Dead end...

Since we are talking about edges may I also offer 2 other observations.

1. Markets change, so edges or characteristics come and go, the job of the trader is to keep finding them, the whole nothing works forever argument is true, but this should not stop you exploiting what works now.

2. It seems most people on forums are trying to develop systems on the most liquid markets, here everybody is trading EUR/USD or GBP/JPY (on other forums it's the ES or YM), the most liquid markets are the most efficient, as far as I can tell most of these markets have no discernable characteristics beyond a random walk. My point being is that it is going to be awfully hard finding technical inefficiencies in these markets.

sounds like you just switched habits

from cigs
to pips


hahaha

Leon, many people here already gave you incredible infos. You just have to believe in yourself. If men can go to the moon, you can make it in forex. If you have the desire to succeed in this market you will. It's not easy but once you get through the toughest part, whatever that maybe, everything will become easier as time goes by. You can try to learn candle formations such as Morning Star, Evening Star...and more candles formations. I don't want to list all because you can find everything on this site and the net. For example, if you see an Evening Star at the end of a bullish run, indicated by one of the indicators such as stochastics overbought zone, a reversal is near. If you know how to read candles, most of the time, you can tell what the market is likely to do next. Use candles with indicators will help confirm high probabilities. Maybe you should try to learn reading candles (if you haven't), and master pattern formations (Head and shoulders, AB=CD, etc.) Master one at a time. You should trade with nano lots or micro lots first until you master your strategy then increase 1 lot after every $500 you make. It's slow, but you'll learn so much and that'll help you stay in the game until you make your millions. Good luck.

Here is an example of what I wrote on previous post.

bro, u can try reading the book "The Dsciplined Trader" by Mark Douglas. i find that this really helps in understanding price action.
previously i also rely strongly on indicators stochs, macd etc.. but none of these comes closer to reading price action (candlesticks). what occurs in the market can actually be said to be started from the 1 minute time frame, and a larger move is brought about by this 1 minute time frame. DO NOT underestimate the power of lower time frames as it is the core of the bigger time frames.

"we might not really know where prices will go but we can try to predict what prices will do when it comes close to support/resistance levels." Adapted from Mark Douglas

the other books which i find useful is "Enhancing Trader's Performace" by Dr.Brett N Steenbarger. from there you would get new insights on how to structure your learning process to become a successful trader.

well, hope these helps bro.

happy trading !

I partly disagree with you. I personally don't think edge is an edge if it doesn't last at least 20 years of modern data backtesting with multiple markets without considerable changes in equity curve. If by markets change you mean that an "edge" works only with certain kind of market (trending/whipsawing etc), you have to find a good filter to find that market is currently in that kind of phase which is almost impossible to do IMHO because you would have to know when the market changes from phase to phase. If you would know that, it would be your edge (or in fact holy grail).

What I agree with you is that there is a very important period where the markets have actually changed dramatically and that is at about 1980-1990 when computers arrived. That was a major game changer for many markets. Just an example: below is a gbpusd quity curve for turtle system (40/10) with fixed 1 lot trades from 1978 to today. Guess where the peak at about 60 is (answer: 1992). You can find very similar curve changes at many markets.

edit: ps. I think (okay I know because I have tested a lot) that turtle system is still an overall winner when tested with multiple markets so that could be one system that OP would want to take a look at.. For full rules from one of the original turtles, google "turtle trading system pdf" (or even better, buy "the way of the turtle", excellent book about trading system analysis + turtle rules)

I don't think it makes any sense to go back that far, after all we are looking to profit in the present, not find market characteristics from 20 years ago.
But that is just my opinion.

This is in fact exactly what I do, but it is not a 'holy grail', one still needs to find things which can work in a given circumstance. To think of it in terms of a 'filtering' of conditions is kind of heading in the right direction but only part of the story. In the end I really don't want to get into a debate about what a valid edge is, because in the end its just whatever works for you, be it over 20 years or the last 2 weeks, it really does not matter in the end as long as it works.

You are right. Edge is what works for you, I was probably too strict with my comments. I think the point here is that edges are totally different and after you have your "base" edge, you can add to that. With some edges something adds to that edge whereas in other edges it doesn't. For my methdods, all trend filtering or adjusting position related to how some other algorithm sees the market just makes negative impact on both returns and drawdown. With other methods it might be totally opposite.

