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  • #181
  • Aug 23, 2014 9:50am Aug 23, 2014 9:50am
Retail traders wouldn't recognize a winning strategy if it smacked them in the face.

The first thing they look at is the win-ratio. If it's under 80% retail traders say it's a junk strategy.

The second thing they look at is the RR ratio. If it's not >1, they laugh and say that it's also junk.

Thus they exclude exactly the winning strategies.

Why? Because they were indoctrinated on how a "winning" strategy looks like (>80% WR, R:R > 3:1). But they forget to look at who is "teaching" them - other losing traders.

Of course, if a retail trader were smart, he would actually test these things and find out the truth.
  • #182
  • Aug 23, 2014 11:09am Aug 23, 2014 11:09am
Quoting corrugatedit
{quote} Like Adal said ...)
Quoting you 3rd time

I was thinking about this more, i mean about your friends operation of collecting sensible information from trading forums, and it seems pretty illogical to me.

Well first of all, lets imagine that any FX forum has 95% of its members who post regular average quality posts, some of them are somewhat useful, while others are somewhat already known.So only 5% of the membership (i dont know for sure but lets just assume that its 5 for a though) is uncommon, and has very innovative ideas.

Now also innovative can be 2 sided, one being (2.5% of members ) absolutely BS, meaning they invent new BS methods, while the other are the Holy Grail inventors, they invent very very useful trading ideas and tools.

So that being said 2.5% of the members are completely useless, while the other 2.5% are golden and very precious, and the other 95% being a nuance of them.

The question is: how do you or he know that those innovators from which camp they are? Because if he find a new post which is very interesting, how does he know that this is actually true and useful or its is just a new BS added to the list? Because i`ve seen many many financial news articles to say, which were so interesing and innovative yet they were complete and utter BS once i discovered their uselessness. How can he distinguish gold from turd?

Question 2 is, why does he waste time to dig the forum and read every post to search for useful posts and new ways to trade, when he can just copy the signals from succesful TRADE EXPLORERS?
"There's a sucker born every minute" - P.T. Barnum
  • #183
  • Aug 23, 2014 11:27am Aug 23, 2014 11:27am
Quoting Adal
Retail traders wouldn't recognize a winning strategy if it smacked them in the face. The first thing they look at is the win-ratio. If it's under 80% retail traders say it's a junk strategy. The second thing they look at is the RR ratio. If it's not >1, they laugh and say that it's also junk. Thus they exclude exactly the winning strategies. Why? Because they were indoctrinated on how a "winning" strategy looks like (>80% WR, R:R > 3:1). But they forget to look at who is "teaching" them - other losing traders. Of course, if a retail trader were...
80% WR and RR of 3:1 is just impossible, anyone who looks for that kind of system must be really naive.

The 3:1 RR i agree with, well i dont know the exact numbers but i ran some simulations with random numbers and the Reward>Risk hypothesis is correct.I dont know from where you get the idea that it is not, because in any pair i ran trough, it did held:

http://www.forexfactory.com/attachme...6&d=1406534098

But we all know that a 3:1 RR implies a 25% WR when random, by each percentage above 25% we get an edge, if we manage to hit 30% accuracy with 3:1 RR we have a 5% edge and can trade well.

Unfortunately the consecutive losses will be also high, so we need to scale down our lot size, and also the trade duration will be high, but its just the only way to trade, i havent seen a Risk>Reward system yet which upheld in the long term, not even fund managers use that kind of trading
"There's a sucker born every minute" - P.T. Barnum
  • #184
  • Aug 23, 2014 12:17pm Aug 23, 2014 12:17pm
Quote
But we all know that a 3:1 RR implies a 25% WR when random

You gave your own answer. Real profitable trading strategies aren't "random". They have edge.

But retail traders, instead of looking for a real edge, keep hoping that money management alone (martingale, going cowboy, ...) can work instead. Because finding a real edge is hard. Going cowboy is not.

And results are accordingly.
  • #185
  • Aug 23, 2014 12:26pm Aug 23, 2014 12:26pm
Quoting Proximus
Question 2 is, why does he waste time to dig the forum and read every post to search for useful posts and new ways to trade, when he can just copy the signals from succesful TRADE EXPLORERS?
I have also downloaded this whole forum. Twice. Once in 2011 and another time two months ago. My computer worked for a whole two weeks, sending one request a second until I got all the pages of all the threads. 9 GB of HTML files (no images).

Why? I will not tell you, because there is edge there.

