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Market is ever changing?

  • #1
  • First Post: Aug 22, 2013 8:27am Aug 22, 2013 8:27am
Relax... I'm not teaching or sharing. Nope, I just wonder what people would say to this question:

If market is ever changing, what's the point of studying one particular strategy? Or a matter of fact, any strategy at all?

You could easily spent thousands on a course/strategy/method/guru, studying it for the whole year, demoing with great success. But by the time you've mastered it, market has changed again, the loop hole inefficiencies have been closed, and therefore the strategy is no longer profitable. Such a waste.

They say you have to have an edge to trade. How do you know that your edge is not just luck? Do you even know the expiry date of your edge, if such time exists?

If you say, "well market changes all the time, so we'll just have to keep changing with the market." But to change means changing the trading plan, otherwise what is there to change? And don't you think changing systems, leaping from one to another, is a no no to do as a professional trader? And I dare say it is quite impossible for one individual trader to always catch up and redefining his or her edge with constant new information about the market. At least I don't know how to do it.

Could it be that those few who make constant money out of the forex market realize that market is actually not ever changing? That it stays the same the day it was born, and it will stay the same the day it dies?

As price is not random, does it also mean that market is not ever changing?
  • #2
  • Aug 22, 2013 8:56am Aug 22, 2013 8:56am
i'm going to show 2 charts and you tell me from what year it is based on price action and how charts look like.
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  • #3
  • Aug 22, 2013 9:08am Aug 22, 2013 9:08am
A market doesnt change - ever. But there are certain elements that do change.

Markets go up and down - Nothing else.

What changes is the amplitude of this 'up and down' stuff.

A particular market could move hi/lo approx. 100ticks/day...but then it drops to 40ticks/day. Has this changed the market from moving up and down? Not at all, the only element that changed was its amplitude.

Other than that, markets never change, as long as people keep buying and selling.
  • #4
  • Aug 22, 2013 9:26am Aug 22, 2013 9:26am
Quoting Pipalicious
A market doesnt change - ever. But there are certain elements that do change. Markets go up and down - Nothing else.
life on earth is born, wants food and reproduction and after that it dies. nothing else on earth has changed since 1 billion years ago ... or did it?
  • #5
  • Aug 22, 2013 9:42am Aug 22, 2013 9:42am
Market philosophers...
In up has down, in down has up...
Maybe... in change has no change, in no change has change...
It's all relative... (Einstein)
  • #6
  • Aug 22, 2013 10:38am Aug 22, 2013 10:38am
Quoting Pipalicious
A market doesnt change - ever. But there are certain elements that do change. Markets go up and down - Nothing else. What changes is the amplitude of this 'up and down' stuff. A particular market could move hi/lo approx. 100ticks/day...but then it drops to 40ticks/day. Has this changed the market from moving up and down? Not at all, the only element that changed was its amplitude. Other than that, markets never change, as long as people keep buying and selling.
Very well said Pipalicious.

The market is an incredibly efficient machine, doing the same thing every single day.

Quoting Ishtana
If market is ever changing, what's the point of studying one particular strategy? Or a matter of fact, any strategy at all? You could easily spent thousands on a course/strategy/method/guru, studying it for the whole year, demoing with great success. But by the time you've mastered it, market has changed again, the loop hole inefficiencies have been closed, and therefore the strategy is no longer profitable. Such a waste.
It is important to master the right things. To create a strategy that does not need to change as "the loop hole inefficiencies have been closed", you need to identify what the market does every single day. Concentrate on the "efficiencies" of the market, not the "inefficiencies".

Quoting Ishtana
They say you have to have an edge to trade. How do you know that your edge is not just luck? Do you even know the expiry date of your edge, if such time exists? If you say, "well market changes all the time, so we'll just have to keep changing with the market." But to change means changing the trading plan, otherwise what is there to change?
1000's of trades will certainly give you some indication that your edge is not just luck. You need to run your edge through some serious stress tests - to identify this "expiry date of your edge". I've done this. I know exactly what will cause my system to fail - the amplitude of the market goes to such an extremely high level (jumps 1000's of pips in minutes) or an extremely low level (crawls just a few pips for an extended period of time, months for my system).

