Fxstu,
I certainly didn’t intend my comments to sound negative, and I’m truly sorry if they came across that way.
Everybody who’s read my other posts knows that I’m an ex-software developer, who dabbles in probability-based games, and forex trading. I'm not a pro trader by any means; please keep that in mind when you read my posts. I’ve been around FF for just over two years now, reading anything up to (maybe) 200 posts per day, and I’ve forward tested maybe 50 of the systems proposed here, plus the umpteen variations that invariably get suggested as each thread progresses. Let’s just say that if I’d found anything good enough to persuade me that it was significantly long term profitable, I would no longer be searching! You say that you’ve spent money on worthless systems. Well, I’ve likewise spent money on systems and forex "education". If you've experienced frustration, and it's led to skepticism, then we definitely have something in common. (You might also like to read JohnW’s story here: http://www.forexfactory.com/showthread.php?t=59460 – his first couple of paragraphs mirror my own experience). Hence I’ve grown to approach any new idea with what I hope is a "healthy but not insurmountable" skepticism, i.e. "unprofitable by default until I see reasonable evidence to persuade me otherwise".
While researching/testing all of these systems, I found that – despite all of the different technical indicators and/or line studies that they used – they all fell into three basic entry categories – (i) breakouts from congestion, (ii) pullbacks in trends, (iii) fading overbought/oversold or statistical extremes back toward a mean. In terms of profit exits, there seem to be three main approaches: (i) profit (or time-based) targets, (ii) trailing stoploss, or (iii) a combination of both. Hence, whenever I see a new idea on FF, I tend to analyze it in terms of these categories. I also tend to look past the detail, because I’ve grown to believe that market "randomness" can only be overcome by applying "robust" principles (e.g. trends, support/resistance, momentum, etc) as opposed to precisely optimized entries and exits.
I totally agree with you about Martingale and the casinos. If Martingale worked we’d all be making a fortune by doubling up at roulette. Anyway, a quick explanatory word about why I tend to connect averaging down, lack of stoploss protection and Martingale. Basically, they are all techniques used to avoid loss:
-- Martingale says that if you keep doubling your bet size, you’ll eventually win, recouping all previous losses.
-- Averaging down (adding to a position every X pips, or whatever, as price moves against you) is based around the notion that price "must" eventually turn around, thus offsetting prior losses. (Frequently packaged with Martingale as a "sure-fire winner" system – LOL).
-- Trading without stoplosses. If you never realize a loss, you’re guaranteed a 100% win rate. (See my earlier comments about unrealized losses). A variation that’s frequently marketed might be profit target of 5 pips, and a stoploss of (say) 500 pips.
-- (I could, no doubt, also add some hedge-based ideas into this category).
Various combinations of these approaches are mixed up with nice looking indicators, fibos, etc and packaged in EAs by many vendors. Of course what they don’t tell you is that the system will work brilliantly – win after win after win – until a "freak" trend occurs, which coupled with the high leverage, blows up your account. In the meantime, the vendor gets ecstatic testimonials from his customers ("wow, I’ve doubled my account in just two weeks!!") to publish on his site, and they get smoothly rising equity curves (no offence intended, or implied connection, but very similar in shape to the one you attached to post #134), before the bubble bursts and the buyer realizes that he’s been conned. These are all variations of a kind of Russian Roulette.
IMHO there’s only one way to (at least, potentially) win at forex, and that’s to put ourselves in the place of the casino. Somehow we need to find a recurring inefficiency (aspect of non-randomness) in price movement, that gives us an "edge", in much the same way that games give the casino an edge (5.26% in the case of Roulette) in statistical expectancy. It might involve trends, support/resistance, momentum, news, economic variables, volatility, price rejection, statistical deviation, session times, or a host of other possibilities. Next, we somehow devise a method of entry and exit to exploit it. Then, despite the leverage that’s available, we size our positions consistently and conservatively enough (like casinos have a max bet size, that’s tiny relative to their capital backing) to survive a losing sequence, while giving our edge the opportunity to ultimately prevail. And just as the dealers and croupiers operate according to strict rules in each game, we trade our system with discipline.
My comments about containing loss were based purely on the evidence of Zen's PDF, and the chart that I posted. I was trying to illustrate how all of the hard earned profit was being undone by the buy orders entered at the white lines being blitzed by the downtrend in the blue box. Also, hence the comment that I added later in blue typeface.
Sorry, I’ve gotten off topic here, but I just wanted to give you a better idea of where I was coming from. Again, my apologies if I sounded negative. My intention was to be constructive. I appreciate all of the blood and sweat that goes into devising a profitable system, and the difficulties involved.
I truly wish you, and Swef, all the best!
