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Myth Busters the Forex Edition

  • #41
  • Oct 1, 2009 4:57pm Oct 1, 2009 4:57pm
Quoting Ferrari
Our inner selves wanting us to fail is a psychological fact?

Dude I don't want an argument, but do you have any evidence from psychological research to support your claim?

Mark Douglas did not state this, he alluded to what I was touching on, that if you have negative beliefs hanging around in your psyche, that will have an adverse effect on your trading.

If you believe your inner self wants you to fail this will become real and dominate your trading.

"Beliefs resist any force that would alter their present form" Mark Douglas...

Actually its the subconscious part of our brain that makes trade decisions like everything else, although our conscious rational brain can make good trades fairly well and frequently, its the subconscious brain that screams TRADE and then loses your money.

Learning to use the rational part of your brain is key and forcing myself to use it I find very tiring, but the results are 80% wins compared to 20% wins ( Short term trader )
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #42
  • Oct 1, 2009 5:08pm Oct 1, 2009 5:08pm
Quoting Craig
I guess we will have to beg to differ on this, I would refer you to "The encyclopedia of trading strategies" by Katz, in this book they test this very thing and conclude that stop management can have a positive impact on expectancy, therefore logically, there must be systems which would by tipped info profitability by such a move.
I respect your opinion, but consider this:

A system that is not profitable with a fixed SL and TP, would be the same (or worse) than calling heads or tails on a coin toss.
At a 1 to 1 payoff, it will break even over a large number of trials.

Do you believe there is any way to money manage, trade manage or any other management technique that will make the coin toss game successful over the long run?
  • #43
  • Oct 1, 2009 5:46pm Oct 1, 2009 5:46pm
Quoting billbss
Do you believe there is any way to money manage, trade manage or any other management technique that will make the coin toss game successful over the long run?
I think we are kind of missing each other here, to reply to the post, no I don't think that there is a way to manage random entries to profit (not a systematic way anyway). But there is a difference between random entries and a system which (for example) does not quite break even but is not random, in this case making say the average loser smaller via trade management may be enough to tip it into just profitable. Also while systematically managing random entries will not produce profit, it does have a measurable impact on the win/loss statistic.
The breaking of a wave cannot explain the whole sea.
  • #44
  • Oct 1, 2009 6:26pm Oct 1, 2009 6:26pm
Quoting triphop
Good call Bill. I'd go one further. The second most pervasive myth - which should be self-evident, but clearly it isn't - is that self-belief will turn a losing system into a good one.
It really can't.

Define your edge or you'll be defined by randomness.
Another pervasive myth is that you don't need any help from more experienced traders.

I have a mate who decided that being taught to drive was for wimps and girls.
He said that because everyone else was able to drive, he didn't need any help.
He regularly crashes his car but he says that is a normal part of learning to drive.
He has lots of accidents because he never learned the road rules, but says that he is plain unlucky.
He says that reading up on the road rules is a waste of time because he can learn more from trial and error.
He has lost a couple of limbs but says that he will get them all back as soon as he learns to drive better.
He drives using 4th gear only because he read somewhere on the internet that that you get top speed in 4th gear.
He says the lower gears are for the wimps and girls, and don't apply to him because he is a top driver.
He has now been driving for three months, so he reckons he might go on the internet and tell other new drivers how to drive.
He has now decided to leverage up buy a more powerful car because that is the reason why everyone else keeps having accidents with him. He says that if he had some more grunt he can get out of trouble quicker.
Yesterday, he told me that he is going to become a race driver and take on the professionals and make some real money from his new skill by beating them.

What do you think I should tell him?
  • #45
  • Oct 1, 2009 7:37pm Oct 1, 2009 7:37pm
Quoting Craig
I never said this is what I do, it's just an observation borne of testing exits.
Didn't mean to imply you did Craig, no offense meant at all. Just thinking out loud.
  • #46
  • Oct 1, 2009 8:21pm Oct 1, 2009 8:21pm
Quoting eclayf
Didn't mean to imply you did Craig, no offense meant at all. Just thinking out loud.
That's cool
The breaking of a wave cannot explain the whole sea.
  • #47
  • Oct 1, 2009 9:47pm Oct 1, 2009 9:47pm
Quoting endroute
I have an agenda here and that is to:

1. Dispel all the BS about trading Forex
2. Hopefully give a little back for all that I have gotten from this forum
3. Amusement

I do expect this to be a civil respectful discussion.
A good agenda.
  • #48
  • Oct 1, 2009 10:10pm Oct 1, 2009 10:10pm
Quoting mongreldog66
Another pervasive myth is that you don't need any help from more experienced traders.

