Statistical trading system based on current traders' positions | Forex Factory

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Statistical trading system based on current traders' positions

  • #1
  • First Post: Aug 10, 2013 11:42am Aug 10, 2013 11:42am
Hi,
This trading system is based on the fact that more than 75% of retail traders loose money on the FX.

So, if a majority of traders go long on one currency pair, eu, gu or uj, for instance, wouldn't it means that the considered pair would go the other way?

Currently, we can see on this page: http://www.forexfactory.com/trades.php the proportion of traders who are long or short on some currency pairs.
eu: 33% 136 traders long & 271 traders 67% short
gu: 36% 70 traders long& 126 traders 64% short
uj: 67% 104 traders long & 52 traders 33% short

This would give a biais for each pair:
eu: go long,
gu: go long,
uj; go short.

This a tool which is used by a broker (a big one). They have a lot more traders for their statistics, and is only available for clients, but the idez stands. And here, this may be applied given the information in "Positions / Live Accounts".
Don"t blame me if ou loose money with this strategy, I personnaly use this indicator for my position. I publish this post just for a pirpose of study
The basic hypothesis:
must have enough traders to beleive the numbers,
doesn't work for day trading, and low goals, I expect at leats 100 pips for each trade (with a stop generaly around -60, -80 pips)
Cheers,
Henri
Remember that the best way to win on the FX is possible if never open an account
  • #2
  • Aug 10, 2013 12:35pm Aug 10, 2013 12:35pm
Quoting kh4y3m
Hi, This trading system is based on the fact that more than 75% of retail traders loose money on the FX. So, if a majority of traders go long on one currency pair, eu, gu or uj, for instance, wouldn't it means that the considered pair would go the other way? Currently, we can see on this page: http://www.forexfactory.com/trades.php the proportion of traders who are long or short on some currency pairs. eu: 33% 136 traders long & 271 traders 67% short gu: 36% 70 traders long& 126 traders 64% short uj: 67% 104 traders long & 52 traders...

Most traders lose money unrelated to direction.Lot has to do with SL size.Most of those losses I suspect were in correct direction but stopped out of interaday randomness.
You could I bet find lot of data supporting retail traders got is correct such as recent up surge on Aussie and Kiwi.
In trading, you have to be defensive and aggressive at the same time
  • #3
  • Edited 1:05pm Aug 10, 2013 12:46pm | Edited 1:05pm
Quoting Davit
{quote} Most traders lose money unrelated to direction.Lot has to do with SL size.Most of those losses I suspect were in correct direction but stopped out of interaday randomness. You could I bet find lot of data supporting retail traders got is correct such as recent up surge on Aussie and Kiwi.

agreed, and you would still miss the most important (entry, SL and TP)

but lets follow this idea,
to have a real strategy we need to know exactly where those traders (losers) put their orders, and even with that, we need to be sure that those 75% of bad traders lose 100% of the time (which is statistically impossible, even the worst trader has a few wins)
we also need to make sure that those are indeed the bad trader's orders, if 80% of trades are in one direction it can come from only the good traders because the bad one took a day off !

there is allot of "if" in this strategy, it may be possible if you were a broker and know exactly where the orders of good and bad traders are.
i lose money for a living
  • #4
  • Aug 10, 2013 1:55pm Aug 10, 2013 1:55pm
Quoting kh4y3m
Hi, This trading system is based on the fact that more than 75% of retail traders loose money on the FX. So, if a majority of traders go long on one currency pair, eu, gu or uj, for instance, wouldn't it means that the considered pair would go the other way? Currently, we can see on this page: http://www.forexfactory.com/trades.php the proportion of traders who are long or short on some currency pairs. eu: 33% 136 traders long & 271 traders 67% short gu: 36% 70 traders long& 126 traders 64% short uj: 67% 104 traders long & 52 traders...

hello,

i dont see anything statistical about your strategy and your thinking is in my opinion flawed. even if you have a statistically meaningful sample in terms of the number of people who are going long and short, you have no idea about their sizing. single trader who is long 100 contracts will probably affect market direction more than 500 traders who are short 0.01 lot each
  • #5
  • Aug 10, 2013 2:58pm Aug 10, 2013 2:58pm
This reminds me of the Odd Lot Index used in stock trading.
Odd lots are trades of less that 100 shares. These are from the little traders.
Tabs are taken on how they are trading and the idea is to trade against them.
  • #6
  • Aug 10, 2013 9:36pm Aug 10, 2013 9:36pm
it does not make sense, how about other big players like banks, big companies etc? Are they also included in this statistic?

