Why traders don't disclose their methods | Forex Factory

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Why traders don't disclose their methods

  • #1
  • First Post: Oct 15, 2005 9:17am Oct 15, 2005 9:17am
Having read Sterling's thread, it occurred to me to pose this question.

I can't for the life of me understand why traders so rarely are prepared to share their specific trading methods.

Is it because they think that if their method is disclosed it will suddenly stop working? I'm pretty sure that wouldn't happen for 2 reasons.

1. The method will never get spread so far as to be adopted by enough traders to affect the market at all.

2. Even if it did, isn't it the case that the more people use a method (in Forex and Securities trading likewise), the more effective it is? Think about it. The more people go long at the same point in time on any particular pair (eg at a particular MA crossover), the more that pair's price will rise! The same of course works in reverse.

I'm new to Forex and I may be wrong and if so, I stand to be corrected.

Or maybe the reason is that if the world found out just how effective and profitable a simple trading method can be, everyone would start quitting their jobs and trading Forex instead? That would leave no one to make our hamburgers and drive our trains. We can't have that.

Just my 2 cents

LightKeeper
"The market will rally from this or lower levels"
  • #2
  • Oct 15, 2005 9:57am Oct 15, 2005 9:57am
If everyone is using exactly the same trading method, entering the market using the same signal and exiting at exactly the same time, then when the signal of such a system comes, price will jump or fall sharply as all traders are trying to get into the market at the same time.

This will increase slippage, and will create bad fills, so the faster and those who have higher internet connections will have the edge.

Thanks,

Nader
  • #3
  • Oct 15, 2005 12:38pm Oct 15, 2005 12:38pm
I disclose all methods. In my thread you can get my exact trade system to a "T". But the likleyhood of any one else using that described method the exact same way every time is impossible. The "human" factor wouldn't allow it.
I cann't use my own method exactly the same every time. As long as I am close to the same I am good. Most people like to make little changes to other peoples system to suit themselves. In addition 90% fail due to lack of self disapline any way.
The key I belive is to get on the same page as the majority of the pros. This simply involves 3 things to acomplish this task.
(Price structure includes...)
1.Fibos
2.pivots
3.trend lines

If you learn to use these types of points correctly you will be with the winners. Use very little else like indicators as confirmation only.

You can post the best trading system in the news paper so any one can understand it, and most people simply won't follow it correctly. For the same reason rumors change in context from person to person as so a system will too.(human nature)

Dave
  • #4
  • Oct 16, 2005 8:47am Oct 16, 2005 8:47am
If everyone traded using the "classics" (5wma 20 wma, macd's, etc) rather than a gazillion different other ideas, all would be making more pips. There's a reason why the NASD came up with a law that dissallows daytrading the stock market with acct.'s under $25,000:

Those trading outside of a daytrading lifestyle without commitment and with tons of greed and fear eventually hurt themselves and others. (and I've been one of these!)

Banks and various financial institutions who make the the currency markets move typically use the aforementioned trading tools rather than changing their "system" everytime someone makes a discovery on a forum thread.
  • #5
  • Oct 16, 2005 12:41pm Oct 16, 2005 12:41pm
Quoting ktrade
If everyone traded using the "classics" (5wma 20 wma, macd's, etc) rather than a gazillion different other ideas, all would be making more pips. There's a reason why the NASD came up with a law that dissallows daytrading the stock market with acct.'s under $25,000:

Those trading outside of a daytrading lifestyle without commitment and with tons of greed and fear eventually hurt themselves and others. (and I've been one of these!)

Banks and various financial institutions who make the the currency markets move typically use the aforementioned trading tools rather than changing their "system" everytime someone makes a discovery on a forum thread.
Are stochastics and RSI 2 of these methods the old schoolers use?

Dave
  • #6
  • Oct 16, 2005 11:43pm Oct 16, 2005 11:43pm
Quoting LightKeeper
Having read Sterling's thread, it occurred to me to pose this question.

I can't for the life of me understand why traders so rarely are prepared to share their specific trading methods.

Is it because they think that if their method is disclosed it will suddenly stop working? I'm pretty sure that wouldn't happen for 2 reasons.

