Where is the science? Where are the statistics | Forex Factory

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Where is the science? Where are the statistics

  • #1
  • First Post: Jul 14, 2009 7:38am Jul 14, 2009 7:38am
As a newcomer to FF I have enjoyed reading through page 1 of the more popular threads and reviewing the various systems and strategies.
My background is very much in science and as such I would require evidence (before investing my hard earned cash) that any particular system had been thoroughly tested and had been proven statistically to be a winner over time.
There would also have to be clearly defined parameters for entries and exits.
Has any thorough hard scientific analysis of forex trading systems been undertaken or is it really just glorified gambling?
Any suggestions?
Never did get the hang of flossing.
  • #2
  • Jul 14, 2009 7:53am Jul 14, 2009 7:53am
As Jacko says in "Jacko's house of forex pleasure and pain", LEAVE YOUR BRAIN AT THE DOOR. You are not trading the pair but trader sentiments- for example there are those like you who think they can make profits through science. Others are irredeemably greedy, indisciplined and fearful. This is no place of science. Its a place of facing your real self. Thesooner you do that the better.
  • #3
  • Jul 14, 2009 8:14am Jul 14, 2009 8:14am
http://www.forexfactory.com/images/icons/icon1.gif more psychology than science
As Jacko says in "Jacko's house of forex pleasure and pain", LEAVE YOUR BRAIN AT THE DOOR.

Mmmm... yes .. I think I understand but reading page 1 of his thread this gentleman does have a strategy based on support and resistance, trend-lines 50% fib's etc.
I appreciate that markets move through human emotions but technical traders think they can predict movement based on patterns/ price action etc.
Are they wrong?
Never did get the hang of flossing.
  • #4
  • Jul 14, 2009 9:08am Jul 14, 2009 9:08am
Here the on of the few guys who approach the market scientificaly.

"We don't hire people from business schools. We don't hire people from Wall Street, says Simons. We hire people who have done good science". Jim simons

The advantage scientists bring into the game is less their mathematical or computational skills than their ability to think scientifically. They are less likely to accept an apparent winning strategy that might be a mere statistical fluke. Jim simons




http://www.turtletrader.com/trader-simons.html
"Simplicity is the ultimate sophistication" leonardo da vinci
  • #5
  • Jul 14, 2009 9:22am Jul 14, 2009 9:22am
Quoting pipmuncher
I appreciate that markets move through human emotions but technical traders think they can predict movement based on patterns/ price action etc.
Are they wrong?
"Predict" is too strong a term in this context. It's more like a "forecast". The difference may be subtle but it's significant nonetheless. Experienced traders know they are playing a game of probabilities and luck does play a role.

An interesting read is The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb.
  • #6
  • Jul 14, 2009 9:34am Jul 14, 2009 9:34am
Take flags as an example. If for example, it can be shown that over the last ten years 70% of bull flags broke north and moved at least 50% the distance of the 'flag-pole' this would be statistically significant and, with proper money management, trading flags alone would be all that was necessary to make money. Why markets move the way they do would become irrelevant.
The questions to be answered however are;
1. How do you define a flag so that it's form can be recognised by everyone without ambiguity.
2. What is the formula to calculate stop loss placement to minimise losses and maximise profit.
Never did get the hang of flossing.
  • #7
  • Jul 14, 2009 10:05am Jul 14, 2009 10:05am
I attempted to attach Greg Fisher's excellent doctoral thesis on price reaction (or non-reaction) upon contact with median lines in the grain markets but it was too large. Try a google search:

Greg Fisher - Median Lines An Empirical Study Grain Markets 1990 - 2005

If you were to conduct an empirical study on a technical pattern you could do a lot worse than to emulate Fisher's work.

There are other impressive empirical studies I have observed ranging from investigations into seasonal tendencies to the typical length of bull markets to candlestick patterns. It's out there, I guarantee if you think of something, someone's thought of it and studied it. It's just a case of finding it, if the author has even made it public. Narrow your topic area and one of the literary hounds in here will sniff it out for you.

It's worth keeping in mind that the object of the game is not to do science and formulate the market, it's to make money from it. They are not necessarily the same thing IMO.
  • #8
  • Edited 10:46am Jul 14, 2009 10:33am | Edited 10:46am
Quoting rufusbucks
As Jacko says in "Jacko's house of forex pleasure and pain", LEAVE YOUR BRAIN AT THE DOOR. You are not trading the pair but trader sentiments-
Quoting birdt
It's worth keeping in mind that the object of the game is not to do science and formulate the market, it's to make money from it. They are not necessarily the same thing IMO.
Simple yet profoundly important concepts. I "predict" these will be the most important points (really, the same point) made in this thread.

I'll go out on a limb here and predict that the OP, with his "background in science", will ignore or minimize this point (as he has already done in post #3) and place inordinate significance to math, statistics, etc.

The psychology (also a science) of trading is at least as important as the mathematics of trading.
  • #9
  • Jul 14, 2009 10:51am Jul 14, 2009 10:51am
Quoting pipmuncher
Has any thorough hard scientific analysis of forex trading systems been undertaken or is it really just glorified gambling?
Any suggestions?
The 'scientific analysis' of a trading system wont happen here. It will be done in private by the ones willing to do the hard work.

The best your going to get here is a vague idea, but considering your scientific background, you should be able to do the proving/dissproving a method by yourlsef, nvm asking if others have done the work for you.
Living the adventure in my head.
  • #10
  • Jul 14, 2009 11:12am Jul 14, 2009 11:12am
Quoting pipmuncher
Has any thorough hard scientific analysis of forex trading systems been undertaken
I'm sure it has but science alone does not make a trader, trading is an art as much as it is a science.

