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Greenspan and Currencies - Delusional?

  • #41
  • Sep 21, 2009 10:35am Sep 21, 2009 10:35am
Quoting FX-Petra
Yes, I am still trading forex. I have FINALLY started to show some consistent profits over the last 5 months... very close to the "expectation" of my system. It was not until I gave in to the notion that I could not predict where price was going that I began to make cosistent money. I have not arrived--- this system may well flame out.... but at least I am not pursuing a system based on false beliefs.

Regards,
great stuff, your answer sums up much of what Pipmut and I have been spitting out. The realisation that you cannot predict. How do you think it has changed your trading mindset? Presumably you have put emphasis on your money management this time round and psychologically you are not fearful of losses.

Good luck (or rather good probabilities), I hope it works out for you this year.
  • #42
  • Sep 21, 2009 10:51am Sep 21, 2009 10:51am
Quoting Porkpie
great stuff, your answer sums up much of what Pipmut and I have been spitting out. The realisation that you cannot predict. How do you think it has changed your trading mindset? Presumably you have put emphasis on your money management this time round and psychologically you are not fearful of losses.

Good luck (or rather good probabilities), I hope it works out for you this year.
Yes, money mangement and market volitility. Those are the 2 things I have to work with. I spent A LOT of time trying to master the third leg, short term market direction. I just could not do it. Many people claim that they can... and maybe they can! But for me, I have given in and started to focus on the other 2 parts of forex. I know that my system will eventually flame out.... but it should only happen once in every 10,000 trades. If I can have a little good luck I should reach my profit goal between 5K and 7K trades (3-5 years for me). If I can dodge the big bad wolf until then I'll retire early from teaching and be gone to my condo in Florida!

Regards,
  • #43
  • Sep 21, 2009 10:58am Sep 21, 2009 10:58am
Quoting 137
In 2004, former Federal Reserve Chairman Alan Greenspan made the following statement about currency trading in a speech before the Economic Club of New York:

“My experience is that exchange markets have become so efficient that virtually all relevant information is embedded almost instantaneously in exchange rates to the point that anticipating movements in major currencies is rarely possible.

”…Despite extensive efforts on the part of analysts, to my knowledge, no model projecting directional movements in exchange rates...
Also remember that greenspan is an academic. He is talking of THEORY. Theory is much much different than reality. He could even be right, that the market is efficient, But the market can truly be efficient at a POINT IN TIME. (ex. 9/21/2009 14:12:13 and 12 milliseconds). If you then take each data point afterwards and order them in succession, you can say you have an efficient market over a PERIOD OF TIME. That is essentially what academia and Greenspan is getting at. So if you use market timing between POINTS IN TIME, you can make money.

To summarize the market is efficient and inefficient at the same time, you just have to understand the time logic behind it.


A few years ago while in college talked to one of the so called "professors" and apparently they all deal in theory, they don't understand anything other than theory. So this guy actually wrote a bunch of papers and articles on the currency and fixed income (bond markets). Then I brought up trading, this guy who is well respected and has many co writers for his papers, never traded a bond or a currency in his life. This sort of makes me think that Greenspan also never traded, and most likely alot of other policy makers also never traded or understand the market, yet they continue with theories and policy.

By the way if you really want a laugh search for papers 2007 and before on the mortgage market and MBS, CDO, and other acronyms from the financial crisis. The crackpot theories and pricing models that these academics came up with are hilarious.

Also this should disprove any thoughts that profitable systems can't be and market inefficiencies don't exist.

http://www.zulutrade.com/Performance.aspx

Once you have an account there though, the real problem comes with position sizing and how much too risk. You can subscribe to a system that creates pips galore, and still lose money due to poor position sizing, risk, and money management.
  • #44
  • Sep 21, 2009 11:33am Sep 21, 2009 11:33am
Quoting Porkpie
great stuff, your answer sums up much of what Pipmut and I have been spitting out. The realisation that you cannot predict.

Hi Porkpie

I might have given the wrong impression slightly, I'm not saying the market is random or that price direction can't be predicted with quite high probability sometimes, what I'm really saying is that it can't be predicted with any certainty so we need to take that into account when we trade.

If the market isn't random but at the same time it's not predictable with any certainty then we're left with the fundamentals of trading itself, which thesnacker listed (although I would change the order slightly ). I think it's that which separates the consistent winners and losers.
  • #45
  • Sep 21, 2009 11:36am Sep 21, 2009 11:36am
Quoting thesnacker
FF should have a trading psychology/logic/philosophy section.
I agree, but I bet we'd only see a half dozen posts every year
  • #46
  • Sep 21, 2009 12:59pm Sep 21, 2009 12:59pm
Quoting pipmutt
Hi Porkpie

I might have given the wrong impression slightly, I'm not saying the market is random or that price direction can't be predicted with quite high probability sometimes, what I'm really saying is that it can't be predicted with any certainty so we need to take that into account when we trade.

