Strategies that don't predict future price | Page 2 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Why it is possible to predict price movement? 1,353 replies

Which indicator has the highest probability to predict price 126 replies

How do forex traders predict price? 101 replies

Using future orderflow, to predict spot prices 16 replies

Consumer Price Index - Can you predict the direction? 66 replies

Strategies that don't predict future price

  • #21
  • Aug 24, 2011 3:13pm Aug 24, 2011 3:13pm
Quoting Razzle
This has the potental to be an interesting thread. You have to start somewhere, so lets try to define what options you have to get the ball rolling ?

You could choose a direction at random, but then you have to think about when you make that choice (e.g pick a random direction at a particular time of day, or pick a random direction at a random time of day, or pick a random direction when "some" market behaviour occurs (e.g. a particular price level is reached, or a randomly selected level is reached, or TA or price action signal occurs)...
Yes I agree...lets get this ball rolling....we are on the right track I think with random direction at a time of day...but that can be complex...patterns could come into play with placing a stop somewhere within the pattern...a certain part of the pattern?
I know that ultimately you have to pick a price direction...but instead of focusing on the price direction we focus on points other then price direction that could materialize into a good strategy. If you do incorporate a direciton bias then great.
Don't be fooled by randomness
  • #22
  • Aug 24, 2011 3:45pm Aug 24, 2011 3:45pm
Quoting Razzle

Alternatively you open a buy and a sell simultaneously, and manage both positions. The same issues regarding WHEN still apply.
That's the funny thing Razza cause as soon as you do this you could have alternatively opened a trade in one direction on a cross pair.

Well if I were going to undertake a strategy like this the only thing I'd wanna know is that the market was going to move BIG. Because if I'm right I can be right BIG but if I'm wrong I can jump out SMALL. So, I would be looking at large volume accumulation areas for starters
Time hides Nothing
  • #23
  • Aug 24, 2011 3:47pm Aug 24, 2011 3:47pm
Ever hear of TREND FOLLOWING No predictions there just reacting to price and risk management.
  • #24
  • Aug 24, 2011 3:48pm Aug 24, 2011 3:48pm
Quoting orderphlow
Sorry for my ignorance, but I'm a little clueless as to how a strategy can be built without factoring in the prediction of price movement.

I'm interested in seeing the ideas that might flow in though..

Cheers!
Not prediction..... probability......
  • #25
  • Aug 24, 2011 4:37pm Aug 24, 2011 4:37pm
Quoting CindyXXXX
That's the funny thing Razza cause as soon as you do this you could have alternatively opened a trade in one direction on a cross pair.
Agreed, you can only be net long, net short or flat and as such you can synthesise any type of hedged trade using purely uni directional trades (and pay considerably less spread).
  • #26
  • Aug 24, 2011 4:54pm Aug 24, 2011 4:54pm
Quoting Razzle
Agreed, you can only be net long, net short or flat and as such you can synthesise any type of hedged trade using purely uni directional trades (and pay considerably less spread).
Ah I see, that is a point. Also true what you said as soon as you go "random" you will start adding non random things to improve your chances and thus start trying to predict price !
Time hides Nothing
  • #27
  • Aug 24, 2011 5:11pm Aug 24, 2011 5:11pm
No not necessarily. This is what I am trying to develop, strategies to harness randomness, without the focus of a direction, but a focus on protection. Someone mentioned that following a trend...very true but please develop a strategy that doesn't try and predict the resumption of the trend but maybe trying to develop a strategy that focuses on an entry strategy...
Don't be fooled by randomness
  • #28
  • Aug 24, 2011 5:13pm Aug 24, 2011 5:13pm
Quoting frothy
No not necessarily. This is what I am trying to develop, strategies to harness randomness, without the focus of a direction, but a focus on protection. Someone mentioned that following a trend...very true but please develop a strategy that doesn't try and predict the resumption of the trend but maybe trying to develop a strategy that focuses on an entry strategy...
But it's kinda backwards if you think about it becasue you want an end result of profitability (your equity curve in an uptrend) obviously but you want to achieve this by pure randomness. It kinda makes no sense.

2 questions:

1) How do you take advantage of randomness when the odds are less than 50/50 (against you)?

2) Why would you chose to do this when the market is not random, you're charts may look it but price moves for very specific reasons that you can take advantage off. Why on earth would you chose to ignore this?

I'll also add that money management is only beneficial if you already have some sort of price predicting skills in place. On it's own it's just a slower way to go broke
Time hides Nothing
  • #29
  • Aug 24, 2011 5:24pm Aug 24, 2011 5:24pm
aOk, lets say I see a pattern that is potentially a double bottom forming. Now I have no idea if the bottom is going to fall thru or go higher...if I decide to not worry about price direction but focus my attention on my stops and entry..wether long or short...where should I put my stop? How man pips should I risk for pips loss, what candles should I look for? All the while not focusing on price direction. All I am saying is, every pattern u see or candle u see it is not 100 percent predictable...so...developing a strategy that can still
Don't be fooled by randomness
  • #30
  • Aug 24, 2011 5:47pm Aug 24, 2011 5:47pm
Quoting tradestar1
Not prediction..... probability......
It's both. There are certain probabilities that your predictions will pan out or not.

