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Odds staked against us?

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  • Post #1
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  • First Post: May 15, 2008 5:37am May 15, 2008 5:37am
  •  NoBread
  • | Joined Jan 2008 | Status: Member | 184 Posts
So being somewhat new to forex, one has to ask are the odds stacked against us and if they are then why bother? I have seen allot of folks claim
to make money, but are they? I have always wondered this and also wondered if this is just a waist of time in a unregulated biz?

Just a thought
  • Post #2
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  • May 15, 2008 6:30am May 15, 2008 6:30am
  •  AKforex
  • | Joined Aug 2005 | Status: AKFOREX | 86 Posts
Quoting NoBread
Disliked
So being somewhat new to forex, one has to ask are the odds stacked against us and if they are then why bother? I have seen allot of folks claim
to make money, but are they? I have always wondered this and also wondered if this is just a waist of time in a unregulated biz?

Just a thought
Ignored
Profitability is solely dependent on money management and discipline.Most traders spend their time analyzing the forex market to predict where it is going instead of developing low risk ideas in which the potential loss is small. Spend time developing low risk ideas, instead of trying to study every aspect of the forex market.
Professional traders know that money management is extremely important, but unlike hobbyist, they focus on the markets.
 
 
  • Post #3
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  • Edited at 8:15am May 15, 2008 8:14am | Edited at 8:15am
  •  max pips
  • | Joined Mar 2008 | Status: using the Force | 445 Posts
Quoting NoBread
Disliked
So being somewhat new to forex, one has to ask are the odds stacked against us and if they are then why bother? I have seen allot of folks claim
to make money, but are they? I have always wondered this and also wondered if this is just a waist of time in a unregulated biz?

Just a thought
Ignored

Off course they are stacked against us. Otherwise everyone would do it and we'd all be rich.

You need to change your vici to future tense vincam!

Max
Gravity goes both ways in forex...
 
 
  • Post #4
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  • Edited at 11:52pm May 16, 2008 3:56pm | Edited at 11:52pm
  •  hanover
  • Joined Sep 2006 | Status: ... | 8,090 Posts
Quoting AKforex
Disliked
Profitability is solely dependent on money management and discipline......
Ignored
No offense, AK, but I think it's fairly easy to disprove that textbook cliche.

Every EA (trading robot) trades according to strict money management rules, and with perfect discipline. If profitable trading was as simple as "enter any emerging move, let profits run, cut losses short, risk only 1%-2% of your capital per trade, and apply perfect discipline", then developing a profitable EA would be a snap, and everybody would use one (which would doubtless have an interesting effect on the market ). Anyway, if we trade using an EA, then money management and discipline cease to be an issue. And if success is dependent upon waiting for only the most profitable setups (that's if we dare to suggest that entry might be important), then an EA again fills the bill, because it incorporates accuracy, consistency, and endless patience.

One counter argument is apparently that "the key lies with the trader, and not the system". Well, every trader has to apply some kind of rationale in making their entries and exits. If there are any kind of rational thought processes involved, that are being applied consistently, then that constitutes some kind of a "system". It's all very well to say that one "must understand the workings of the markets intimately", but every technical approach ultimately involves looking at patterns in price movement, and every fundamental approach involves looking at trends in economic indicators.

A similar argument is that profitable trading systems must be discretionary, and therefore supposedly can't be programmed. I'm afraid the latter part of that statement is simply untrue. Developing software has been my career since I left high school in 1979. It's not that difficult to make software intelligent enough to perform tasks like multiple timeframe analysis, pattern recognition, applying line studies, pair correlation analysis, and even seek out trends in fundamental data. I've done it myself, and I've no doubt there are much smarter programmers out there than me (who'd like nothing better than to have a robot trader generate them an exponentially increasing passive income).

To provide any sort of long-term edge, discretionary trading has to be more than just lucky guesswork. Given that that's true, it's simply a case of the trader and programmer working through enough examples of what the trader looks for in a chart-based setup, to establish some programmable rules, and then gradually hone these rules - simply by categorizing further examples as either valid or invalid setups - into a system.

Another well-worn comment is that mechanical systems fail because they're inacapable of adapting intelligently to changing market conditions. Well, the underlying principle behind expert ("AI"-based) systems is their ability to gather new data, and adapt themselves accordingly. That's how they "learn". Adaptation is definitely not an insurmountable barrier.

