Do you believe this market is random? | Page 31 | Forex Factory

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  • #601
  • May 30, 2014 12:57pm May 30, 2014 12:57pm
Quoting saneblane
{quote} Man Proximus I knew you were a gekko fan but to quote him? that's on a whole other lever. But wall street was a mildly entertaining movie I can say that much.
That movie wasnt supposed to teach you to trade, but it was meant to show the mentality on Wallstreet.Gekko is the best character out there who summarizes a real succesful wallstreet trader, in every aspect.

And i`m pretty sure that nobody likes to have losses here.

Quoting Rap Skallion
When you close a trade in loss, what happens to your equity? Nothing. the profit/loss column already discounted that loss from the balance for you. So why close a trade in loss? To gain room in your margin. If the prospects of a brand new trade increasing your equity out weigh those of the trade you closed, you have improved your position. Your margin has room in it for only so many trades of a size. Now, if in your estimation, the trade you are thinking of closing will get to that point, it is cheaper to close it now, and open yourself for new...
Yes but i dont put trades blindly, i analyze it carefully, and if the trade initially goes against me, its just temporary.Huge markets turns are very predictable with my analysis, and the rest doesnt matter, just wait out the trades.

Tuesday and Wednesday has always the highest volatilty, Thursday is ok, and the rest is pretty flat.
"There's a sucker born every minute" - P.T. Barnum
  • #602
  • May 30, 2014 12:58pm May 30, 2014 12:58pm
Define 'random'. I define it as 'unpredictable', 'unknowable', and 'not following any structure'. If you truly believe this and still trade, you are merely a gambler and there is no skill to your trading, right?

There is no logical reason to suppose that markets are random. The EMF has been proven false a long time ago.

Complex is not the same thing as random. All markets have memory.
  • #603
  • May 30, 2014 12:58pm May 30, 2014 12:58pm
Quoting Rap Skallion
So why close a trade in loss? To gain room in your margin. If the prospects of a brand new trade increasing your equity out weigh those of the trade you closed, you have improved your position. Your margin has room in it for only so many trades of a size.
You're thinking in trades, I'm thinking in positions. I closed 2 trades (or 30% of the position) because I estimated that the probability of the market moving in the position direction decreased. When thinking in positions, it doesn't matter what trades from the set forming that position you close. Like you said, the effect on equity when closing the trades is zero (actually it's not for me, because I pay commissions instead of a larger spread like most, but you get the idea).
  • #604
  • May 30, 2014 1:10pm May 30, 2014 1:10pm
Quoting Fractalist
Define 'random'. I define it as 'unpredictable', 'unknowable', and 'not following any structure'. If you truly believe this and still trade, you are merely a gambler and there is no skill to your trading, right? There is no logical reason to suppose that markets are random. The EMF has been proven false a long time ago. Complex is not the same thing as random. All markets have memory.
That's the same thing I said. If you truly believe the market is random then you are merely gambling. Blackjack might be seen as gambling too until you learn to count cards and that's when the big bucks come in. The market is like blackjack, but most never learn to count the cards.
Being a trader is lonely, but being a great trader is lonelier still
  • #605
  • May 30, 2014 1:45pm May 30, 2014 1:45pm
Actually, I only closed one trade in a loss this week. I hit a 'sell by market" by mistake: said a word, and closed it.
If you watch a lot of windows, enter only in the best few, you just don't get many trades that bomb that bad.

I may close some trades out next week though. I am always afraid of falling in love with past mistakes. It is rare when the market doesn't punish me for doing so.

There is this saying: "The longer you wait to close a trade in loss, the sooner it will turn around into profit after you close it."

I have multiple trades in over 2/3ds pairs open at this time. if a completely different pair gives me a cheaper $/margin increase (once it is over 90 p) That goes. Only if I realize "geez, why do I have 8 trades active in one pair" do I concentrate on freeing that pair up.

Okay, that happens to me every couple of months. Probably something I should improve on. I probably am relaxed to the point of being sloppy.