Quoting Ishtana
And don't you think changing systems, leaping from one to another, is a no no to do as a professional trader? And I dare say it is quite impossible for one individual trader to always catch up and redefining his or her edge with constant new information about the market. At least I don't know how to do it. Could it be that those few who make constant money out of the forex market realize that market is actually not ever changing? That it stays the same the day it was born, and it will stay the same the day it dies? As price is not random, does it...
I'm sure there are professionals who change their systems from time to time - adapting to what they perceive to be changing market conditions. However, my system is exactly the same as it was when it started 40 months ago. Why? Because the market is an incredibly efficient machine.

The biggest edge in trading is that there is a market. You know every single day that price will move up and down, only the amplitude changes (thanks Pipalicious). Exploit that and you will (more than likely) never need to change anything.
  • #7
  • Aug 22, 2013 12:26pm Aug 22, 2013 12:26pm
Quoting Ishtana
If market is ever changing, what's the point of studying one particular strategy? Or a matter of fact, any strategy at all? You could easily spent thousands on a course/strategy/method/guru, studying it for the whole year, demoing with great success. But by the time you've mastered it, market has changed again, the loop hole inefficiencies have been closed, and therefore the strategy is no longer profitable.
Better thread, you're getting closer. What is your definition of a trading strategy? Please give an example if possible.

Quoting Ishtana
They say you have to have an edge to trade. How do you know that your edge is not just luck?
zznbrm is correct that if you have a large set of trades, you should know if you are succesful or just lucky. Luck does help sometimes!

Quoting Ishtana
don't you think changing systems, leaping from one to another, is a no no to do as a professional trader?
What kind of systems do you think professional traders use?
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  • #8
  • Aug 22, 2013 3:05pm Aug 22, 2013 3:05pm
Quoting zznbrm
...
Concentrate on the "efficiencies" of the market, not the "inefficiencies"
...
Would you please clarify about this sentence?
  • #9
  • Aug 22, 2013 6:39pm Aug 22, 2013 6:39pm
I always enjoy Ishtanas threads

Market structure doesn't really change, at least not fast enough to really affect traders systems. Market dynamics do change though.

I see technical strategy traders as a person alone in a room with a ball and a goal. The aim obviously is to kick the ball into the goal - but the room is always changing. The floor tilts wildly, the walls move in and out, and the goal moves around the room unpredictably. The player sometimes gets the timing right and sometimes gets it wrong. There is another way to approach the problem though - one that most people never think of. You can look for a door, step outside the room and study the mechanisms causing the room to change. Once you know how and why the room is changing you have a chance.

The movement and behavior of financial instruments, including currencies, depends largely on the macro environment at the time, because the players involved change their behavior according to the wider economic climate. Whether a currency is reacting to a news release, a technical level or manipulation, the nature and severity of it's reaction depends on many things such as inflationary cycles, bull/bear market conditions in equities and global macro themes. If US GDP grows faster than expected, and investors need to park more money somewhere, where do they go? Gold, stocks, cash, or property? It depends. If inflation is a threat, they go to gold. In a property boom they go to property. In a bull market they go to stocks. And the USD acts very differently in each of these climates, a fact lost on people who are preoccupied with technical analysis, wondering why their system sometimes works and sometimes doesn't.

This is a chart of SPX500 with gold overlaid on it, the second chart is USD and the indi at bottom is ATR applied to SPX. The trendlines I have drawn aren't very accurate but you can get the picture of what is happening here. You can see how the wider economic climate changes halfway through this chart, a lot of perfectly fine technical trading systems suddenly stopped working around this time and their operators probably still don't know why.
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si hoc legere scis nimium eruditionis habes
  • #10
  • Edited 1:29pm Aug 24, 2013 6:16am | Edited 1:29pm
Ah... such a breath of fresh air to have a discussion in a civilized manner with intelligent people.

