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Moving SL to BE is very wrong/noobish

  • #41
  • Jun 27, 2010 2:12pm Jun 27, 2010 2:12pm
Quoting Dutch_trader
I would say im good at stats. but in forex i tend to use basic stats a little bit of standard deviation and probabilities thats all.
Traditional standard deviation calculations don't work in forex because the distribution isn't Gaussian. Typically, data is positively skewed (positive long tail). Additionally, when doing means you usually want to aim for the geometric mean, rather than a simple arithmetic mean. That can be confusing. Basically, start with a grouped frequency distribution of whatever you're studying and work from there. You can learn a lot from that.
  • #42
  • Jun 27, 2010 2:15pm Jun 27, 2010 2:15pm
Quoting Sim
STDEV is where i can understand that actual stats come into it..finding deviation from the mean is handy and not something u can do from glancing at the tables
Anyone doing a regular STDEV on forex data is going to get trashed by the market. The market doesn't tend to a normal distribution.
  • #43
  • Jun 27, 2010 2:31pm Jun 27, 2010 2:31pm
Quoting Rabid
Anyone doing a regular STDEV on forex data is going to get trashed by the market. The market doesn't tend to a normal distribution.

Not necessarily, I use it to track the performance of trades that have been done and fine tuning trades for future events over months.
  • #44
  • Jun 27, 2010 2:40pm Jun 27, 2010 2:40pm
Quoting Dutch_trader
Not necessarily, I use it to track the performance of trades that have been done and fine tuning trades for future events over months.
I can't see rabid's posts but yeah it seems by making those claims you might as well be saying anyone doing stats in general is pointless because of what the market is, which I actually agree with moreso, but would not agree that it would equate to one gettin trashed by the market..

point is of course STDEV can be beneficial to an extent, and is all dependent on how the user takes advantage of it...
  • #45
  • Jun 27, 2010 3:28pm Jun 27, 2010 3:28pm
Quoting Sim
Man what an advantage electrical engineers must have in fx!!
Your query is a little fun to me,

may be the correlation of electrical wave form vs forex waveform..haha..


I am an electrical engineer too
should I mention here...hahaha
I got a feeling why u ask this..
  • #46
  • Jun 27, 2010 3:33pm Jun 27, 2010 3:33pm
Quoting akukaya
Your query is a little fun to me,

may be the correlation of electrical wave form vs forex waveform..haha..


I am an electrical engineer too
should I mention here...hahaha
I got a feeling why u ask this..
Haha. I saw some guy started a thread about Sine waves in FX!!
http://www.forexfactory.com/showthread.php?t=231578

Not to mention electromagnetic waves trading!!
http://www.forexfactory.com/showpost...4&postcount=11

But never read and never will , lol!
  • #47
  • Jun 27, 2010 4:02pm Jun 27, 2010 4:02pm
Quoting Dutch_trader
Not necessarily, I use it to track the performance of trades that have been done and fine tuning trades for future events over months.
Apples to oranges. You can track the performance of trades, ie: returns, because returns DO (at least usually) follow a normal distribution.

You cannot work with price data using a normal distribution. Well, you can, but it will have an abysmal failure rate.

All you need to do is pull up any price series data and run a grouped frequency study, then plot the results on a graph. You'll see the real distribution in action.
  • #48
  • Jun 27, 2010 4:28pm Jun 27, 2010 4:28pm
Quoting Rabid
Traditional standard deviation calculations don't work in forex because the distribution isn't Gaussian. Typically, data is positively skewed (positive long tail). Additionally, when doing means you usually want to aim for the geometric mean, rather than a simple arithmetic mean. That can be confusing. Basically, start with a grouped frequency distribution of whatever you're studying and work from there. You can learn a lot from that.
does Forex price distribution lose Gaussian properties?
Vincit qui se vincit.
  • #49
  • Jun 27, 2010 4:36pm Jun 27, 2010 4:36pm
Quoting Pippopotamus
does Forex price distribution lose Gaussian properties?
It never had them. It's a logistic distribution. Later tonight, if I get time, I'll post some graphs.

For now...
http://en.wikipedia.org/wiki/Log-normal_distribution

And
http://en.wikipedia.org/wiki/Log-logistic_distribution

And
http://en.wikipedia.org/wiki/Logistic_distribution
  • #50
  • Jun 27, 2010 4:40pm Jun 27, 2010 4:40pm
Quoting Dutch_trader
As you can see there is one less win over the 96 trades when using BE .
These results are not enough to come to any conclusion but I did notice that the DD on the BE strategy was less in comparison to without.
[size=3][font=Calibri]If more people could post up results in a similar fashion we could come to a reasonable conclusion as to whether it is worse or better, from my results I might actually change my strategy to BE as the MAX DD was...
Variance aside, that's what we should expect. Moving a stop up lowers the survability of the trade, but also lowers risk to the original risk amount. Lower winrate at the benefit of lesser drawdowns. As someone else said though, we're not going to find out which is better just by pooling a significant sample. A s&r trader may benefit from leaving the stop where it is in case of a retest, while a momentum trader may be best off moving it up quickly.
  • #51
  • Jun 27, 2010 5:21pm Jun 27, 2010 5:21pm
Quoting Rabid
It never had them. It's a logistic distribution. Later tonight, if I get time, I'll post some graphs.