Good luck,
David
I certainly didn’t intend my comments to sound negative, and I’m truly sorry if they came across that way.
Everybody who’s read my other posts knows that I’m an ex-software developer, who dabbles in probability-based games, and forex trading. I'm not a pro trader by any means; please keep that in mind when you read my posts. I’ve been around FF for just over two years now, reading anything up to (maybe) 200 posts per day, and I’ve forward tested maybe 50 of the systems proposed here, plus the umpteen variations that invariably get suggested as each thread progresses. Let’s just say that if I’d found anything good enough to persuade me that it was significantly long term profitable, I would no longer be searching! You say that you’ve spent money on worthless systems. Well, I’ve likewise spent money on systems and forex "education". If you've experienced frustration, and it's led to skepticism, then we definitely have something in common. (You might also like to read JohnW’s story here: http://www.forexfactory.com/showthread.php?t=59460 – his first couple of paragraphs mirror my own experience). Hence I’ve grown to approach any new idea with what I hope is a "healthy but not insurmountable" skepticism, i.e. "unprofitable by default until I see reasonable evidence to persuade me otherwise".
While researching/testing all of these systems, I found that – despite all of the different technical indicators and/or line studies that they used – they all fell into three basic entry categories – (i) breakouts from congestion, (ii) pullbacks in trends, (iii) fading overbought/oversold or statistical extremes back toward a mean. In terms of profit exits, there seem to be three main approaches: (i) profit (or time-based) targets, (ii) trailing stoploss, or (iii) a combination of both. Hence, whenever I see a new idea on FF, I tend to analyze it in terms of these categories. I also tend to look past the detail, because I’ve grown to believe that market "randomness" can only be overcome by applying "robust" principles (e.g. trends, support/resistance, momentum, etc) as opposed to precisely optimized entries and exits.
I totally agree with you about Martingale and the casinos. If Martingale worked we’d all be making a fortune by doubling up at roulette. Anyway, a quick explanatory word about why I tend to connect averaging down, lack of stoploss protection and Martingale. Basically, they are all techniques used to avoid loss:
-- Martingale says that if you keep doubling your bet size, you’ll eventually win, recouping all previous losses.
-- Averaging down (adding to a position every X pips, or whatever, as price moves against you) is based around the notion that price "must" eventually turn around, thus offsetting prior losses. (Frequently packaged with Martingale as a "sure-fire winner" system – LOL).
-- Trading without stoplosses. If you never realize a loss, you’re guaranteed a 100% win rate. (See my earlier comments about unrealized losses). A variation that’s frequently marketed might be profit target of 5 pips, and a stoploss of (say) 500 pips.
-- (I could, no doubt, also add some hedge-based ideas into this category).
Various combinations of these approaches are mixed up with nice looking indicators, fibos, etc and packaged in EAs by many vendors. Of course what they don’t tell you is that the system will work brilliantly – win after win after win – until a "freak" trend occurs, which coupled with the high leverage, blows up your account. In the meantime, the vendor gets ecstatic testimonials from his customers ("wow, I’ve doubled my account in just two weeks!!") to publish on his site, and they get smoothly rising equity curves (no offence intended, or implied connection, but very similar in shape to the one you attached to post #134), before the bubble bursts and the buyer realizes that he’s been conned. These are all variations of a kind of Russian Roulette.
IMHO there’s only one way to (at least, potentially) win at forex, and that’s to put ourselves in the place of the casino. Somehow we need to find a recurring inefficiency (aspect of non-randomness) in price movement, that gives us an "edge", in much the same way that games give the casino an edge (5.26% in the case of Roulette) in statistical expectancy. It might involve trends, support/resistance, momentum, news, economic variables, volatility, price rejection, statistical deviation, session times, or a host of other possibilities. Next, we somehow devise a method of entry and exit to exploit it. Then, despite the leverage that’s available, we size our positions consistently and conservatively enough (like casinos have a max bet size, that’s tiny relative to their capital backing) to survive a losing sequence, while giving our edge the opportunity to ultimately prevail. And just as the dealers and croupiers operate according to strict rules in each game, we trade our system with discipline.
My comments about containing loss were based purely on the evidence of Zen's PDF, and the chart that I posted. I was trying to illustrate how all of the hard earned profit was being undone by the buy orders entered at the white lines being blitzed by the downtrend in the blue box. Also, hence the comment that I added later in blue typeface.
Sorry, I’ve gotten off topic here, but I just wanted to give you a better idea of where I was coming from. Again, my apologies if I sounded negative. My intention was to be constructive. I appreciate all of the blood and sweat that goes into devising a profitable system, and the difficulties involved.
I truly wish you, and Swef, all the best!
Good luck,
David