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Strategies that don't predict future price

  • #41
  • Aug 24, 2011 9:46pm Aug 24, 2011 9:46pm
What I am going to start now is gathering ideas from posters on this concept and if we can try and put together a strategy (s) that limit price prediction and if we can zero price prediction. I will take some from redlion's post regarding volatility and market structure and go dfrom there. Since volatility does not predict price or direction it just tells us what it implies. I am determined to build this...so god help me..lol.
Don't be fooled by randomness
  • #42
  • Aug 24, 2011 9:50pm Aug 24, 2011 9:50pm
Quoting frothy
What I am going to start now is gathering ideas from posters on this concept and if we can try and put together a strategy (s) that limit price prediction and if we can zero price prediction. I will take some from redlion's post regarding volatility and market structure and go dfrom there. Since volatility does not predict price or direction it just tells us what it implies. I am determined to build this...so god help me..lol.
Seems a bit over complicated to me, but good luck!
  • #43
  • Aug 24, 2011 9:59pm Aug 24, 2011 9:59pm
Quoting frothy
ya but the point is not to predict price.....

Somewhat similiar to a stock you see value in
It's a good thread here, guys.

My 2 cents:

I basically look at what value the market is placing on a price range. Then, I just trade accordingly. For example: If the market starts selling off a level, or it sells off of it on a retest - then I sell it, too. That level is a sell level until the market demonstrates that it's willing to buy it. In other words, until it places greater value on it. The market rises through price levels that traders want and sinks through levels that it considers overvalued. Simple really - in principle. LOL! Making consistent money in markets that are forever in a state of flux? Another story!

Anyway, that's how I do it. Like anyone gives a rat's ass. LOL! But, I do feel that working with the valuation on price levels has merit. I got my POV from Stiedlmayer's work, as some of you guys know.

That's it for me. Back to Picture Tennis.



P.S. No, I'm not posting a chart. If what I'm saying isn't clear then you should really just quit.
  • #44
  • Aug 24, 2011 10:29pm Aug 24, 2011 10:29pm
Purchasing or shorting discounted instruments based on other's placement of stops to enter market. No prediction, just great entries.

ie; trend trading w/ limit orders when a counter trend occurs to stop out 'system's participants' like round numbers, 3*ATR(5) trailing stops, ect ect
  • #45
  • Aug 24, 2011 10:32pm Aug 24, 2011 10:32pm
Quoting FXSurfer
It's a good thread here, guys.

My 2 cents:

I basically look at what value the market is placing on a price range. Then, I just trade accordingly. For example: If the market starts selling off a level, or it sells off of it on a retest - then I sell it, too. That level is a sell level until the market demonstrates that it's willing to buy it. In other words, until it places greater value on it. The market rises through price levels that traders want and sinks through levels that it considers overvalued. Simple really - in principle. LOL!...
"Exchanges are search engines." Harris fr. Trading and Exchanges

One of the most useful books on trading I've ever bought.
  • #46
  • Aug 25, 2011 3:58am Aug 25, 2011 3:58am
Quoting orderphlow
"Exchanges are search engines." Harris fr. Trading and Exchanges

One of the most useful books on trading I've ever bought.
I'd go so far as to say one of the only useful books on trading that I own. I have a few. All a bunch of TA garbage re-hashed ad infinitum. Oh yeah, lots of trader war stories, too.
  • #47
  • Aug 25, 2011 5:24am Aug 25, 2011 5:24am
Frothy,

This is a link to an old direction-less grid strategy, which may fit into your criteria.

