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Oanda Open Position Ratios conundrum

  • #1
  • First Post: Oct 27, 2010 9:14am Oct 27, 2010 9:14am
I checked it out, it shows the percentage of long and short positions of their customers in each pair. Here is what surprised me.
We've all heard ad nauseasm the 95% traders that lose. So I figured that whatever direction(long or short) is in the majority percentage would be the direction to avoid. WRONG. I discovered that the majority percentage is the direction where it trends.
So to conclude:
1. either the 95% "fact" is not very accurate or
2. despite being in the right direction of the general trend, the majority loses.

Any other ideas?

P.S I don't use any of this as an indicator of any sort, neither should you, cuz it ain't UBS order flow
  • #2
  • Edited 9:54am Oct 27, 2010 9:31am | Edited 9:54am
"2. despite being in the right direction of the general trend, the majority loses."

I vote that this is correct.

Trend trading is difficult. Despite being one of the most popular mantras...
"Trade with the trend."

It is psychologically taxing, winning trade percentages may only be 30-40%, and there is drawdown.

Eventually, there are longer trends with trades which payoff handsomely, if you hold them.

I think that the Oanda positions ratio could be traded as a decent LONGER term trend indicator. But you have to really be a longer term trend trader, with appropriate stops, and the ability to stay with the trend if it is not broken. I would gamble that 90% of Forex Factory and 90% of Oanda customers rarely hold a trade longer than 2 days.

(edit: I don't consider myself a trend trader.)

Just my thoughts...feel free to disagree.
  • #3
  • Oct 27, 2010 9:32am Oct 27, 2010 9:32am
First of all, I would like to refer you to the recently published figures concerning the profitability of brokers' customers. About half of the customers seem to have made a profit over the last 4 months.

Secondly, people generally don't lose money because of a negative edge (i.e. consistently betting in the wrong direction), but because of having no edge. In practice this means that people lose because the spreads kill them over time, and that there is little value you can obtain from the information Oanda publishes.

Your second point might contain some truth. The hard part of trading isn't the estimating the high probability direction, but applying appropriate trade management.

By the way, what research did you conduct to make your discovery?
The nail that sticks out gets hammered back in
  • #4
  • Oct 27, 2010 9:48am Oct 27, 2010 9:48am
Quoting Noloqy
First of all, I would like to refer you to the recently published figures concerning the profitability of brokers' customers. About half of the customers seem to have made a profit over the last 4 months.

Secondly, people generally don't lose money because of a negative edge (i.e. consistently betting in the wrong direction), but because of having no edge. In practice this means that people lose because the spreads kill them over time, and that there is little value you can obtain from the information Oanda publishes.

Your second point might contain...
I agree with you. While the costs stated by the brokers are 2.0 pips per trade, by my experience the actual cost is somewhere close to 5 pips per trade, which includes slippage, not executing at perfect time, reaction time etc. So to have a reasonable system with a 2:1 profit factor, you can't simply go for 10 pip scalps, since a 5pip(adding 5 pips for above factors makes it 10) stop is unreasonable for 10 pip scalps. Such active "scalping" has no edge for the retail trader.
If he must daytrade then it better be those 40 pip swings. Then he has a chance. Most people don't know what they're doing.
For the record, i didn't do much research, just observed the position ratios with my own eyes for a week or so.

Regards.
  • #5
  • Oct 27, 2010 9:56am Oct 27, 2010 9:56am
As a rule of thumb, a trader should subtract 5pips from his expected trade payoff for each trade , if it's still worthwhile as a system then he may become a winner.
Another point I would like to raise was people don't think of portfolio diversification much. For example, today I got caught of the sideways chop of the EUR twice for 62 pips negative(mostly due to bad judgement). Significant. Yet 10 minutes after this ordeal a short Crude oil trade emerged which netted me 57 cents, which is 570 bucks per contract. And that nearly neutralized the EUR loss. Thus at the end of the day the drawdown was very minimal.
A trading plan needs to encompass
1. entry and exit
2. bet sizing
3. smoothing of the overall equity curve(using multiple instruments)
4. A quantifiable edge of course.

