KISS

I will say this.....once I figured out how to trade the FOREX market.....I couldn't believe how simple it was. It is extremely simple folks!! Waiting for the set ups is the most difficult thing to do once you figure out what is going on. It takes an enormous amount of skill, time, and effort to uncover what that simplicity is. I could teach someone in ten minutes what it took me three years to figure out. I was listening to a lecture by a Turtle student. I'm sure all of you remember how they were hand picked by a couple of wealthy guys to try and prove some nature vs nurture crap. The turtle experiment proved absolutely nothing as far as I'm concerned. You are not a genius just because you can follow directions well and it didn't prove that "anyone" can be a trader. A better experiment would be to give those students all the money in the world and then ask them to come up with a winning strategy w/o any coaching and see who comes out on top. If I spend two weeks with you showing you the ins and outs of the market and basically hand you a winning strategy; a person with reasonable intelligence can be expected to be very successful.

im sayin i don't know, but suspect you can get a gist of what is happening and about to happen... or at least know when it's worth taking a punt and when it's just noise.

i'll let my bank account do the talking here... "ignore nubcake!"

Nub, many thanks for your thoughtful response.

Assuming a non-biased wheel, roulette is random, because there is no causal link between one spin and the next. It's impossible for the player to gain a mathematical edge in a random game.

IMO price movement is NOT random. There is a rationale behind every trade placed, and a causal link in that: analysis engenders sentiment; sentiment results in trades being placed; these trades result in price movement; which spawns further analysis; and so on, in a never ending cycle, creating a kind of 'self-fulfilling prophecy' effect. (That's probably a gross over-simplification, but I think the basic concept is valid). My point is that a causal link exists, and consequently there's an important qualitative difference between real price charts, and randomly generated 'forgeries' (as discussed in this thread).

Presumably you've also seen the recent orderflow threads. My understanding is that ordeflow attempts to understand some of the major drivers behind the price candles. However, as a technical analyst, I work only with price charts (hence the tools I have at my disposal include S/R, line studies, indicators, candle and chart patterns, 'price action'; but NOT fundamentals, open interest, barrier defense, IFR, DOM and all of the other elements associated with orderflow analysis). OHLC is essentially a sequence of numbers, which is all that a purely technical trader sees. If that sequence amounted to a completely random walk, then it's my view that no technical trader could gain an edge (just as with roulette - see my comment in the first paragraph). If I believed that, then I would have seen trading as a futile exercise, and I would have given up all hope of ever becoming a successful trader a long time ago. More info in my post here.

I have no knowledge of math beyond secondary school. My background in programming and gaming definitely influences my way of thinking, but I'm nonetheless a discretionary trader, largely the result of my acknowledging that probabilities associated with price movement are, at best, extremely vague, and much of the time no better than 50/50. What I was trying to say in my earlier post was that a real edge must locate a genuine bias (or 'inefficiency') in price movement, and translate it into a method of entries and exits that exploits it. Simply trying to devise a system around MM (position sizing), one's account balance, and/or current or recent trade P/L, can not provide an edge. For the same reasons that there's no betting system capable of beating a random game.

About pyramiding. Rather than re-typing a whole lot of material, please see my thoughts here. Even if the probabilities involved are impossibly vague, I still believe that the principles are valid. If price movement amounted to a completely random walk, then ALL trade management strategies (including 'cutting losses quickly and letting profits run'; pyramiding; scaling in and/or out; hedging; moving SL to breakeven; etc) would have an expectancy of zero. Again, for these strategies to be effective, price has to 'trend' in a way that's qualitatively different to a random walk.

I can relate to the parallels that you draw between trading and Poker. However I think that Blackjack is more analogous to trading than Poker is (my thoughts here).

Not sure how well I've answered your points. I'm rushing out to dinner. Hope the above makes some kind of sense.

Ahhhh......there is definitely a mathematical model associated with FOREX charts....irrespective of the pair. I use mathematical models mainly to determine my exit points. It's right in the charts folks........look at the data in an unorthodox viewpoint and you will find it. In other words you have to think outside the box. Anyway, this has been a good discussion. Keep up the good work.

i have 10 minutes... hell i'd even give you 12!