I've responded to quite a few posts here regarding prediction, and whether its part of a good trading strategy or not. Sometimes it's traders trying to distance themselves from the notion of being market 'predictors' and sometimes it just comes down to semantics.

But even in trend trading or following, the minute you place your trade, you are predicting the market to go up or down (whichever way you are following) - for whatever reason, as logical, or illogical as it may be.

Even in the OP idea of focusing on the stops, by placing a stop, you are predicting the market to move away from your stop. Even if you would say, "I don't even care where price goes", you are still, at some level making a prediction. You will never be able to get away without predicting something. And that is not a bad thing!! Read on..

Look at the markets like this: Say you are a company that needs to transact in US dollars, but you are Canadian. So you have CAD, but in 3 months time, you have a bill to pay to your suppliers. What do you do? Forward contract? Spot transaction? Option? They will all work, depending on your requirements, but where do you transact?

Well you might ask your private broker or bank what a good level might be. What do you think the bank or broker would say? "Oh uhh, yea, I'm not into making predictions, but I will however, tell you where to get out if your ass gets burned!" Not really the best thing to say to a potential client. Alternatively the broker or bank might use prior S/R levels or pivots to show where the highest probabilities are. That, is a prediction. One that is made over and over for various commercial interests around the world. They can't just sit on their hands and wait for a transaction like a retail trader. To FX traders, "this is life! This is what makes the world go round, and I'm targeting this R level to break to make all my money!!"

To a commercial interest, it is a part of business, and they will transact given the best probable level. It doesn't always work out, and sometimes they could have transacted at a better level. But that is not the core of their business. They need to buy and sell currencies as a consequence of doing international business.

If you start to think like a broker, or bank, that does business with commercial interests, you will find that the levels where to place stops and entries gets a little more clear.

So if you are a retail trader, and want to get away from predicting the markets, remember, that you can't. Predictions are at the heart of any strategy. What makes the probability of any prediction increase, is taking note of what I mentioned above about commercial interests. Combine that with some insight in the next two quotes taken from prior posts, and you might get a clearer idea about why market prediction may not be that tough at all.

"The problem is that at some point when designing such a strategy you'll realize that rather significant performance improvements can be achieved by applying a trend bias, and of course that is going to require the determination of price direction (and possibly even prediction of future direction)"

"2) Why would you choose to do this when the market is not random, you're charts may look it but price moves for very specific reasons that you can take advantage of. Why on earth would you choose to ignore this?"

Cheers!
  • #31
  • Aug 24, 2011 6:46pm Aug 24, 2011 6:46pm
Quoting frothy
I didnt predict where the nzd/usd was going...i just thought about my stop. Now mind you this isnt really a good strategy as there was nothing to it. But I did have a tight stop because I felt that the candles were tight....based on this strategy I didnt predict any future price
how about this:

Keep creating price predictions (each with a different reason) from a set chart area, each prediction with less of a chance of success. When success rate drops to zero or close to it, you're not predicting price. That's where you put the stop.
  • #32
  • Aug 24, 2011 7:02pm Aug 24, 2011 7:02pm
Quoting ha-pattern
how about this:

Keep creating price predictions (each with a different reason) from a set chart area, each prediction with less of a chance of success. When success rate drops to zero or close to it, you're not predicting price. That's where you put the stop.
Ok now we are talking....this is good. Can we apply this to an indicator? What sort of indicator out there can be applied to this concept.
Don't be fooled by randomness
  • #33
  • Aug 24, 2011 8:43pm Aug 24, 2011 8:43pm
i like this thread because it is closer to the truth than most threads, predicting price gets you screwed, but there is always a prediction aspect to it, or a bias according to observations.

so predict with out predicting, a strategy that focuses on flexibility and the randomness of the market. but prediction always plays a role, when not predicting. so there is the conundrum yet i will attempt.

information gathering:

looking at current events, market sentiment, usually Asia precedes New York stock exchange and its great clue for market sentiment. Usually advance in stocks will mean cash converted into equities, and people appetite for risk.
so watch for movement in risk currencies with HIGH YIELDS, which brings about the question of interest rates among central banks.
where would you park millions if you had them? is a good question to ask
treasury note yields also give you an idea of whether The dollar will move up or down.

the dollar is reserve currency so EVERY CURRENCY is measured VS the USD.
so if you are predicting price it should be the dollar. although sometimes the dollar rule breaks according to current events of the country of the currency you want to trade. so keep an eye on that.

for dollar measuring oil, gold, commodities are a good indicator.

then look at the 6 majors and identify, direction and market form.

