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Strategy of losers

  • #101
  • Oct 20, 2009 4:42am Oct 20, 2009 4:42am
Quoting Alderlug
The markets are absolutely random. Everybody except the losers and the newbies knows that. It is a pure fact like the fact that the earth is not flat. Why discuss facts?? A waste of time.
You may want to re-think your statement after doing some research into the matter - and I mean not just your personal experience in terms of every time you place a trade and the market went 'randomly' in a different direction.

Below an excerpt from a man who has done his homework and made a few bob from 'non-random' markets.

regards
daytrading

The Nonrandom Market

For the most part, commodity prices are like a drunken sailor, wandering down the street without any knowledge of where he is going, or where he has been. Mathematicians would say there is no correlation between past price activity and future trends. About that, they would be wrong: there is some correlation. Although that drunken sailor does swagger,
stagger, and seemingly move in a random fashion, there is method to his madness. He is trying to go someplace, and we can usually find out where.
While price action involves a large degree of randomness, it is far from a totally random game. If I cannot prove that point, right now, early on in this book, the remaining chapters should be devoted to learning how to throw darts. In a random game, the dart thrower will outperform the experts.
Start with a given-if we flip a coin 100 times, it will come up heads 50 times and tails 50 times. Each time it comes up heads, on the next flip we will have 50 percent heads and 50 percent tails. If heads has now appeared two times in a row and we flip again, the results continue to be 50/50 that a head will appear on the next flip. As you have probably heard, the coin, dice, or roulette wheel has no memory. The odds are fixed, as this is a random game.
If that were true of the market and prices close higher 50 percent of the time, then after each up close we would expect to see another up close 50 percent of the time, and following that up close again 50 percent
odds of another up close. The same thing should apply to a down close: 50 percent of the time following one down close, we should see a repeat; and again 50 percent of the time following two in a row, a third down
close should appear. In our real world of trading, it does not turn out that way, which can only mean price action is not totally random!

Reference:

'The Non Random Market' in Larry Williams 'Long Term Secrets To Short Term Trading'
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  • #102
  • Edited 7:22am Oct 20, 2009 5:02am | Edited 7:22am
Random: ran-dom:

  1. Having no specific pattern, purpose, or objective: random movements.
  2. Mathematics & Statistics. Of or relating to a type of circumstance or event that is described by a probability distribution.
  3. Of or relating to an event in which all outcomes are equally likely.

  • #103
  • Oct 20, 2009 5:15am Oct 20, 2009 5:15am
The Nonrandom Market: "The Secret is the shorter your timeframe of trading the less momey you make."

I think some people my take issue with this statement. Don't believe everything you hear, and only half of what you see. Talk talk talk but I see no evidence for anything.

Show me the pips!
  • #104
  • Oct 20, 2009 5:23am Oct 20, 2009 5:23am
Why do losers lose? It’s a simple question, but to find the answers hasn’t been easy. Ignore the Mark Douglas bullsh*t, ignore the threads of why 95% of people lose (all guesswork and seriously uninformed), and to find the truth you’ve got to collate and analyse thousands of hours of Oanda open interest data, dozens of academic papers on retail order flow and combine with a dollop of lateral thinking.

Hi triphop great thread,

Retail traders are at a massive disadvantage from the start as like you have said above markets are made up of orders, this is information we do not have at our disposal. We have charts and indicators and have to try and figure out using price action what the professional traders are doing.

Couple this with mark downs/ups, buying on down bars and selling on up bars it is no wonder the retail traders are consistently losing their accounts. This is why in my opinion charts are very deceiving.

If they know where the majority of retail traders are placing their orders they only have to move it 50 pips against that price and most retail traders will be forced to exit based on account size and inexperience etc.

You have said that you aren't going to reveal certain things but would you be able to post the information that you have gathered and then we can read it to see if we can come to the same conclusions as you.

It would seem from your posts that you have found where the retailers are losing from open interest etc and then trade against them?

Thanks J
  • #105
  • Oct 20, 2009 5:27am Oct 20, 2009 5:27am
Quoting Ferrari
Don't believe everything you hear, and only half of what you see. Talk talk talk but I see no evidence for anything.

Show me the pips!
hmmmm! yah ! thats true actually.
know thy edge and abide by it ! 4 in it shall thou be successful !
  • #106
  • Oct 20, 2009 5:34am Oct 20, 2009 5:34am
daytrading, if that piece of shit comes from Larry Williams, seriously, he has no idea what he's talking about.
Either he is lying or he is completely stupid.

If you want to see randomness in action, do the following "Larry Williams" experiment.
Start with 1000$ and use a coin.
Throw it in the air. If it comes tails add 1$. Heads -> substract 1$.
Do it 100 times. Wow, you have a candle.
Open = 1000.
High = maximum
Low = minimum
Close = The last value.

Do it 10 times starting from the last close (= new open) always. Draw the candles on a paper. You'll be surprised.
  • #107
  • Oct 20, 2009 6:07am Oct 20, 2009 6:07am
Sauron

there is no need for me to conduct that experiment. If what he says is wrong, trends would not exist in the markets (i.e. a directional bias based on the cumulative buy/sell transactions during a specific period of time).