Forgetting about inefficiencies for a minute, don't you think it's possible to effectively and efficiently use money management to exploit a trade where price is moving in a favourable direction, and conversely use risk management when it isn't?

So instead of looking for an edge in something which to some degree involves predicting direction (unreliable) you're instead managing a trade depending on where price is actually going (reliable), ie the reason for the trade isn't as important as what you do with the trade once you're in it. We have no control over what price does, but we do have total control (or we should have!) over how we manage our trade.

Our perception of probability just helps us to form a directional bias and gives us a reason to trade but I don't believe it's what separates the truly profitable from the unprofitable.

Sorry, what was this thread about again?

-

Interesting thoughts Trolkaone,

Bit cryptic though, but I think being successful in this business its has to be simple, as you say the journey may not be easy. I heard other posters stating similar.

Troikaone1 has got it. There really is a mathematical model because the market is always moving.

ahuh, well it seems i made a few mistakes there. somewhere along the way i was under the impression you were a stephen hawking of numbers. not sure where i got that impression from. maybe you are and it is all through your own hard-work and not from 'school'. colour me confused either way. also, seems you are more in-tune with the way i see things than i gathered from your previous post.

i had a look at the links you posted and in some ways i agree and others disagree. it's a bit like you look at it in one way without considering the other. i'm a bit hazy atm so maybe i'm still screwing-up interpretation, but you gave the example that whichever way you look at it person A who enters 10 units and then another 10 units via pyramiding is worse-off than person B who simply enters 20 units from the start. this is of course entirely true in terms of profit in a sideways market, however, if person A and B have the same initial stoploss and get stopped-out then person A who would have pyramided loses less than person B, and then on the flipside person A gains more when a runner is caught and s/he continues to pyramid while also constantly lessening risk by moving the stoploss as the trade progresses.

however, this all becomes moot if you take the consideration of both traders starting at 20 units as the initial starting trade, and then trader A pyramids further into it. the previous circumstances still apply, however, the payoffs and losses have simply increased monetary-wise for trader A, and depending on how the market behaves Trader A is likely to get stopped-out more often in a sideways movement for less gains or maybe overall loss until a runner is caught.... which is the point as price virtually can not stay sideways forever (as that is not really a market), and this thought continues in the next paragraph.

how about this for an example. if both traders start with the same initial position and move to breakeven at the same time and then trader A adds a smaller position (let's say half the first) trader A has now minimized loss to less than the initial risk or could even move the stoploss forward a bit and make the entire position a zero risk with less room to move... in either case if it goes in favour then trader A will win more due to the added position, and if the move becomes a runner then trader A can continue to keep a low or NO risk or even guaranteed profitable trade while adding positions for a potentially greater and greater win. this is where a previous poster mentions how someone once said their holy grail is managing to get their entire margin into the market. If a runner is caught then Trader B either has to become a pyramider or simply hold the original position and let it do its thing while trader A maximizes the profit from the movement while minimizing the loss (of actual loss as well as unrealized profits being eroded).

trader B probably wins more in a sideways market due to trader A moving the stoploss to minimize overall risk... until a runner is caught. depending on the extent of the runner trader A could potentially smash the hell out of trader B... in a big way.

it all comes down to which is the most appropriate for the situation, and which one is workable and most profitable (if at all).

i saw some of your poker and blackjack thoughts and in some ways i agree and disagree, and i think at one point you actually negated your own example but it's nitpicking. but what stood-out was the part where you mention how pro poker players don't go all-in and risk all their money on one play. I think this is a bad example as my understanding is that poker players don't have all their money at stake in an individual game so going all-in is not sending them bankrupt. instead it can be a muscle-move, particularly if they have more chips than other players in which case all-in isn't really all-in but more of forcing weaker players out of the hand and trying to muscle the pot, and in this case you could look at it as a risk-minimized play which is reinforced by how strong their actual hand is in the first-place... either other players will call and win and take a chomp of the player who went all-in in which case they are both still in the game, or players go all in and lose and the all-in player takes the pot and in the process also nukes some players out of the game, or players fold in which case the all-in player has muscled-out the other players and still taken the pot.

i'm no poker player so perhaps i'm missing something. either way none of this really correlates to trading, except for maybe if you believe there are 'big boys' who 'stop hunt', which is kind of the same thing i guess.