Quoting deltatrade
i'm going to show 2 charts and you tell me from what year it is based on price action and how charts look like. {image} {image}
Hm... Well, one is from 2008 by the looks of the label, the other I don't know. But it proves a point that market doesn't have a lot of tricks up its sleeve. It's the same old thing, day in day out. PA works, candlestick pattern, I doubt it.

Quoting Pipalicious
A market doesnt change - ever. But there are certain elements that do change. Markets go up and down - Nothing else. What changes is the amplitude of this 'up and down' stuff. A particular market could move hi/lo approx. 100ticks/day...but then it drops to 40ticks/day. Has this changed the market from moving up and down? Not at all, the only element that changed was its amplitude. Other than that, markets never change, as long as people keep buying and selling.
I agree, you sum it up well. My own conclusion is this: Market movement is a variation of a theme, and nothing else. Once, I managed to backtest my system as further back as 2001, and holy tamale! They behave almost like this year's price movement. Coincidence? Nuh...

Quoting zznbrm
{quote} Very well said Pipalicious. The market is an incredibly efficient machine, doing the same thing every single day. {quote} It is important to master the right things. To create a strategy that does not need to change as "the loop hole inefficiencies have been closed", you need to identify what the market does every single day. Concentrate on the "efficiencies" of the market, not the "inefficiencies". {quote} 1000's of trades will certainly give you some indication that your edge is not just luck. You need to run your edge through some...
Spot on. Personally, I would name it constant inefficiency. I don't think this edge has an expiry date (or so I thought. See below). Certain things have to be done which without it market will simply stop to work. And it seems you've mastered your system deeply to understand the inside out of it. Well done.

You brought up an interesting point. I'll cover it below.

Quoting EmeraldEyes
{quote} Better thread, you're getting closer. What is your definition of a trading strategy? Please give an example if possible. {quote} zznbrm is correct that if you have a large set of trades, you should know if you are succesful or just lucky. Luck does help sometimes! {quote} What kind of systems do you think professional traders use? {image}
Trading strategy to me is finding and exploiting the real inefficiency in the market that will be there almost indefinitely under the right circumstances.

I'm trying to suppress the luck part of my trading system. Reducing the art side of my trading, and maximizing the mechanical and functional aspect of it. Sure we find comfort in statistics and probability, but I'd rather maximize what I can do in mastering these inefficiencies and be as mechanical as possible. Really, it's about price moving up and down. Price is not random, it's mechanical but hard to be mechanized. No big ladies with viking hats singing soprano while a murder took 3 hours to be done, no imagination needed to produce Da Vinci's Last Supper, no Andy Warhol's ingenuity of his Campbell's soup can is needed.

Although I really have to say that I'm deeply impressed by the people with artistic vision who brought their work into the table of forex. Seeing what I've seen in the past, you see unbelievable quantity and quality of human ingenuity in trying to make a profit from the market. They are extremely smart and intelligent people outside forex. Yet majority of them couldn't find success in forex, evident from me testing their system. Maybe, just maybe, it is less about intelligence and more about humility to study how the market works. Instead of saying "I think I've found a way to fool the market", we should ask "How does the market work, and how can we benefit from it?"

If only they base it on the understanding of how the market really works, I'm more than sure that the myth of 95% losers wouldn't ever be invented, and seriously intelligent trading system would be created. It would be extremely fast, it would extremely efficient, and it would rarely, if ever, take a loss. Maybe such system is already in existence.

