Are we being conned? | Forex Factory

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Are we being conned?

  • #1
  • First Post: Apr 29, 2012 11:29am Apr 29, 2012 11:29am
Okay, probably a bit controversial but I am interested in some feedback on this. I have been studying FOREX trading for a couple of years now and am yet to take the plunge to live trading. I have read many different threads on many forums and my conclusion is that there is some good stuff out there but there is also a lot of junk. To me though, perhaps the most disturbing revelation is that most of the 'received wisdom' seems to fly in the face of good trading practice. For example, we are often told that it is madness to trade without a Stop Loss in place, yet often that just turns what could have been a profitable trade into a losing one. Below are some things that I have developed an opinion on and I am open to discussion about whether these constitute sound elements to developing a profitable trading strategy.

Obviously, my opinions are not unique so I take no credit for my views - I am just trying to justify in my own mind the most important aspects of a sound trading method.

1. A Stop Loss is not necessary for a good trading method. To qualify that statement if sound money mangement techniques are used then a position size should never become unmanageable.

2. The Trend is not my Friend. I have found that any trend-based system does not get you in early enough or stay in long enough to make sufficient profit to cover all the little losing trades when the market is ranging.

3. All indicators are effectively useless as the market can and will go wherever it likes (ie, where the traders as a collective take it).

4. In general, any practicable profitable trading method involves either a good risk reward ratio but with a not so good win loss ratio - or vice versa. You can't have your cake and eat it!

5. Most of the 'good ideas' put forward on forums are bogus and (maybe I'm being a bit cynical here) are designed to fuel the market with lots of long-term losing traders to benefit the 5% or so consistently profitable traders.

My conclusion is that the only profitable method is based on sound money management coupled with nerves of steel to bear the inevitable draw-downs.

Standing by for the hurricane!

Regards

Mike
When you are wrong - admit it. When you are right - keep quiet!
  • #2
  • Apr 30, 2012 12:00pm Apr 30, 2012 12:00pm
Quoting Freightdog
Obviously, my opinions are not unique so I take no credit for my views - I am just trying to justify in my own mind the most important aspects of a sound trading method.

1. A Stop Loss is not necessary for a good trading method. To qualify that statement if sound money mangement techniques are used then a position size should never become unmanageable.

2. The Trend is not my Friend. I have found that any trend-based system does not get you in early enough or stay in long enough to make sufficient[b] profit to cover all the little...
ah go on then:

1) A stop is a method of exiting a trade, that's all. So yes.
2) Depends on what you mean by trend. Intraday, counter-trend is way harder once you've taken off spreads and account for the smaller moves in an already tight market. Ditch the systems, not the trend.
3) Indicators aren't for predicting, they just tell you info that doesn't jump out from observing price charts. Or for discipline.
4) That's randomness for you.
5) No need for conspiracy loons, trading's tough enough to blow up without anyone elses help.
  • #3
  • Apr 30, 2012 1:48pm Apr 30, 2012 1:48pm
You need to work on how the market works. What are the banks and other big guns trying to do and how, why. Its no good looking at the market from a retail point of view and expecting to be profitable, you have to look at it from the perspective of the really big players. In doing so you will discover a lot of answers and techniques that can be used in the markets. Its the only way imo. Good luck.
  • #4
  • Apr 30, 2012 2:11pm Apr 30, 2012 2:11pm
Some good replies by Porkpie and triphop. Not much more I can add to what they already said, but one thing I will say is for #1. The sooner you can grasp in your mind that unrealized p/l and realized p/l are the same, the better off you are.
  • #5
  • Apr 30, 2012 2:25pm Apr 30, 2012 2:25pm

2. The Trend is not my Friend. I have found that any trend-based system does not get you in early enough or stay in long enough to make sufficient profit to cover all the little losing trades when the market is ranging.
The triend is your friend," till the end of the trend" which is impossible to predict...again, youré right...

3. All indicators are effectively useless as the market can and will go wherever it likes (ie, where the traders as a collective take it).
If not true very very close!!!



5. Most of the 'good ideas' put forward on forums are bogus and (maybe I'm being a bit cynical here) are designed to fuel the market with lots of long-term losing traders to benefit the 5% or so consistently profitable traders.
Consistently profitable robots that belong to the big boys...including stop hunting robots.
Big boys are: Hedge Funds, insurance, banks and yes brokers...
If the trend is your friend, all the rest are your enemies...(or better put, very good friends of your money, which they are eager to take)

My conclusion is that the only profitable method is based on sound money management coupled with nerves of steel to bear the inevitable draw-downs.
Sound money managmnet begins with position size/risk


Standing by for the hurricane!

