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Strategies that don't predict future price

  • #61
  • Aug 26, 2011 2:08am Aug 26, 2011 2:08am
Quoting frothy
Warren buffet buys a stock based on value..without even looking at the price.
When he buys a stock based on value, he is predicting an increase in price over time.

Perhaps it is too late tonight, but I just don't see the value in building a strategy on placing a stop where the price isn't going to go...seems like it would just be easier to build a strategy around the prediction of price movement......but good luck to you!!
  • #62
  • Aug 26, 2011 2:30am Aug 26, 2011 2:30am
What I see a lot of around these halls, is long discussions about differing opinions, when the core of the issue is a difference of definitions of terms.

Maybe the thread title wasn't quite accurate.... or it's quite possible that the word predicting means different things to different people.

Many price action traders speak of following the market and not predicting where price will go. Maybe anticipating would be more proper. But how do we define those terms ?? If we enter long, we are predicting that price will rise. To say that we are not predicting, seems only for want of a better descriptive word. How about hoping ?? That word has taboo all over it... but I have to admit, when I enter a trade, I do tend to hope I'm right. Or at least that the market ends up actually going in that direction. We certainly can't know in advance where the market will go. So... what's the right word ?? (OK, wishing and praying are both definitely out) Actually predicting works for me, it's got a nice ring to it. Either that, or anticipating expectations.

I'm not knocking anyone's efforts here, but it seems that a lot of the discussion is centered on definitions.
  • #63
  • Aug 26, 2011 2:45am Aug 26, 2011 2:45am
The thing about trading is that you DON'T know where the price will go. But what you do is to manage the risk. You keep the risk low enough that one win will cover most of the losses and you gain some of it. I usually look at the exit signals of system before I even look at the entries. The exit is the 2nd most important aspect. The first is of course the risk management.
  • #64
  • Aug 26, 2011 4:57am Aug 26, 2011 4:57am
Quoting supremeChaos
trading will always have an element of prediction, expectation &/or anticipation. IMHO...
Not necessarily.

What about volatility grid systems where you enter a bunch of orders above and below the current price and wait for them to get hit ?

What about systems based on the concept of hedging ?

What about sytems based on exploting positive swap ?

What about sytems based on capturing the spead ?

All of the above are conceptually very simple idea's, none of which necessarily require prediction of price direction
  • #65
  • Aug 26, 2011 5:15am Aug 26, 2011 5:15am
Quoting Razzle
Not necessarily.

What about volatility grid systems where you enter a bunch of orders above and below the current price and wait for them to get hit ?

What about systems based on the concept of hedging ?
I came up with a system some time ago where id trade above and below a certain range of the 15m candle open.

So using the open of the m15 bar, when it moved open + x pts id have a breakout long, when it moved open - x pts id have a breakout short.

It worked wonders for a while... and i thought i came up with something new

But then i realized 2 things:

1) I wasnt trading price. I was trading TIME.

2) It already existed and its similar to 'TheRealThing' open breakout system.

After realizing point one, I saw that a lot of people actually trade time more than price itself.

This led me to research heavily intro grid/volatility approaches, since it isnt based on time at all, but on movement alone.
  • #66
  • Aug 26, 2011 5:53am Aug 26, 2011 5:53am
Quoting walb99
fully agree

trading strategy =not knowin where price is moving, but applying machnical rules
(edefining exits , MM)

gambling strategy = predicting or anticipating future price movement with descretionary methods
glad to see someone who agrees however I don't see many people discussing these issues...
  • #67
  • Aug 26, 2011 6:35am Aug 26, 2011 6:35am
Quoting walb99
fully agree

trading strategy =not knowin where price is moving, but applying machnical rules
(edefining exits , MM)

gambling strategy = predicting or anticipating future price movement with descretionary methods
Interesting. You appear to be operating under the premise (illusion) that the market is not predictable, and therefore attempting to predict movement and trading on that opinion is gambling. Of course, if your belief is false (which it is), then predicting with discretionary methods is in fact "speculation" as it has been for hundreds or thousands of years, and mechanical/MM methods (which don't capture some real inefficiency or provide liquidity services, etc) are closer to gambling, as you're "throwing out your net" regardless of the true probability of success of that particular trade.
  • #68
  • Aug 26, 2011 8:24am Aug 26, 2011 8:24am
Quoting randomuser
Interesting. You appear to be operating under the premise (illusion) that the market is not predictable, and therefore attempting to predict movement and trading on that opinion is gambling. Of course, if your belief is false (which it is), then predicting with discretionary methods is in fact "speculation" as it has been for hundreds or thousands of years, and mechanical/MM methods (which don't capture some real inefficiency or provide liquidity services, etc) are closer to gambling, as you're "throwing out your net" regardless of the true...
The thing is we as traders can know the probability of success of that particular trade but the question comes when what if it goes wrong?

do we activate the mechanical stop or do we hope for the best for the price to turn into our favour?

hoping for the best is gambling...
  • #69
  • Aug 26, 2011 9:26am Aug 26, 2011 9:26am
Quoting jennywonda35
The thing is we as traders can know the probability of success of that particular trade but the question comes when what if it goes wrong?

do we activate the mechanical stop or do we hope for the best for the price to turn into our favour?

hoping for the best is gambling...
It depends on the reasons for your having taken the trade. Yes hoping for the best is gambling. When you take a mechanical trade, you are hoping for the best because there's no specific reason for your trade to succeed. You just took some pattern or whatever and you don't know if this time the likelihood of price moving in your direction is greater or less than your backtested average (or however you came to the conclusion that you have a statistical edge). In that case you will likely want to use a mechanical stop.
If instead you took your trade for a discretionary reason - for example your analysis of a situation and what you expect the market reaction to be - then you can find out quickly/eventually (depending on what you're expecting) whether you were right or wrong and exit the market if you see your analysis was wrong.

However my point is that discretionary trading is not necessarily gambling (in the common usage of the word) because it is possible at times to determine with greater than 50% probability what a given outcome will be. Granted if your discretionary skills suck, then the outcome will be as if you were gambling. But if you don't believe it's possible to "predict price", then it's understandable that you might think discretionary trading is necessarily gambling.
  • #70
  • Sep 2, 2011 10:49pm Sep 2, 2011 10:49pm
Here is one. Find highly corellated two instruments (or one instrument but two brokers). Wait for the major news release, a few minutes before the release simultaneously buy one (with sl for example 50 p) and Sell the Other one with it's own sl of 50 pips. Have Tp of 100 p (2:1 rr) for both.

So, now you don't care which way price will go after the release all you care that price shall move hard so to reach your tp on either instrument.

News releases act as price accelerator, nothing else.
  • #71
  • Last Post: Mar 29, 2017 8:37pm Mar 29, 2017 8:37pm
Quoting Pipalicious
{quote} I came up with a system some time ago where id trade above and below a certain range of the 15m candle open. So using the open of the m15 bar, when it moved open + x pts id have a breakout long, when it moved open - x pts id have a breakout short. It worked wonders for a while... and i thought i came up with something new But then i realized 2 things: 1) I wasnt trading price. I was trading TIME. 2) It already existed and its similar to 'TheRealThing' open breakout system. After realizing point one, I saw that a lot of people...

am interested to examine such ideas as well
https://www.forexfactory.com/showthr...34#post9720334
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