For now...
http://en.wikipedia.org/wiki/Log-normal_distribution

And
http://en.wikipedia.org/wiki/Log-logistic_distribution

And
http://en.wikipedia.org/wiki/Logistic_distribution
sample from any pair show a Gaussian distribution? Graphs are not necessary. I am familiar with the subject matter.
Vincit qui se vincit.
  • #52
  • Jun 27, 2010 6:09pm Jun 27, 2010 6:09pm
I trade short term with (normally) a 10 pip profit target and one thing I can't get my mind around: several people on this and the other SL at BE threads talk about being 30, 50 100, even 150 pips in profit and moving stops to break even......and often getting stopped out. At what point do people start taking money off the table? I just can't fathom someone being 100 pips in profit and giving it all back. They have to be trading nano-lots or something, because someone trading 10 lots isn't going to let $10K+ profit dwindle to nothing (if they do, I wouldn't consider them a very good trader!) It seems like people are more worried about the few pips spread than actually booking a profit on a trade.

Granted, I only use an emergency SL of 100 pips, but the way I see it, if people aren't willing to close a trade in profit, moving the SL to BE at least keeps them from losing money. I would consider that a good thing.

Just my 2 pips....
  • #53
  • Jun 27, 2010 6:19pm Jun 27, 2010 6:19pm
Quoting moneymaker2
They have to be trading nano-lots or something, because someone trading 10 lots isn't going to let $10K+ profit dwindle to nothing
It has nothing to do with amount of capital, they're simply trading a longer timeframe than you. They also may choose a larger equivalent stop (i.e. two people trading the same timeframe will differ of size of stop).
  • #54
  • Jun 27, 2010 7:04pm Jun 27, 2010 7:04pm
Quoting Pippopotamus
sample from any pair show a Gaussian distribution? Graphs are not necessary. I am familiar with the subject matter.
Ok. I've not found any pairs that do. However it seems more of a timeframe issue than a pair issue. Different TFs trend to different distributions it seems.
  • #55
  • Edited 7:20pm Jun 27, 2010 7:07pm | Edited 7:20pm
Quoting moneymaker2
I trade short term with (normally) a 10 pip profit target and one thing I can't get my mind around: several people on this and the other SL at BE threads talk about being 30, 50 100, even 150 pips in profit and moving stops to break even......and often getting stopped out. At what point do people start taking money off the table? I just can't fathom someone being 100 pips in profit and giving it all back. They have to be trading nano-lots or something, because someone trading 10 lots isn't going to let $10K+ profit dwindle to nothing (if they do,...
I'm the one who said 150 pips. Addressing a couple of things:

For me, when the price advances that far, moving the stoploss to breakeven is just an emergency measure so that I can sleep or otherwise be away from the charts for several hours without worrying about it.

My normal stoploss is based on chart pattern, so when I see that the multi-day or multi-week move is exhausted, I close manually. If the chart pattern shows that I made the wrong decision I'll know it within a few hours, so I never give up triple-digit pips - and sometimes I can 'save' a bad decision by getting out with (for me) only 20-30 pips gain.

As Mr. J suggested, I take my signals from a Weekly-Daily symbiosis. A 20-30 pip drawdown is frequent (when I'm too early or late for the move), sometimes 50 pips, but since even a single Daily candle is usually over a hundred pips, my risk:reward is fairly conservative by the time the trade is done.

And I'm trading with more than Nano-lots.

Rob
  • #56
  • Jun 27, 2010 7:22pm Jun 27, 2010 7:22pm
Quoting Rob Mondave
And I'm trading with more than Nano-lots.Rob
I'm guessing you trade on a higher timeframe than intra-day, and you're probably looking at moves that last several days or longer, versus several hours and shorter.
  • #57
  • Jun 27, 2010 7:26pm Jun 27, 2010 7:26pm
Quoting Rabid
I'm guessing you trade on a higher timeframe than intra-day, and you're probably looking at moves that last several days or longer, versus several hours and shorter.
Right. My signals are from a Weekly-Daily combination. I don't look at anything under 240 minutes because it messes me up - I start freaking out if I see a reversal signal on the 15-minute, even though it has little relevance to the likely higher timeframe move.

Rob
  • #58
  • Jun 27, 2010 7:42pm Jun 27, 2010 7:42pm
Quoting Rob Mondave
Right. My signals are from a Weekly-Daily combination. I don't look at anything under 240 minutes because it messes me up - I start freaking out if I see a reversal signal on the 15-minute, even though it has little relevance to the likely higher timeframe move.
Nod. A reversal on the 15 minute means maybe a 20 pip change in most cases. It's a short term retrace. There are some 5 minute signals that occasionally spell massive changes, but they show up on other TFs soon enough anyway.

By contrast, some people may be trading the 5 minute... where a 20 pip change is massive.
  • #59
  • Jun 27, 2010 7:59pm Jun 27, 2010 7:59pm
Quoting Rabid
Apples to oranges. You can track the performance of trades, ie: returns, because returns DO (at least usually) follow a normal distribution.

You cannot work with price data using a normal distribution. Well, you can, but it will have an abysmal failure rate.

All you need to do is pull up any price series data and run a grouped frequency study, then plot the results on a graph. You'll see the real distribution in action.
then how are options written?
  • #60
  • Jun 27, 2010 8:17pm Jun 27, 2010 8:17pm
Quoting jest1081
then how are options written?
Using other distributions. See the links I posted earlier. Are you familiar with the Black-Scholes equation?

http://en.wikipedia.org/wiki/Black%E2%80%93Scholes

Altho it's been known for some time that this model misprices things a little bit.
There's a lot of research in that area, it's nutty complex.
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