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Why am I so good at picking wrongly?

  • Post #1
  • Quote
  • First Post: Sep 9, 2009 12:09pm Sep 9, 2009 12:09pm
Hi all - no doubt the below will ring true for many newbies...

I'm new to trading and I am basically doing short term trading (intra day trading). I only look at currency pairs GBP/USD, EUR/USD and AUD/USD. The spread of each of these currencies are about 3.0, 2.5 and 3.0 pips respectively. Stops are usually placed at 10 pips (inclusive of spread) and trailing stops are placed at about 10 pips if the market moves in my favour.

Consider this scenario. From a mathematical / statistical perspective, markets can either move up or down. So, just like tossing a coin, you would expect that the chance of the price going up is approximately 50% and vice versa. Accordingly, there should be an equal chance of the price falling to trigger the stop of 10 pips, or increasing to go past the trailing stop of +10 pips.

Now add to this scenario a little bit of actual technical analysis. I use various indicators (EMAs / RSI / MACD) and generally favour trading in the direction of the trend. Why is it that more often than not (I'm talking around 75% here) the movement is against me? At the very least, I would expect no worse than 50:50. Now you would probably think that if I'm that good at picking wrong, then I should trade OPPOSITE each time! Again, in that instance, although I should expect to now be 75% successful, I would certainly again expect it not to be worse than 50:50. Yet, again, it seems that 75% of the trade goes against me!

Now I'm sure the market is not looking to single me out, but it sure as hell feels that way. Any thoughts from anyone there?

On another point - I know there are plenty of books / articles / courses out there on trading, but does anyone know if there are any "courses" where you can just sit next to someone trading for a day and have them talk you through each trade they make that day? I'm pretty certain that would be a hundred times more helpful than most books / courses out there.

KC
Quoting kwcmau
Hi all - no doubt the below will ring true for many newbies...
You'd better believe it.

Quote
I'm new to trading and I am basically doing short term trading (intra day trading). I only look at currency pairs GBP/USD, EUR/USD and AUD/USD. The spread of each of these currencies are about 3.0, 2.5 and 3.0 pips respectively. Stops are usually placed at 10 pips (inclusive of spread) and trailing stops are placed at about 10 pips if the market moves in my favour.
Why are your stops set at 10 pips? Are they based on careful assessment of Support/Resistance? Are they just an arbitrary number that you pick up somewhere? Why are you trading such short-term charts if you're new to this game? Have you tested what you're doing on a demo to see IF it works and if not why not?

Quote
Consider this scenario. From a mathematical / statistical perspective, markets can either move up or down. So, just like tossing a coin, you would expect that the chance of the price going up is approximately 50% and vice versa. Accordingly, there should be an equal chance of the price falling to trigger the stop of 10 pips, or increasing to go past the trailing stop of +10 pips.
If life as a FX trader was that easy this forum would never have got off the ground! Nothing, absolutely nothing, in FX can be approached from that point of view. At any given time, for any given reason, price can turn round and head off on a completely different road to the one it was going on before. Everything you do has to be based on the assumption that this is the most likely scenario that you will meet. How far the change of direction will last and how much you are prepared to spend finding out is the key to this business. Money Management as well as understanding the rhythm of the way price moves is also vital.

Learning to recognise when to open a trade and when to get out takes time. You would be better off spending some time reading some of the threads dealing with longer timeframes as you can then sit back and avoid rushing in to bad decisions.

Quote
Now add to this scenario a little bit of actual technical analysis..I use various indicators (EMAs / RSI / MACD) and generally favour trading in the direction of the trend.
At the risk of starting a flame war here, my belief is that having one indicator on your chart is one too many. It's a hard habit to break but many end up with nothing but bars/candles on their charts and I haven't read of one who has gone back to their old ways.

Quote
Now I'm sure the market is not looking to single me out, but it sure as hell feels that way. Any thoughts from anyone there?

On another point - I know there are plenty of books / articles / courses out there on trading, but does anyone know if there are any "courses" where you can just sit next to someone trading for a day and have them talk you through each trade they make that day? I'm pretty certain that would be a hundred times more helpful than most books / courses out there.

KC
The market doesn't even know you exist. Your b roker does but he's not the one causing you the problems. When you're trading several million at a time, someone might be interested but not today.

