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Ridiculous Trading Myths

  • #181
  • Nov 7, 2010 11:41am Nov 7, 2010 11:41am
Haha, please argue why it is NOT a zero sum game.
The nail that sticks out gets hammered back in
  • #182
  • Nov 7, 2010 11:41am Nov 7, 2010 11:41am
Quoting Noloqy
I'm really happy for you that you're able to beat the market, but finding an edge cannot be "easy" for the very simple reason that Forex is a zero sum game, and that you have to pay to participate. On that note, I'm curious how your apprentice is going to perform in the future.
You can find it easy (and apparently you do), but it isn't easy for the general participant, for the reason described above. It's like Usain Bolt saying running 100 meters in under 10 seconds is easy, as he does it consistently.

I guess I'm just a little confused then. I only recently started coming to this forum all that often. I find it very interesting how different people "skin the forex cat". If trading the forex is sooooooo hard, why is everyone doing it. The point is to make money. I know I wouldn't be on here looking for answers or handing out cynicism to everyone that does know what they are doing. Why is everyone here?
  • #183
  • Nov 7, 2010 11:43am Nov 7, 2010 11:43am
Quoting Noloqy
Haha, please argue why it is NOT a zero sum game.

For starters there is the cost of trading, which precludes it from ever being zero sum, secondly the largest part of the volume in FX is non-speculative and thirdly there is no final settlement. That in a nutshell is why FX can never be zero sum.
  • #184
  • Nov 7, 2010 11:49am Nov 7, 2010 11:49am
Quoting Monroe
lol 10 in a row... IMPOSSIBLE!! whuhahahaha!!!

but I agree with what Marv said, it's really about what your system is capable of. what is the reward on wins?

Take it to the max, or go home like a chump. If you really have an edge with anything close to 90% win rate, you're telling me you're going to stick to (what I consider a definite trading myth) 1-2% BS?

1-2% risk with no real edge playing TA patern/indicator probabilities fine... but if you have a real edge things are different aren't they?
Well i learnt my lessons the hard way in a span of last 2.5 years so i wont talk further about 1%-2% or that you can never have 10 losses in a row.

If i have an edge or something that guarantees that the next trade will be a winner no matter what i'd risk 60% of my account on it.... but dont have one
.
  • #185
  • Nov 7, 2010 11:53am Nov 7, 2010 11:53am
Quoting ReaperKK
lol

Personally I believe the 95% of traders don't make it statement is a myth.

I just think 95% of people don't have the patience to become a successful trader.
I actually think this is referring to 95% of ppl who try trading fail.

Until you can make money trading you are not a 'trader' and that precludes 95% of ppl who try.

Traders who have the perseverance and discipline to stick at it can and do make money.
  • #186
  • Nov 7, 2010 11:55am Nov 7, 2010 11:55am
If someone could explain how I can take half my losses I would take half my profits. LOL
  • #187
  • Nov 7, 2010 11:55am Nov 7, 2010 11:55am
Quoting nasir.khan
IMO Market is both Random and Predictable.

Lets say we have a system/method that tells us that if price breaks 100, it will hit 110. This is where market is predictable to some extent, like 70%-95% of the times ( according to our Win ratio).

Now we do not know in what manner price is going to hit 110 and this is where its random.

Will is shoot straight to 110 in a day?

Will it go to 105 than retrace back to 102 and than will hit 108 and than retrace back to 105 and than shoot straight to 110??

Will it go to 109 and than stay there for...
Yep I agree 100%, I would just use the higher timeframes to filter out the noise.
  • #188
  • Nov 7, 2010 11:58am Nov 7, 2010 11:58am
Quoting cloggie
That may be so in your mind, but there are plenty of us that know differently and make money by seeing clarity and opportunities in your chaos.

Think about it if the market was truly chaotic and random then anybody using a coin toss would make the same returns as a trader with 10 years on the floor.

If you truly believe in the randomness of the markets why waste the time trading? Do you think you have more luck then others? Is that why you even attempt trading in your chaotic markets?

If the markets were truly chaotic and random, there would...
I'll second that.
  • #189
  • Nov 7, 2010 11:59am Nov 7, 2010 11:59am
Quoting Marv
It is my belief that one of the first steps a trader should take is to acknowledge and learn how to deal with such predominant randomness in the markets, yet it seems most traders bypass that through ignorant denial.
I dont believe that markets are necessarily random, but what you say makes a great deal of sense. I personally believe its almost impossible to trade profitably without a very clear understanding of the role random chance plays in the distribution of gains and losses.