for me trading is all about minimizing risk while maximizing profit. doesn't mean i'm good at it or profitable (i mean seriously, would i be here if i was profitable... ok well maybe i would be from boredom). i feel that maximizing profit is the no-brainer part and is mostly about pyramiding, and the other side of the coin is minimizing the risk. these are almost the same thing except looking at things from both directions of profit and loss... minimizing risk to me is about deciding when not to trade, deciding what strategy to use (could be a form of pyramiding, or could be just a straight one position play depending on what is happening), trying to minimize unnecessary stop-outs both in the original opening of the position as well as while it (hopefully) goes into profit and a stop is trailed, balancing the risk (if any even present) and potential profit versus continually adding to a position

ideally it'd be great to be able to profit in a sideways market and then also smash an emerging trend for massive gains. i think it's more realistic to hope to work-out a method of maybe minimal gains in a sideways market, but more likely small losses, while then smashing an emerging trend for the big payouts.

long post, man i talk some crap.

Why thank you!

In simple mans terms.

The concept of spread does not really bother me, when you have 2 pips and you are talking of SL of 100 pips and TP of 102 pips. Win loss ratio of 1:1

So therefore if your system says go Long, you should go short on that bias and you are telling me that 2 pips is going to make a difference is it?

I have 2 versions of MT4 running, both on demo and one I am doing what my systems says and the other, I am doing what the broker (some brokers might do - take the other side of the trade.... and guess who's winning) might do, take the other side and I say the broker is winning more than he is losing.

The house always wins my friend. I not playing against the house, I am playing with the house!

Regards,
Vip

you are welcome. let's move on to the next lesson... what is a whipsaw? a whipsaw is what you will probably experience now instead. if you introduce a stoploss and takeprofit into any equation you are either going to get screwed by the spread or by the whipsaws. expanding your range for the stoploss and takeprofit to minimize the spread does not eliminate it (to answer your question), and in this case your whipsaws have only been slowed so that they take longer to eventuate and see the pattern of it happening still.

actually you have slowed the effect of both the spread eroding trades as well as whipsaws nuking a trade for a loss. if by simply reversing your 'normal' trades over the longterm gets you profitable then goddamn well done! but i don't see it being the answer *shrug*

So you are no longer on the buy side? Interesting.

Just wanted to add something here based on another poster in another forum.

I posted the link earlier, but to recap ill explain his findings after intense decades of studying (he did not me)

The poster created a model based on a biological function of the body. The result of that was to have a group of simple systems and then use an algorithm to find the best, based on times etc, and create new ones based on a big loss. (Im not 100% sure this is what he did but its not the point).

He found that if he used a handful of simple strategies he would be profitable more than all his years of trying to find the best entry and using complex analysis.

Mark

Yes...yes I am a Chemical Engineer by profession; so I have used numbers most of my life. But I also have an edge in that I can flip charts around in my head and view them from a different perspective. FOREX has incredible mathematical accuracy when it is trending well. It is close to child's play to be honest. But during times of uncertainty or when fundamental data starts to clash with the technicals; everything can go haywire. Only experience can convince a trader to stay in a trade that may be acting uncharacteristically. There are a million different combinations that FOREX can throw at you and only the human brain can discern what is going on. This is why I laugh at folks who rely on indicators. Are you kiddin' me? Not using indicators is part of thinking outside the box. As this thread indicates....trading is all about simplicity. But when I say simplicity I don't want to give the impression that trading FOREX is easy. When you first start trading it,it will probably be one of the hardest things you will ever undertake. I have a few years of experience under my belt so a lot of things appear "easy" to me now. Before I started trading FOREX I traded equities, options, and the futures markets. FOREX, however, was a totally different animal.

Hi Troikaone1,

Are you using any ATR MTF approach?

Regards,
Vip

LOL....your job is to find an even better way to trade!! I have acquired a little bit of knowledge on my FOREX journey.....but there is so much more to learn. I have yet to exploit larger timeframes and I am no good at intermarket analysis. In other words...I could care less what the DOW, NASDAQ or the S&P is doing while I trade. If there is a way to exploit this, I have yet to figure it out. As I have said before....."You're as good as you are, but you are not as good as you think you are." I am self taught...but if I had an extremely competent mentor...I could have learned a lot quicker. But as I mentioned before, a lot of what I do is outside the box, so it is doubtful that a mentor would have been able to teach me what I learned on my own. That's why I tell folks all the time....find your own way through the FOREX maze. If you use the same approach as everyone else, you may miss out on finding other unorthodox approaches that may be much more successful.