If analysis/trading is an "art" rather than an accurate "science", does that mean that applying a less accurate - or less rational - approach is the optimal solution?

What does all of the above ultimately tell me? That price movement defies any kind of analysis, and profitable trading is therefore nothing more than luck?
Apparently it's not, because there are honest folk who claim to be successful. I congratulate them!

David
 
 
  • Post #5
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  • May 16, 2008 4:41pm May 16, 2008 4:41pm
  •  fenlander
  • | Joined Dec 2006 | Status: Member | 33 Posts
David,

Great post - but whats your ultimate opinion ?
 
 
  • Post #6
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  • May 16, 2008 5:54pm May 16, 2008 5:54pm
  •  AKforex
  • | Joined Aug 2005 | Status: AKFOREX | 86 Posts
Quoting hanover
Disliked
No offense, AK, but I think it's fairly easy to disprove that textbook cliche.

Every EA (trading robot) trades according to money management rules, and with perfect discipline. If profitable trading was as simple as "enter any move, let profits run, cut losses short, risk only 1%-2% of your capital per trade, and apply perfect discipline", then developing a profitable EA would be a snap, and everybody would own one (which would doubtless have an interesting effect on the market ). Anyway, with an EA, money management and discipline cease to be an issue. And if success is dependent upon waiting for only the most profitable setups (that's if we dare to suggest that method might be important), then an EA again fills the bill, because it has endless patience.

One counter argument is apparently that "the key lies with the trader, and not the system". Well, every trader has to apply some kind of rationale in making their entries and exits. If there are any kind of rational thought processes involved, that are being applied consistently, then that constitutes some kind of a "system". It's all very well to say that one "must understand the markets intimately", but every technical approach ultimately involves looking at patterns in price movement, and every fundamental approach involves looking at trends in economic indicators.

A similar argument is that profitable trading systems must be discretionary, and therefore supposedly can't be programmed. I'm afraid the latter part of that statement is simply untrue. Developing software has been my career since I left high school in 1979. It's not that difficult to make software intelligent enough to perform tasks like multiple timeframe analysis, pattern recognition, apply line studies, and even seek out trends in fundamental data. I've done it myself, and I've no doubt there are much smarter programmers out there than me (who'd like nothing better than to have a robot trader generate them an exponentially increasing passive income).

To provide any sort of long-term edge, discretionary trading has to be more than just lucky guesswork. Given that that's true, it's simply a case of the trader and programmer working through enough examples of what the trader looks for in a chart-based setup, to establish some programmable rules, and then gradually hone these rules - simply by categorizing further examples as either valid or invalid setups - into a system.

Another well-worn comment is that mechanical systems fail because they're inacapable of adapting intelligently to changing market conditions. Well, the underlying principle behind expert ("AI"-based) systems is their ability to gather new data, and adapt themselves accordingly. That's how they "learn". Adaptation is definitely not an insurmountable barrier.

And if analysis is an "art" rather than an accurate "science", does that mean that applying a less accurate - or less rational - approach is the optimal response?

What does all of the above ultimately tell me? That price movement defies any kind of analysis, and profitable trading is therefore nothing more than luck? Apparently it's not, because there are honest folk who claim to be successful. I congratulate them!

David
Ignored
David,
I agree with you , delete <<solely>>.
by the way your post is great.
 
 
  • Post #7
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  • Edited at 11:50pm May 16, 2008 7:57pm | Edited at 11:50pm
  •  hanover
  • Joined Sep 2006 | Status: ... | 8,090 Posts
Fenlander, I guess my point was that, given sufficient programming expertise, hard work and attention to detail, any discretionary approach can ultimately programmed into an EA, eliminating money management and discipline from the trading equation. Hence the latter need not be a problem.

If you’re asking "what is the most profitable way to trade?", then you need to ask a pro trader, rather than a programmer.

AK, no problem, I’m definitely not dogmatic in any of my views, and am very willing to accept any reasonable counter argument. I’m sure that we all agree that trading recklessly, emotionally and/or without sound risk management will deplete an account much more quickly than ill-timed entries and exits.

