DislikedIf you take a random entry it can be anywhere on that chart and over large sample of trades the probability of reaching any further point is proportional to the distance to that point. Money managment alone cannot give u profitable system.
Ignored
- Joined Oct 2009 | Status: >Apocalypto< for Deputy PM 2020 | 3,686 Posts
Forex Trading for the Savvy Beginner
- Joined May 2011 | Status: Making money 1 pip at a time. | 2,150 Posts
This is the biggest BS you have posted so far. Making totally radnom trades will have 50/50 success rate but at the end your money will be gone due to broker fees.
Here are 4 trades :
Trade 1: -100 pips
Trade 2: +400 pips
Trade 3: +250 pips
Trade 4: -100 pips
What is the success rate? 50%
Did we make money? Yes
How much? +450 pips
The random entry signal described here : http://www.forexfactory.com/showthread.php?p=4819619 works for one reason and one reason only: freely traded markets (like the Forex) are NOT random, they TREND, how many times do we have to repeat that before it goes through your thick head?
If you flip a coin and Head comes up, what is the probability of getting ANOTHER Head? 50%
On the other hand, if the market moves 100 pips in one direction, what is the probability of seeing another 100 pip move in the same direction? Now if you answer 50% then your ignorance is beyond belief!! It is NOT 50%, it is MORE than 50%.
Why?
Because markets trend, they have a tendency to keep doing what they were doing before. Take any Forex chart, count the number of time the market keeps going another 100 pips in the same direction and dare to tell us it is not so!
Back to the random entry system. If you observe its trading rules closely you will notice that they have been designed to capture (and stay with) the trend as long as possible, while quickly closing the losing trades.
Let's take an example.
We all know that the euro went from $0.80 to as high as $1.60. We could have made tons of money trading the euro with this random entry system and here is why.
Let's say we flip a coin, Head we buy and Tail we sell.
The euro is at 0.80 and the coin is showing Tail, so we sell the euro. Since we are trading against the trend this random system will quickly close the trade and we lose let's say 150 pips.
We flip the coin again and this time Head comes up. But wait a minute, now we are trading WITH the trend so the system (due to its trade management rule) is going to stay with that trend for a long, long, long time. This time we have a winning trade and we collect let's say 900 pips.
So yes, we will win "only" 50% of the time, but each time we have a Tail we lose a little (because we are trading against the up trend) and each time we have a Head (a buy signal) we win big, because we are trading with the trend, so at the end we will end up making money.
- Joined Aug 2009 | Status: Reading the tape | 2,231 Posts
This is a very interesting area of enquiry. Do you know of any such studies? If so I would be grateful if you could point me in the direction of the evidence, thank you.
.My understanding (which certainly can be wrong), is that while we know that TRENDS EXIST, there is no mathatical way to prove it. If one could prove they exist, then logically one could prove when they start and when they end.
A simple example from a simple mind:
flip a coin and the odds are 50/50 that the outcome will be heads or tails. Flip a coin 10 times and the last 8 are heads. What is the probability that the next will be heads? 50%. However, because we can observe a trend, we know that "betting" on heads is a better bet than bettting on tails. But the probabilities have not changed.
We know that at some point the outcomes will tend towards the actual probabilites (the Law of Large Numbers). So at some point, we would get more tails than heads to even things out. Yet any one observation independant of an understanding of trend would tell us the probability is always 50/50.
EDIT: I usually don't like gambling references when talking about trading but this one is very interesting. A while back Vegas introduced those displays on the roulette wheels. They found that the money made at those games INCREASED.
Why? Because people would see that the last number was red, for example, and then make bets that the next number would be black. Totally denying the existence of TREND. True, the probabilites never changed, but probabilities don't account for trend.
- Joined Feb 2011 | Status: Probabilities, Not Absolutes | 1,246 Posts
About your previous post, I do not quite agree, brokers have all the tools that allow them to play tricks against the average trader, from time to time, take a look at this video for example:
http://forexsocialmedia.com/home/soc...r+Manager.html
Yes, I have seen this video. Yes I can not deny that the tools are there. Yes there are probably some brokers who do use these tools from time to time.