Nope.

Can you do any more guessing via pm.

Ok great, thanks... not too worry... as something just struck to me today (re: MTF ATR approach) and that was so obvious... I was like duhhh!

We could try to analyze every pyramiding permutation, but rather than risk hijacking Markmm's thread, I'll just say that IMO pyramiding will increase profit when prices trend, and decrease profit when they don't. If price reverses soon after a second (or subsequent) position is added then the loss(es) from the later position(s) will offset the profit from the original position; hence it would have been better to stay with the first position only. So, everything else being equal, it becomes an exercise as to how often prices 'trend' suitably versus how often they don't. Hence I concur with your statement "it all comes down to which is the most appropriate for the situation". Along these lines, I attempted to discuss different trading approaches for different market scenarios here.

Rather than 'pyramiding', I tend to think in terms of the individual component positions. If a second valid setup occurs while I still have the original position open, then IMO it's valid to take the second position, but in its own right. I've had some success with this approach, but in terms of my experimenting with it, it's early days yet.

I still contend that trading on the basis of one's account balance, or P/L (i.e. adding positions merely because the current trade is in profit) can't in itself provide an edge. But oops, I'm just repeating what I said before…..

As I said in my Poker vs Blackjack post, I'm not a Poker expert. Mike (mbqb11) is your man when it comes to things Poker. In the WSOP competitions that I've watched on TV, when a player loses all of his chips, he's eliminated from not only the table, but also the tournament. In that situation, it seems to me that 'all in' is the Poker equivalent of risking one's entire account on a single trade. But supposedly in a private game, only the most foolish person would risk his total personal equity on the play of a single hand.
________________

Perhaps there's confusion over the way we see 'MM'. When I talk about MM, I mean position sizing and method (fixed frac, fixed ratio, optimal-f, etc), as opposed to exits, which I would call 'trade management'. I'm not saying that's a universally correct definition, it's just my way of thinking.

IMO exits are crucial. Expectancy is the product of both entries and exits. I guess I didn't state that strongly enough back in post #22. Letting winners run (by trailing SLs on different TFs) and exiting losers quickly is a key component in my current approach. As I said in the last paragraph of #22, the setups I take are specifically designed to locate areas where price is more likely to trend, thereby improving the probability of catching a larger, cleaner move, and thus complementing a 'let winners run' strategy.

Correct me if I've misunderstood, but you're apparently convinced that entry offers no better probability than 50/50, in ALL situations. If that were so, then I would agree managing the trade is the only possible way of attaining an edge. But if you did manage to find entry setup(s) that helped to improve your bottom line, and complemented your exit strategy, wouldn't you use them?

Part of what constitutes entry, and exit, is arguably moot. For example, is setting the initial SL part of the entry setup, or should we categorize it as 'risk management'? I expect that most folk do the latter, but I see the SL as also creating an opportunity of a low risk entry, and therefore creating the possibility of a high RR trade. Semantics.....?

Finally, I would point out (as I have on many other occasions) that I'm not that experienced at live trading. I've only been studying forex for 3-4 years, and I've only started to become profitable with any kind of consistency in recent months (but virtually all of my trading is demo, for whatever that's worth). I've read posts saying that methods that have been profitable for many months, even years, suddenly lose their edge. I'm prepared to eat humble pie, if and when that happens to me. Meantime, I'll continue experimenting, and testing different ideas in my demo accounts. But until I learn a better way, I will stay within the overall philosophy of trying to find as many independent potential edges as I can, and forging them into a workable trading method.
________________

I traded equity CFDs before moving to forex. I have likewise reached the conclusion that forex price movement exhibits different characteristics to that of equities. Maybe that's a good reason that the indicators originally designed to work with equities etc are less effective in forex.
________________

Anyway, I must exit this thread now. I've babbled for far too long. And, among other things, I have a busy week's programming ahead…..