I think my 20 year comment was more about my personality , I want to be absolutely sure that my method works with multiple markets with different conditions to eliminate all possibility of curve fitting. But that's just me, I want to be bulletproof with testing, that's just how 10+ years of software business with critical systems makes you.

Well all this clap trap about find yourself, master the inner you, rubbish its simple rules.

Let winning contract go as far as possible close losers fast.

Trade two contracts, take your first profit to cover the stop asap, if you can get more do.

If you are in the right way, your contract will start to go plus quickly, if it does not go plus then get out you can alway re-enter. Remember that when you are wrong be prepared to close.

Do not stay in a losing contract, many people here will say you have to give a position room to move you do, wiggle is fine, but moving against you is insulting, don't take the insult!

I have many little losses, many little wins and a few big wins, thats what adds up in trading. As a trader do not hope that a negative position will turn round, hope is for beginners and losers.

Yes I have closed positions that have turned around 50-100-200 points from my original entry. I don't worry because I still trade them, I am a believer in scrapping an analysis because the market says its wrong. Markets always right, regardless of what I think.

Also keep your winning trades open, because once your stop is BE then that trade can only go +ve or make nothing, just advance the BE under each wave as the market moves in your direction.

Here is something to do, take a demo account put in the same amount as in your reall account, trade exactly the same, but do the things listed above and compare them at the end of the week. Then tell us about the difference.

Smalldog

That's my background as well (telecoms), lot's of IT guys in trading it seems.

Thanks alot for your posts Gaston and Topher, These are the kind of posts that Id like to read more often. Exactly what I wanted from this thread, cheers.

Ive also got another question for you guys. Could you carry on trading and profiting from sole use of a naked chart and your Buy/sell buttons? (just to give me some idea about the direction you have went in with your trading)

Personally Im looking at my trading from the possition of: The chart shows me the end result but not the story.
We will see where that gets me. Im running in to alot of things I dont really understand much, but ill have to keep swatting.

Leon

PS. Ive just been thinking and realise the effort put in to those rather large posts by you guys, they deserve more aknowledgement. You have given me some things to think about and I apreciate the time taken but theres nothing for me to add because you guys obviously know your stuff and it all makes sence. Just to let you both know your efforts were not in vain, lol.

No problem, Leon. Glad to know that I have helped at least give you some ideas.

As for your question, you are asking if you sat me down in front of some naked charts and said "trade away Chris" if I would be able to be consistently profitable. Haha - while I would love to think so it is highly doubtful. And not because I wouldn't have winning trades; I'm sure that I would have many, and probably even some decent streaks. However, I would likely fail in the longer-term for several reasons:

1. I would be lacking the precision that I find necessary in my trading to properly exploit an edge. Looking at a naked chart would force my process to become discretionary, which would distort the integrity of my exits and position risk adjustment, etc.

2. I would almost certainly lose faith in my 'strategy' when I went into drawdown, since I would have no statistical drawdown expectations to help ground my battered confidence.

3. I would undoubtedly get caught up in the emotion of trading again, which is never something that has made me successful. Overconfidence or fear would inevitably erode my capital.

I do want to make it clear, though, that my only input is price. I don't use volume or any sort of fundamental analysis. I don't want to give you the idea that my screen is cluttered with a million lines and indicators; at the same time, I follow carefully constructed rules that cover every potential occurrence. I never even contemplate whether or not to enter a position: it is a given based on my rules, as is every single action that I could possibly take with that position as a reaction to the market.

To put it simply, there is no thinking involved in any of my trading decisions; in fact, I wouldn't even really call them decisions, since they were decided along time ago. Now they are simply givens. All of the thinking (discretion) went into creating the strategy, following it is simply about discipline. Discipline only ever wavers during drawdowns, and even then it is kept in check by more rules. Rules, rules, rules - they are what keep me confident enough to follow a strategy consistently; sane enough to live everyday without a frenetic fixation on the market; and humble enough to know that the outcome of any single trade - or series of trades - is completely out of my control. After all, I'm just following orders. Just make sure that those orders are grounded on a tenable foundation - that you actually have a solid edge at the core of the entire process.

Good luck,

Chris

Given enough time and motivation, I probably could pull profit from nothing but a naked chart and my buy/sell buttons. Could I do that tomorrow? Probably not, but only because my trading style takes in information found outside of charts, and therefore I would need to come up with a new system that does not lean on outside information. For me to be successful, I need order flow, and often times chart information alone does not provide sufficient amount of order flow for me to trade it effectively.