David
 
 
  • Post #8
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  • May 17, 2008 12:27pm May 17, 2008 12:27pm
  •  ElectricSavant
  • Joined Apr 2005 | Status: Member | 578 Posts
There are some fine posts in your thread. In my Journey, I am almost there. I can soon make some conclusions about the "waste of time issue" weighed against the "is this gambling" question.

Without sounding fully conclusive...I am leaning towards the fact that my stubborness supports a "denial" in my phsyche concerning Retail Spot Forex Trading.

ES

P.S. Bernacke and Greenspan...eat your heart out..I can speak in the same language that you do! without saying a thing.





Quoting NoBread
Disliked
So being somewhat new to forex, one has to ask are the odds stacked against us and if they are then why bother? I have seen allot of folks claim
to make money, but are they? I have always wondered this and also wondered if this is just a waist of time in a unregulated biz?

Just a thought
Ignored
 
 
  • Post #9
  • Quote
  • May 17, 2008 6:58pm May 17, 2008 6:58pm
  •  tdion
  • Joined Nov 2005 | Status: EURUSD Quant FREAK | 3,197 Posts
facts:

you are paying spreads and rollover premiums on trades

negative rollover outweighs positive rollover

there is no such thing as a "professional trader" only a lucky trader. welcome to the casino, my friend.
 
 
  • Post #10
  • Quote
  • May 17, 2008 9:51pm May 17, 2008 9:51pm
  •  hanover
  • Joined Sep 2006 | Status: ... | 8,090 Posts
Quoting tdion
Disliked
facts:
you are paying spreads and rollover premiums on trades
negative rollover outweighs positive rollover
Ignored
That's true, but if you trade longer term, and only in the direction of the carry trade, then a few days of positive swap will overcome the spread. Then, even with random entries and exits, you have (FWIW) a positive expectancy system.

Of course the problem with this approach is that returns are torturously slow, and applying high enough leverage to offset this is a double edged sword. The daily price movements exceed both the rollover and the spread many times over, and volatility multiplied by leverage increases the risk of account wipeout.

David
 
 
  • Post #11
  • Quote
  • May 17, 2008 10:59pm May 17, 2008 10:59pm
  •  tenantro
  • | Joined Feb 2008 | Status: Member | 215 Posts
Quoting tdion
Disliked
facts:

you are paying spreads and rollover premiums on trades

negative rollover outweighs positive rollover

there is no such thing as a "professional trader" only a lucky trader. welcome to the casino, my friend.
Ignored
I keep reading your posts for a while and I'm becoming more and more convinced that you're so bitter and mockingly negativistic sometimes because unconsciously you're mad at yourself for not being capable to be part of those "professional" traders.which is not wrong in itself, but maybe you should try to keep it to yourself from time to time.

there are many ways one can build a method/system with positive expectancy, especially if you know your math and advanced statistics, and luck has nothing to do with it.

but it's difficult, so probably that's why some prefer to rely on luck then.
 
 
  • Post #12
  • Quote
  • May 17, 2008 11:24pm May 17, 2008 11:24pm
  •  tdion
  • Joined Nov 2005 | Status: EURUSD Quant FREAK | 3,197 Posts
positive expectancy with a random data set!

when did you become a forex expert?

define a "professional" trader. what are his/her qualities? what separates him/her from everyone else? as usual, there will be no definitive answer from anyone, because there isn't one.

hey tenantro, are you going to tell me that they are fibonacci experts? that they can spot a head and shoulders or double/triple top/bottom from a mile away? let's move on past the voodoo chart observations...

maybe you'll say that they are fundamental experts, and can spot the price movement from interest rate changes and economic fundamentals. wrong again!

the only person that truly knows anything about future price are the central bankers, and the agendas they set for their countries.

PS) The title of this thread is "Are the odds stacked against us?" I agree that they ARE. Is there something wrong with me responding to the question? Is your opinion more valuable than mine? At least I can give reasons that support my point of view, unlike others.

