop loss is a point in the market where you are saying it is okay for the broker to take my money from me, I give them permission, here, take it.

3. Hedging. What? I can't do that, that exposes more margin, or that doesn't make me money that essentially just freezes my unrealized profit/loss....wake up....if you have 1 2 or 3 positions open in one direction, you look at your charts and see that the price is going to start going in the other direction....hmmm, now is a good time to hedge....why? because WHILE the price is going against your original positions your account balance is increasing 1 2 or 3 times as fast.... your equity remains unchanged though.

so you close the hedge position, and the price starts going back in the direction of your original positions, what does THIS mean? it means that now your account balance remains unchanged but your equity is increasing....IMAGINE THAT. But wait, theres more.....you are analyzing your charts and poof, you see another classic setup that the price will once again be moving AGAINST you.....well guess what, this calls for another chance to HEDGE! you open the hedge position and once again you FREEZE your accounts equity, but this time, your equity is significantly higher than it was when you entered your first hedge. you close out the hedge making your account balance bigger. hooray. The price starts moving back in the direction of your original positions, and once again your equity begins increasing....and after all, THAT is what its really all about.

4. Forex is just as big of a gamble as poker. It should be called gambling, but instead people view it as an investment, and investments are commonly viewed as profitable. Well lets take a closer look at this gambling investment. In forex there are two main ways to analyze the market, technical indicators, and fundamental indicators. Which do I use? Let's say that you use technical, just because this seems to be all the rage these days....wait...Texas Hold'em seems to be all the rage with the different kinds of poker.....theres that gambling analogy again......hmmm correlation maybe? lets find out. In Texas Holdem there are "good" starting hands, ie High pocket pairs, face cards, high cards like Ace-Ace, or Ace-Queen, or King-King...etc. In forex, we see highly profitable patterns, like double bottoms, triple bottoms, head and shoulders, wedges, pennants, aside from patterns you have extremely oversold/overbought levels, you have candlesticks...the list goes on....
No matter what you start with, the best overall odds, say Ace-Ace, or a triple bottom, with extremely oversold levels on all the indicators you use, with divergence, extending outside of its channel or bollinger bands with a super long wick on a downtrend followed by a bullish engulfing pattern, your stochastics just crossed above the 20 line, your support level held, and whatever other indicators you use, and you are sure that the price will reverse. This doesn't mean that the price WILL reverse. There is no for sure in this market. Your technical indicators may say one thing, but then the price starts falling...why why why you ask yourself....its because this market is unpredictable. There are probable set ups....but nothing is set in stone.

What it comes down to in this scenario, is that no matter how hard you try, if you set a stop loss, with all indicators in your favor..there is nothing saying that the price won't keep going before it turns around, and in that time...if you have a stop loss......well you probably got stopped out. You took the loss, because you said it was ok for the broker to have your precious money.

5. Placement of stop losses.....I have seen this on multiple threads, posts, etc etc etc...but time and time again, I see someone who enters a trade, and sets a stop loss of 15-25 pips....are you serious?....Bro, I must level with you....the forex market moves ALOT everyday.....if you have small stop losses like that, well than you are asking to just slowly but surely decrease your account value by 1-5% every time you place a trade....

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OK after all of that, I would just like to say that I have found one person in these forums that I think uses stop losses correctly. He has already made an appearance on this thread. Steviet. He uses a 1000 pip stop loss with a 50 pip target profit. a what?!?! yes, a 1000 pip stop loss. No tiny small little deal like 15-25 or even 100 pip stops. For this, I give him credit.

If you want to check out his thread you can go HERE.

The rules behind his system are on Post #3052, and can be found HERE.


I am not endorsing steviet's method, he is successful with it, but I just think that everyone here who uses tight stoplosses, might be enlightened by his views.......I on the other hand will continue to not use them, nor do I ever plan to continue with them.

I just want everyone to know, these are my personal views, and I like FXTitan have found my edge, my holy grail.

Zack

Just awesome post, Zack.
What is your max DD so far as a percentage of your account's equity? After I've read through Steviet's journal I am a little confused again, what if price keeps going down, down and down against you 1000, 2000 and more pips. I know proper MM protects you, but still DD could be significant. Maybe it's not a bad idea to have very widely limited SL. From other hand why 1000 pips? Why not 1500? or even 2000?

From all I've read I think all such hedge-> wide SL methods are all about trading in the price range channel. Do you place hedge orders even relatively close to the borders of the channel or only in the zone of consolidation (I think that's what Steve does)?

Thanks again, great post.

The Max DD that I experience in my account is 10%. The Max that Steviet allows for is 10% as well. In relation to steviet's method I believe he just answered this question on his thread with someone else. He explained that he uses a 1000 pip stop loss because anything less on the GBP/JPY would very well have a good chance of being stopped out on the same day. He also explained that if he were to use a 2000 pip stop loss, he would increase his maximum number of open trades to 20, he has more positions to manage and if he has 20 trades open, it may take a while for some of them to come into profit. Again this is just what I recall from reading his post earlier today, you are welcome to check out what he said about it in his thread, he would better be able to answer that question. I don't trade his method, I just think he has a unique approach trading forex that might offer some help to struggling traders that seem to be fixated on tight stops.

As for how I place my hedge orders? I have my own analysis, my own strategy....but if within my strategy if I see a chance to make pips in another direction and there is a high probability of this opposite move occurring. I will place a hedge trade. If this is on the outside of a price channel, I might use a lower lot size rather than hedge all open positions. It depends on the situation. But I always, always, always take into consideration what is happening on all of the timeframes. If I place a trade on the 30 minute or 1 hour chart....I know very well what is happening on the 4 hour daily, weekly and monthly as well. It's important to keep track of what is happening all the time.

I hope that answers your question.