I'm not even sure that the problem is caused by denial. Im my experience its very rare to see new traders who think logically or rationally, as they're generally more focused on seeking information from more experienced market participants. Whilst this makes perfect sense in other area's in life its not something that's really applicable to trading. The only people willing to help are either equally clueless, of failed traders with a commercial adgenda. As neither of these types of people understand the fundemental rules of the game new traders adopt totally inappropriate belief systems that are very difficult to eliminate, and the longer they associate with other losers, the deeper those beliefs become engrained, they very quickly get to the point where all is lost, and worse still, they infect others with their nonsense.
  • #190
  • Nov 7, 2010 12:02pm Nov 7, 2010 12:02pm
Quoting nasir.khan
Well i learnt my lessons the hard way in a span of last 2.5 years so i wont talk further about 1%-2% or that you can never have 10 losses in a row.

If i have an edge or something that guarantees that the next trade will be a winner no matter what i'd risk 60% of my account on it.... but dont have one
.
fair enough, It really comes down to comfort level and confidence in what you have I guess. I was just saying, if you truly had a edge and a system with that kind of expectancy... it would be different.
  • #191
  • Nov 7, 2010 12:06pm Nov 7, 2010 12:06pm
Quoting brenzaj42
If trading the forex is sooooooo hard, why is everyone doing it.
Same reason cats will chase a string when you dangle it in front of them
  • #192
  • Nov 7, 2010 12:07pm Nov 7, 2010 12:07pm
Quoting cloggie
For starters there is the cost of trading, which precludes it from ever being zero sum...
right so that makes it negative sum.

I like it....
  • #193
  • Nov 7, 2010 12:10pm Nov 7, 2010 12:10pm
Quoting jag1966
Yep I agree 100%, I would just use the higher timeframes to filter out the noise.

That is simply not true and the reason is fundamentals. A market that jumps up the minute a good jobs or manufacturing report comes out is NOT random!

The market ultimately follows the fundamentals. Nothing random about that. Lower time frames are noisier but they are still working off the fundamentals.
  • #194
  • Nov 7, 2010 12:15pm Nov 7, 2010 12:15pm
Quoting hubbahubba
That is simply not true and the reason is fundamentals. A market that jumps up the minute a good jobs or manufacturing report comes out is NOT random!
To me that is just market makers / dealers capitalising on news announcements.

If you were trading a weekly chart you would hardly notice a spike like that.
  • #195
  • Edited 12:30pm Nov 7, 2010 12:15pm | Edited 12:30pm
Quoting ReaperKK
Personally I believe the 95% of traders don't make it statement is a myth.

I just think 95% of people don't have the patience to become a successful trader.
That's just typical wishful thinking. It is neither about their lacking patience or discipline or whatever we want to believe. The reality is least discussed or accepted because it is less appealing to the wannabe dreamy trader or the self-proclaimed guru who wants to sell his teachings.

Let's put it this way:

Scenario 1

Imagine 10 professional blackjack players, each of them managed to have an edge at blackjack. These players will meet at a table and play everyday for the rest of their lives.

The source of their winnings is not each others money, but a multi-billion dollar casino industry, which has virtually unlimited funds. This is not a zero-sum game.

10 out of these 10 players will be consistently profitable.

Scenario 2

Imagine 10 professional poker players. Each of them has been a consistent winner at poker throughout his life, making his living from it. These guys will now meet at a poker table every day to play against each other and no one else for the rest of their lives.

The source of their winnings is of course not some gold mine, but instead each other's money. This is a zero-sum game.

As a result, not all of these guys is going to be consistently profitable.

Now which of these two scenarios applies to trading?
The second of course. Only a small percentage will be consistently profitable.

Keep in mind that, "consistently" implies that these guys will keep growing their capital until they retire or die. Think about it, how can (for example) 5 traders in an imaginary market of 10 traders keep winning and growing their capital to 5, 6, 7, and even 8 figures, while the other 5 traders are losing their small $1k capitals. Where is the money coming from?

So in my opinion, in the real trading market, no matter how good, experienced, patient, disciplined, etc. all market participants may be, only a small percentage such as 5% or less will make money consistently. The rest will either win temporarily, break even, or lose.

Quoting nasir.khan
IMO Market is both Random and Predictable.
Spot on. (though it might seem paradoxical)

What makes this game beatable is the fact that only a VERY small number of market participants move price. As for the rest, all their money can do is perhaps create some noise on the tick level, but it's that small "big boys club" that creates the real price movements.

This is basically why it's better to try to step away from the smaller time frames, so you can bypass the noise.

If every trader, big or small, had the same power to move price, then the whole thing would be 100% chaotic/random.
  • #196
  • Nov 7, 2010 12:15pm Nov 7, 2010 12:15pm
Quoting Noloqy
I'm really happy for you that you're able to beat the market, but finding an edge cannot be "easy" for the very simple reason that Forex is a zero sum game, and that you have to pay to participate. On that note, I'm curious how your apprentice is going to perform in the future.
You can find it easy (and apparently you do), but it isn't easy for the general participant, for the reason described above. It's like Usain Bolt saying running 100 meters in under 10 seconds is easy, as he does it consistently.
Question is what a persons perception is about an Edge?