His example is a mere simplification of the processes involved.

I think the problem here lies more in the nature of currency trading as such - because of the extreme volatility that can be involved and the possible lack of directional bias otherwise attributed to stock and commodity prices - may well present the trader (specifically the short-term trader) with what looks like a more random picture.

By simply switching to higher time frames, weekly for example, a clear case can be made for times that present more favourable entries into one direction rather than the other - which is the basic question throughout: Up, or down?
If any market was random, nobody would be able to identify such 'favourable' points and no trend would ever materialize.

On a different note, I wouldn't dismiss LW writings as 'shit' or call him stupid for that matter - in the late 80's when I started out in trading, he had made already about $10m, which in those years was a lot more than it is today.

We are of course all entitled to our opinions but fact remains that most traders trade what they see - and what I can see on a chart (whatever instrument) does not look random by way of my own interpretation.

regards
daytrading
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  • #108
  • Oct 20, 2009 6:26am Oct 20, 2009 6:26am
Quoting daytrading

Start with a given-if we flip a coin 100 times, it will come up heads 50 times and tails 50 times.
If he had done his "homework" he would not formulate it this way if he actually understood what he was talking about. His entire argument is BS and just one problem is that a toss of a perfect coin is normal distributed while the financial markets are generally not.

Even a classic random walk though is difficult for most to distinguish from a real market.

Anyway, markets have non-random characters like volatility clustering, so those how think they can "prove" the markets are random are going to have a pretty hard time.
  • #109
  • Oct 20, 2009 6:48am Oct 20, 2009 6:48am
As I pointed out in my previous post, he uses a simplified example. I find the point he made extraordinarily easy to comprehend.

I think there is no need to extend the debate about whether he could have formulated his point in a different way relative to his mindset at the time any further.

Clearly we are drifting away from the main discussion here. It is safe to say though that unless one believes in the non-randomness of price behaviour in the financial markets, the endeavour of trading becomes a futile exercise. Whatever may be the individual choice of determining what makes a market non-random is not even relevant.

What should be relevant, is how a trader can utilize this information to his/her advantage.

regards
daytrading
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  • #110
  • Oct 20, 2009 6:58am Oct 20, 2009 6:58am
Quoting daytrading
By simply switching to higher time frames, weekly for example, a clear case can be made for times that present more favourable entries into one direction rather than the other - which is the basic question throughout: Up, or down?
Sorry to disagree but the weekly chart doesn't offer better opportunities than M15. If this would be the case then an automatically EA would exploit the presumable edge.
Another problem of the weekly chart is that there aren't simply enough weeks to draw a statistical conclusion.

I think LW wrote that "proof" because he wanted to sell his book or to impress newbies. "Well, I'm Larry Williams and I can asure you that the markets aren't random by showing a coin-tossing experiment. After my state-of-the art proof I'm going to teach you how you can profit from the non-random markets. "
  • #111
  • Oct 20, 2009 7:00am Oct 20, 2009 7:00am
actually the markets appear random and not random, I checked this some time ago with excel,

those who say the market isn't random because it trends, let me ask you this,
how long is a trend?

think about it, you see trends that last a week, a month or several weeks,
the point is you (or I) don't know how long it will last because it will end at some RANDOM time!

what I have found is that the market is equal ie; every time something happens the opposite will happen, if one day sees an up candle there is a fifty fifty chance it will go up again.

I have written EA's to test if prices are up x no. of pips, go long for y no. of pips with y pips SL
and they lose whatever the settings are(due to spread).

in all my testing I have yet to find an edge.

The market is not random but equal.

Steve.
  • #112
  • Oct 20, 2009 7:11am Oct 20, 2009 7:11am
Quoting Arnold49
The market is not random but equal.

Quoting Ferrari
Random: ran-dom:

  1. Having no specific pattern, purpose, or objective: random movements.
  2. Mathematics & Statistics. Of or relating to a type of circumstance or event that is described by a probability distribution.
  3. Of or relating to an event in which all outcomes are equally likely.


Steve, this is definition 3 of randomness.
  • #113
  • Oct 20, 2009 7:31am Oct 20, 2009 7:31am
Quoting daytrading
By simply switching to higher time frames, weekly for example, a clear case can be made for times that present more favourable entries into one direction rather than the other - which is the basic question throughout: Up, or down?
If any market was random, nobody would be able to identify such 'favourable' points and no trend would ever materialize.
Ok guys, question time.

I just pulled this chart off metatrader...

What currency pair and timeframe is this chart taken from?

Attached Image (click to enlarge)
Click to Enlarge Name: weekly.gif Size: 8 KB
  • #114
  • Oct 20, 2009 7:39am Oct 20, 2009 7:39am
Quoting Ferrari
Ok guys, question time.

I just pulled this chart off metatrader...

What currency pair and timeframe is this chart taken from?