But I will tell you why professional market makers do this since 2000 - they scan online trading forums and count how many times each instrument (EUR/USD, AAPL, bond, ...) is mentioned. And they look for deviations from the average. When they instruments are mentioned a lot, volatility will increase on that instrument in the very near future. And since option prices are based primarily on estimated implied volatility, well, you get the idea... Hard cold cash, gotten from scanning online forums full of losers. You don't care what direction they trade. But you do care that they will trade and increase volatility.
  • #186
  • Aug 23, 2014 12:47pm Aug 23, 2014 12:47pm
Quoting Adal
{quote} You gave your own answer. Real profitable trading strategies aren't "random". They have edge. But retail traders, instead of looking for a real edge, keep hoping that money management alone (martingale, going cowboy, ...) can work instead. Because finding a real edge is hard. Going cowboy is not. And results are accordingly.
No what i was saying that Reward>Risk situations were more effective overall then vice-versa.There were more positive expectancy outcomes even if we looked at random numbers on the Reward>Risk half, than on the other.The market is just structured that way.

Besides its not a big secret, most traders already trade with Reward>Risk, just look at the poll on this thread, the majority definitely voted on the Reward>Risk principle.And its also very logical, because it eases your winrate expectations, and the pressure from your shoulders, as a 90% winrate requirement is a hell more stressing than a 25% one.

Quoting Adal
{quote} I have also downloaded this whole forum. Twice. Once in 2011 and another time two months ago. My computer worked for a whole two weeks, sending one request a second until I got all the pages of all the threads. 9 GB of HTML files (no images). Why? I will not tell you, because there is edge there. But I will tell you why professional market makers do this since 2000 - they scan online trading forums and count how many times each instrument (EUR/USD, AAPL, bond, ...) is mentioned. And they look for deviations from the average. When they instruments...
Well if that helps you fine, i`m not a scalper, but there could be also uncertainty with this method, because if you search for keywords like "EUR/USD" or E/U, it doenst tell you the time horizon, traders might trade the EUR/USD tomorrow or the next month, it doesnt tell you the duration, but if you quantified it and found a pattern there then good for you.

I`ve heard about twitter bots which analyzed #EURUSD and similar sections, and it is way more effective because usually twitter posts is almost like a signal service because traders post them right before taking a trade, you also have the timestamp and the direction usually in keywords like "bullish", "up" and such, and also they will disclose their SL and TP.

Its a clever idea, but i just think that a trader must be really desperate to use such a complicated strategy, if you are not a daytrader then there are 10000000x easier methods to be consistent, it is just that its hard to quantify, that is what i`m working on right now.
"There's a sucker born every minute" - P.T. Barnum
  • #187
  • Aug 23, 2014 12:47pm Aug 23, 2014 12:47pm
Quoting Adal
{quote} I have also downloaded this whole forum. Twice. Once in 2011 and another time two months ago. My computer worked for a whole two weeks, sending one request a second until I got all the pages of all the threads. 9 GB of HTML files (no images). Why? I will not tell you, because there is edge there. But I will tell you why professional market makers do this since 2000 - they scan online trading forums and count how many times each instrument (EUR/USD, AAPL, bond, ...) is mentioned. And they look for deviations from the average. When they instruments...
FXCM has a SSI tool. It reflects the Retail Trader Sentiment and is used as contraindicator. There is real hard negative correlation between what retailer think and the curse is doing. This is based on buy low sell high /trying to catch the bottom mentallity, cut the wins and let losses run strat (80% winrate with -50% balance) & Mainstream Media to control the crowed. Negative Correlation is no Coincidence!!!
If You are right at the wrong time, youre wrong!
EUR/USD 18th August 2014(Pic)
Attached Image
  • #188
  • Aug 23, 2014 12:54pm Aug 23, 2014 12:54pm
Quoting nese
{quote} FXCM has a SSI tool. It reflects the Retail Trader Sentiment and is used as contraindicator. There is real hard negative correlation between what retailer think and the curse is doing. This is based on buy low sell high mentallity, cut the wins and let losses run strat (80% winrate with -50% balance) & Mainstream Media to control the crowed. Negative Correlation is no Coincidence!!! If You are right at the wrong time, youre wrong! EUR/USD 18th August 2014(Pic) {image}
I dont find these tools very accurate, the COT report , or any other sentiment indicators, they cant be used to generate signals, even if you always take the opposite than the retail i dont think you gain a really big edge.