Quoting tenantro
Disliked
there are many ways one can build a method/system with positive expectancy, especially if you know your math and advanced statistics, and luck has nothing to do with it.
Ignored
 
 
  • Post #13
  • Quote
  • May 18, 2008 5:29am May 18, 2008 5:29am
  •  NoBread
  • | Joined Jan 2008 | Status: Member | 184 Posts
Ok I am going to let the cat out of the bag, I have posted allot of newbie
questions on here to see what people are thinking in this biz. Yes i do trade full time for a living yes i do have over 1000 live trades and yes i do make money. Gamble question, well i can tell you that life is a gamble my friends.
I have owned retail stores, restaurants, and manufacturing biz. I say those are a bigger gamble. This is the best biz out there (jacko) While i do agree with some of you folks on different issues in the biz, the facts are the facts.
The market does not care if you are in the money or out, i do not care what you trade. It is what it is, if you are not making money then find out why.What are you doing wrong? Another fact people are afraid to loose money if that is the case this is not for you. In this business you will loose money and you must come to terms with it. I have lost more money with some of the business i have owned. One final thought, the gambling issue, if this is gambling then this country is some gambling fools and wall street is loaded with them. Also if you never take a chance if life is that not a bigger gamble?
 
 
  • Post #14
  • Quote
  • May 18, 2008 9:10am May 18, 2008 9:10am
  •  ElectricSavant
  • Joined Apr 2005 | Status: Member | 578 Posts
ok..No more newbie questions...got it?

Quoting NoBread
Disliked
Ok I am going to let the cat out of the bag, I have posted allot of newbie
questions on here to see what people are thinking in this biz. Yes i do trade full time for a living yes i do have over 1000 live trades and yes i do make money. Gamble question, well i can tell you that life is a gamble my friends.
I have owned retail stores, restaurants, and manufacturing biz. I say those are a bigger gamble. This is the best biz out there (jacko) While i do agree with some of you folks on different issues in the biz, the facts are the facts.
The market does not care if you are in the money or out, i do not care what you trade. It is what it is, if you are not making money then find out why.What are you doing wrong? Another fact people are afraid to loose money if that is the case this is not for you. In this business you will loose money and you must come to terms with it. I have lost more money with some of the business i have owned. One final thought, the gambling issue, if this is gambling then this country is some gambling fools and wall street is loaded with them. Also if you never take a chance if life is that not a bigger gamble?
Ignored
 
 
  • Post #15
  • Quote
  • May 18, 2008 9:40am May 18, 2008 9:40am
  •  mmont
  • | Joined Oct 2005 | Status: Member | 78 Posts
veni vedi vici
OR AS I HAVE WRITTEN IT ON MY SCREEN SAVER,

VENI . VEDI ! VICI ?
 
 
  • Post #16
  • Quote
  • May 18, 2008 4:03pm May 18, 2008 4:03pm
  •  hanover
  • Joined Sep 2006 | Status: ... | 8,090 Posts
Quoting mmont
Disliked
veni vedi vici
OR AS I HAVE WRITTEN IT ON MY SCREEN SAVER,

VENI . VEDI ! VICI ?
Ignored
Or Caesar, after his first night with Cleopatra: VIDI VICI VENI ?

(If I offended anybody, I apologize)
 
 
  • Post #17
  • Quote
  • May 18, 2008 5:05pm May 18, 2008 5:05pm
  •  Jurrasic
  • | Joined Feb 2008 | Status: Live long and have fun :) | 1,386 Posts
Quoting tenantro
Disliked
there are many ways one can build a method/system with positive expectancy, especially if you know your math and advanced statistics, and luck has nothing to do with it.

but it's difficult, so probably that's why some prefer to rely on luck then.
Ignored
Agreed, and not sure I'd call it difficult, just takes time, logic, calibration and a willingness to accept that it won't get you 100% total win and it'll take time to make big money using it (unless you already have big money to invest). Difficult is like building a space shuttle or curing cancer...
On the path to Enrichment.
 
 
  • Post #18
  • Quote
  • May 18, 2008 9:04pm May 18, 2008 9:04pm
  •  fxtrader42
  • Joined Oct 2007 | Status: Member | 576 Posts
Are the odds stacked against us? The answer is yes, but this should be obvious to anyone who has traded any market for a long period of time but lets stick to the spot fx market.

