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Profiting from an unpredictable market?

  • #41
  • Apr 2, 2015 7:59am Apr 2, 2015 7:59am
Quoting AnatoliyS
... Don't allow the market to make any of your analysis/trading decisions wrong by not assuming that you know what is "right".
EXCELLENT post sir.
  • #42
  • Apr 2, 2015 8:19am Apr 2, 2015 8:19am
Quoting gspajon
{quote} EXCELLENT post sir.
Hello gspajon.. I have taken the time to read the last 3 weeks of post over at the EUR/USD thread. I am utterly shocked at how many people use words like "It will", "It won't", "It can't". My question to you is as follows. Do you think that most members who follow other traders online run a higher risk to fail, compared to only taking their own trades?
Everything in life has a "counter". Especially in forex.
  • #43
  • Apr 2, 2015 8:49am Apr 2, 2015 8:49am
No need to take on Goliath to predict what the market will do next, that's impossible. Just predict what the market will not do next, that will do. The difficult part is to get yourself there when the window opens, that's the harder part of the prediction process.
  • #44
  • Apr 2, 2015 12:16pm Apr 2, 2015 12:16pm
Quoting PaulJames
{quote} Hello gspajon.. I have taken the time to read the last 3 weeks of post over at the EUR/USD thread. I am utterly shocked at how many people use words like "It will", "It won't", "It can't". My question to you is as follows. Do you think that most members who follow other traders online run a higher risk to fail, compared to only taking their own trades?
Hello Paul...we are getting a bit off topic here...I am happy to answer your question but perhaps we should find a forum (or start one) more suited to your questions...

To answer you question, I really cannot say who has a "higher risk to fail" or not. I can say that from my own experience every time in the past when I've tried to "box the market in" with my beliefs about what it MUST or SHOULD do I have been invariably proven wrong. There are only TWO things you say about prices that are "truths." (1) prices WILL rise and, (2) prices WILL fall - not necessarily in that order. That's it!

Why prices rise or fall is also just as simple but people ignor that, and thus project their beliefs onto the market. Once that is done all that is left is for them to find some "logical" reason, so they can psychologically "justify" their belief...enter technical analysis which, at any given point an equal "argument" could be made for both sides of the market...naturally they will add more weight that agrees with their belief. This will then compound into what the market "will" or "must" do from their point of view.

As we have discussed here...no one can possibly know what will or must happen in the future and thus a delimma now arises...admit you're "wrong" or lose money...oddly most people chose to lose money.

The power of psychology on our trading is immense and worthy of personal study (in so far as your personal reaction and psychology). But that is a subject for another thread...if you have more questions...why don't you PM me or start another thread and lets talk about that.
  • #45
  • Apr 2, 2015 1:16pm Apr 2, 2015 1:16pm
Quoting gspajon
{quote} Hello Paul...we are getting a bit off topic here...I am happy to answer your question but perhaps we should find a forum (or start one) more suited to your questions... To answer you question, I really cannot say who has a "higher risk to fail" or not. I can say that from my own experience every time in the past when I've tried to "box the market in" with my beliefs about what it MUST or SHOULD do I have been invariably proven wrong. There are only TWO things you say about prices that are "truths." (1) prices WILL rise and, (2)...
Thank you once again for your response. What you've mentioned is the basics of my trading. So much so, that it makes everything else everyone is doing seem almost "silly". Which now leads me to expand on what it is you mentioned. If we know the price will rise and the price will fall, maybe we should search for "What is the golden rule that applies to when the price will NO LONGER RISE, or NO LONGER DROP". Many will say "That is the million dollar question", and the reality is the answer is within the charts we have in front of us.
In order to find the answer it depends on what you believe came first... "The chicken or the egg". Assuming you believe the "chicken" is much more complex then "the egg", then the same question should be asked in forex. What came first "Tick charts" or "Higher tf". It is obivious that tick charts gave birth to what we see on the higher tf, or any tf higher then the tick. I believe the higher "tf" is much more complex in nature, then the "lower tf" only because more bias is involved in trading the higher tf. The tick chart plays off the theory of "supply and demand". Thus bringing us back to the "price will go up" and "price will go down" law.
Once forex was made public, the very first tick set off everything we see in front of us today, so the majority of the public "BOUGHT" any particular pair, it is safe to assume that the price would do the opposite. That then leads to simply looking at any lower tf like the 1m and 5m and it is clear to see that right before any breakout their is always one candle which was engulfed, and NEVER RE-ENGULFED. Simply being able to identify that ONE LAW/RULE would make people buying or selling with pending orders at any one particular price makes their position go against THE LAW OF SUPPLY AND DEMAND.
A slowing down of the price heading in any one direction doesn't consistent "reversal". What would consistent a reversal would be the "engulf" or better yet "the shift in supply and demand" which is what an engulf represents.
Everything in life has a "counter". Especially in forex.
  • #46
  • Apr 3, 2015 2:42am Apr 3, 2015 2:42am
Quoting spaceduck
{quote} Good that you talked about NFP for example, tomorrow there is NFP. I tell you what may happen: 1) NFP is positive for usd, sending eurusd down (perfect logic).
Guess you didn't catch the idea of @available. It's not about which direction market will take after release of NFP. It's all about if real events can impact market significantly enough to make it visible for us. This nice spike (I will try to profit from today) at time of NFP release is driven by NFP, it was not RANDOM MOVE, regardless of direction.
Hope you got what I mean.
  • #47
  • Apr 3, 2015 3:06am Apr 3, 2015 3:06am
There are traders, that mostly using highly developed momentum indies, can really predict the market. And make big money.
Momentum can show the hands of the Big Boys that manipulate forex.
Remember 5 banks own 60 percent of the trading...(stop running, "liquidity pools"), with algos designed to absorb retail money..besides they can see all orders.