Attachment
without a lot of research its not possible to tell from just looking at the chart.
  • #115
  • Oct 20, 2009 7:41am Oct 20, 2009 7:41am
Quoting endroute
without a lot of research its not possible to tell from just looking at the chart.
So your saying you cannot make a clear case for a long or short entry based on, say a weekly chart? I'm trying to make a point here, it kinda goes with the quote attached in that post.
  • #116
  • Oct 20, 2009 7:41am Oct 20, 2009 7:41am
Quoting Arnold49
those who say the market isn't random because it trends, let me ask you this,
That wouldn't be much of an argument, because a chart of a sample of coinflips would show trends. The proof that markets do not move randomly lies with the fact that humans are behind every action, and we do not act randomly.

Quote
what I have found is that the market is equal ie; every time something happens the opposite will happen, if one day sees an up candle there is a fifty fifty chance it will go up again.
We may see it that way, but it doesn't mean it is true. As I look at that candle, the transactions that will cause the next move are being entered, and the next move has already been decided.

Quoting Ferrari
What currency pair and timeframe is this chart taken from?
I'm going to guess you're trying to be deceptive and have posted a chart something along the lines of a sample of coinflips. Actually, ignore that, I thought you were commenting on the markets appearing random.
  • #117
  • Oct 20, 2009 7:45am Oct 20, 2009 7:45am
Quoting Mr J
That wouldn't be much of an argument, because a chart of a sample of coinflips would show trends. The proof that markets do not move randomly lies with the fact that humans are behind every action, and we do not act randomly.

We may see it that way, but it doesn't mean it is true. As I look at that candle, the transactions that will cause the next move are being entered, and the next move has already been decided.



I'm going to guess you're trying to be deceptive and have posted a chart something along the lines of a sample of coinflips.
No, no coins flips. That is a real chart I just pulled off metatrader. I took out the chart stamp with paint and uploaded it. The point is it doesnt matter what chart it is, is no one getting this? Read the quote that is in that post.
  • #118
  • Oct 20, 2009 7:48am Oct 20, 2009 7:48am
That chart seems to be real because some candles are clearly longer, I would say a hourly chart. I would remove the possibility of a random generated chart because I played with this kind of charts and they aren't so loose. It depends what kind of generator one uses, a good generator is not so easy to program.

LE. Yeah right, weekly. The point being?
  • #119
  • Oct 20, 2009 7:56am Oct 20, 2009 7:56am
Quoting Sauron
Sorry to disagree but the weekly chart doesn't offer better opportunities than M15. If this would be the case then an automatically EA would exploit the presumable edge.
Another problem of the weekly chart is that there aren't simply enough weeks to draw a statistical conclusion.

I think LW wrote that "proof" because he wanted to sell his book or to impress newbies. "Well, I'm Larry Williams and I can asure you that the markets aren't random by showing a coin-tossing experiment. After my state-of-the art proof I'm going to teach you how...
I am gathering from your reply that you prefer the shorter time frames over the longer ones.

Take into account though that whether you can write an expert advisor makes no difference at all to the profitability or the possibility of the basic exploitation of any time frame. When it comes to algorithmic trading programs (or advanced EA's), they are designed to cope with trading environments which are beyond the human ability to execute on parameter basis like 'dark liquidity pools' and other similar elements.

Besides, on longer time frames, there is no need for EA's since actual market participation in terms of placing orders of any kind is not that frequent that it would require a machine to take care of it (see the original Turtle rules as an example).

When it comes to trading larger amounts (amounts where execution fees, slippage and spreads become a factor), shorter time frames become vastly more cost ineffective. Besides that, the risk increases disproportionate in that the amount of trades to be conducted loses its optimal frequency compared to models that trade less often with more effective money management.

Another factor is the psychological pressure of having to change trade direction far too often on short time frames and a great deal of traders cannot cope with it.

I am by no means saying that what you are stating can't be true for your own trading - since I don't have the required information about how you trade, what you trade and how large your profit or your losses are, but my guess is that you trade retail size in (a) liquid pair(s) and that you are still finding your way along at present.

I have attached two charts. Let's spot the opportunities bearing in mind the resulting gain/loss, amount of trades, cost, and most important: scalability when it comes to execution of real trading size. Don't forget that by the time you have placed several hundred million, you will most likely have a worse average price than anticipated - and the same dilemma when you try to get out of your position (slippage). If you count that over the year, you'll be surprised how much that takes away from your profits.

Anyway, I am always happy that people trade in different ways - if everybody would trade the same way at all times, we would not have a functioning market.

regards
daytrading
Attached Image(s) (click to enlarge)
Click to Enlarge Name: aussie fifteen minutes.gif Size: 25 KB
Click to Enlarge Name: aussie weekly.gif Size: 20 KB
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  • #120
  • Oct 20, 2009 7:58am Oct 20, 2009 7:58am
Quoting Ferrari
So your saying you cannot make a clear case for a long or short entry based on, say a weekly chart? I'm trying to make a point here, it kinda goes with the quote attached in that post.
Thats not the question you asked, you asked what timeframe and pair this chart was taken from!
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