Regards

Mike[/quote]
  • #6
  • Apr 30, 2012 2:33pm Apr 30, 2012 2:33pm
meh.
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #7
  • Apr 30, 2012 2:54pm Apr 30, 2012 2:54pm
It makes you wonder about websites that tell you how to trade, could be really ploys set up by the big boys to tell us retailer what to do when we see the market do this, do that, and know where our stops will be, so they know what we are going to do, effectively they do the opposite and we all know they have the most money so the market moves in their direction.
  • #8
  • Apr 30, 2012 3:11pm Apr 30, 2012 3:11pm
Funny, today I traded with a stoploss, relied on indicators (paying attention to only the most basic market structures), traded with the trend getting in as early as normal and getting out at the "bottom of the top" There are many different systems that work out there my friend that even use indicators. You just have to know how to use them and that takes time. I am three years in on my addiction to forex and study/ watch it for at least 6 hours a day even on weekends... A word of caution on the stoploss though... I know a very good trader that doesn't trade with a stoploss. Multiplies his money all the time. And then twice a year he blows up his account. You can still make money this a way if you practice money management, your right. its called withdrawing your winnings when you get them....Certainly not for me. Anyway, Good luck to you. I hope you are able to figure out a system that works for you.

Lazy Lobster
"IN CASH WE TRUST"
  • #9
  • Apr 30, 2012 4:03pm Apr 30, 2012 4:03pm
I don't see it so much as an issue of good info vs. bad info.

Every discipline has its own nomenclature and trading most definetely has its own, but people don't really take the time to learn it. On top of that you have many different styles of trading: scalp, swing, position, mechanical, discretionary, news, breakout, counter-trend, etc.

So what you see on the forums is the scalping mechanical trader with his system arguing with the discretionary swing trader. They never take the time see what type of trader the other person is and how different methodologies apply to different styles of trading.

ADD on top of all that, each person has their own very specific style of trading that suits their personality. So although long term trend trading may not work for one person, it maybe a dream come true to another. Some people (very few) can handle only having a 20% win rate while another needs to see 70%, etc.

It is all in what context and perspective we are talking about things, like stop losses, trend, etc. So what looks like useless information to a trend trader maybe very useful information to the scalper. The news trader vs. the non-news trader. Indicators are good vs. not good.

Well, it really all depends...
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #10
  • Apr 30, 2012 5:02pm Apr 30, 2012 5:02pm
Some really great insights offered here - thanks to you all.

The caution made about trading without a Stop is taken on board. I guess the key is to place your Stop where the big guns or are not likely to find it and where your broker is not willing to go.

Well, back to the drawing board...
When you are wrong - admit it. When you are right - keep quiet!
  • #11
  • Edited 9:35pm Apr 30, 2012 6:07pm | Edited 9:35pm
Quoting LazyLobster
Funny, today I traded with a stoploss, relied on indicators (paying attention to only the most basic market structures), traded with the trend getting in as early as normal and getting out at the "bottom of the top" There are many different systems that work out there my friend that even use indicators. You just have to know how to use them and that takes time. I am three years in on my addiction to forex and study/ watch it for at least 6 hours a day even on weekends... A word of caution on the stoploss though... I know a very good trader that...
Well said LL. You could take a high multiplying strategy and withdraw the profits before it blows up, but then it becomes a matter of how many times does it double before you lose the seed money. Then the other issue with this is you never compund the profits. This style is certainly not for me either.
  • #12
  • Apr 30, 2012 7:46pm Apr 30, 2012 7:46pm
Quoting Freightdog
1. A Stop Loss is not necessary for a good trading method. To qualify that statement if sound money mangement techniques are used then a position size should never become unmanageable.

2. The Trend is not my Friend. I have found that any trend-based system does not get you in early enough or stay in long enough to make sufficient[b] profit to cover all the little losing trades when the market is ranging.

3. All indicators are effectively useless as the market can and will go wherever it likes (ie, where the traders as a collective...
1) a Stop loss only limits your loss. If you are stopping out "too soon" then perhaps it is too close. But I personally wouldn't trade without one because I don't want to stay in front of the screen wonder whether or not the current open position loss is enough. If its going to stop out so be it...that was the calculated risk I took entering the trade in the first place...here and no further.

2) The trend is only your friend if you're in on it earlier enough to make a difference. To do this you must enter counter trend or put another way "pick tops and bottoms". It can be done with practice. By the time you recognize "the trend" its pretty much over, (no matter what time frame you trade).

3) Indicators and any other form of "technical analysis" is just a mirror into your own trading...they are "useless" because your trading is also that way. If an indicator is giving you 70% losses...start entering the other way and get 70% wins.

4) Hit the nail on the head. Sound money management (or "risk management" as I like to call it) is the bread and butter of this business. Entering means nothing...exiting is where profits or losses are realized. Finding a way to exit as profitable as much as possible is how we make our money. Enter is only a PROBABILITY...exiting is ACTUALITY.