If the market isn't random but at the same time it's not predictable with any certainty then we're left with the fundamentals of trading itself, which thesnacker listed (although I would change the order slightly ). I think it's that which separates...
Yes absolutely I agree. I do not believe that the market is Random rather complex and seemingly chaotic. There are patterns and ways to exploit those patterns. I have emphasised I hope, that there is a mindset that is required to deal with this complexity. To help the psychological mindset there are two methods of dealing with it. Directly with one's mind head-on, and by managing risk and ones trade. Methods of the mind such as mental preparation will help you deal with the complexity helping you to stay focused, and methods of trade and risk management will help the mind, I believe. Like you say the 'certainty' issue (I.e not trading with certainty is about dealing with this complexity at both the psychological level and trader decision/active level.
  • #47
  • Sep 21, 2009 1:34pm Sep 21, 2009 1:34pm
People need to understand that being a successful trader and being a successful central banker are two very different things.

A trader may make a killing, but that doesn't mean he understands the intricacies of conducting a sound monetary policy. Thus, most traders would fail miserably as central bankers. There may be some things you learn as a trader that may help you become a good central banker, but monetary policy is truly a profession in and of itself. It requires time and experience to get good at, just like anything else.

Greenspan on the other hand may have been a good central banker but obviously wouldn't make a great trader. He didn't need to be a great trader to do his job. He just needed to know a few things about how/to what extent the dollar's foreign exchange value impacted the Fed's dual mandate.


Bottom line is trading and conducting monetary policy require two very different skill sets.
Private message me for a link to my order flow website.
  • #48
  • Sep 21, 2009 1:40pm Sep 21, 2009 1:40pm
Quoting grkfx
People need to understand that being a successful trader and being a successful central banker are two very different things.
Was Greenspan a successful central banker? Was Greenspan a successful trader?
  • #49
  • Sep 21, 2009 2:56pm Sep 21, 2009 2:56pm
Quoting thesnacker
Was Greenspan a successful central banker? Was Greenspan a successful trader?
I am not going to debate whether he was a successful central banker or not. He was never a trader.

Greenspan is looking at the forex market from his macro-economic perspective, 18 years as Fed Chairman and has certain beliefs that many traders would consider inaccurate.

Whole point is that you wont find many central bankers that were also traders because they are different careers, different skill sets, etc...

So it shouldn't be a surprise that his beliefs about currency trading are far from accurate.
Private message me for a link to my order flow website.
  • #50
  • Sep 21, 2009 5:32pm Sep 21, 2009 5:32pm
Quoting birdt
The writing is on the wall for you; seek contentment elsewhere. I would think that others will see this for what it is - failure projection and pain avoidance.
lol well yeah i'm definitely projecting that i haven't found a system that will make me tens of millions of dollars yet. have you? anything less and you don't have a proven system. i mean with 4000 billion being traded a day i think you should be able to get a couple million dollar investment based on your consistent results. no? why not?

i am willing to endure pain - i just don't see the point. unless you have a strategy that, when used with proper psychology (only trade when you are clear enough to properly perceive what your strategy is telling you), discipline (only trade when your strategy tells you to), MM (risk between 0.5% and 1% per trade and never over 2%) and management (when A happens do B), is consistently profitable?
change the future, not the past
  • #51
  • Sep 21, 2009 6:06pm Sep 21, 2009 6:06pm
Quoting thesnacker

Also this should disprove any thoughts that profitable systems can't be and market inefficiencies don't exist.

http://www.zulutrade.com/Performance.aspx
seriously? the site claims this:

"you don't have to study or monitor the market to make a good pick, because hundreds of industry well-known experts from all over the world are doing it for you."

then it goes on to say in the FAQ:

"Any individual can become a ZuluTrade signal provider."

well at least they're consistent with their system lol.