They have their usefulness, which is to detect the sentiment, thats it.But the sentiment alone is not enough, creating a full profitable trading strategy has to be complex and analyses many things about the markets.Analysing the sentiment is useful, but sometimes it can be misleading, but yes i think it should be a part of any trading strategy.
"There's a sucker born every minute" - P.T. Barnum
  • #189
  • Aug 23, 2014 12:58pm Aug 23, 2014 12:58pm
Quoting Proximus
{quote} Its a clever idea, but i just think that a trader must be really desperate to use such a complicated strategy, if you are not a daytrader then there are 10000000x easier methods to be consistent, it is just that its hard to quantify, that is what i`m working on right now.
Pretty much all the research I've seen shows that there is more profit to be extracted on lower TF than on higher ones. Higher TF are much more efficient, since a lot more size trades them (think pension funds).

Lower TF on the other hand, are less random. This was measured time and time again.

Lower TF also allow you to get better statistics - you don't need to trade 2 years to get a 100 trade sample.

On the other hand, lower TF are much more technologically challenging. Watching a chart with your eyes just doesn't cut it anymore. Neither watching the charts 2 minutes in the morning and then forgetting about it until the next day.

Harder, but much more rewarding.
  • #190
  • Aug 23, 2014 1:06pm Aug 23, 2014 1:06pm
Quoting Proximus
{quote} I dont find these tools very accurate, the COT report , or any other sentiment indicators, they cant be used to generate signals, even if you always take the opposite than the retail i dont think you gain a really big edge. They have their usefulness, which is to detect the sentiment, thats it.But the sentiment alone is not enough, creating a full profitable trading strategy has to be complex and analyses many things about the markets.Analysing the sentiment is useful, but sometimes it can be misleading, but yes i think it should be a part...
Yeah the Index for it self is worthless(especially if many retailer are using it ).
Extremes (its getting a Indicator in Extremes)and momentum shifts of the Index are great tools!
  • #191
  • Aug 23, 2014 1:13pm Aug 23, 2014 1:13pm
Quoting Adal
{quote} Pretty much all the research I've seen shows that there is more profit to be extracted on lower TF than on higher ones. Higher TF are much more efficient, since a lot more size trades them (think pension funds). Lower TF on the other hand, are less random. This was measured time and time again. Lower TF also allow you to get better statistics - you don't need to trade 2 years to get a 100 trade sample. On the other hand, lower TF are much more technologically challenging. Watching a chart with your eyes just doesn't cut it anymore. Neither...
That is true more profit can be extracted from low TF, but not anyone can do it, i dont know how you scalp small TF, but it takes much effort and the uncertainty is by orders of magnitude higher than on high timeframe (>D1).

I`ve read many researches about the microstructure of the markets, and unexpected events there can be caused by merely anything even when the market is quiet, one misplaced price by a prime market maker can cause a ripple effect in the whole markets, by other MM trying to figure out why/what/where and adjust their quotes accordingly.

So even if you have a pattern which you follow, any it is consistent, the magnitude of uncertainty can be really unpleasant.It takes many hours of research to come up with a plan like it, and once the world found it out its gone.Not many arbitrage opportunities nowadays isnt it?

Quote
Lower TF on the other hand, are less random.

Thats nonsene, maybe you wanted to say, the length of time passing from an event, so lets say you have a strong GDP bearish case, then the market impact will be bearish, and the more time passes the less effect this release will have, and then it will decay.

But just to say that the low TF is less random is nonsense, as i said before, technically anything can cause random behaviour there, which is noise and you pretty much need a bigger stoploss than it to engulf it, therefor a bigger TP aswell as we go with Reward>Risk method, hence higher timeframe and trade duration.

Quote
Lower TF also allow you to get better statistics - you don't need to trade 2 years to get a 100 trade sample.

True, but if you know what you are doing, you dont even need a statistical sample, because you can get that from backtests, and you know it will work in the future too because the method itself never changes.It may sound silly but thats how it is, i know an ex fund trader who traded similarly with big money, and didnt even bothered to backtest its strategy because he was certain that it will never change, and it worked, and also it wasnt a gambling method
I cannot reveal it, but if you believe me its fine.
"There's a sucker born every minute" - P.T. Barnum
  • #192
  • Aug 23, 2014 1:27pm Aug 23, 2014 1:27pm
Quoting nese
{quote} Yeah the Index for it self is worthless(especially if many retailer are using it ). Extremes (its getting a Indicator in Extremes)and momentum shifts of the Index are great tools!
Not because many traders are using it, but because the retail market is only <=1% of the total FX market.