Even sitting next to a 'proper' trader may not help you. If he/she has been around for a while there is an intuitive aspect of trading that can't be taught. It can only come after months (in my case years) of watching charts and learning what method suits you as a trader.

The learning curve is steep but everything you need is somewhere on this forum. You just have to dig it out. Start with the stickies at the top of each section.
  • Post #3
  • Quote
  • Edited 4:09pm Sep 9, 2009 1:41pm | Edited 4:09pm
Hi there,

I actually liked PeterFMs response so much that I included it in my post too (just because it's worth reading again)

His response is in bold
My response is in bold and blue

Trade well.
Jig


Quote
Hi all - no doubt the below will ring true for many newbies...
You'd better believe it.

Oh hello there, yeah been there too.

Quote
I'm new to trading and I am basically doing short term trading (intra day trading). I only look at currency pairs GBP/USD, EUR/USD and AUD/USD. The spread of each of these currencies are about 3.0, 2.5 and 3.0 pips respectively. Stops are usually placed at 10 pips (inclusive of spread) and trailing stops are placed at about 10 pips if the market moves in my favour.
Why are your stops set at 10 pips? Are they based on careful assessment of Support/Resistance? Are they just an arbitrary number that you pick up somewhere? Why are you trading such short-term charts if you're new to this game? Have you tested what you're doing on a demo to see IF it works and if not why not?

Your stops are way too tight, also because your stops are so small the cost of the spread you have to pay is way larger. In a coin flip situation (Which the market is not anyway) with a ten pip stop and a spread of 3 . . The spread of three automatically decreases your probability of winning by a huge amount. If you were trading the larger timeframes with a larger stop the spread becomes less of an issue.

Again just to echo PeterFMs above point, you actually don't really have a reason for having a stop of ten pips ? You should try hiding your stops in hard to reach places but again with a stop of ten pips this is nearly impossible.

Quote
Consider this scenario. From a mathematical / statistical perspective, markets can either move up or down. So, just like tossing a coin, you would expect that the chance of the price going up is approximately 50% and vice versa. Accordingly, there should be an equal chance of the price falling to trigger the stop of 10 pips, or increasing to go past the trailing stop of +10 pips
If life as a FX trader was that easy this forum would never have got off the ground! Nothing, absolutely nothing, in FX can be approached from that point of view. At any given time, for any given reason, price can turn round and head off on a completely different road to the one it was going on before. Everything you do has to be based on the assumption that this is the most likely scenario that you will meet. How far the change of direction will last and how much you are prepared to spend finding out is the key to this business. Money Management as well as understanding the rhythm of the way price moves is also vital.

Learning to recognise when to open a trade and when to get out takes time. You would be better off spending some time reading some of the threads dealing with longer timeframes as you can then sit back and avoid rushing in to bad decisions.

I have nothing to add really except to say apart from the fact that your spread automatically makes the idea of a 50 50 coinflip obsolete.

Quote
Now add to this scenario a little bit of actual technical analysis..I use various indicators (EMAs / RSI / MACD) and generally favour trading in the direction of the trend.
At the risk of starting a flame war here, my belief is that having one indicator on your chart is one too many. It's a hard habit to break but many end up with nothing but bars/candles on their charts and I haven't read of one who has gone back to their old ways.

I respectfully disagree with Peter here, indicators are perfectly fine once you know the purpose that they serve. I use indicators for specific things all the time and they work fine - like mechanical trailing stops and strength relative to other currency's. The problem with indicators here on FF is that people start trying to eliminate every loss and start adding indicators and adding indicators.

Your bigger problem here from what I can gather is you do not have a solid plan, a statement like "I generally favour trading in the direction of the trend" says to me that you dont have any concrete trading plan. If you don't have a plan theres no way you will succeed.

Also consider learning Price Action at the J16 thread, it's (although I am bias) the best thread on here, and there are far far better traders on there than me willing to help out anyone that needs it.

Indicators are fine for certain things . . But that being said I always enter on price action.

Quote
Now I'm sure the market is not looking to single me out, but it sure as hell feels that way. Any thoughts from anyone there?

On another point - I know there are plenty of books / articles / courses out there on trading, but does anyone know if there are any "courses" where you can just sit next to someone trading for a day and have them talk you through each trade they make that day? I'm pretty certain that would be a hundred times more helpful than most books / courses out there.
The market doesn't even know you exist. Your b roker does but he's not the one causing you the problems. When you're trading several million at a time, someone might be interested but not today.