'zulutrade is not too good to be true! even though you see hundreds of graphs with massive green mountains which are steep enough to make even the most hardened gambler faint, it is, i repeat not too good to be true.

and when you see people rating these systems with 2/5 stars and even 1/5 stars it just means another signal provider has launched a smear campaign against them, again testifying to the integrity with which you are now associated!

and can you believe it's all free? so yes let's recap, all you need is $1000 and within 5 years, and with someone else doing all the work for you, you will most likely become one of the most successful traders of all time! you may ask yourself "well why would they wanna make pennies on commission when they clearly should be managing accounts worth millions upon millions of dollars because of their unbelievable success?" the answer is the best part! these internationally renowned experts are doing it out of the goodness of their heart! yes that's why! i know it's INCREDIBLE!! and definitely not too good to be true.'


right.
change the future, not the past
  • #52
  • Sep 21, 2009 6:21pm Sep 21, 2009 6:21pm
Quoting 137
seriously? the site claims this:

"you don't have to study or monitor the market to make a good pick, because hundreds of industry well-known experts from all over the world are doing it for you."

then it goes on to say in the FAQ:

"Any individual can become a ZuluTrade signal provider."

well at least they're consistent with their system lol.

'zulutrade is not too good to be true! even though you see hundreds of graphs with massive green mountains which are steep enough to make even the most hardened...

Well your partly correct.

First of all, not everyone on the site is profitable, if you look through the list of signal providers, only like 2-3% are actually profitable with green graphs, go to the back and 95+% are red graphs showing negative. You also should not look at the $ returns, but pip returns and the risk profiles of each provider.

They get paid through a broker rebate, go read the facts. Who would give out their signals for free? You get the signals for free, and they get paid with a piece of your commission. I am not going to discuss this further since this is not in the broker discussion forum and do not want to break FF rules. Here is a link that can further explain how it works. The second QA from the bottom can answer that.

http://zulutrade.com/FAQ.aspx


I only posted the performance page from zulu to demonstrate that the market is beaten all the time. But only a small number of traders do so because there is a multitude of other factors involved such as money, risk, and trade management.

Quote
Once you have an account there though, the real problem comes with position sizing and how much too risk. You can subscribe to a system that creates pips galore, and still lose money due to poor position sizing, risk, and money management.

You took my post on zulu out of context I directly put that disclaimer above in post 43.
  • #53
  • Sep 21, 2009 6:26pm Sep 21, 2009 6:26pm
Quoting Porkpie
Yes absolutely I agree. I do not believe that the market is Random rather complex and seemingly chaotic. There are patterns and ways to exploit those patterns. I have emphasised I hope, that there is a mindset that is required to deal with this complexity. To help the psychological mindset there are two methods of dealing with it. Directly with one's mind head-on, and by managing risk and ones trade. Methods of the mind such as mental preparation will help you deal with the complexity helping you to stay focused, and methods of trade and risk management...
no offense but that sounds really vague.

based on what you said it seems that you do look at historical market data?
but if you can't predict then there are no patterns until you can see them which is too late. so now what? do we just call our broker without looking at a chart and somehow come up with a trade plan?

this comes back to the argument that if you can predict the future of the market to a consistent degree, you will, without a doubt, be in a position to make millions of dollars, at least. let's hope that is the case. send me a pm with a link to your strategy while you're at it lol
change the future, not the past
  • #54
  • Sep 21, 2009 6:27pm Sep 21, 2009 6:27pm
It seems you are down for the abuse. Keep talking like you have been and your PM box will start to fill with nasty messages. Simply offering that the forex market may not be predictable seems to be an offensive statement right up there with challenging the Diety of Christ. It evokes powerful, viceral, and sometimes nasty responses. Does not make you wrong, though. It does make you unpopular.

Regards,
  • #55
  • Edited 7:04pm Sep 21, 2009 6:41pm | Edited 7:04pm
Quoting thesnacker
Well your partly correct.

First of all, not everyone on the site is profitable, if you look through the list of signal providers, only like 2-3% are actually profitable with green graphs
2-3% sounds like profits based on luck. if not then why the hell are these people trading for scraps of commission?


Quoting thesnacker
They get paid through a broker rebate, go read the facts.
i did and that's why i said they are only making pennies in commission when you have a $1000 account.



Quoting thesnacker
I only posted the performance page from zulu to demonstrate that the market is beaten all the time. But only a small number of traders do so because there is a multitude of other factors involved such as money, risk, and trade management.

You took my post on zulu out of context I directly put that disclaimer above in post 43.
money: ok well 5% profit on $1000 is still 5% profit.

risk: ok don't risk more than 0.25 - 0.5% per trade.

trade management: so the results definitely aren't accurate? i mean how could they be if they don't give you a clear plan to follow? it states that these 'experts' do all the trading for you anyway.

i'm glad you posted the link but unfortunately it seems to only strengthen my point. i also won't post about this site anymore because i don't want to break any FF rules either. btw the best thing about currency trading that i've discovered? - FOREX FACTORY.
change the future, not the past
  • #56
  • Sep 21, 2009 7:03pm Sep 21, 2009 7:03pm
Quoting FX-Petra
It seems you are down for the abuse. Keep talking like you have been and your PM box will start to fill with nasty messages. Simply offering that the forex market may not be predictable seems to be an offensive statement right up there with challenging the Diety of Christ. It evokes powerful, viceral, and sometimes nasty responses. Does not make you wrong, though. It does make you unpopular.