Diversification within only the fx universe is pretty useless, you're either a dollar bear or a bull.
  • #6
  • Oct 27, 2010 9:45pm Oct 27, 2010 9:45pm
I've followed the Oanda position ratios and open orders stuff for a long time now and I can say with confidence that there is very little predictive value in knowing what retail traders are doing.

Having said that, there is one nugget of value to be had if you set the open orders to show net open orders. It doesn't happen frequently, but if you look for concentrations of an outsized percentage (>1%) you can quite frequently catch tops and bottoms by getting in ahead of them.

For an example of what I'm talking about look at U/J at ~85.50. All things being equal, when price gets back up to that level you would be looking at a great short opportunity.

Enjoy the fish
  • #7
  • Oct 28, 2010 12:54am Oct 28, 2010 12:54am
The legendary darkstar contributes to my humble thread
Thanks.

Regards.
  • #8
  • Oct 28, 2010 12:56am Oct 28, 2010 12:56am
Quoting Darkstar
I've followed the Oanda position ratios and open orders stuff for a long time now and I can say with confidence that there is very little predictive value in knowing what retail traders are doing.

Having said that, there is one nugget of value to be had if you set the open orders to show net open orders. It doesn't happen frequently, but if you look for concentrations of an outsized percentage (>1%) you can quite frequently catch tops and bottoms by getting in ahead of them.

For an example of what I'm talking about look at U/J at ~85.50. All...
I agree ratios like 20:80 may indicate tops and bottoms.
  • #9
  • Oct 28, 2010 8:38pm Oct 28, 2010 8:38pm
Quoting Darkstar
I've followed the Oanda position ratios and open orders stuff for a long time now and I can say with confidence that there is very little predictive value in knowing what retail traders are doing.

Having said that, there is one nugget of value to be had if you set the open orders to show net open orders. It doesn't happen frequently, but if you look for concentrations of an outsized percentage (>1%) you can quite frequently catch tops and bottoms by getting in ahead of them.

For an example of what I'm talking about look at U/J at ~85.50. All...
Thanks for the info Darkstar

For those people struggling to know where the stops are they can use that same tool and look for buy/sell stop clusters as well.

Example: There is a large concentration of stops below 0.8700 in EUR/GBP with a close to 1% reading. Now you should be able to tell that from looking at the charts, but this tool can help some of the people looking for some confirmation.
Private message me for a link to my order flow website.
  • #10
  • Oct 28, 2010 9:38pm Oct 28, 2010 9:38pm
http://www.olsenblog.com/2010/07/thi...-how-to-trade/

Might be of interest to some. Written by the CEO of Oanda.
  • #11
  • Nov 21, 2010 3:50pm Nov 21, 2010 3:50pm
Quoting dakoo
I checked it out, it shows the percentage of long and short positions of their customers in each pair. Here is what surprised me.
We've all heard ad nauseasm the 95% traders that lose. So I figured that whatever direction(long or short) is in the majority percentage would be the direction to avoid. WRONG. I discovered that the majority percentage is the direction where it trends.
So to conclude:
1. either the 95% "fact" is not very accurate or
2. despite being in the right direction of the general trend, the majority loses.

Any other ideas?

P.S...
I vote that this is wrong and that you are mistaken.

The trend exists on many different time frames, and the 'edge' is to be with the long-term underlying trend - the majority of retail traders go against this trend.

The market by it's very nature will effectively do whatever it needs to do to make the majority wrong. It dupes the majority into going against the long-term underlying trend so that the majority of traders are providing the liquidity for a few big players who move the market to take. This isn't actually very hard for the market to do either since the majority of retail traders are essentially gamblers trying to pick tops and bottoms rather than figuring out the direction of the long-term underlying trend and entering in the direction of that trend with low leverage and large stop loss and giving the trend time to slowly let their trade drift with the flow into profit; retail traders seem more interested in betting when the direction of the market will change rather than going with the direction of the market. The market can change direction at any time; however when a trend is in place there is more chance of it continuing than reversing and most of the time it's hard to really say any more than that, my advice is not to even try.