But at the same time, I wonder what happens if suddenly majority of retail traders become profitable. That's the scary part for me. This is my system's expiry date. I can only benefit if majority of traders lose. I'm such an evil person. LOL!... Nuh, I'm only surfing the wave, and there's nothing illegal about it. With or without me, majority of traders would still lose. Another BUT! If such condition ever come to existence, I'm also willing to bet that a new paradigm shift will be created, and everyone will be back to where they were. The powerful will benefit the few while sacrificing the many. It's a natural order.

What do I think professional traders use? The simplest and safest answer I can give in this forum is, I don't know.

Quoting numbnuts
I always enjoy Ishtanas threads Market structure doesn't really change, at least not fast enough to really affect traders systems. Market dynamics do change though. I see technical strategy traders as a person alone in a room with a ball and a goal. The aim obviously is to kick the ball into the goal - but the room is always changing. The floor tilts wildly, the walls move in and out, and the goal moves around the room unpredictably. The player sometimes gets the timing right and sometimes gets it wrong. There is another way to approach the problem...
Another well thought post.

Numbnuts, I think I still have to study fundamental analysis in much greater detail because my current understanding of fundamental analysis doesn't translate to my bottom line profit at all. And nor is my technical analysis. I've stopped using technical analysis when I realize what it actually is.

I never pay attention to anything outside the 21 charts I see daily. No indices, no CNN, no Wall Street Journal, etc. And although I'll never stop learning, but just at this very moment, I fail to see the value of fundamental analysis to currencies, simply because currencies do not have value unlike equities. That is why no one ever called forex as an investment per se, because you only invest in something that has value in it. The fact that a company making a billion dollar "book" profit, no matter how well-cooked the book is, will be factored in into the price. I said "book" profit because numbers are toys. I studied forensic accounting, and couldn't stop laughing. Say a company's real profit is $50,000. Then out of generosity, the director's mum lend the director $50,000. The accountant can mask this "loan" into "profit", making a total of $100,000 " book profit," something the director would boast on his annual GM to unsuspecting investors. In reality it isn't that extreme, but numbers can easily be changed. Nevertheless, a working business is valuable despite a chance of bankruptcy.

So from my understanding currencies as a strictly speculative security, I have yet to find the value of trying to find the value in currencies.



***



Hmm... don't you guys realize that our discussion can actually encourage those who think that Holy Grail EA exists? I mean if market is not changing, then a robot can, logically, trade, indefinitely. If it is only "rinse and repeat," then theoretically a Holy Grail can be developed out of the market, providing there are only very few people who are using it. Maybe it's time to dig out those old outdated EAs? Now that no one is using it anymore? Just a thought.

I actually have an EA that works well for one period of time (quite long I have to say), then for I don't know what reason, the profit line begins to curve down, slowly. Hmm... liquidity issue most likely.

On the other hand, I can't help but to think that this "No EA can work consistently" statement is actually a false idea perpetrated by those who actually have a working one, in order to protect their own interest. Easy logic. The less people are looking for a working EA, the less likely the working EA is threatened by liquidity issue.

I'd still love to believe in Holy Grail EA. If my system can be mechanized, then I'm a free man, and I'll make a better world out of it.

That's right. Make one, don't find one.
  • #11
  • Aug 24, 2013 7:47am Aug 24, 2013 7:47am
-------------
I'd still love to believe in Holy Grail EA. If my system can be mechanized, then I'm a free man, and I'll make a better world out of it.
-----------
even if you get that lucky, no you will not make better world because you will be taking money from someone else and push him/her in misery. Market is changing and one needs to learn to read the mood of the market and take money from less skilled.

