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An Edge for an Edge (System Development) 110 replies

What do you thing is your edge? 5 replies

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The most simple thing you could ever do. 0 replies

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Attachments: Where is the EDGE in trading? The most important thing in trading!
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Where is the EDGE in trading? The most important thing in trading!

Quoting Mr Breakout
So if backtests have "no meaning" then you wouldn't mind trading a system that generated a 8,500 pip loss during the last 15 years of backtest now would you?
?

Backtest can be used to see if strategy is any good but it doesnt proove anything. Only real time trading does.

Why do you think there are so many EAs out there having nice backtested 10 year equity curve...yet single one of them fail to work for more than few weeks let alone few months?

Its becouse they are based on TA indicators.
Quoting LasVahGoose
Time for the Bin? I think so.
It is intresting to see this topic be reargued again by a fresh crop of forum participants. It seems to be a fun exercise and a good way to fill time, but in the end is it making anybody more money? Probably not. But a lot of damn intresting commentary....

Regards,
  • Post #443
  • Quote
  • Edited at 3:46pm Aug 12, 2011 3:45pm | Edited at 3:46pm
Quoting reres
?

Backtest can be used to see if strategy is any good but it doesnt proove anything. Only real time trading does.

Why do you think there are so many EAs out there having nice backtested 10 year equity curve...yet single one of them fail to work for more than few weeks let alone few months?

Its becouse they are based on TA indicators.
No, it's because they are curve-fitted to have the best equity curve. That is different than having an idea that makes sense, based on experience watching the charts and then backtesting it to see if it worked in the past. Of course you need to forward test it to, but backtesting is extremely useful, and meaningful when done correctly.

Cory
Quoting Cbh123
That is different than having an idea that makes sense, based on experience watching the charts and then backtesting it to see if it worked in the past.
EXACTLY!

And this is something Reres will never understand.
Quoting nubcake
lol. that's just excuses to not be helpful when no help would be given in any circumstance anyway. i don't see the point in continually trying to discourage the OP. if you think he's a muppet then let him be. if not, then move on to a new topic. repeatedly describing how shitty you and others think his thread is only adds pointless noise.... and you all know it. each and every one of you.

if you have a point to prove in relation to trading edges then come up with a way to communicate with the OP in a way that he understands, else why beat a dead...
Pointless noise? Coming from you that is a laugh.

There are a great many people that don't have the drive and determination to realise their full potential without assistance.

What reres and other naysayers and negative nellies actually do is add weight to the foolish notion that trading profitably from home is not actually achieveable BY ANYONE who has enough self belief, guts and the tenacity to succeed.

Some people need encouragement and assistance, I know it works.

I will never give up arguing with people that give up and blame thier failure on everything but themselves.

Take a good hard look at yourselves.
  • Post #446
  • Quote
  • Edited at 5:00pm Aug 12, 2011 4:02pm | Edited at 5:00pm
Quoting reres
Lack of intelligence is displayed by trading with unprooven methods and funny indicators.
This is one of the "stupid indicator mumbo jumbo" methods I use that I believe gives me an edge, because I define an edge as anything that I can use to make a decision about a trade that will ultimately lead to profitability of that trade.

Do I blindly follow this or any other methods I use when I see them? No, you have to take into account what the overall market is doing (news coming out soon, Friday afternoon, higher time frames signal different direction, etc.). But it certainly says to me "Hey!! Look at this...might be some money here for you!!"

This is first time I have attached anything, and it comes up as a .jpeg rather than a .png...so don't know how it will look.
Attached Image (click to enlarge)
Click to Enlarge Name: RSI Divergence 2.jpg Size: 186 KB
Quoting jag1966
There are a great many people that don't have the drive and determination to realise their full potential without assistance.

What reres and other naysayers and negative nellies actually do is add weight to the foolish notion that trading profitably from home is not actually achieveable BY ANYONE who has enough self belief, guts and the tenacity to succeed.

Some people need encouragement and assistance, I know it works.
I think its better to teach people about the stuff that really works and not brainwash them with stuff that doesnt. Why are 90-95% of people loosing money on forex? They trade with ta indicators and dont really understand what moves the market.
Quoting reres
Why are 90-95% of people loosing money on forex?
90% of traders lose because their "system" has no trading edge to begin with.

If you place 3,000 trades with a 3 pip spread you WILL lose 9,000 pips on average if your system has no trading edge, PERIOD.

If you don't understand that simple mathematical fact then you have a serious problem.