That's probably why only a small percentage of people who trade systems found on trading forums achieve consistent profitability.
  • #11
  • Jul 14, 2009 1:50pm Jul 14, 2009 1:50pm
I attempted to attach Greg Fisher's excellent doctoral thesis on price reaction (or non-reaction) upon contact with median lines in the grain markets but it was too large. Try a google search:

Greg Fisher - Median Lines An Empirical Study Grain Markets 1990 - 2005

Many thanks for this- and to everyone that has contributed. This is exactly what I was looking for.
With great respect to those who believe otherwise I do not believe trading should be considered an art as much as it is a science. I believe it should be entirely based on science.
Until I can uncover a system/strategy that has been shown to be consistently profitable I am not interested in trading since fear and lack of confidence would affect my decision making and trade management.
I am not a statistician but I plan to back-test one currency (eur/usd) over the last ten years and analyse the accuracy of the main technical formations in forecasting price action.
I will publish my findings in this thread in due course.
Thanks again
Never did get the hang of flossing.
  • #12
  • Jul 14, 2009 2:19pm Jul 14, 2009 2:19pm
we go through our lives trying to fit everything into a perfect box. Trading although there is much that can be made "science"(I say statistical), in the end those that seem to be open to the idea of learning how to trade, instead of trying to fit a square into a circle end up doing the best from my experience
  • #13
  • Jul 14, 2009 2:28pm Jul 14, 2009 2:28pm
Quoting mbqb11
we go through our lives trying to fit everything into a perfect box. Trading although there is much that can be made "science"(I say statistical), in the end those that seem to be open to the idea of learning how to trade, instead of trying to fit a square into a circle end up doing the best from my experience
Mike, have I ever told you that your a genius? Just sayin.
I dream, therefore I become.
  • #14
  • Jul 14, 2009 2:51pm Jul 14, 2009 2:51pm
I'm a science and maths guy so I'm up for the analysis.

But it's very hard to do, it's a for ever changing market with a huge element of randomness kinda so it's very hard to actually do.

Luck definately isn't a factor, as well its not a real thing!!
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #15
  • Jul 14, 2009 2:51pm Jul 14, 2009 2:51pm
Quoting pipmuncher
With great respect to those who believe otherwise I do not believe trading should be considered an art as much as it is a science. I believe it should be entirely based on science.
Unfortunately market participants don't always conform to any sort of orderly science, well not in a way which could be reliably reproduced and exploited anyway.

Markets are about participants perception, and that frequently bears little relation to anything logical let alone scientific!

There has been a lot of research done on things like market cycles, some researchers even believed they had discovered the blueprint....invariably the market disproved their theory.
  • #16
  • Jul 14, 2009 3:03pm Jul 14, 2009 3:03pm
Quoting pipmuncher
Until I can uncover a system/strategy that has been shown to be consistently profitable I am not interested in trading since fear and lack of confidence would affect my decision making and trade management.
Ah, there's that ol' psychology monster rearing it's ugly thang again. Every successful trader has his/her own tried and true method of bringing it under control. If formulas and maths and er, "science" are what it takes for you, it's all good. Hell, if astrology and chicken bones works for you, it's good!

Welcome to the forum, munch.
  • #17
  • Jul 14, 2009 3:06pm Jul 14, 2009 3:06pm
Quoting pipmuncher
I attempted to attach Greg Fisher's excellent doctoral thesis on price reaction (or non-reaction) upon contact with median lines in the grain markets but it was too large. Try a google search:

Greg Fisher - Median Lines An Empirical Study Grain Markets 1990 - 2005

Many thanks for this- and to everyone that has contributed. This is exactly what I was looking for.
With great respect to those who believe otherwise I do not believe trading should be considered an art as much as it is a science....
No offense. But you have a lot to learn about. There was another individual here like you who wanted everything provided and spoonfed to him.

The truth is, is that what makes a trader good isn't whether or not they have the holy-grail of trading plans. Its the traders experience in the market, and detachment from emotions that make a good trader.

Good luck trying to find a purely technical plan that is consistent. The reason why there's so many different plans is because no trading plan can do that.

If you ask most traders, even heavy technical traders like myself, eventually they add fundamentals, s/r and trend lines to it because through experience you realize that a technical system that incorporates these aspects can become a winner.

For someone like you who seems to rely totally on math/science, I feel you will end up failing at forex because it isn't purely that.

But good luck.
  • #18
  • Jul 14, 2009 3:19pm Jul 14, 2009 3:19pm
What kind of scientific evidence have you ever found in any FINANCIAL markets??
I would suggest you take your hard earned cash and stash it under the bed!

It is scientifically impossible to 100% prove any system in Forex or any other financial market for that matter. There are just too many factors that are beyond yours and everyone's control. There is only one today, and there will never be another day like today. You can flip a coin a million times in a controlled environment, but you cannot repeat the exact same conditions that made a currency move 100 pips up then 500 pips the other way ... ohh and this movement can happen again and again for totally different reasons .. and half of them you won't even know.
Any idiot can take profit, real traders know how to take losses!
  • #19
  • Jul 14, 2009 3:25pm Jul 14, 2009 3:25pm
Basically its the hardest game your going to ever try to beat ( unless you play chess against a master I guess )
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #20
  • Jul 14, 2009 3:38pm Jul 14, 2009 3:38pm
Quoting bmchunu
It is scientifically impossible to 100% prove any system in Forex or any other financial market for that matter.

Unless your talking about Arbitrage. But good luck finding true Arb Opportunites as a retail trader with MT4.
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