Look at it from this perspective. If brokers are constantly manipulating the market order for their benefit... Then I guess we are all stupid for trading Forex at anytime.. This implies we can never win.. never...But that is simply not the case.. ( except for Reres .. just kidding Reres
) Now if one chooses to trade with some "mousehouse broker" then I will concede there may ?? be a chance of this happening. But given the videos ( like this one ).. The amount of info contained in forums, its darn hard to keep a secret. An that's what it would have to be, A secret, for this to really be happening on grand scale.
From my own account I have not had these issues. I can only speak from my own experience. Again, I'm not much on conspiracy theories.
If I were to have any of these issues, I have no problem moving my account. I trade both Forex and E mini's.
TSD
About your previous post, I do not quite agree, brokers have all the tools that allow them to play tricks against the average trader, from time to time, take a look at this video for example:
http://forexsocialmedia.com/home/soc...r+Manager.html
In fact it is in their advantage not to cheat, they would lose customers.. and customers brings profit, therefore by cheating they would lose money on the long run...
Same with forex, odds are against youanyway, why would they cheat, specially on smaller accounts (less than 50k) You are going to lose that money most likely anyway..
- Joined Apr 2004 | Status: #slack pricetimeforecast | 1,909 Posts
I am by no means a math geek
My understanding (which certainly can be wrong), is that while we know that TRENDS EXIST, there is no mathatical way to prove it. If one could prove they exist, then logically one could prove when they start and when they end.
A simple example from a simple mind:
flip a coin and the odds are 50/50 that the outcome will be heads or tails. Flip a coin 10 times and the last 8 are heads. What is the probability that the next will be heads? 50%. However, because we can observe a trend, we know that "betting" on...
Again, people are equating the odds of any particular outcome with profitability. They are not the same. Yes, the outcome of a coin flip is 50/50. But it's the payout on the bet that determines profitability in a series of coin flips. A payout of 1:1 means you have a 50% chance of being profitable of a series. A payout of 2:1 means you have 70% chance of being profitable.
Here is the mathematical proof of this.
http://www.forexfactory.com/showthre...20#post4867020
On the other hand, if the market moves 100 pips in one direction, what is the probability of seeing another 100 pip move in the same direction? Now if you answer 50% then your ignorance is beyond belief!! It is NOT 50%, it is MORE than 50%.
Edit: No, sorry. I shouldn't write code at 2am. I found my error, it is 50%.
- Joined May 2011 | Status: Making money 1 pip at a time. | 2,150 Posts
I am by no means a math geek
My understanding (which certainly can be wrong), is that while we know that TRENDS EXIST, there is no mathatical way to prove it.
Take any forex chart and if the market makes a 100 pip move up write the letter X on a piece of paper. If the 100 pip move is down write the letter O. Repeat that until you have 1,000 letters.
Every time you see an X count the number of times another X appears, call the total T1.
Every time you see an O count the number of times another O appears, call the total T2.
You will notice that T1 or T2 exceed 50%, thus proving that the market is not random. Of course some currency pairs (like GBP/USD) trend less than others.
If one could prove they exist, then logically one could prove when they start and when they end.
- Joined Nov 2010 | Status: Pips... or GTFO! | 1,023 Posts
So far this thread looks to me like
"OMG where the F**K is the edge.. I look everywhere and I cannot see..."
wake up and smell the coffee you are the edge.
thats right you been looking everywhere and the answer was you.. your the edge that feeds the elite players.
and when you yourself give up trading don't worry... there will always be a continuing stream of sheep to maintain this edge
"OMG where the F**K is the edge.. I look everywhere and I cannot see..."
wake up and smell the coffee you are the edge.
thats right you been looking everywhere and the answer was you.. your the edge that feeds the elite players.
and when you yourself give up trading don't worry... there will always be a continuing stream of sheep to maintain this edge
I am by no means a math geek
My understanding (which certainly can be wrong), is that while we know that TRENDS EXIST, there is no mathatical way to prove it. If one could prove they exist, then logically one could prove when they start and when they end.
A simple example from a simple mind:
flip a coin and the odds are 50/50 that the outcome will be heads or tails. Flip a coin 10 times and the last 8 are heads. What is the probability that the next will be heads? 50%. However, because we can observe a trend, we know that "betting"...