trading is not noble activity.
  • #12
  • Aug 24, 2013 9:18am Aug 24, 2013 9:18am
Quoting Ishtana
Hm... Well, one is from 2008 by the looks of the label, the other I don't know. But it proves a point that market doesn't have a lot of tricks up its sleeve. It's the same old thing, day in day out. PA works, candlestick pattern, I doubt it.
the label comes from an expert and i forgot to delete those . actually what i did i went to the yahoo finance and got the dow jones daily data and sp from farthest in time i could get. then i adapted the csv for metatrader and i input the data into an instrument.
the first chart is dow jones 1929 and the second one is sp500 1970. price action is chandlesticks.
  • #13
  • Edited 1:00pm Aug 24, 2013 11:48am | Edited 1:00pm
Quoting seaman2
------------- I'd still love to believe in Holy Grail EA. If my system can be mechanized, then I'm a free man, and I'll make a better world out of it. ----------- even if you get that lucky, no you will not make better world because you will be taking money from someone else and push him/her in misery. Market is changing and one needs to learn to read the mood of the market and take money from less skilled. trading is not noble activity.
Morality? You wanna bring morality to trading? Dude, your very existence in this forum speaks volume about juxtaposing the statement you just made.

If I managed to turn my system into an EA, how's that me pushing someone else into misery? What? Did I put a gun on your head to trade? Am I supposed to be responsible behind the decision made by all participants in this 4 trillion industry? If I win money, who gives a sh*t about my winnings? If I lose money, who gives a sh*t about my misery?

Average Joe, whom I have no idea at all about, decided to spend his $50,000 life saving into trading forex, and he lost them all because he doesn't know how to trade, and expect easy money out the market. Now, where do I fit in the story?

And then you said everyone should learn the mood of the market AND TAKE MONEY FROM LESS SKILLED??? Such hipo***.

...

There is no good cop and bad cop story in the market. Noobs always find an excuse when their trading is out of whack. "Oh there is a big evil in the financial market and he just took my $42.70 trade."

Well unless you subscribe to the idea that the Illuminati is behind IMF and all big banks and all central banks, and they are here to control the world, then the banks are just like you, they want to make money. Trouble is, you came unprepared into a stage where they've spent millions to get the best strategy and harnessing their advantage. Did the bank reps come to your door, take hostage of your family and force you to trade? ...

Oh hell I will make this world a better place. Money ain't worth SH*T when you ain't got the more important things.

But I know money can enhance lives. I know money can save lives. I know by distributing money to the right people with the right purpose, I know I can make a difference. When just one person is happy because of something that I say or do, I'm happier than him/her.

Out of my current financial poverty, I've already given away my money. That's because I'm wealthy, unmeasurable by money, and only the wealthy can give. A poor billionaire cannot give simply because he/she is poor. A poor person is someone who has lots of money and nothing else. How can you give love if you ain't got none?
  • #14
  • Aug 24, 2013 12:17pm Aug 24, 2013 12:17pm
Quoting Ishtana
Trading strategy to me is finding and exploiting the real inefficiency in the market that will be there almost indefinitely under the right circumstances.
Like what inefficiencies? What are the right circumstances?

Do you really not follow the markets outside price charts? So did you know why the US dollar strengthened so much this week and the Yen fell?
  • #15
  • Edited 1:09pm Aug 24, 2013 12:40pm | Edited 1:09pm
Quoting EmeraldEyes
{quote} Like what inefficiencies? What are the right circumstances? Do you really not follow the markets outside price charts? So did you know why the US dollar strengthened so much this week and the Yen fell?
If we purely look at USD/JPY, then by Tuesday's prior to New York opening, I can already tell that there are many technical traders putting sell orders at last Friday's "support," expecting for price to break it. This gives the bank the liquidity to buy by absorbing all those sell orders. By Friday's prior to New York opening, I can already tell there are so many buyers following the trend, maybe from knowing that the US is strengthening like you said. And the banks absorb all that buy order, giving them enough liquidity to drop the bomb using New Home Sales news release as an excuse to pull the price the other way.

Did I even look at the actual number of the New Home Sales data? No. Do I know why Yen fell? Except for the above explanation, no. I honestly don't. Maybe you can tell everyone here why? Especially the fundamental reason which I'm really curious to know about?