I have a mate who decided that being taught to drive was for wimps and girls.
He said that because everyone else was able to drive, he didn't need any help.
He regularly crashes his car but he says that is a normal part of learning to drive.
He has lots of accidents because he never learned the road rules, but says that he is plain unlucky.
He says that reading up on the road rules is a waste of time because he can learn more from trial and error.
He has lost...
He was my taxi driver yesterday.
  • #49
  • Edited 10:30am Oct 2, 2009 12:32am | Edited 10:30am
Not targeting anybody in particular, but this type of thread frequently leads to all kinds of cliches, generalizations and each trader's assumption that there is only one optimum way to trade....... his or her own.

Given time, there will inevitably be folk who will post that:

  1. entries are unimportant; that exits are where the money is made.
  2. you can be profitable with any method, because mindset is all that's necessary.
  3. trading is an 'art', not a 'science'.
  4. you can only make money with 'price action', and not with indicators.
  5. it's impossible to make money scalping, that only the longer timeframes are reliable.
  6. it's impossible to make money trading news announcements.
  7. automated systems and EAs can't possibly work.
  8. win size (RR) is more important than win rate.
  9. you should average down, and/or avoid using stoplosses.
  10. basket trading is the only way to profit.
  11. the market is a random walk; profitable trading is nothing more than luck; TA can not provide a winning edge.

And so on........

Quoting mongreldog66
I have a mate who decided that being taught to drive was for wimps and girls....... What do you think I should tell him?
So now we can add:

  1. the only way to be profitable is to subscribe to a paid-for mentorship service.


BUT for every one of these arguments, there are counter-examples: real life evidence of profitable traders whose philosophy, or approach, differs from each of these points. Hence one trader's myth is another trader's route to profit. As Jack Schwager said in his Preface to New Market Wizards (Harper Business, 1992) "There are a million ways to profit from the markets; the irony is that they're all difficult to find".

Conclusion? Take your pick, and follow your own path. Profit is the only objective consideration.

________________________


About the MM debate, it depends upon whether one's definition of 'MM' extends beyond pos sizing to include exits, i.e. trade management.

My view is influenced by my background in casino games:

Expectancy is determined solely by the strategy one employs to play the game. In trading that equates to entries and exits. [Having said that, I've found it extremely difficult to gain a direct mathematical edge from exits (e.g. optimizing X for X:1 RR trades**, or for an X pip trailing SL). But perhaps an edge can be gained either through technically based exits, or by treating exits as an art rather than science? ]

MM is about one's betting system. In trading that equates to position size, and sizing method (fixed frac, fixed ratio, optimal-f, Martingale, etc). The only way to alter expectancy via bet size is to place higher bets on higher probability events. In a trading context, the only way to achieve this would be to know in advance which setups are higher probability, and increase size commensurately. Beyond that, it's impossible to use sizing to gain any kind of edge. I've attached an XLS that allows experimentation in this area. No matter how one varies one's betting method, overall expectancy is always equal to zero.

[** Jimmy Young apparently reached a similar conclusion - see point #33 here]

Attached File(s)
File Type: xls Martingale comparison.xls   118 KB | 436 downloads
  • #50
  • Oct 2, 2009 2:27am Oct 2, 2009 2:27am
Quoting hanover

Conclusion? Take your pick, and follow your own path.

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Almost everything that is said and bandied about, about forex is total BS. Hanover hit upon my point in doing this thread exactly, there are no hard and fast truths only what works for a given individual and the only way to find that is through trial and experience. Almost everything that is said and bandied about, about forex is total BS.

The people looking to be told how to trade will never succeed unless they "learn how to trade for themselves". This is not like learning how to develop software or fix a car where it is for the most part purely mechanical (do this, then do that) and emotion free.
  • #51
  • Oct 2, 2009 4:28am Oct 2, 2009 4:28am
I've met a lot of people showing me trading systems that absolutely work, 100%. The losing trades are always bad calls by the person trading; bad calls made over and over again. But seriously, once they can avoid the bad entries, they'll be driving Ferrari's within the next 3 months.
  • #52
  • Oct 2, 2009 5:10am Oct 2, 2009 5:10am
Quoting Cjn
But seriously, once they can avoid the bad entries, they'll be driving Ferrari's within the next 3 months.
Ahhh, the sarcasm of humor. So refreshing with my java for the a.m. session.