1. The method will never get spread so far as to be adopted by enough traders to affect the market at all.

2. Even if it did, isn't it the case that the more people use a method (in Forex and Securities trading likewise), the more effective it is? Think about it. The more people go long at the same point in time on any particular pair (eg at a particular MA crossover), the more that pair's price will rise! The same of course works in reverse.

I'm new to Forex and I may be wrong and if so, I stand to be corrected.

Or maybe the reason is that if the world found out just how effective and profitable a simple trading method can be, everyone would start quitting their jobs and trading Forex instead? That would leave no one to make our hamburgers and drive our trains. We can't have that.

Just my 2 cents

LightKeeper
ive struggled with this question myself. mostly deciding how much to disclose to friends etc. whether or not a trader will ruin his/her system depends on what kind of system it is.

for instance, if you have a discretionary method for reading charts or indicators, disclosure will not likely result in failure of the system. this is because everyone will trade it differently, and there is not a specific, palpable inefficiency that the system is taking advantage of. its more art than math.

but if you have system that is based on a market inefficiency that can be boiled down to a mathamatical equation, say the warrants strategy proposed by Ed Thorp in 1966, then you can quickly ruin your system by disclosing it. because once market participants are aware of the inefficiency, they will flock to fix it because there is BIG money at stake.

Ed Thorp first published his warrants strategy in a book called Beat the Market. he spends an entire chapter calculating exactly how much money will have to be traded on the system before it is ruined. surprisingly, the dollar figure wasnt extremely high. and Thorp was absolutely correct about his assumptions, because about 10 years later the warrants strategy was rendered useless. there are still thousands of money managers that trade some derivative of this strategy, however.
Relax and be happy.
  • #7
  • Oct 17, 2005 1:30am Oct 17, 2005 1:30am
Quoting Isotonic
I can see an edge disappearing if everybody plugs in the same trades mechanically but if the system has a discretionary element to it then the edge might still be there...
I think your real "edge" is the ability to execute your trading plan time after time after time. The so called "90%" cannot do this. One ony has to look to the success of places like Las Vegas to get a grasp on human nature and its impact with regards to trading. Finding a profitable trading method, once you understand how the market works, is dead easy. Sticking with that trading plan is what separates the traders from the losers.
I was here, here I was. Was I here? Yes I was!
  • #8
  • Oct 18, 2005 9:56am Oct 18, 2005 9:56am
Sterling,

Yes - I forgot to add these most important things:

An entry/exit plan, money mgmt., and strict rule following.

I once lost 75% of my portfolio overnight b/c I thought I knew what I was doing as I was "breaking" ALL of my rules and ALL of plans. I hate to say it but mini lot trading I believe is the cause of most problems in trading today! It's harder to be more strict when trading smaller amts of money as well as the common practice of mini-trading as a side job, hobby, holy grail, etc.
Don't get me wrong, I started trading mini's and things have been good for me and others but that's a small percentage so I'm told. Yes, it enables many to be able to trade b/c of the reduced amt of capital needed but the aforementioned problems are directly related to this.

Good luck and good trading to all!!
  • #9
  • Oct 18, 2005 11:08am Oct 18, 2005 11:08am
Quoting merlin
ive struggled with this question myself. mostly deciding how much to disclose to friends etc. whether or not a trader will ruin his/her system depends on what kind of system it is.

for instance, if you have a discretionary method for reading charts or indicators, disclosure will not likely result in failure of the system. this is because everyone will trade it differently, and there is not a specific, palpable inefficiency that the system is taking advantage of. its more art than math.

but if you have system that is based on a market inefficiency that can be boiled down to a mathamatical equation, say the warrants strategy proposed by Ed Thorp in 1966, then you can quickly ruin your system by disclosing it. because once market participants are aware of the inefficiency, they will flock to fix it because there is BIG money at stake.