No one to this point has discussed the number one reason why the odds are not in your favor. The number one reason should be leverage! The only market that is even on the same level is futures but still the leverage offered in the futures market does not compare to the spot fx market. Think about it your buying power is generally 100X greater than your initial deposit. If you do not know how to quantify that or manage that kind of buying power than you are in for a world of hurt. Lets say you deposit 10K that means your buying power is 1M, 1M is no joke my friends. Can you put 10K down to buy a 1M dollar house? If you could how long could you hold that position with the interest rates you would have to pay? The answer is not very long and this is why most retail traders lose.

Luck plays a part in everything we do in life so there is no way to discount that. However, if you are hoping to get lucky rather than knowing what you are doing than luck is what you are betting on.

Unfortunately, this is an easy game, not an easy game to make money in but rather a fairly easy place to assess the information that is given. The fx market is a mathimatical equation that has no right or wrong answer but rather a right way of trying to solve the equation. This is where you find your professional traders.

You are going to tell me that there is no such thing as a professional trader but rather there are just lucky traders. If that is what you want to tell me than I am going to tell you that professional athletes are just lucky. This isnt the case. Yes luck plays a role but the reasons why they are professionals and you arent are: they know how to play the game, they know when to take a risk and when not too. It is truly that simple. I am not saying that everyone has it in them to become a professional trader but those who know the game and know when to take a risk have a huge advantage. Its not about EA's or systems its about you! What works for you, what do you understand, what dont you understand, what can you manage, what cant you manage and what do you know about you? I can tell you this; if you can answer those questions honestly, then you can find out if you have what it takes to play this game full time.

Dont ask me if I am a professional or if I know a professional trader! Ask yourself, do you know what you are doing? The rest will soon become history. Best of luck to all and dont give up until you know that giving up is the right move!
 
 
  • Post #19
  • Quote
  • May 18, 2008 9:19pm May 18, 2008 9:19pm
  •  fxtrader42
  • Joined Oct 2007 | Status: Member | 576 Posts
I guess I should add this for the sake of trying to be a little more helpful.

 

  1. Manage your money properly - how much are you able to lose on a trade and how much do you expect to make on a trade? How many times can you lose before you are done? Never, never, never over leverage yourself. Think like this, if this thing doesnt go my way am I going to be able to play again or am I done. Are we betting on luck or the idea that you assessed the situation correctly?
  2. Trade - why did I place that trade?
  3. Do you know for sure - you never know for sure or you wouldnt be here! Cut your losses and maximize your gains. It's easy to think that every trade will turn around in your favor but it is very hard to say I F'd up and it didnt work out for me. If things in life were easy we wouldnt have the word hard in our vocabulary. Making money in this game is hard so dont take the easy way out as that never works in the end.
  4. Figure out what works for you - figure it out there is no one in this world that can tell you what works for you but you.
  5. The rest is just NOISE.

 
 
  • Post #20
  • Quote
  • May 18, 2008 10:50pm May 18, 2008 10:50pm
  •  clockwork71
  • | Commercial Member | Joined May 2007 | 7,569 Posts
Honestly, I think the odds are stacked against us. Statistically, just the fact that you pay a spread, assuming price is a 50-50 shot at which way it goes, the odds are against you. (This is also what makes scalping so difficult from a mathematical point of view.)

However, the good news is that you can be profitable. I know, because I am. (No, I am not a professional trader - I have a business outside of trading that I love.) I for one, have chosen to take the long, slow grind in equity. (Which for my personality works. Someone else make need more of a "rush"....although I would say very few people can do it in super speed.)

But I think the biggest enemy is noise. If you think about it....with proper money management, some sensible stops, and a willingness to get out of bad trades before they become horrible trades - it's not rocket science. Not at all.....I agree the comment about leverage making this market tough.

As I was learning to trade - I listened to everyone. I was learning to trade the 15 minute charts with too much leverage. I learned to trade "in the moment".....It took me ignoring that noise to realize that I got into trading to gain FREEDOM. So sitting at this computer worrying about a stupid trade is NOT what I want. Once I figured that out.....it got easier, and fast. It's the way I trade....maybe not the way you will, but it works for me, and that's key.

But when I say noise, sometimes it's the noise that we make for ourselves as well as other noise. (news, analysis, forums, etc.)

Just my two cents mate.

Good luck,
Clockwork
 
 
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