Luck or probability? | Forex Factory

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Luck or probability?

  • #1
  • First Post: Jul 3, 2011 2:04am Jul 3, 2011 2:04am
I'd like to point out a few things and share some of my thoughts.

i haven't contributed much to FF but i have been reading and checking up on the news before i trade, just little things that can increase my "luck".

sharing is caring, so let's begin/fast forward. when i came up with my trading plan the chances of the market going my way is 73-75% chance. i've tried to back test/forward test over and over and over again but i could never get it past 75%. but thats alright. 75% is good right? it's better than flipping a coin.

(so i feel confident enough, saved up for a couple of weeks, managed my spending budget to $340 a month, which is nothing because australia is so expensive but i was pretty sure that once i saved up enough i'd be able to make heaps of money blah blah)

created a mini account and started trading 10k ($1~ per pip) i decided to write down my feelings because everyones always going on about how trading live is so different and all that crap. first couple of trades i won, then i realised something.

i lost twice and i was in negative for the day.. then i would win a couple more times and lose once or twice and id lose most of what i made so it was very very very slow.

so after a couple of weeks i managed to work out the perfect exit for my trades, gave me a better advantage. i worked this out on a weekend. so i was fairly excited to trade the next week. week begins.. trade a couple here and there. 1 or 2 losses brought my profits down.

so i've been constantly trying to workout how to manage my money.. 2% of my funds and all that.

THEN i realized something.. which i cant believe i didnt work out before, i felt so stupid.

if my chances of winning at 72-75% and i know exactly when to exit, then i should take the trades that offer the highest win. i know it sounds stupid but my losses were always catching up.

so to conclude my story, i just wanted to say that no matter how good your trading system is, you can never win with bad money management, and this has been talking about all the time and i finally understand the importance of it.

There is no difference between demo trading and live trading, when you are ready then you are ready.. thats it.

if anyone else has something they have noticed. please share, we can never learn too much.

also, correct me if im wrong but i don't think you need to be a rock to trade, u cant be completely emotionless.. you should not let your emotions determine when and how to enter a trade. i get happy and angry at times.. like a few nights ago i entered a trade hit my profit target. i turned my head around to stretch.. turned back and news occured.. 5 more seconds and i couldve had an extra $150 shit happens

goodluck
  • #2
  • Jul 3, 2011 3:19am Jul 3, 2011 3:19am
Quoting ishii1
I'd like to point out a few things and share some of my thoughts.

i haven't contributed much to FF but i have been reading and checking up on the news before i trade, just little things that can increase my "luck".

sharing is caring, so let's begin/fast forward. when i came up with my trading plan the chances of the market going my way is 73-75% chance. i've tried to back test/forward test over and over and over again but i could never get it past 75%. but thats alright. 75% is good right? it's better than flipping a coin.

(so i feel confident...
You are right about money management, it is crucial to becoming successful at this game(or any other business).

I would just like to point out tho that, just because your 'system' has a 75% hit rate, doesn't mean it is a winning system. You also need to take into account the risk/reward ratio and the max draw down count.

If your losses were wiping out your profits then the R:R or DD is not acceptable for your system. Just trading the trades that offer the highest win may not overcome your problem. While testing any system we should be ensuring that the win rate, R:R and DD will yield a profit. It may be that a few tweaks of the system might reduce the win rate to 60% but the increase in R:R and decrease in DD means that you actually end up with more profits in the bank.

Just a few thoughts.
  • #3
  • Jul 3, 2011 6:01am Jul 3, 2011 6:01am
Quoting Forexable
You are right about money management, it is crucial to becoming successful at this game(or any other business).

I would just like to point out tho that, just because your 'system' has a 75% hit rate, doesn't mean it is a winning system. You also need to take into account the risk/reward ratio and the max draw down count.

If your losses were wiping out your profits then the R:R or DD is not acceptable for your system. Just trading the trades that offer the highest win may not overcome your problem. While testing any system we should be ensuring...
good post
  • #4
  • Jul 3, 2011 6:44am Jul 3, 2011 6:44am
Quoting Forexable
You are right about money management, it is crucial to becoming successful at this game(or any other business).

I would just like to point out tho that, just because your 'system' has a 75% hit rate, doesn't mean it is a winning system. You also need to take into account the risk/reward ratio and the max draw down count.

If your losses were wiping out your profits then the R:R or DD is not acceptable for your system. Just trading the trades that offer the highest win may not overcome your problem. While testing any system we should be...
thats exactly what i was saying, at first i thought 75% is really good. what i'm trying to say was it worked out better that i was taking the trades that offered more (same trading system). it's not tweaked. as i said i can measure how much i can make, so taking the trade that offers the more would be logical. i was just shocked that i didnt realise this for ages.
  • #5
  • Jul 3, 2011 6:47am Jul 3, 2011 6:47am
Quoting ishii1
thats exactly what i was saying, at first i thought 75% is really good. what i'm trying to say was it worked out better that i was taking the trades that offered more (same trading system). it's not tweaked. as i said i can measure how much i can make, so taking the trade that offers the more would be logical. i was just shocked that i didnt realise this for ages.
normally trades with higher R:R will lower your win-rate. So, I would test that out before you jump to conclusions, cause it might be that your losses still eat up your profits, if you win-rate drops.
  • #6
  • Edited 7:31am Jul 3, 2011 7:19am | Edited 7:31am
Yep it sucks when you exit a profitable set up, only to see it move more in your favor after you exit. I just put that experience on the "lessons learned" shelf and try to capitalize on the same set up the next time. I rationalize it by constantly reminding myself that "the markets are constantly moving"...it's not as if folks stop trading after I exit my position......lol.