Quoting reres
They trade with ta indicators and dont really understand what moves the market.
I just showed you that you can make money with a simple Bollinger Bands system. You can also make money with a simple moving average system (see another 16 years backtest of a moving average cross over system here http://www.forexfactory.com/showthre...51#post4805451) and yet you continue to claim that TA indicators have no predictive power.

Reres, do you know how we call people who constantly deny the evidence and reality? ....
Quoting Mr Breakout
90% of traders lose because their "system" has no trading edge to begin with.
And this is excatly why this thread was opened. So that people can discuss what brings them edge. But anything that is put out needs to be backed up by common sense. Correlations trading is one such example.

Quote
I just showed you that you can make money with a simple Bollinger Bands system.
Yes and NO. You showed it can be done in theory but all u did was copy/paste the data from that book you suggested before. And in the book it says "data is curve-fitted and hopefully it will be optimized in the future". Go read the conclusion on chapter with backtests.

Quote
Reres, do you know how we call people who constantly deny the evidence and reality? ....
Creationist?
Quoting reres
And in the book it says "data is curve-fitted and hopefully it will be optimized in the future". Go read the conclusion on chapter with backtests.


Are you drunk or simply quoting paragraphs out of context? On page 226 the author clearly says : "Optimization and/or re-optimization is NOT the answer to the ever-changing markets"

The whole book is about finding ROBUST trading systems, not optimized garbage.
Ok guys,

I have been trading since 2006 and I have consistency have return 70% annually. I don't look for a jackpot one trade, however I look for the opportunity!.

Everyone has their own system, money management, and style of trading.

Here are the ideas that I have use.

Trade no more than 3 pairs. Reasons? well, the less pairs you trade, the more you understand its behavior, daily pip average, monthly and yearly average.

Great example is the swissie. Look the this week, all people around the world see how powerful its move right. Look how many pips its retrace?

EUR/CHF retrace 1000 pips
CHF/JPY RETRACE 1000 PIPS
others I mean from 400 800 pips retrace.

What I really try is to clarify is LOOK FOR THE OPPORTUNITY. If I don't see the opportunity, I DO NOT TRADE. I don't care even I have to wait 1 day, 1 month or even 1 year. Because there are alway another trade for me.

Time Frame and prive actions: it is the key for your success.

well, very much that's it. Any ideas would be wellcome.

Have a great weekend and happy Trading!!
Quoting Klforexr
I don't care even I have to wait 1 day, 1 month or even 1 year.
Well I think most traders will never have the patience to wait for a trading setup for a full year
Quoting Klforexr
Ok guys,

I have been trading since 2006 and I have consistency have return 70% annually. I don't look for a jackpot one trade, however I look for the opportunity!.

Everyone has their own system, money management, and style of trading.

Here are the ideas that I have use.

Trade no more than 3 pairs. Reasons? well, the less pairs you trade, the more you understand its behavior, daily pip average, monthly and yearly average.

Great example is the swissie. Look the this week, all people around the world see how powerful its move right....
Good stuff....!!! I would go crazy if I only traded 3 pairs....I admire you for that level of discipline. I trade about 16 different pairs.....I have found that every currency pair acts pretty much the same from a technical standpoint. I would trade more pairs, but the more exotic pairs have low liquidity and outrageous spreads. You are correct....there is always a trade somewhere if you can exercise patience; but patience is irrelevant if you don't know what you are waiting for.
Quoting Mr Breakout
Are you drunk or simply quoting paragraphs out of context? On page 226 the author clearly says : "Optimization and/or re-optimization is NOT the answer to the ever-changing markets"

The whole book is about finding ROBUST trading systems, not optimized garbage.
Yes but that data is curve-fitted. Thats what matters here. Curve-fitted data cannot proove anything altho i dont deny there are some ROBUST trading systems which do work on long term.

Quote
Klforexr http://www.forexfactory.com/images/buttons/viewpost.gif
Ok guys,

I have been trading since 2006 and I have consistency have return 70% annually. I don't look for a jackpot one trade, however I look for the opportunity!.

Everyone has their own system, money management, and style of trading.

Here are the ideas that I have use.

Trade no more than 3 pairs. Reasons? well, the less pairs you trade, the more you understand its behavior, daily pip average, monthly and yearly average.