A big algo trading company was on sale last year,(worth billions)
In the offering they showed their perfromance.
1 loosing day in 2 years!!!!!
Either their algo could predict better than us, or they were cheating.
  • #48
  • Apr 3, 2015 3:27am Apr 3, 2015 3:27am
Quoting cuchuflito
There are traders, that mostly using highly developed momentum indies, can really predict the market. And make big money. Momentum can show the hands of the Big Boys that manipulate forex. Remember 5 banks own 60 percent of the trading...(stop running, "liquidity pools"), with algos designed to absorb retail money..besides they can see all orders. A big algo trading company was on sale last year,(worth billions) In the offering they showed their perfromance. 1 loosing day in 2 years!!!!! Either their algo could predict better than us, or they were...
Yeah, the thing of this thread is that it is possible to make profits from a market even if it is unpredictable.
I'm not saying that because the market cannot be predicted with 100% accuracy then it's not possible to profit from it, i'm saying the opposite, we don't need to be able to predict with 100% accuracy in order to make huge profits.

About the algos, well that are HFT front-running algos (perhaps google it), the whole HFT thing is based on this very simple concept, it is of course a sort of insider trading, in the sense that the algos use information not yet available to the market.
The basic concept is simply, sombody somewhere want to buy 1000 lots of eurusd (that would bring price up of a few pips or more), the hft algo intercept that buy order before it hit the market, knowing that eurusd will go up of a few pips it (the algo) buy eurusd, then the 1000lots order hit the market, eurusd go up a few pips, the hft algo take the profit, risk-free profits.
Mostly they work on equities and stocks, but forex too. Of course they don't trade on a retail-broker account...

  • #49
  • Apr 3, 2015 4:11am Apr 3, 2015 4:11am
Quoting gspajon
{quote} Hello Paul...we are getting a bit off topic here...I am happy to answer your question but perhaps we should find a forum (or start one) more suited to your questions... To answer you question, I really cannot say who has a "higher risk to fail" or not. I can say that from my own experience every time in the past when I've tried to "box the market in" with my beliefs about what it MUST or SHOULD do I have been invariably proven wrong. There are only TWO things you say about prices that are "truths." (1) prices WILL rise and, (2) prices WILL...
Your posts are full of truth and wisdom.
  • #50
  • Apr 3, 2015 7:22am Apr 3, 2015 7:22am
As we move forward past NFP. Ask your self the following questions and try to come across it online, as most people google search anyway.

1) How many lots could all the money which ever existed buy all the lots of EUR/USD? As in some sort of exchange, you would get the entire float at a discount compared to market price. Yet, it their has to be a limit. What would it be?

2) Most look at today as a day to take off. You have many account in red with this move by EU, and if EU moved to either r3 or s3 it will blow many account prior to that. Why not record your tick charts of the market, and input the data to create your own chart.

3) If the market is ZERO-SUM, and someone has the ability of having the market wipe your account with 2000 pips. Would you feel a bit saver not being exposed?