I enjoy systems with a high winning percentage, but if you lack discipline in certain situations; or if you practice bad money management or have no money management system at all; your losers will crush you far greater than any of your many wins.
  • #7
  • Jul 3, 2011 7:57am Jul 3, 2011 7:57am
Quoting Troikaone1
Yep it sucks when you exit a profitable set up, only to see it move more in your favor after you exit. I just put that experience on the "lessons learned" shelf and try to capitalize on the same set up the next time. I rationalize it by constantly reminding myself that "the markets are constantly moving"...it's not as if folks stop trading after I exit my position......lol.

I enjoy systems with a high winning percentage, but if you lack discipline in certain situations; or if you practice bad money management or have no money management...
yep 100%. after all that it comes down to the type of person you are. i tried to teach my friend with a $1,000 mini account. after losing a few he decided to take his money out.
  • #8
  • Jul 3, 2011 8:05am Jul 3, 2011 8:05am
Quoting ishii1
yep 100%. after all that it comes down to the type of person you are. i tried to teach my friend with a $1,000 mini account. after losing a few he decided to take his money out.
Just think.....he would have figured this thing out had he only put in another 30,000 hours of screen time!!!!
  • #9
  • Jul 3, 2011 8:42am Jul 3, 2011 8:42am
The Consistently Positive Balance is not driven by lucky factor nor probability.

Traders must have a solid trading system, good money management and psychological aspect. They all are not built just at a glance.

You need build your own trading system based on your own experiences, and so your mm and psychological aspect. Although there's a professional trader comes to you and teach his discovery, it still depends on your own comprehension to absorb his knowledge. And most of all are built by his own experiences.

Get a long trading journey with a solid research to develop your own system, mm and psychological aspect. This is a 10,000 hours rule.

There is 260 trading days in a year. If you spend 9 hours of trading research a day, at least you must have 4.27 years of trading experiences to be a professional trader.

You must know how an indicator works at a time and in another time it doesn't work. Why there's traders throw away their indicators, and then just use their own eyes as the most valid indicator. Why they so close their own ears from news.

As long as I know, most of trading forum members just teach you how to be losers.
  • #10
  • Jul 3, 2011 9:07am Jul 3, 2011 9:07am
Quoting 100m
The Consistently Positive Balance is not driven by lucky factor nor probability.
Very well said. The only thing I would like further clarification on is the notion that probability does not matter. When I trade, I trade with the knowledge that not every profit target is going to be met (i.e. trendline support/resistance). There are times when trendline support/resistance will be met and there are times when it will not be met.....it is a game of probabilities. I have seen profitable trades miss an assumed target by 3 pips and roar back against me for a loss....it is those experiences that forced me into thinking in terms of probabilities. In other words, I am only 90% sure that this target will be reached, so I must trade accordingly. What say you?
  • #11
  • Jul 3, 2011 9:22am Jul 3, 2011 9:22am
Quoting 100m
The Consistently Positive Balance is not driven by lucky factor nor probability.

Traders must have a solid trading system, good money management and psychological aspect. They all are not built just at a glance.

You need build your own trading system based on your own experiences, and so your mm and psychological aspect. Although there's a professional trader comes to you and teach his discovery, it still depends on your own comprehension to absorb his knowledge. And most of all are built by his own experiences.

Get a long trading journey...
i agree with you 100% no one can give/teach you experience (if that's worded right), it's up to you to gain the experience. it's good to share your experience on the forum despite what others have to say.

however i feel that sometimes luck plays a part in the market, whether it's considered lucky or not. for example big news happening elsewhere.

i never said i couldn't trade, everyone just assumed that's what i meant even though i was trying to share how i overcame a problem which i should have realised a long time ago. trying to say that even with a very high probability trading system i still couldn't do it.

what helped me alot was to write down a little journal with consisted of how much made/lost, the time, the pair, some notes, etc.
  • #12
  • Jul 3, 2011 9:23am Jul 3, 2011 9:23am
You can't trade such as coin tossing. Although you have a good mm, you can't make a consistently profit.

When you use SR, have you understand why you use them?

Will the market think he must obey your SR line?



Quoting Troikaone1
Very well said. The only thing I would like further clarification on is the notion that probability does not matter. When I trade, I trade with the knowledge that not every profit target is going to be met (i.e. trendline support/resistance). There are times when trendline support/resistance will be met and there are times when it will not be met.....it is a game of probabilities. I have seen profitable trades miss an assumed target by 3 pips and roar back against me for a loss....it is those experiences that forced me into thinking in terms...
  • #13
  • Jul 3, 2011 9:28am Jul 3, 2011 9:28am
Quoting Troikaone1
Very well said. The only thing I would like further clarification on is the notion that probability does not matter. When I trade, I trade with the knowledge that not every profit target is going to be met (i.e. trendline support/resistance). There are times when trendline support/resistance will be met and there are times when it will not be met.....it is a game of probabilities. I have seen profitable trades miss an assumed target by 3 pips and roar back against me for a loss....it is those experiences that forced me into thinking in terms...
thats why sometimes its just unlucky, but if you are consistant with profits, it will always be ahead

might i also add that saying, a cookie can crumble in a million different ways. trendline support and resistance aren't the only way to exit!
  • #14
  • Last Post: Jul 3, 2011 9:47am Jul 3, 2011 9:47am
Quote
also, correct me if im wrong but i don't think you need to be a rock to trade, u cant be completely emotionless.. you should not let your emotions determine when and how to enter a trade. i get happy and angry at times.. like a few nights ago i entered a trade hit my profit target. i turned my head around to stretch.. turned back and news occured.. 5 more seconds and i couldve had an extra $150 shit happens
True. Perfection is not possible in forex. Sometimes you get angry on loss and sometimes you r angry when you cannot make good profit. There is always a "could be better" feeling.
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