Good post ! Its same with trading anything, the more specialized you are in one field/sector/currency the more sucessfull you get.
Quoting reres
Yes but that data is curve-fitted. .
Oh, now you can curve-fit the data itself, thanks, I did not know that
Quoting Mr Breakout
Oh, now you can curve-fit the data itself, thanks, I did not know that
wiki: Red herring is an idiomatic expression referring to the rhetorical or literary tactic of diverting attention away from an item of significance. For example, in mystery fiction, where the identity of a criminal is being sought, an innocent party may be purposefully cast in a guilty light by the author through the employment of deceptive clues, false emphasis, 'loaded' words or other descriptive tricks of the trade. The reader's suspicions are thus misdirected, allowing the true culprit to go (temporarily at least) undetected. A false protagonist is another example of a red herring.


back to the point: your copy-pasted data fails to proove anything.
Quoting reres
the more specialized you are in one field/sector/currency the more sucessfull you get.
Well that's another total myth!

On the contrary, trading different markets IS the key to success. Diversification will smooth your equity curve and reduce your drawdowns. Look at the previous backtests for example, some markets are always losing while other contracts are always winning.

I personally follow 25 currency pairs at the same time, so if I lose 35 pips on NZD/CHF for example, EUR/CAD will bail me out and bring me 135 pips profit.
Quoting reres

back to the point: your copy-pasted data fails to proove anything.
It only proves one thing : you are a stubborn fool.

Monday I will show you some backtests on the 1min time frame, since you foolishly claim that TA does not work on smaller time frames. I will even give you the Omega Trade Station Code.

And then, hopefully, you will stop talking nonsense about things that are obviously beyond your limited knowledge of technical analysis.
Quoting Mr Breakout
Well that's another total myth!
Wrong. Its only a myth to those like you that only trade specific setups and dont really care what market they are trading. Being specialized for one market or one commodity does bring you some benefit. You can still diversify in a sector.
Quoting reres
Lets say that we solve all the problems with traders psyhology and money managment. Lets say money managment is perfect and the trader is trading like a robot. Knowing that trading is just a probability game and not having problems accepting losses.

Than to make a profit he still needs to have an edge. Just like casino has an edge and it doesnt care if someone wins a jackpot once in a while.

So where excatly is an edge in trading??
“What will give me the edge is how I capitalize on trading my winners, how I make money with what the market gives me, and how I keep what I win.” ~ N. Concorde-Cushing

If someone isn't making money with your assumed robot like trading and perfect money management, then that said money management probably isn't perfect. Which actually boils down to either risk/reward, position sizing, and add-on strategies.

Let's prove this mathematically. For our sakes let's keep it simple. 2% of the account at risk on any given trade because that seems to be everybody's favorite. 1 entry per trade no add-ons.

Even if the odds of any given trade being a winner are 50%, the difference is that with trading, profitability over time is not only based on wins vs losses, but heavily on risk/reward. That is the edge and an edge the casinos try to minimize. Such as adding '0' to the roulette wheel and kicking blackjack players that are caught counting cards. (smart counters don't get kicked out because they know how to bet not to get caught.)

Now the question of accuracy. The oft quoted maxim is that you only need to be correct more than 50% of the time to eventually make money over the long term. The issue there is that it's assuming a 50% outcome is the determinate of profit which it isn't unless you are only making a single trade. The primary determinate of profit is how big the avg. win is to the avg. loss in the series. (Again, the assumption being a series of trades and not just a single event.)

Let's do the math to prove this point:

Accuracy = Avg. Loss/(Avg. Win + Avg. Loss)

I personally only look for trades where I'm getting at least r/r of 2:1. Therefore:

1/(2+1) = 33% Accuracy required to breakeven. So anything over 33% means I'm profitable over time.

With a set of rules and trading plan and the assumed robot type trading, how hard would it be to come up with something that is at least 33.1% accurate? Hell, you could probably just come up with a method to buy the open every day and bat .500 over a decent period of time.

Now if instead of automatically taking profit once a trade hits 2:1 and we raise stops (in a logical manner) and let profit run? Over time our accuracy rate required is even less to remain profitable in that given time period. Or how about adding on trades using profit accumulated?

Of course a huge variable is distribution of wins vs losses. But as stated above, limiting risk to 2% on any single trade should be sufficient to absorb quite a few losses. I'm too lazy to do the math on that, but it's not hard figure out either. Search the forum for risk calculator or profit spreadsheet and I"m sure there's plenty of topics with attached files out there.

But of course this gets lost on 90%-95% of traders and that's ok. It provides liquidity to the 5%-10% that do understand and implement.

Seriously, read the Schwager Wizards books. I swear it's a broken record story after story. "I worked the floor for years as a runner, went live on my own, blew out a few times, learned that money and trade management are the keys, and now I'm successful".
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