To help settle the argument I'm trying to go against the majority on the EUR/USD on OandA and DailyFX+'s books. The thread is here http://www.forexfactory.com/showthread.php?t=265005 I might be wrong though, time will tell
  • #12
  • Edited 6:49pm Nov 27, 2010 6:38pm | Edited 6:49pm
Quoting Darkstar
I've followed the Oanda position ratios and open orders stuff for a long time now and I can say with confidence that there is very little predictive value in knowing what retail traders are doing.

Having said that, there is one nugget of value to be had if you set the open orders to show net open orders. It doesn't happen frequently, but if you look for concentrations of an outsized percentage (>1%) you can quite frequently catch tops and bottoms by getting in ahead of them.

For an example of what I'm talking about look at U/J at ~85.50....
I too have looked at the position ratios and found them fairly useless, I think it would help if they were divided into the categories of traders.... Commercials, Large traders, and piss ant retail traders with their 100 dollar accounts.
However I guess you could use them in a contrarian method.

Just a thought.

By the way.... Good to see you around Darkstar.
  • #13
  • Nov 27, 2010 8:20pm Nov 27, 2010 8:20pm
this might be interesting theres a trader called fhuetter in my etoro platform and he always used to win challenges and he says this

"Also I use the top traders’ insight list at eToro as a contra-indication: if 70% or more are on sell, I go long and vice versa."
http://www.etoro.net/traders-insight...fit-14283.html

i think this proves that majority of traders are loosers,well at least etoro ones
  • #14
  • Feb 17, 2011 2:54pm Feb 17, 2011 2:54pm
I read your post! i can conclude your point as follow:

1- I agree 95% forex trader lose money
2- but i disagree you see in oanda and other brokers sentiments that these ratio belongs to losers, becuase losers has no money at all they lose money in the bigining stages, may be 10% of losers invest over than 200k but they are very less and they lose money very quickly...

thats why only winners in forex can make big deals short or longs....

I know here are those guys (winners) takes in one time quantity (lot) over than 50% losers. They acant buy such quantities same as one Legend of Forex

Conclussion: always respect the sentiments... offcourse sentiments take some time but go positive...

Regard

khizer



Quoting dakoo
I checked it out, it shows the percentage of long and short positions of their customers in each pair. Here is what surprised me.
We've all heard ad nauseasm the 95% traders that lose. So I figured that whatever direction(long or short) is in the majority percentage would be the direction to avoid. WRONG. I discovered that the majority percentage is the direction where it trends.
So to conclude:
1. either the 95% "fact" is not very accurate or
2. despite being in the right direction of the general trend, the majority loses.

Any other ideas?...
Trade what you see, Not what you think.
  • #15
  • Jan 11, 2015 7:26am Jan 11, 2015 7:26am
Quoting dakoo
I checked it out, it shows the percentage of long and short positions of their customers in each pair. Here is what surprised me. We've all heard ad nauseasm the 95% traders that lose. So I figured that whatever direction(long or short) is in the majority percentage would be the direction to avoid. WRONG. I discovered that the majority percentage is the direction where it trends. So to conclude: 1. either the 95% "fact" is not very accurate or 2. despite being in the right direction of the general trend, the majority loses. Any other ideas? P.S...

I did the same stats as you and found the exact opposite.

When price rises, retail shorts, and when price falls retail buys - this is the most obvious feature.

I then looked at the next 50 pip movement after extreme positions where held, an extreme position was a 20% difference between the long and short ratio.

On average there was a higher probability that price would move against the majority of the retail crowd.
  • #16
  • Last Post: Feb 26, 2020 6:42am Feb 26, 2020 6:42am
Do you think only taking sells while this indicator is blue and only doing buys when this indicator is red would have been better than trying both longs and shorts during the same time? I do. Stops may get you and sentiment flips will get you, but when there are long trends, simply using as a filter on top of your own analysis can keep you on the right direction. (FYI this is just an indicator showing FXCM's sentiment/position data, but it's very similar to Oanda's position flows).

Happy trading y'all.
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