Thanks you two!
  • #606
  • May 30, 2014 1:57pm May 30, 2014 1:57pm
Quoting Fractalist
Define 'random'. I define it as 'unpredictable', 'unknowable', and 'not following any structure'. If you truly believe this and still trade, you are merely a gambler and there is no skill to your trading, right? There is no logical reason to suppose that markets are random. The EMF has been proven false a long time ago. Complex is not the same thing as random. All markets have memory.

As Bill Clinton once observed, "That depends on what 'Means' means."

People talk about the wind blowing at "random", yet sailors have navigated the seas for millenia. There is this pairing from communications theory: "signal versus noise". Sometimes the static is so bad you can't read the signal, sometimes you can.

If you sit absolutely still in your room and do nothing you are gambling that that is a good thing for you to do (you gambler you!).

I wonder how many people are trying to use this as an excuse to quit... The market is random , you fools, I q--t!

They'll come back at random
  • #607
  • May 30, 2014 2:04pm May 30, 2014 2:04pm
Quoting saneblane
{quote} Blackjack might be seen as gambling too until you learn to count cards and that's when the big bucks come in. The market is like blackjack, but most never learn to count the cards.
Love the analogy.......... :nerd:
Markets are not efficient, rather they are effective - Jones
  • #608
  • May 30, 2014 2:25pm May 30, 2014 2:25pm
Quoting Rap Skallion
{quote} As Bill Clinton once observed, "That depends on what 'Means' means." People talk about the wind blowing at "random", yet sailors have navigated the seas for millenia. There is this pairing from communications theory: "signal versus noise". Sometimes the static is so bad you can't read the signal, sometimes you can. If you sit absolutely still in your room and do nothing you are gambling that that is a good thing for you to do (you gambler you!). I wonder how many people are trying to use this as an excuse to quit... The market is random...

People are confused. The wind is not random. It is complex. Same thing in markets.

As for SNR issues, scrap moving averages and use lowpass filters instead and watch that SNR get much better. Moving Averages are quite possibly the worst filter on the planet and cannot remove noise very well. They also lag way too much.
  • #609
  • May 30, 2014 2:49pm May 30, 2014 2:49pm
Quoting mzvega
{quote} Love the analogy.......... :nerd:

Lol hey what can I say, I have been working on that one for weeks
Being a trader is lonely, but being a great trader is lonelier still
  • #610
  • May 30, 2014 7:15pm May 30, 2014 7:15pm
Quoting 60minuteman
{quote} your patterns are an illusion, or they could be quantified and a robot made to trade "your patterns" and you would be rich
Interesting statement. Patterns form because we take a picture in time for example a 4H chart takes a picture and it will be different than a 15M chart because it takes a picture every 15 minutes but once every 4 hours they will take a picture at the same time. The problem I have had with patterns is the 15M pattern may tell a different story than the 4H pattern. So which one will you choose? Most would say the 4H because a higher pattern trumps a lower pattern. Having said that patterns only work when they work, people never point out when they fail.

The subject of EAs interest me because I use them but not 24/7. I find them useful when I think a market is going to do a certain thing so I use an appropriate EA for the moment. For example if I think the market will trend I will use one that works good in trending markets. If I think the market is ranging, I will use one that works good in a ranging market. If I see a news spike and I want to counter trend trade it back to its median I can use a CT EA. This way I dont have to wait at the screen for the right moment or use a pending order to guess where I think it might happen. Which leads me to my statement.