CUuuute CJN. I think I have met the same people in learning to trade. Most of them had really wierd split tongues,,, sort of and lookes sort of scaly!
  • #53
  • Oct 2, 2009 6:10am Oct 2, 2009 6:10am
Quoting endroute
Myth 2: Forex is Some Mystical Art that Nobody can Master
This is actually one of my favourite myths because it is bandied about here on ff so often. I will discuss this myth over the course of several posts.

The truth here is that learning to trade is a skill just like any other and must be learned and honed to perfection. The problem here is that most people don't really put in the time to learn the mechanics of how to be a good trader and more importantly don't really recognize their own self defeating characteristics:
One of my favourites from a recent conversion with a clever friend of mine: "trading is wasting time... it is just random walk" and "you can never beat the random walk of the market". A nice example I've run into along the theme of zero expectancy.

Best thing about it, the guy soon after gloated about buying and holding stock. It was supposedly the only way to invest other than putting money in the bank. Good for you!
  • #54
  • Oct 2, 2009 6:53am Oct 2, 2009 6:53am
Quoting endroute
Almost everything that is said and bandied about, about forex is total BS....
I'm not sure I agree with this.

The market doesn't know if you're trading for yourself or following instructions. It doesn't care.

If you buy at one price and sell at a higher price you make money.

If you sell at one price and buy at a lower price, you make money.
  • #55
  • Oct 2, 2009 10:06am Oct 2, 2009 10:06am
Hanover, sometimes I read your posts and shake my head in disbelief, because there's not a lot to say afterwards...
Myths abound, the real question (another thread?) are what are the absolute truths in fx?
- Price can only go up/down/sideways
- You can't escape risk whichever way you play it, so you have two choices - accept that and control it, or let it control you
- Pareto's law applies to winners:losers, ergo you need to be doing something the majority aren't.

Can't think of anymore...
  • #56
  • Oct 2, 2009 2:22pm Oct 2, 2009 2:22pm
OK, so we all know some of the myths. The next obvious question is how do we kill these little buggers that keep so many discouraged, unsuccessful and struggling?
  • #57
  • Oct 2, 2009 2:54pm Oct 2, 2009 2:54pm
Quoting eclayf
OK, so we all know some of the myths. The next obvious question is how do we kill these little buggers that keep so many discouraged, unsuccessful and struggling?
You can't the first thing people here is likely what they'll believe for ever more, to imply they might be wrong gets there shields up and they just can't/won't listen to reason.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #58
  • Oct 2, 2009 4:21pm Oct 2, 2009 4:21pm
Quoting Turveyd
You can't the first thing people here is likely what they'll believe for ever more, to imply they might be wrong gets there shields up and they just can't/won't listen to reason.
So true. Its the whole herd mentality, I would hazard a guess that most of the people on this forum would jump off a bridge if someone went first and told them in would be OK.
  • #59
  • Oct 2, 2009 4:37pm Oct 2, 2009 4:37pm
Quoting eclayf
OK, so we all know some of the myths. The next obvious question is how do we kill these little buggers that keep so many discouraged, unsuccessful and struggling?
By giving positive support and feedback to those who are truly interested in learning. It is usually obvious to pick up who is keen and who likes to whine, complain and attack other trades about these "myths".

There are some factors at play which are ubiquitous and will keep the myths alive:
1) Greed
2) Lack of perserverence & impatience
3) Reward without effort or thinking, as Confucius said "Man who stand on hill with mouth open will wait long time for roast duck to drop in"

How to become more successful is big business, just walk into your local bookstore or check out amazon's best seller list.

The first step on the journey is to be willing.
  • #60
  • Oct 2, 2009 4:50pm Oct 2, 2009 4:50pm
Quoting Turveyd
You can't the first thing people here is likely what they'll believe for ever more, to imply they might be wrong gets there shields up and they just can't/won't listen to reason.
If I may add, I agree it is a shame when people are so close minded. It would be a superb outcome if the open minded philosophy of "let's have a good critical consideration of this new bit of information and perspective that this person has built from their experience" was more common.

It is good to have healthy skepticism, but it is also so much easier to learn from others' experience where possible, so not to have to repeat their mistakes yourself to gain that same valuable experience.
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