http://www.forex-tsd.com/commercial-...5-per-day.html

It relies on repeated small take profits and hedging when it starts trending.
  • #48
  • Edited 6:48am Aug 25, 2011 6:16am | Edited 6:48am
Quoting walb99
the best not predicting method was developed by Nicolas Darvas

http://www.amazon.com/How-Made-000-S...4269856&sr=8-3
Nicolas Darvas had a system like any other and hate to break it to you but yes he was predicting price as well with his Box Method. He looked for undervalued stocks and watched high volumes push price into the next "box" and simply kept adding when he was right.
Time hides Nothing
  • #49
  • Aug 25, 2011 8:15am Aug 25, 2011 8:15am
Quoting frothy
I disagree, I think that a good strategy is built by not predicting a price or direction but yet placing an appropriate stop. So instead of looking at where the market will go, its suggesting where the market isnt going to go, and therefor placing a stop in that area. Once the price has moved away from the stop zone, it can be raised or lower. This is what I am trying to discuss.
The man makes a good point. Poor stop placement probably causes more losing trades than any other factor.
  • #50
  • Aug 25, 2011 8:21am Aug 25, 2011 8:21am
Quoting frothy
Recently I purchased NZD/USD long at .8267 and I just exited at .83. I had no clue where nzd/usd was going when I purchased it...and neither did I care. I just knew that if I place my stop .8262 (the last low candle on the 15min) and that I was risking 5 pips for.....in this case 16. 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...
I like your idea (and you won't read me saying that very often) but your example above is a really piss poor one. If I read it correctly, you put a stop 5 points away. Really, come on, do you think this is in line with what you're proposing? A hiccup will take out a 5 pip stop. The only reason it wasn't hit was pure luck, nothing else.

Flesh the idea out, but be a bit more critical in your thinking.
  • #51
  • Aug 25, 2011 8:23am Aug 25, 2011 8:23am
Quoting Razzle
The problem is that at some point when designing such a strategy you'll realise 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)
Exactly. Even if it's something as simple as only buying above/selling below the open, a simple filter will produce better results than just a random entry. My, I'm feeling verbose today.
  • #52
  • Aug 25, 2011 8:43am Aug 25, 2011 8:43am
Quoting Dopey
I like your idea (and you won't read me saying that very often) but your example above is a really piss poor one. If I read it correctly, you put a stop 5 points away. Really, come on, do you think this is in line with what you're proposing? A hiccup will take out a 5 pip stop. The only reason it wasn't hit was pure luck, nothing else.

Flesh the idea out, but be a bit more critical in your thinking.

Yes but your missing the point..The idea behind this thread is to explore the idea of building a strategy that involves not predicting price. Warren buffet buys a stock based on value..without even looking at the price. Volatility could be a measure..as volatility does not suggest price direction....but it is used within strategies. SO the question is there other points of interest that could be explored?

What about time? time and volatility dont predict price...and can we build a strategy from these two variables? anybody else want to throw some input into this discussion? any other variables we can think of?
Don't be fooled by randomness
  • #53
  • Aug 25, 2011 9:28am Aug 25, 2011 9:28am
Quoting frothy
What about time? time and volatility dont predict price...and can we build a strategy from these two variables? anybody else want to throw some input into this discussion? any other variables we can think of?
Volatility is a good option, I personally believe that this is pretty much the only thing that changes in markets.

So by observing volatility in a way you eliminate market 'conditions' per se.

My opinion of course.

As for time well like others have said no matter how one looks at it some kind of prediction is involved. For example with time you would be looking to exploit certain 'time patterns' that reocurr over time (no pun intended). So there already you would be waiting for a certain probable action to occur at a specific time of the day, be it volatility increasing, price direction,...
  • #54
  • Aug 25, 2011 9:40am Aug 25, 2011 9:40am
Anyone tried this before?
  • #55
  • Aug 25, 2011 1:47pm Aug 25, 2011 1:47pm
Quoting ForexQuant
Anyone tried this before?
I thought it wasnt possible at retail level. Or is this naive on my behalf?
  • #56
  • Aug 25, 2011 2:25pm Aug 25, 2011 2:25pm
Quoting Pipalicious
I thought it wasnt possible at retail level. Or is this naive on my behalf?
There are many retail brokers for FX options. For example Saxo Bank.

But you are right, the maths involved are way to complex for 99.9% of retail. Try explaining to one that a put option is not a bet that price is going to fall, but a bet on the volatility (if you delta hedge it like most do). Or try explaining the concepts behind gamma scalping.