THE STRATEGY:
the Vega- looking at a daily chart with a 20 or 22 setting Bollinger Band, will give you a mid SMA= indicating 20 or 22 trading days due to (5d)(4w)=20 or (5.5d)(4w)= 22 (d for days w for weeks)
this tries to observe volatility of the market for the past month

momentum: looking at P.A not only for patterns and formations but also for momentum, a candle gives you a range, big candles = big range and speed of price movement, small candle = diminishing range and slowing of price movement. color of candle signals pressure either (+) or (-), understand that price behavior moves in A,L,C= Acceleration, Loss of momentum Correction.

plott the upper and lower band of a daily BB on an hourly to know the volatility, and take a 1hr chart with TR, (true range) High Low Deliniations, to see the ranges and see the daily candles on the screen in real time, plot the open price for reference anything below it becomes a red candle anything above it is a blue candle

now take a 5 minute or 1 minute chart to see market in the now, and trade off that chart. by this time should know

1 . volatility
2 Range
3 market form
4 directional bias

now make a decision according to all the information you gathered and either buy or sell, but understand that is just a reference point now, the market will continue to move either in the money or out of the money. now you observe.

if you are right you buy more
if you are wrong you could hold if you have not yet being proved wrong, as you know range and volatility
or you average down on extremes to get out of the position at b/e calculating pips against you and lots it would take to b/e and pips it would take to b/e

or simply liquidate if your bias was wrong and re assess,

i recommend a scale in strategy as to not lose to much if wrong and continue to press if right to maximize profit
AVT INVENIAM VIAM AVT FACIAM
  • #34
  • Aug 24, 2011 8:56pm Aug 24, 2011 8:56pm
Quoting the redlion
i like this thread because it is closer to the truth than most threads, predicting price gets you screwed, but there is always a prediction aspect to it, or a bias according to observations.

so predict with out predicting, a strategy that focuses on flexibility and the randomness of the market. but prediction always plays a role, when not predicting. so there is the conundrum yet i will attempt.

information gathering:

looking at current events, market sentiment, usually Asia precedes New York stock exchange and its great clue for market sentiment....
Someone mentioned semantics earlier and I think we have just reached that void. What you outlined above is a trading method and you are predicting price. Plain and simple. You could copy and paste that into the trading systems forum and it won't get moved.

Saying "oh well if price moves against me I will close/average/ wait and if price goes with me I will add" is not "not predicting price", it's just managing the risk of your trade.

All due respect.
Time hides Nothing
  • #35
  • Aug 24, 2011 9:02pm Aug 24, 2011 9:02pm
i see.

you have a point, but it is truly impossible to not predict because either you
buy or you sell.

so a bias has to exist
AVT INVENIAM VIAM AVT FACIAM
  • #36
  • Aug 24, 2011 9:03pm Aug 24, 2011 9:03pm
Quoting the redlion
i see.

you have a point, but it is truly impossible to not predict because either you
buy or you sell.

so a bias has to exist
My point exactly and flipping a coin to choose just won't cut it in the real world
Time hides Nothing
  • #37
  • Aug 24, 2011 9:07pm Aug 24, 2011 9:07pm
Quoting the redlion
i like this thread because it is closer to the truth than most threads, predicting price gets you screwed, but there is always a prediction aspect to it, or a bias according to observations.

so predict with out predicting, a strategy that focuses on flexibility and the randomness of the market. but prediction always plays a role, when not predicting. so there is the conundrum yet i will attempt.

information gathering:

looking at current events, market sentiment, usually Asia precedes New York stock exchange and its great clue for market sentiment....
Yes I like this...this is a good post. You nailed it perfectly, a conundrum! This seems like a good strategy, you mentioned volatility, ranging, market form and of course directional bias. I totally admit there has to be some sort of directional bias but not a prediction. So I think with this post we are on the right track to building a good strategy. You mentioned volatility, which does not predict, but yet informs. A range gives a potential boundary and candles inform of market speed, which is really important. Building a strategy that incorporates market speed, volatility and candlestick formations combined with fundamental data could be good.
Don't be fooled by randomness
  • #38
  • Aug 24, 2011 9:08pm Aug 24, 2011 9:08pm
I suggest looking into selling options strangles if you are seriously interested in trading without directional bias. You make money whether the price goes up, down or ranges - but you still have to predict the range that the price won't break out of.
  • #39
  • Aug 24, 2011 9:11pm Aug 24, 2011 9:11pm
Quoting frothy
Yes I like this...this is a good post. You nailed it perfectly, a conundrum! .
A conundrum alright. I give up
Time hides Nothing
  • #40
  • Aug 24, 2011 9:11pm Aug 24, 2011 9:11pm
ya but the point is not to predict price.....I do understand you have to pick a direction but your not ultimately predicting a price, your assuming direction from what the strategy tells you. Can you work around this? I think you can. Somewhat similiar to a stock you see value in a stock doesnt mean its going to go up, it could get cheaper..but your specifically investing like warren buffet and buying the stock on its value. Can we achieve a similar basis with forex? I think we can....redlion had a good couple of points...volatility is not price prediction! neither is a candlestick.
Don't be fooled by randomness
0 traders viewing now