Even sitting next to a 'proper' trader may not help you. If he/she has been around for a while there is an intuitive aspect of trading that can't be taught. It can only come after months (in my case years) of watching charts and learning what method suits you as a trader.
The learning curve is steep but everything you need is somewhere on this forum. You just have to dig it out. Start with the stickies at the top of each section.

Yeah as Peter said nobody is singling you out. And contrary to what a lot of people seem to say around FF your broker is not "stop hunting you".

Sitting next to a trader that is already profitable still won't make you profitable, Forex is a job where experience dictates profitability more so than knowledge. You cannot learn experience from somebody you have to earn it for yourself.

See you already have experience - you have experienced the fact that 10pip stops seem very small and you get stopped out a lot. Now a mentor could have told you that, but you never would have properly believed it until you found out for yourself. I have been given tonnes and I have read tonnes of good advice from people here, but it's like your parents giving you advice when your growing up. You just never truly believe it until you experience it for yourself.



Cliff Notes -

1) Stop is too small / your timeframe is too small
2) You don't seem to have a concrete plan, you need to get one and stick to it like glue.
3) Consider learning Price action, J16 thread.
4) Your going to have to work hard at this yourself, theres no holy grail / nobody will teach you how to be profitable. Well you might get some but in reality you are going to have to do all the work yourself anyway. I have forward tested so many systems, a large percentage of them don't work but by putting in the work you constantly make observations and gain experience.

Great post by PeterFM - you should listen careffully to what he says and i would suggest checking out his thread for newbies as well.

One thing i don't think Peter or Jig touched on is losing.

Don't fall into a trap that you're afraid to lose. No matter how good a trader, everyone has losers. It doesn't mean you're poor trader, and always consider that each trade is (hopefully) only ONE of thousands that you're going to make in the long run - forget about the individual winners and losers, it's the score at the end of the game which matters.
no offense or anything, but those stops are just plain bullsh... You cannot have 10 pips stops in such a liquid market like forex. No way is that possible. You will get stopped out waaaaay too many times.
Twitter: @forexpokerpro
there is a reason why some people think trading longer time frames are better--you get more time between trades (win or lose) to clear your head. The shorter the time frame, the less time for you to separate yourself from your trade emotionally/mentally.

This is how I'd get myself out of a rut:
- first, i'd define which style am I comfortable trading given my circumstances: scalp, swing or trade long term?
- for the moment, get rid of all indicators and learn how to trade using price action in and around support and resistance.
- scale down trading positions to the least minimum possible. this way, i'd be detached from my trading outcome emotionally, mentally. if it is possible to trade one unit with your broker, do so.
- i'd keep a trading journal and note EVERYTHING about every trade i make. if i got stopped out, i'd note down how i could have stayed out or managed that trade better next time. If i win, i'd write down what i did right and if there was a way to make it better.
- at the end of each trading day, go back over your charts and "reverse engineer" how you would have traded that day. write them down in your journal.

I scalp m5 and, depending on market conditions, I often use 10-pip hard stop on my trades. Sometimes I win, sometimes, I learn.

hope this helps. good luck!
Quoting BBPI_fxtrader
no offense or anything, but those stops are just plain bullsh... You cannot have 10 pips stops in such a liquid market like forex. No way is that possible. You will get stopped out waaaaay too many times.
Impossible? Come on. You are not thinking about this one in probabilities
Unlikely? Probably.
Impossible? Definitely not.
I don't know what time it is at your place, but right here it's 4:20.
Quoting kwcmau
Hi all - no doubt the below will ring true for many newbies...

[font=Arial][size=2]I'm new to trading and I am basically doing short term trading (intra day trading)....
50 of chances?

Throwing coin also gives you 50%, but sometimes you have winning and losing streak.

And the fact that you add additional indicators does not make it easier but more complicated IMO.
All very useful advice, and I'm definitely going to be taking some time to read through the various suggested polls.