The problem with full fledged EAs is they dont have the ability to change to market conditions, sudden news stories, holiday dead periods, pre-news flat times,etc. They are stuck in a set of rules that cant possibly adjust to the various type of market movements. So they build up losses when in reality if only used in markets they are designed for they can be successful. So the human mind though has the ability to adapt to changing markets and adjust the trading style accordingly. The mind can know a news story is coming and not trade and wait for the result, its holiday time so dont bother, two countries are about to go to war or end one. A certain country is going to make a major change in economic direction. The human mind can make adjustments for these things an EA cannot. So EAs can be used like a golf club in a golf bag. You size up the situation and then pull out the appropriate EA for the market. Cant use a putter on the tee and cant use a driver on the green but both have the appropriate use when conditions are right.
  • #611
  • May 30, 2014 7:21pm May 30, 2014 7:21pm
Quoting nanningbob
{quote} Interesting statement. Patterns form because we take a picture in time for example a 4H chart takes a picture and it will be different than a 15M chart because it takes a picture every 15 minutes but once every 4 hours they will take a picture at the same time. The problem I have had with patterns is the 15M pattern may tell a different story than the 4H pattern. So which one will you choose? Most would say the 4H because a higher pattern trumps a lower pattern. Having said that patterns only work when they work, people never point out when...
Very sensible post.
  • #612
  • May 30, 2014 7:31pm May 30, 2014 7:31pm
Quoting nanningbob
{quote}I find them useful when I think a market is going to do a certain thing so I use an appropriate EA for the moment. For example if I think the market will trend I will use one that works good in trending markets. If I think the market is ranging, I will use one that works good in a ranging market. If I see a news spike and I want to counter trend trade it back to its median I can use a CT EA. This way I dont have to wait at the screen for the right moment or use a pending order to guess where I think it might happen.
The technical term for the different types of market conditions you are talking about is "market regimes". The most common ones are momentum (trending) and mean-reversion (ranging). But there are other axes that you can measure against (volatility, dispersion, correlation, ...) . And there are tons of academic paper describing various ways of detecting the current regime, from the kind retail use (simple technical rules) to more sophisticated ones (neural networks, SVMs, markov chains, machine learning, ...)

https://www.google.com/search?q=mark...me%20detection

An example, where green is mean-reversion regime and red is momentum regime:

http://systematicinvestor.files.word...ot2-small4.png

One very interesting paper I've read used a bunch of algorithms to detect the current regime. Imagine running on demo 3 EAs that work best in trending market (moving average crossover, higher high & higher low, ...) and 3 EAs that work best in ranging markets (RSI overbough/oversold, support/resistance, ...). Then you would monitor the profitability of these EAs. If the trending ones are more profitable, it means that the market is in a trending regime. Pretty obvious, huh? Of course, the devil is in the details. And obviously you need to know the current regime before it ends.
  • #613
  • May 30, 2014 7:32pm May 30, 2014 7:32pm
Quoting Naokia980
Do big boys follow each other's and respect their orders? Current money flow is mirror of future actions and Big money exit one and enter another currency. How can retailers diversify informed flow from mm tricks? Both have big size of money and move market for bla bla reasons..
Go here. Some institutional traders are having a discussion about trading when working for banks or hedge funds. Some truly nice nuggets to add to your trading knowledge.

http://www.forexfactory.com/showthread.php?t=486128
  • #614
  • May 30, 2014 7:38pm May 30, 2014 7:38pm
Quoting Adal
{quote} The technical term for the different types of market conditions you are talking about is "market regimes". The most common ones are momentum (trending) and mean-reversion (ranging). But there are other axes that you can measure against. And there are tons of academic paper describing various ways of detecting the current regime, from the kind retail use (simple technical rules) to more sophisticated ones (neural networks, SVMs, markov chains, machine learning, ...) https://www.google.com/search?q=mark...me%20detection One...
And when you get that information you find you are too late for the party unless the trend is long term. The devil is in the details. My favorite trading tool is comparison of the weakness or strength of a currency across the board. If gbp is getting stronger and the jpy is getting weaker then I go to my charts and look for gbp/jpy buys. I have found that to be the best predictor of market moves. So that is what I use.

As far as terminology, you can be a doctor at a medical convention or a doctor talking to a patient. Same disease but different terminology depending on the group you are talking too. I prefer simplified language that everyone can understand.
  • #615
  • May 30, 2014 7:45pm May 30, 2014 7:45pm
Quoting nanningbob
As far as terminology, you can be a doctor at a medical convention or a doctor talking to a patient. Same disease but different terminology depending on the group you are talking too. I prefer simplified language that everyone can understand.
That is correct. But you would have a difficult time googling about a disease using terms like "my head is pounding, I have fever and I can't swallow". Much easier to google for "flu disease". (And yes, I know that by googling that phrase the first result is "flu symptoms", but most of the times you won't be that lucky)

This is why I mentioned the professional term. Googling for "the market sometimes is trending, and sometimes is not" won't find you the academic research about this.