You mention that a “chart shows me the end result but not the story”. I would say you almost have it backwards. A chart will tell you a story. It will tell you where supply and demand balances shifted, and how price got to be where it is now. It will never, however, show you the end result, because supply and demand are always imbalanced. Even when price is ranging, the number of bears vs. bulls are still off balance, it is just a battle of who will run out of buying/selling power first. But is this thought process as far back as you should go? Let me take you further back, along the lines I was thinking when I was your age (trading age).

Think on a macro scale of what the market is really all about, and how a chart fits in to all of this. Nations have different currencies, and they need to exchange them across a standard rate. Boom, you have a foreign exchange market. As values of nations bounce up and down, the rate of exchange changes to accommodate these fluctuations. These fluctuations are then plotted on a chart, and divided up into timeframes. That is it. A chart is simply a picture of fluctuations that have already happened. It is a tool used to provide a perspective of the market.

Now take a minute and think about that, then consider the following.

Chart reading and interpreting skills are considered essential to successful trading, and this mindset runs rampant throughout the trading community. New traders cannot comprehend price movement without a chart in front of them. To the vast majority of traders, the forex market IS a chart. To them, the markets do not represent currency rates, and the little 6 letter symbol in the corner of the screen means nothing to them. They spend all their time and energy reading charts, learning charts, and forecasting chart movement. They are addicted to them. It is appealing to the mind, as they see all the big moves on the left side of screen, and they just imagine if they were in them. As price dances in front of them, their mind becomes entranced, and they can easily justify why price SHOULD go here or SHOULD go there; all according to these bars in front of them. Then consider that countless brokers catch a trader’s eyes by advertising a computer monitor with a pretty looking chart towering over them. Consider that almost every new trader believes that success begins and ends on this picture in front of them, then consider that 95% of these people fail. Next, ask yourself why you think studying the same tool which countless others have failed with is the best and most efficient route to success.

Charts are used by newbies as a sole tool to predict price. Professionals know this, so they use charts to determine what all the newbies are thinking. Therefore, charts often times provide the right amount of information needed to trick a trader into losing his money. Big players need order flow to get into and out of the market. What better way to do it than to buy at a point you know everyone and their dog is going to sell? The market will follow the big money on such a transaction, because all the speculators in the world cannot provide enough buying/selling power to eat up and oppose a bank’s intervention.

So anyway, my long winded point is to question the importance of charts. Can I profit off a naked one with a buy/sell button only? Probably. Should I devote years of my life studying a TOOL of the market instead of the market itself? Probably not. Again, this is the thought trail I walked down to take me where I am today. Hopefully it benefits you as well.

Would this post be an example of using order flow info for trading?
Just checking to see if I'm understanding correctly.

Thanks Again!
Brent

From what I understand(maby incorrectly), Order-Flow is Time and Sales. But this info is not available in the Fx market.

Ps. Which brings me back to what I suggested earlier, Can Futures be used for this info. And if it can, what advantage does it offer over just trading futures. Actually, I dont recall Gaston saying tht he trades FX, maby im just making assumptions.

Looks like a good piece of advice for a futures/stock trader.

Swaps still accounts for the majority of all transactions in forex. Speculation is not .

Just compare a 5 minute charts on ES and the same of E/U and you'll see the fast and wide futures are in comparison.

Order flow in forex?? Something to see...

Lorenzo, You have given us just bits of information. In order for you to either get reassurance on your points or look for a new perspective, you must put on the line all you did during this time. That way , many pairs of eyes will look at it with the necessary information to give you a fair assessment.

The advice on this thread has been good, don't get me wrong. But it's time to stop being philosophical and start being practical, don't you think??

Lay everything on the line, buddy. Don't worry, nobody is going to steal any secrets.

Gaston, that was one of the best posts I've ever read here - no joke!

I doubt that I have any secrets to be stolen wiz, like Topher or Gaston said before, I know of many of the ad-ons needed to trade but still need to find an edge to apply those well known trading techniques to.

I found this a great read Leon:

http://www.zen18752.zen.co.uk/html/forex_trading.html

Bottom line is a simple MA cross system can be profitable.

Get hold of a MA cross EA, put it on a daily chart and backtest for 5-10 years. 10 and 20 periods for the MA are a good start.

Completely mechanical, no stops, short on cross down, exit and re-enter long on the cross up.

You may be surprised that it is actually profitable.

May not be 5% per day like many are blindly chasing, but it is still profitable in the long run.