Regards,
thank you

well i've said all i really need to say. the funny thing is when i first heard about forex trading and if saw a thread like this written by someone with similar views as i have now, i would have been on the opposite side of the argument.

it started to change when one of my 500 page finance textbooks, which was truly amazing with its depth of knowledge and insight, basically said that you're flipping a coin when you trade currency because past price movements do not consistently correlate with future price movements. that about sums it up i guess.

i think people respond emotionally, like i would have, and did actually, because it challenges a long held belief system which is based on the fulfillment of a fantasy. how can you blame anyone for having that fantasy? i mean we're conditioned to believe in it since we're children. it's money, after all. and money is a powerful 'religion'!

i wanted to put this thread together because FF is a great place and i feel that if i don't state my opinion based on my experience it would be a disservice to the community. also i was hoping someone would drop a hint as to where the grail was resting lol.
change the future, not the past
  • #57
  • Sep 21, 2009 7:26pm Sep 21, 2009 7:26pm
Quoting FX-Petra
Sorry birdit--- I did not mean to irritate you....
I apologise FX-Petra, perhaps frustrating would have been a better word. I don't take internet forums or the heated debates I get myself into on them personally, and I'm sorry to hear that people have resorted to unpleasant PM's just because you take a different stance to them. Probably says more about the conviction in their beliefs more than anything else.
What frustrated me was not that your findings differed to mine or anyone else's. They're all as valid as each other. But the extrapolation and the statement as fact that short term trading is impossible in the long run is what I dispute. You're certainly right to point out that day trading is incredibly difficult to master and any newbie is well up against the odds but you can never say that something is impossible. Just because it has not occurred yet, or that you have not found the solution does not mean to say that it can never be done or you will not find the solution. If you limit your beliefs in this way then it certainly becomes more improbable that you will find or achieve anything. It would appear that you have now taken on this belief and there is little that can be done to change your mind.

137, the possession of a potentially profitable strategy does not automatically entitle you to the keys to the mint. In my experience, defining trading rules that work is relatively easy, execution is the difficult bit, and as the numbers get bigger so does the fear and greed. I guess some people are born with the ability to detach themselves, but the rest of us have to acclimatise slowly.
  • #58
  • Sep 21, 2009 8:17pm Sep 21, 2009 8:17pm
Quoting birdt
I apologise FX-Petra, perhaps frustrating would have been a better word. I don't take internet forums or the heated debates I get myself into on them personally, and I'm sorry to hear that people have resorted to unpleasant PM's just because you take a different stance to them. Probably says more about the conviction in their beliefs more than anything else.
Birdt, couldn't say it better myself, we are here to learn and help each. Most trading forums i've been too are crap. This is one of the only ones that are relatively civil.


http://traderfeed.blogspot.com/

That is blog of Dr. Brett who trade and is a trading coach. FF disclaimer: no paid links just trading and psychology.

He has alot of great articles on this subject, hard to search through his archives but well worth the wealth of info.
  • #59
  • Sep 21, 2009 9:04pm Sep 21, 2009 9:04pm
Quoting 137
In 2004, former Federal Reserve Chairman Alan Greenspan made the following statement about currency trading in a speech before the Economic Club of New York:

“My experience is that exchange markets have become so efficient that virtually all relevant information is embedded almost instantaneously in exchange rates to the point that anticipating movements in major currencies is rarely possible.

”…Despite extensive efforts on the part of analysts, to my knowledge, no model projecting directional movements in exchange rates is significantly...

Are those real tears I see? The real issue is expectations. Most people have extremely unrealistic ones.
  • #60
  • Sep 21, 2009 10:23pm Sep 21, 2009 10:23pm
Quoting 137
like i said, if you can make money consistently in this market you are on your way to making tens of millions or more during your career. congrats if this is the case!

137,

What trading systems have you tired, & for how long, demo, to micro etc?

Do you have a favorite set of indicators etc yet?

Try taking a couple of them play with their settings a bit if necessary for whatever you see that may work best for that pair's time frame or chart type your using.

Post a few screen shots, and ask what you can do to make it better.

You might be surprised with what you, & ff come up with, and it will be custom made for you.
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