-------
1001 indicators
  • #7
  • Aug 10, 2013 9:54pm Aug 10, 2013 9:54pm
This is called sentiment analysis. Several brokers provide position ratios (Oanda, Dukascopy, FXCM, etc). Just one more indicator. I don't think this info alone is tradeable.
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #8
  • Aug 11, 2013 5:04am Aug 11, 2013 5:04am
Quoting pindang
it does not make sense, how about other big players like banks, big companies etc? Are they also included in this statistic? ------- 1001 indicators
Nope. Only the retailers. That's the whole idea. The OP wants to fade the retailers expecting the big boys will go his direction, under the assumption that the retailers are usually wrong.

But this isn't that easy. Statistically 60% of the retail positions are in the correct direction. Retailers don't fail because of the direction. They fail because of a too small SL which is almost forced because of an over-leverage which is itself almost forced because of under-capitalisation. This make them afraid of letting a position open too long and they take profit way too early. Vicious circle as their equity is now smaller. So they focus on "being right". To do so they use what they call "momentum" (which doesn't exist btw) i.e. they trade breakout: they enter after the big boys have, too late. Their SL is again at the wrong place because they need it too small. So they zoom-in and use the dangerous lower TFs to set their SL; as if the S/R on M5 was strong enough. They now have to take profit too early, because price is going to reverse, just a little bit, just beyond their SL... To allow them to trade this way, almost scalping, they use, they need, the smallest spreads as possible. No surprise the lowest spread is on the most efficient pair: the honey pot called Fiber.
No greed. No fear. Just maths.
  • #9
  • Aug 11, 2013 5:59am Aug 11, 2013 5:59am
Quoting PipMeUp
{quote} Nope. Only the retailers. That's the whole idea. The OP wants to fade the retailers expecting the big boys will go his direction, under the assumption that the retailers are usually wrong. But this isn't that easy. Statistically 60% of the retail positions are in the correct direction. Retailers don't fail because of the direction. They fail because of a too small SL which is almost forced because of an over-leverage which is itself almost forced because of under-capitalisation. This make them afraid of letting a position open too long and...
Quality post, PipMeUP You have my invisible vouch haha
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #10
  • Aug 11, 2013 6:34am Aug 11, 2013 6:34am
Quoting PipMeUp
{quote} Nope. Only the retailers. That's the whole idea. The OP wants to fade the retailers expecting the big boys will go his direction, under the assumption that the retailers are usually wrong. But this isn't that easy. Statistically 60% of the retail positions are in the correct direction. Retailers don't fail because of the direction. They fail because of a too small SL which is almost forced because of an over-leverage which is itself almost forced because of under-capitalisation. This make them afraid of letting a position open too long and...

I concur 100%
Which leads to this question: are you really French ?
  • #11
  • Aug 11, 2013 7:42am Aug 11, 2013 7:42am
Quoting Mingary
{quote} I concur 100% Which leads to this question: are you really French ?
Oui je suis bel et bien français. Pourquoi?
(yes I am well and truly French, why?)
No greed. No fear. Just maths.
  • #12
  • Aug 11, 2013 8:06am Aug 11, 2013 8:06am
Quoting PipMeUp
{quote} Oui je suis bel et bien français. Pourquoi? (yes I am well and truly French, why?)
Because you are showing remarkable insight into the true nature of a price move.
  • #13
  • Aug 11, 2013 6:15pm Aug 11, 2013 6:15pm
Wonderful to see what people come up with to be a winner on Forex. Very inventive.
  • #14
  • Aug 13, 2013 12:58pm Aug 13, 2013 12:58pm
this idea is surely not doable for us but the idea is not stupid when you know that brokers,etc take opposit trades of their loser customers.
I think that almost everybody has already thought to that
  • #15
  • Aug 14, 2013 4:52am Aug 14, 2013 4:52am
Quoting kh4y3m
Currently, we can see on this page: http://www.forexfactory.com/trades.php
I'm not sure that FF records many traders positions - I'd personally look at:
http://fxtrade.oanda.co.uk/analysis/...osition-ratios
  • #16
  • Aug 19, 2013 12:37pm Aug 19, 2013 12:37pm
@davit, check the position ratio when a major is in trend, you'll see that a lot of traders are against the market. Which is kind of wrong... Currently you can see a lot of traders short on the cable in ff reports...