The FX market structure is: 50% market makers (from T1 prime MM banks down to smaller MM brokers) and 50% traders (from funds to private corporations to average Joe retail trader), and the average Joe is only about 1%, so you see the market doesnt really care about Mr Average Joe's sentiment

Mr Average Joe retail trader doesnt matter in the grand scheme, yet its all we have, because large traders dont really reveal their sentiment so we need to use mathematical induction to estimate the entire trader side's sentiment, so we need to view only the winner retail trader's sentiment, and thats easy because 95% lose right, so obviously the opposite of retail sentiment will most likely be correlated with the large traders sentiment.But not always identical because as i said, retailers doesnt matter.

Logical
"There's a sucker born every minute" - P.T. Barnum
  • #193
  • Aug 23, 2014 1:44pm Aug 23, 2014 1:44pm
Quoting Proximus
{quote}But just to say that the low TF is less random is nonsense, as i said before, technically anything can cause random behaviour there, which is noise and you pretty much need a bigger stoploss than it to engulf it
But what is the reaction to that noise? Is the reaction to that noise random?

Quote
Not because many traders are using it, but because the retail market is only <=1% of the total FX market.

You should research stuff before repeating what the losers believe (and thus becoming indoctrinated with falsehoods yourself).

New breakdowns collected in the 2013 Triennial show that retail trading accounted for 3.5% and 3.8% of total and spot turnover, respectively

In April 2013, retail trading in Japan accounted for 10% and 19% of total and spot, respectively.

http://www.bis.org/publ/qtrpdf/r_qt1312e.htm
  • #194
  • Aug 23, 2014 1:54pm Aug 23, 2014 1:54pm
Quoting Proximus
{quote} Not because many traders are using it, but because the retail market is only <=1% of the total FX market. The FX market structure is: 50% market makers (from T1 prime MM banks down to smaller MM brokers) and 50% traders (from funds to private corporations to average Joe retail trader), and the average Joe is only about 1%, so you see the market doesnt really care about Mr Average Joe's sentiment Mr Average Joe retail trader doesnt matter in the grand scheme, yet its all we have, because large traders dont really reveal their sentiment...
Yes youre right retailer dont make the market but they make the SSI wich is incredible neg correlated with the market. If 33,3% , of crowd wich is making the SSI, trade after SSI it getting worhtless because they make the SSI.
Because of tht I like the COT .
  • #195
  • Aug 23, 2014 1:56pm Aug 23, 2014 1:56pm
Quoting Adal
{quote} But what is the reaction to that noise? Is the reaction to that noise random?
Hehe, it is a nice philosophical question what is random and what is not, random is basically what is unknown, the fact that X trader at a big bank puts on 100 million to trade its obviously not random, but if you didnt know about it and it is a surprize to you, then it is.Randomness is really subjective, and its mostly caused by lack of information.

Also with LV1 quotes, pretty much everything in the charts are random, unless you find a subtle pattern.However the noise remains noise.

Quoting Adal
{quote} You should research stuff before repeating what the losers believe (and thus becoming indoctrinated with falsehoods yourself). New breakdowns collected in the 2013 Triennial show that retail trading accounted for 3.5% and 3.8% of total and spot turnover, respectively In April 2013, retail trading in Japan accounted for 10% and 19% of total and spot, respectively. http://www.bis.org/publ/qtrpdf/r_qt1312e.htm
Hmm i suspected that i was wrong there, thanks for correcting me.But i still dont think that few % makes any difference.The herd remains the herd, and the herdsman will slay the herd just like it did always

The quote from wallstreet: " Ever wonder why fund managers can't beat the S&P 500? 'Cause they're sheep, and sheep get slaughtered. "
"There's a sucker born every minute" - P.T. Barnum
  • #196
  • Aug 23, 2014 8:19pm Aug 23, 2014 8:19pm
Quoting nese
{quote} Yeah the Index for it self is worthless(especially if many retailer are using it ). Extremes (its getting a Indicator in Extremes)and momentum shifts of the Index are great tools!
RE: POSITION/SENTIMENT REPORTS/INDICATORS
I think they have an ulterior motive - they are designed to serve the brokers - though not neccessarily good or bad or to hurt the clients - it's just an interesting mechanism. Let me explain.

Ideally a broker wants to offset clients' positions against each other, internally, as much as possible, because it costs him to hedge the risk of net-exposure upstream (simplistic).

Whatever each broker calls them: ssi, long/short ratios, net positions, net balance.., these reports, if you think about it, what they really are - and reveal - is the BROKER'S OWN NET EXPOSURE.

Publically, superficially, they get advertised and understood to represent 'the retail sentiment'.

Combine that with the common wisdom that says: 'retail loses - so fade it'.

And you get this key effect: clients fade these sentiment indicators.