I guess I don't subscribe, at least not anymore, to the idea of strength and weakness, overbought and oversold, support and resistance. I only know where and when the big boys are most likely to trade and I trade along with them. Charts give plenty of information, but not enough from my own experience. That's why I'll never stop learning. I'm still far away.

I can't talk more than this. Someone is not too happy when I do that.
  • #16
  • Aug 24, 2013 1:09pm Aug 24, 2013 1:09pm
Oh, buyers on the Eur/Usd before Friday?

Usd spotlight has been on "when will the fed taper?" markets took the FOMC minutes release this week as in-line for tapering, and went bullish USD. US bond yields went higher as well, making USD very attractive. Of course, the Japanese really need a weak Yen so there was some verbal easing done by the BoJ.. in addition to their trillions worth of QE. That's just the basics of the flows happening.

You can't talk more about what? Is there a FF conspiracy?
  • #17
  • Edited 1:52pm Aug 24, 2013 1:16pm | Edited 1:52pm
Quoting EmeraldEyes
Oh, buyers on the Eur/Usd before Friday? Usd spotlight has been on "when will the fed taper?" markets took the FOMC minutes release this week as in-line for tapering, and went bullish USD. US bond yields went higher as well, making USD very attractive. Of course, the Japanese really need a weak Yen so there was some verbal easing done by the BoJ.. in addition to their trillions worth of QE. Someone is not too happy? Is there a FF conspiracy? lol
Yup, not all of them at once, but most would be done by Thursday's news traders and buyers at Friday's Tokyo Session.

Thank you. That makes sense. I've been meaning to study more about fundamental reason behind price movement. Never get my head around it because the evidence is often contrary to the theory. Maybe I'm focusing too much on news trading, instead of proper fundamental analysis as numbnuts pointed out.

Yeah, I got suspended recently by a senior member when I was teaching my method. I think he/she is not too comfortable with the truth I was sharing, which most probably against his/her own super understanding of forex. Hey who am I to say a senior member is wrong? ... I got bullied by one of them who abused the in-built bullying system. What's the point of having moderators when senior members can suspend people like that?

Twee contacted me and he said the suspension was unwarranted for. The suspension was lifted and the senior member has been given a warning. Don't know why this guy/girl is so agro. Looking at his/her recent posts, almost all of them are so negative. Nay saying what everybody else is saying.
  • #18
  • Aug 24, 2013 1:28pm Aug 24, 2013 1:28pm
No problem. Its super easy to know what is/about to move based on whats happening in the world. These flows echo through the forex market, as you can see all the Jpy crosses went against the Yen for example.

Oh, well that stinks then. As long as you aren't trying to scam anyone, there's no wrong perception of the markets. The market will let you know if you're right
  • #19
  • Aug 24, 2013 1:41pm Aug 24, 2013 1:41pm
Quoting EmeraldEyes
No problem. Its super easy to know what is/about to move based on whats happening in the world. These flows echo through the forex market, as you can see all the Jpy crosses went against the Yen for example. Oh, well that stinks then. As long as you aren't trying to scam anyone, there's no wrong perception of the markets. The market will let you know if you're right
True that.

Yeah, I still don't know which exact event moves what and how. I don't know how to catch up with all the news, politics, and economy. Worse, I still don't know what warrants a continuation of a move. All my trades are done at the swing peak, as I only trade reversals, but I just don't know whether the move will continue or not. Trailing stop doesn't work, besides I don't have a VPN to run the EA on. And my computer is shared by 4 people a day, so I can't claim monopoly of it. Manual jumping stop works, but I have to watch the chart almost all day which I cannot do. I got life outside forex =)

I think you'll be laughing at my understanding of fundamental analysis, but hey my bottom line is growing, and I ain't complaining.
  • #20
  • Aug 24, 2013 1:51pm Aug 24, 2013 1:51pm
the market is like riding a dragon.
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