I do not consider the kiwi and aussie becasue of the lack of data. Not enough information to validate a position...

@tylerbose, I never talk about SL and TP. they are calculated otherwise man

@tony47 Thanks for stating these obvious math... If you check ff/trade, you can see that you have lots too Anyway, if I use your example, I stand in my opinion that the majority is wrong, as usual on the fx market, the single trader is certainly right.

@billbss
this is nearly the spirit..

@pindang, if you say that is makes no sense don't ask a question to be sure at the end

@vox dei
exactly, and I like this set of information

@pipmeup
You're right, I guess, this is not easy, I can confirm, but reliable!

@Mingary stating that someone is stronger (or weaker) in any field because of his origins or country is the beginning of racism don't you think so?


@BataviaTrade
flipping a coin won't make you rich, neither monkey trading

@thomasz1 this is not exactly the point, this indicator is only based on the retail traders, so if all go long on the cable, we can take it as a bearish indicator.

@TheMaxx I mainly use this page in onda's website, the trade section in ff and some others. The conjonction give bigger indications. The divergence, nothing.

To be more accurate, this is not a strategy to enter the market. This help validate current positions. For instance, if you are long on the yen, winning a few pip, close the position or it may be stopped before you know.

Anyway, there is no absolute truth in this system, but I found it quite good.
  • #17
  • Aug 19, 2013 4:44pm Aug 19, 2013 4:44pm
Quoting kh4y3m
@davit, check the position ratio when a major is in trend, you'll see that a lot of traders are against the market. Which is kind of wrong... Currently you can see a lot of traders short on the cable in ff reports... I do not consider the kiwi and aussie becasue of the lack of data. Not enough information to validate a position... @tylerbose, I never talk about SL and TP. they are calculated otherwise man @tony47 Thanks for stating these obvious math... If you check ff/trade, you can see that you have lots too Anyway, if I use your example, I...
good idea what I think you should do is add stochastic on 4hr, trade off or near support/res pivots in the direction against the crowd. For example if traders are 70% short in euro, go long when 4hr stoc oversold, because the herd will have add in more sells as they think the currency is finally making a move in their direction, buy hold until 4hr is oversold and has hit daily resistance you may want to scroll to daily Stoch and see the herd get hammered for at least a week or 150 pips.You may want to use certain forum users to trade against when they are adding into losing positions this gives you added confidence that you are correct.
All Assets NAS100 GLD BTC AUS JPY GBP All Time Return: 18.3%
  • #18
  • Aug 20, 2013 3:18am Aug 20, 2013 3:18am
@Phil_GMT
Hi, thanks for your answer. But I think that Technical Analysis is as much reliable than cartomancy, astrology, or reading runes... Sorry but if you thnk (and know) that market are markovian, so this kind of study is useless... TA is more profitable for people who teach it than for traders who use it. TA is before all a business which is useless for any decision in trading. this may eventually confort an idea, but no more...
Anyway, if this work for you great, but I would never enter the market because a moving average has crossed anything... This worths for every other indicator: it does not work... Saddly may I say. But otherwise this would be too easy
  • #19
  • Last Post: Sep 17, 2013 12:49pm Sep 17, 2013 12:49pm
Quoting kh4y3m
@Phil_GMT Hi, thanks for your answer. But I think that Technical Analysis is as much reliable than cartomancy, astrology, or reading runes... Sorry but if you thnk (and know) that market are markovian, so this kind of study is useless... TA is more profitable for people who teach it than for traders who use it. TA is before all a business which is useless for any decision in trading. this may eventually confort an idea, but no more... Anyway, if this work for you great, but I would never enter the...
I agree 100% that indicators don't work in the way you describe them. I also agree that 90% of people put ridiculous faith on what indicators are saying. But the reason some of them work is not because of a mathematical truth, but rather a self-reinforcing truth of the traders:

If there is a huge widespread rumour or discussion that a certain stock is going to skyrocket, and the stock goes insanely up, it most often is due to crowd madness. The same I believe is for certain indicators that are mentioned and regarded as many extremely important, such as for example the 200-day MA.

TA doesn't work because there are mathematical patterns in the market. TA works because people think it works. That simple.
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