Is it like an inefficiency in you brokers pricing. at times or something like that.

I mean i heard some people talking about those and exploiting them and making huge amount of money. But those kind of inefficiencies dont stay for a long time. As soon as the market/broker realizes it they correct it and in the mean time u figure out that its gone, you'd already lost most of what you had made from it (now dont tell me u were risking 10% on it or dint expect 10 looses in a row cause it may take some time to find the next one).

Or t your edge is about a price pattern that works out like 90% of the times but it appears only once or twice a month?

Now that's workable and maybe one can risk like 6%-8% on it.

In the end being able to stick to your rules could provide u an edge over many.
.
  • #197
  • Nov 7, 2010 12:18pm Nov 7, 2010 12:18pm
Quoting fxhermit
Yikes, myth hits the fan.

Yes, and everything that I think you are referring to has been removed in the last 12 hours.

And here I am thinking this was an open public forum.

Public yes, open no.
  • #198
  • Nov 7, 2010 12:25pm Nov 7, 2010 12:25pm
Quoting brenzaj42
I guess I'm just a little confused then. I only recently started coming to this forum all that often. I find it very interesting how different people "skin the forex cat". If trading the forex is sooooooo hard, why is everyone doing it. The point is to make money. I know I wouldn't be on here looking for answers or handing out cynicism to everyone that does know what they are doing. Why is everyone here?
If I may be permitted to speculate, and also be brutally candid:

1. Entertainment and possibly some stress relief. It can be fun discussing semantics to pass time while waiting for the next valid setup to occur.

2. Many unprofitable traders outwardly claim that that success is impossible, but inwardly believe otherwise. They cling to the possibility that somebody on a forum will share a trading secret that will become the "aha" moment that turns their trading around. That's possibly a harsh statement, but I suspect that it's true.

3. Even more harshly, folk who aren't profitable proclaim that success is impossible, because attempting to justify themselves in this manner helps soothe their wounded ego. Ego desperately wants to achieve equality with others as a baseline minimum, and if one can't prove that one is right, then equality can be sought by attempting to prove that somebody else is wrong.

Or, oppositely, unsuccessful folk claiming that they're profitable, because any kudos (or even vouches) received, or even merely having others believe that they're profitable, offers some kind of consolation.


The above may seem harsh and cynical, but it never ceases to amaze me how the human ego behaves where success and credibility are on the line. And, for better or worse, humankind regards wealth as the most important measure of success. Forex arguably represents the epitome of entrepreneurship, and hence fuels the ego like nothing else (except possibly sexual prowess and achievement, but boys' locker-room talk is another topic, LOL).

In keeping with the theme of ego:

Myth: that something is universally impossible (and hence a trading myth) because I haven't been able to get it to work profitably for myself.

Myth: my way is the only profitable way to trade, therefore everybody else who posts something opposite must necessarily be wrong.


Anyway, it's my wife who has the masters degree in psychology, so please take my layman's opinions with a pinch of salt. LOL.
  • #199
  • Nov 7, 2010 12:26pm Nov 7, 2010 12:26pm
Quoting cloggie
For starters there is the cost of trading, which precludes it from ever being zero sum, secondly the largest part of the volume in FX is non-speculative and thirdly there is no final settlement. That in a nutshell is why FX can never be zero sum.
Whether there are non-speculative participants or not does not change the zero-sum nature.

There are multiple scopes for analyzing the market. You're right that on a microlevel, costs and settlement can make the market non-zero-sum.

However, from a macro perspective, the market remains zero-sum, as agents do not necessarily incur costs, and non-settlement does not enter the real market.

Brenzaj, I won't argue with you that there are numerous people here at FF that have an edge. However, the number of members that are chasing dreams, and are studying to master the market is probably bigger. Some will give up, some will continue but remain unprofitable, some will crack it. As in my previous post, the point I'm trying to make it is virtually impossible for everyone to have an edge.
The nail that sticks out gets hammered back in
  • #200
  • Edited 12:37pm Nov 7, 2010 12:26pm | Edited 12:37pm
Quoting jag1966
To me that is just market makers / dealers capitalising on news announcements.

If you were trading a weekly chart you would hardly notice a spike like that.
And if that were true all charts would become a straight horizontal line the higher up in time you go. The market is not driven by speculators. It's driven by fundamentals. I used jobs reports and manufacturing reports as an example but there are also interest rate changes which absolutely affect the price and continue to long after the initial announcement.
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