If you consider that research worthwhile to read or not, that's up to you. But you can at least search for it by knowing the proper terms.
  • #616
  • May 30, 2014 7:46pm May 30, 2014 7:46pm
Quoting Fractalist
{quote} People are confused. The wind is not random. It is complex. Same thing in markets. As for SNR issues, scrap moving averages and use lowpass filters instead and watch that SNR get much better. Moving Averages are quite possibly the worst filter on the planet and cannot remove noise very well. They also lag way too much.
I loved your analogy, in one thought you summarized the whole debate. Excellent.

The wind is not random; it is complex. Same thing in markets.
  • #617
  • May 30, 2014 7:49pm May 30, 2014 7:49pm
Quoting Adal
{quote} That is correct. But you would have a difficult time googling about a disease using terms like "my head is pounding, I have fever and I can't swallow". Much easier to google for "flu disease". This is why I mentioned the professional term. Googling for "the market sometimes is trending, and sometimes is not" won't find you the academic research about this. If you consider that research worthwhile to read or not, that's up to you. But you can at least search for it by knowing the proper terms.
Point taken and you are correct, however, as a life long teacher it is proper to explain what terms mean. Since there would be only 1 in a 1000 or 10,000 who would understand those terms here at FF I do not wish to spend paragraphs of my time explaining terms when simplified English will do. But yes you should teach proper terms.
  • #618
  • May 31, 2014 6:00am May 31, 2014 6:00am
Quoting nanningbob
{quote} Interesting statement. Patterns form because we take a picture in time for example a 4H chart takes a picture and it will be different than a 15M chart because it takes a picture every 15 minutes but once every 4 hours they will take a picture at the same time. The problem I have had with patterns is the 15M pattern may tell a different story than the 4H pattern. So which one will you choose? Most would say the 4H because a higher pattern trumps a lower pattern. Having said that patterns only work when they work, people never point out when...
Nearly all these 'patterns' people use are just 50/50 guesses with some random distribution of wins and losses, they then find other patterns to explain why their first pattern failed. The only time a pattern has an edge is if it backed by the fundamentals/long term trend.

The amount of time spent trying to quantify the intraday swings is a total waste, you either have to have an extreme RR system, say over 5/1 or you need to use very wide stops and get out of most your trades with a win. Everything else is apples and oranges (unless you include HFT)

As for EA's I have one that takes entries, because they don't matter to me. If anyone has a "pattern" that in itself is profitable I have never seen one..
tradewith60
  • #619
  • May 31, 2014 6:11am May 31, 2014 6:11am
Quoting 60minuteman
{quote} Nearly all these 'patterns' people use are just 50/50 guesses with some random distribution of wins and losses, they then find other patterns to explain why their first pattern failed. The only time a pattern has an edge is if it backed by the fundamentals/long term trend. The amount of time spent trying to quantify the intraday swings is a total waste, you either have to have an extreme RR system, say over 5/1 or you need to use very wide stops and get out of most your trades with a win. Everything else is apples and oranges (unless you...
Depends what you mean by pattern. There are underlying patterns which occur again and again and which lead to greater than 50% probability of a win, but they're not patterns like a pinbar or a doji (liek you say, these are a bit like 50-50 in the long run). There's something much deeper there, and perhaps you haven't found it yet.

Then again, entries is less important than how you manage the trade to exit, yet everyone is looking for a pattern for their entry rather than a pattern for exit.
  • #620
  • May 31, 2014 6:36am May 31, 2014 6:36am
Quoting SeanyTsunami
I don't believe its totally random, price moves for a reason. Banks and funds buying and selling currencies at certain price levels, causes price movements and patterns that repeat themselves over time as a result of the order flow.
+1
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