One other thing I might try on a demo account is to trade opposite to what I would normally have done. When you think about it, if I am able to adhere strictly to placing an opposite trade each time, then in a way, isn't that just turning my consistent loss strategy to a consistent winning strategy? It sounds like this has happened to everybody at some stage in their trading life - I'm curious if anything has ever done any experiment on it.
  • Post #10
  • Quote
  • Edited 12:08pm Sep 10, 2009 11:53am | Edited 12:08pm
Quoting PeterFM
The learning curve is steep but everything you need is somewhere on this forum. You just have to dig it out.

Start with the stickies at the top of each section.
Actually, just start with Peter's sticky... Help for Newbies at FF

He rocks...

Fwiw... and at the risk of appearing to plug my own thread (which I'm not) you may find The Index I'm compiling of posts/threads I've found helpful over many hours of 'digging' thru FF archives and currently active posters as well... I add to it as Time allows.

It's at the very botttom of Post #1 on the EU Redux Thread There's a couple humorous posts thrown in that still have a lesson in them but it's mostly solid instructional posts from some of the premier traders a'rd here that it might otherwise take you awhile to find. ((At the bottom is my pitiful attempt to hitch a ride on their coattails... ignore that for the time being))
FUBAR...
Quoting ak4x
Actually, just start with Peter's sticky... Help for Newbies at FF

He rocks...
You're so sweet but so right of course.
  •  Deman Uc
  • | Joined Oct 2009 | Status: I Got de nuts..now hand me ur Chips | 9 Posts
Now add to this scenario a little bit of actual technical analysis. I use various indicators (EMAs / RSI / MACD) and generally favour trading in the direction of the trend. Why is it that more often than not (I'm talking around 75% here) the movement is against me? At the very least, I would expect no worse than 50:50. Now you would probably think that if I'm that good at picking wrong, then I should trade OPPOSITE each time! Again, in that instance, although I should expect to now be 75% successful, I would certainly again expect it not to be worse than 50:50. Yet, again, it seems that 75% of the trade goes against me!

KC[/quote]

My friend i feel you completely...i will advice focusing on price. price is all you need to trade. If you focus on some price action/pattern, the out come is way higher than 50/50. My biggest improvement as a trader came after i got rid of all my indicator and focused on price.
They(indicators) lag big time...i understand that everybody is different.

Remember we grow not when things are going well, but when they arent working...this is your chance to move up one step ahead.

Good luck!
Winning or losing is all in your mind...you creat your reality
Quoting kwcmau
I am basically doing short term trading (intra day trading).
You just answered your own question.




Truth is, more than likely, you are not good at picking "wrong", you are just good at getting out before you even have a chance to be right. People who get into a trade and then expect it to go their way on the short term are dreaming. With spread, you have less than a 50% chance to begin with, with emotions involved (meaning you will get out of a bad probably faster than a good trade) you will be probably at about 25% win to 75% loss ratio.

Two words of advice: ZOOM OUT
The market is my nation. Traders, my family. Hello, brothers and sisters!
You have to think about it this way, a 10 pip stoploss is basically making it so the market isn't allowed to breath, most small insignificant moves are more than 10 pips, so you have to be careful when placing very tight stoploss's.
The main problem is your trading based on indicators!!!
Since the sistem gives you a signal, the majority of move is over.
  • Post #16
  • Quote
  • Last Post: Oct 27, 2009 1:51am Oct 27, 2009 1:51am
kwcmau, you say you are new to this trade so what you need is knowledge and skills.
1) Technical (General knowledge is a MUST)
2) Fundamental (General knowledge is a MUST)
3) Emotion (You must learn to lose in order to win)
4) Discipline (Let to stick to your game plan even if you already are losing 3 trades in a row)

You don't need to pay a hefty price to go to a forex course. Trust me most of the forex courses are a bunch of so call experts that teaches you basic skills which you can easily acquire from forex books purchased from bookstore OR borrow from library. Imagine going to a $2000 forex course as compared to purchasing 10 forex books which is MORE value for money? Also please dun be lure by the so called forex guru no idiot will share his winning recipe to you because this is F.O.R.E.X

for your info. I am a pure technical trader (i don't do fundamental analysis at least not now) and is currently using three indicators combine with a set of rules which produce a result 50% accurate(BUT NOT PROFITABLE YET!!!) most of the time. This means that I can see the movement one or two days well in advance most of the time. Am I kidding you? Nope. In fact, I am now currently testing this system and it is working.
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