However in reality: they really fade the broker's unbalanced net exposure - and push it back to balance, trade against each other's positions - offset each other internally (lol,, that sounds sick), and he gets to keep the spread inhouse.

And a bonus: if his exposure gets too extreme, the clients are now 'educated' to push on it back towards neutral.
  • #197
  • Aug 23, 2014 9:05pm Aug 23, 2014 9:05pm
Quoting corrugatedit
{quote} RE: POSITION/SENTIMENT REPORTS/INDICATORS I think they have an ulterior motive - they are designed to serve the brokers - though not neccessarily good or bad or to hurt the clients - it's just an interesting mechanism. Let me explain. Ideally a broker wants to offset clients' positions against each other, internally, as much as possible, because it costs him to hedge the risk of net-exposure upstream (simplistic). Whatever each broker calls them: ssi, long/short ratios, net positions, net balance.., these reports, if you think about it,...
Yes thats true. the main reason i dont use it is its just the fact i get the info from a broker! I cant install the Indicator on a other platform from a other broker to compare it . I dont even know if thats true what they giving me on the Screen! Common Volume Indicators are also a quiet spicy thing.
  • #198
  • Aug 23, 2014 9:43pm Aug 23, 2014 9:43pm
Quoting Proximus
{quote} Not because many traders are using it, but because the retail market is only <=1% of the total FX market. The FX market structure is: 50% market makers (from T1 prime MM banks down to smaller MM brokers) and 50% traders (from funds to private corporations to average Joe retail trader), and the average Joe is only about 1%, so you see the market doesnt really care about Mr Average Joe's sentiment Mr Average Joe retail trader doesnt matter in the grand scheme, yet its all we have, because large traders dont really reveal their sentiment...
The market is prety much all market making, good, bad and indifferent plus a smidgin of retailing when the MM's are absent (which is the odd day). If you can't get to grips with that process, momentum would be the way to go, IMHO.
The road to pipland is arduous and fraught with challenge.
  • #199
  • Aug 24, 2014 12:01pm Aug 24, 2014 12:01pm
Quoting corrugatedit
{quote} RE: POSITION/SENTIMENT REPORTS/INDICATORS I think they have an ulterior motive - they are designed to serve the brokers - though not neccessarily good or bad or to hurt the clients - it's just an interesting mechanism. Let me explain. Ideally a broker wants to offset clients' positions against each other, internally, as much as possible, because it costs him to hedge the risk of net-exposure upstream (simplistic). Whatever each broker calls them: ssi, long/short ratios, net positions, net balance.., these reports, if you think about it,...
Wow now thats what i call an eye opener, an interesting preposition, i dont know that it is true or not, but for sure it is logical, as it didnt seemed logical that brokers would make that kind of information public, and free, just because their "kindness of their heart", it must have had a hidden motive.

But if a MM broker, ( as STP & ECN brokers dont have net exposures ), wants to cover their exposure, why dont they just do the "hot potato" trading as prime MM banks do? Or is it just easier to cover the imbalance with amateour retailers ?
"There's a sucker born every minute" - P.T. Barnum
  • #200
  • Aug 24, 2014 12:26pm Aug 24, 2014 12:26pm
Quoting Proximus
{quote} Wow now thats what i call an eye opener, an interesting preposition, i dont know that it is true or not, but for sure it is logical, as it didnt seemed logical that brokers would make that kind of information public, and free, just because their "kindness of their heart", it must have had a hidden motive.
The hidden motive is simple to see: contrary to what many retailers think, brokers actually WANT profitable traders, since profitable traders trade more, thus the brokers earn more commissions. Of course, I'm talking about brokers who offset their exposure, not about bucket shops. And giving traders more information allows them to make better models.

As a side note, I can tell you for a fact (because I requested this) that for access to realtime 1 minute SSI information FXCM requested a minimum volume of $10 mil per month, and a further condition was that the strategy had to run on their servers, so that you couldn't exfiltrate that information:

1. The strategy must be fully developed with a basic back-test provided in whichever software your testing is done.
2. Strategies must also come with pseudo code to give the exact rules and flow of the strategy written out.
3. In order to be hosted on our internal servers, one of our developers will need to code your strategy to be hosted on our server, which would involve disclosing the code and the signing of a non-disclosure agreement to protect your intellectual property.
4. Live accounts that run on the systems will need to execute a minimum of $10m notional volume monthly.

This was in 2010. Today they are more open about this (see the recent volume indicator).

If a brokers wants to reduce it's exposure it can just do so as you said, no need to trick traders into trading in some directions. Occam razor.
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