Non-directional trading (volatility trading, stat-arb, dispersion trading, ...) is way beyond retail.
  • #57
  • Edited 3:23pm Aug 25, 2011 3:09pm | Edited 3:23pm
Quoting Adal
There are many retail brokers for FX options. For example Saxo Bank.

But you are right, the maths involved are way to complex for 99.9% of retail. Try explaining to one that a put option is not a bet that price is going to fall, but a bet on the volatility (if you delta hedge it like most do). Or try explaining the concepts behind gamma scalping.

Non-directional trading (volatility trading, stat-arb, dispersion trading, ...) is way beyond retail.
Baird is one of my favourite books. Yes only few MMs strategies can be applyed by retail traders but you are not trading I vol so you are trading direction.Spreads etc etc.Maybe if you trade in a prop firm you can trade I vol surely in a pit.
commissions will kill you plus the spread.
Predicting is dangerous when the prediction is wrong Murphy law is always behind the corner prediction becames hope more dangerous and you froze.
  • #58
  • Aug 26, 2011 12:31am Aug 26, 2011 12:31am
frothy has a good idea here

in the option markets we have

strike price
type of option (put/call..and other variables)

delta- movement sensitivity of underlying
vega- volaitility
theta- time decay.

non predicting trading has to compose of :

volatility
range
speed
momentum
time

however a certaint bias needs to exist and cyndyxxx has put it, you cannot NOT predict. but following price on momentum, while being a aware of range and volatility gives you a probability edge,

the strike price would be the reference point of the daily open
knowing the range of the currency serves the purpose of guesstimating the probable distance of pips traveled a day (same concept that people attempt to get with pivot point trading) except that the exhaustion point won't be an arbitrary mathematical formula but the momentum of price itself



but of course we know that a glass can be half full or half empty so contingency plan, or a good money management strategy has to exist. some people here are talking about delta hedging ( if millions are on the table this hedging techniques makes sense, but for retail is too much premiums and canceling out a small amount on the movement of the delta or the gamma is too expensive in my opinion)
AVT INVENIAM VIAM AVT FACIAM
  • #59
  • Edited 1:22am Aug 26, 2011 1:12am | Edited 1:22am
Quoting frothy
Yes but your missing the point..The idea behind this thread is to explore the idea of building a strategy that involves not predicting price. Warren buffet buys a stock based on value..without even looking at the price the question is there other points of interest that could be explored?
im still confused. it doesnt make sense.
is it possible u chose a poor thread title?

in trading, price moves in 2 directions -- up or down.
if price is unidirectional, then u dont have to predict price. the problem is price isnt unidirectional.
trading will always have an element of prediction, expectation &/or anticipation. IMHO.

if u dont want to predict price, then why are u employing a stop loss? a stop loss helps u get out of a trade that goes in a direction against your position. if u are long, u place a stop below your entry price to protect u from a downside move, & vice versa for a short position.
we will not always get the price direction or price prediction correctly,but the point & fact is u have to pick a direction, up or down, long or short.

we're probably going around in circles here.
the thread starter might not want to call or view it as price prediction but i believe direction & prediction (or expectation, anticipation) is inherent in trading.

Quote
Warren buffet buys a stock based on value
if u employ value, it is still related to picking, predicting, anticipating, expecting a price direction.
if the value is cheap/low, u expect/want to buy in expectation/anticipation of possible higher prices in the future.
whatever u want to explore, or whatever variable u want to use, i think they all have already been used/discovered a long time ago (some probably just recently, depending on the technology involved).

having said that, im still interested to see what u have in store for us..
  • #60
  • Aug 26, 2011 1:22am Aug 26, 2011 1:22am
this is just another edge-hunt.

the point of the thread is not to detail how, when, where, how long, etc. the point is to get some beliefs / ideas that give a better possibility of success over failure when entering / exiting a trade. a belief or idea is not a 22 step system that gives reason to buy or sell, but is an avenue that can be explored leading to a sharpened concept that will eventuate on its own into a system of buying or selling.

e.g. setting stop orders outside of a range does not predict the future price, so to speak. it predicts that price will at some point break out of it's box into new territory, hopefully taking a trade into positive pips along the way.
Congratulations ScalaFX for coming out of the closet!
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