Ed Thorp first published his warrants strategy in a book called Beat the Market. he spends an entire chapter calculating exactly how much money will have to be traded on the system before it is ruined. surprisingly, the dollar figure wasnt extremely high. and Thorp was absolutely correct about his assumptions, because about 10 years later the warrants strategy was rendered useless. there are still thousands of money managers that trade some derivative of this strategy, however.
That's exactly what I was referring to. A complete mechanical system having all the components of trading will fail if the crowd follows it. This crowd will eventually turn into the 90% and the smart guys who will understand the price action will still remain in the 10%.

I once read someone writing, Price = Information, and information is the most valuable trading tool you can use.

Thanks,

Nader
  • #10
  • Oct 19, 2005 5:18pm Oct 19, 2005 5:18pm
LOL! i just realized you said the exact same thing before i made my post

eye-to-eye man, eye-to-eye

Quoting narafa
That's exactly what I was referring to. A complete mechanical system having all the components of trading will fail if the crowd follows it. This crowd will eventually turn into the 90% and the smart guys who will understand the price action will still remain in the 10%.

I once read someone writing, Price = Information, and information is the most valuable trading tool you can use.

Thanks,

Nader
Relax and be happy.
  • #11
  • Nov 3, 2009 11:25pm Nov 3, 2009 11:25pm
It is probably not a good idea to share strategies and systems.
First of all, everybody would be doing the same thing and we would all
win.

Teaming up together can have tremendous benefiical effect on the
market. Do the bankers, the government, and the brokers want this kind
of team power control on the market???

No way! Because they are here to make money from you.

It is better to be scattered. A fiber on its own is weak, but when
united into a rope can be strong and will move the market.
  • #12
  • Nov 4, 2009 3:38am Nov 4, 2009 3:38am
Quoting LightKeeper
I can't for the life of me understand why traders so rarely are prepared to share their specific trading methods.
1. It's discretionary.
2. I earned it.
3. I don't want to create competition for my entries.
4. The journey is important. Developing personal philosophy is important.

My question to you is why you seem to have an expectation that traders should share?
  • #13
  • Nov 4, 2009 3:47am Nov 4, 2009 3:47am
Quoting charlyher
It is probably not a good idea to share strategies and systems.
First of all, everybody would be doing the same thing and we would all
win.
Hi charlyher,

I can't agree with that statement. People share their strategies here all the time and if 100 people trade the same exact strategy you get 100 different results. Generally fairly poor results. The person who developed the system usually does well because they have developed a strategy that suits them. Everyone's personality is different.

I see your logic, but it doesn't seem to work out that way.

I will say this though, you are digging, researching, questioning, thinking..... these are all good traits. Keep at it.

(I can tell you're digging because you keep finding several-year-old threads.)

You'll soon be directed to learning centers like the James16 thread, and the babypips website. Good luck in your studies.
  • #14
  • Nov 4, 2009 4:01am Nov 4, 2009 4:01am
Nice that this old thread got bumped. Interesting replies here.

The main difficulty in "disclosing" how a person trades IMO is just that everyone is operating, as they should be, at their own wavelength. It seems like the simpler and clearer things become for me, the less readily understandable - or at least acceptable - it is to others. Why should it be any different than that anyway? We all have to trade for ourselves.

I find it really interesting to continue to discover the seeming endless approaches to trading that others take but, not with the intention or desire to copycat - just out of general interest in the field of trading and the markets.
  • #15
  • Nov 4, 2009 4:18am Nov 4, 2009 4:18am
My two cents, sure if everyone is trading at the same signal then there'll be pressure in you favour, but this would attract a lot of attention, namely the dreaded stop head hunters. That's why systems don't work imho.
  • #16
  • Nov 4, 2009 4:26am Nov 4, 2009 4:26am
Quoting pa18
My two cents, sure if everyone is trading at the same signal then there'll be pressure in you favour, but this would attract a lot of attention, namely the dreaded stop head hunters. That's why systems don't work imho.
Yes and that's why I don't use stops. My approach is somewhat simple so even everyone would use it you won't see any conflicts with the market direction (at least on retailers side).
  • #17
  • Last Post: Nov 4, 2009 4:28am Nov 4, 2009 4:28am
Because they are almost always on vacations. Rest of the time they trade.

And those who do post are bored of the vacations. or have started a family
The only way to get smarter is by playing a smarter opponent.
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