5) Cant speak to this as I have never explored the good or bad ideas offered here. My best advise to anyone would be express yourself in your own way and don't compare your results with anyone. You are unique and view the markets with your own unique lens. Thus you will have your own unique method to extract money from the markets.

Conclusion: It sounds to me like you are looking for "certainty" when trading. I want to make x% wins and if I can't I won't bother trying. I'm afraid it doesn't work that way. Use risk management wisely...start small work into larger position sizes, but do it live. Keep good records and adjust your "work" as you progress. Trading is not science...it is art and even Picaso (or pick your favorite artist) didn't do his/her master work the first time. You must do it because it is how YOU express yourself and not because this method or the other will produce x% profit over x time.

The market is and always be uncertain. Technical/Fundamental or any other type of analysis will only get you so far...right about the point where you can consistently lose. To break through this you must delve into YOUR method of seeing the markets and study/analyze THAT not the markets.
  • #13
  • Apr 30, 2012 7:56pm Apr 30, 2012 7:56pm
You are always being conned in FX and all other markets for that matter.
  • #14
  • Apr 30, 2012 8:23pm Apr 30, 2012 8:23pm
Quoting Freightdog
1. A Stop Loss is not necessary for a good trading method. To qualify that statement if sound money mangement techniques are used then a position size should never become unmanageable.



Regards

Mike
You've found one of the secrets- trading without stops.

To round it out, you need to look into repainting indicators and martingale.
  • #15
  • Apr 30, 2012 9:10pm Apr 30, 2012 9:10pm
Hope you don't mind, I'm still learning and your thread inspired me:

Quoting Freightdog
to place your Stop...
My guess is that to take a risk,
it's easier to know how right and how wrong you are
beforehand.

Of course, you may be generally only so wrong and specifically so right in a range,
specifically so wrong and generally so right in a trend,
generally so wrong and right in a chaotic area,
and specifically so wrong and right in a predictable area.
(This applies only to where one's study allows a choice of being specific or general.)

So knowing the bounds of the chart area you're in is just as important as the bounds of your trade. When it calls for a general bound, look for a sign from the chart that conflicts with your original trade reason.
  • #16
  • Apr 30, 2012 10:22pm Apr 30, 2012 10:22pm
Well let's put it like this. 98 percent of material out there to teach newbies how to trade is broker originated. So I would ask you this. Would you go to Cesar's palace to attend a seminar on how to play black jack and poker given by the owners of the Casino?
All that is left in FF is just plain garbage. "Cloggie"
  • #17
  • Apr 30, 2012 10:25pm Apr 30, 2012 10:25pm
Quoting gspajon
1) a Stop loss only limits your loss. If you are stopping out "too soon" then perhaps it is too close. But I personally wouldn't trade without one because I don't want to stay in front of the screen wonder whether or not the current open position loss is enough. If its going to stop out so be it...that was the calculated risk I took entering the trade in the first place...here and no further.

2) The trend is only your friend if you're in on it earlier enough to make a difference. To do this you must enter counter trend or put another way...
Great post. I'm printing this out and posting it on my wall, by the monitor. For a reminder, whenever I don't follow my trading rules. Picking tops and bottoms have been the most profitable way for me. But with this sloppy PA on the E/U, I'm stuck with just picking my nose, in the mean time. And mathematics have worked wonders for me.
Time turns trend. - W.D. Gann
  • #18
  • Apr 30, 2012 10:28pm Apr 30, 2012 10:28pm
Like someone else said before, a stop is just a way of getting out of a trade. You may not place a hard stop, but I'm sure you have a mental stop, a point at which you decide a trade is not going well and You have to get out. So yes, in theory you don't actually need to place a hard stop.

Points 2, 3 and 4 I agree. Point 5, no, I don't think it's all a big conspiracy.

Now about your conclusion:

Quoting Freightdog
My conclusion is that the only profitable method is based on sound money management coupled with nerves of steel to bear the inevitable draw-downs.
I totally disagree here, money management is just money management. You still need and edge to profit from your trading.
  • #19
  • Apr 30, 2012 10:41pm Apr 30, 2012 10:41pm
Quoting tonyo524
Well let's put it like this. 98 percent of material out there to teach newbies how to trade is broker originated.
98 percent? Where did you get this from?
  • #20
  • Apr 30, 2012 10:53pm Apr 30, 2012 10:53pm
Quoting 2+2=4ex
98 percent? Where did you get this from?
Just browsing while waiting to be seated for dinner....

You stole the words right out of my mouth...lol

I would say Tonto is hmmmmmm way off...

I have no stats but most of the material I read on trading is around
99% non broker...

Except for this circus..
Markets are Mirrors,,Mastery of craft is mastery of self
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