Guys respect NFP. Back when eu was 1.22 in 2012. NFP spiked it to 1.3999 and Mario dropped to where she is now.
Everything in life has a "counter". Especially in forex.
  • #51
  • Apr 3, 2015 9:01am Apr 3, 2015 9:01am
Quoting spaceduck
{quote} Your posts are full of truth and wisdom.
Ah shucks!! Now your making me blush... Honestly I was just stating how I see things...
  • #52
  • Edited 7:37pm Apr 3, 2015 6:57pm | Edited 7:37pm
Quoting cuchuflito
There are traders, that mostly using highly developed momentum indies, can really predict the market. And make big money. Momentum can show the hands of the Big Boys that manipulate forex. Remember 5 banks own 60 percent of the trading...(stop running, "liquidity pools&quot, with algos designed to absorb retail money..besides they can see all orders. A big algo trading company was on sale last year,(worth billions) In the offering they showed their perfromance. 1 loosing day in 2 years!!!!! Either their algo could predict better than us,...
Its possible retail traders can do the same even without these 'highly developed indicators'. Now that you know the focus is on momentum, check out appropriate indis in the public domain(most are mere rough guides n distorts with volatile price movement) that do the job to delicately calibrate them n/or use them in unison to reveal that you want to know. Must warn you that it won't be easy(that's why most peeps thrash indis) but it's well worth the effort. Well, you can begin to 'cheat' too !
  • #53
  • Apr 4, 2015 8:15am Apr 4, 2015 8:15am
Quoting skyway
{quote} Its possible retail traders can do the same even without these 'highly developed indicators'. Now that you know the focus is on momentum, check out appropriate indis in the public domain(most are mere rough guides n distorts with volatile price movement) that do the job to delicately calibrate them n/or use them in unison to reveal that you want to know. Must warn you that it won't be easy(that's why most peeps thrash indis) but it's well worth the effort. Well, you can begin to 'cheat' too !
I think you made a big point here, even if accurately forecast the future of market movements is impossible, the momentum per se offer what can be the nearest thing to the predictability success, of course the idea would be to get in as momentum develop (when volatility expand after a period of low volatility, and the market is well bidded or offered in the momentum direction).

That is more or less what all the indicators-system based try to do, grab pips from the current movements, without trying to predict anything.

Said this, it is not as easy as put a macd and buy blindly when it go up, it's easy to get sucked in promising moves that reveal to be short-lived ones, etc.

Yet, with the right patience and knowledge of what to look for, profit can be made following the market momentum without the presumption of predict anything about the future, that is mainly how prop-traders of all the investment banks trade, strictly momentum based.
Many of them (especially in the stock market) do use the orderflow to understand when a good momentum is developing (they see if somebody buy BIG the market, that can be a signal that something is going to happen). But in forex this oderflow stuff isn't applicable (unless you trade with a prime broker, i really doubt that in the whole FF there is even 1 trader that use a prime broker).

But the momentum concept is a very good one, be it developed with the use of average-based indicators or with the observation of a naked chart, it doesn't matter.
  • #54
  • Apr 4, 2015 8:58am Apr 4, 2015 8:58am
Quoting spaceduck
... But in forex this oderflow stuff isn't applicable (unless you trade with a prime broker, i really doubt that in the whole FF there is even 1 trader that use a prime broker).....
Ah Spaceduck...forex is where order flow is MOST applicable, especially in a decentralized market. Order flow balance and imbalance can be readily seen not only in each candle but also in groups of candles. All it takes is the most basic understanding of what order flow really is, and how to recognize it in real time. Relying on volume based, or 'momentum' indicators in the forex market is where many lose their path.

True volume (in lots or contracts) does not exist in a decentralized market because the "big players" are confidential. However their ORDER FLOW and its effect on price is evident in each and every candle. Thus using price alone one can learn to "see" how the order flow affects the formation of your charts. It is much like a sailor who learns to "see" the wind.

A good mariner knows he cannot control the direction or speed of the wind, but knows how to harness it effectively. When the wind is blowing strong...he makes good progress toward his goal...and when there is a doldrum, he knows to just wait and enjoy the break. As well a good mariner knows how much sail to use to harness the wind...if it is too strong, he reduces sail, and when it is weaker, he puts more up...

The mariner does not have math formulas to determine which direction the wind is coming...he does not rely on technology or algorythms to determine how much sail to put up, or take down. He listens intently to weather reports to anticipate potential problems along his route. But he "sees" the wind and observes its affect on his craft in real time. He does not "predict" there will be a big wind soon, or which way the wind will blow. Nor does he change course every time the wind changes direction or gusts from a different area. He simply adjust his sails and continues his predetermined course.

So too in trading...we must learn to "see" order flow by its effects on price and adjust our "sails", (or methods) to harness the current order flow. As with everything, order flow waxes and wanes and is never steady from only one direction. We wait during the "doldrums" with larger sails ready to catch the next "puff". When there is a big blow...we reduce sails (lot size) and ride the momentum provided not only by the wind but the waves as well. We don't go out in a storm because our survival depends on good conditions. And if "caught" in a storm we seek out the next port and give thanks for our survival while we make any needed repairs.

Order flow trading is by far the simplest method while simultaneously being the most difficult to grasp and learn. However, if you are ever "caught in a storm" and your instruments (indicators) stop working the way they should, you can still rely on your raw skills learning to "see" the order flow and not only survive...but flourish.
  • #55
  • Apr 4, 2015 10:54pm Apr 4, 2015 10:54pm
This is always an interesting question. The original poster alluded the presence of a random walk model explaining return series. While this is a good place to start, a RW can't explain a lot of the behaviour we see. A RW with drift or integrated component might be a better bet. In this case, defining changing stationarity is the problem. While I think its unrealistic to ask someone to provide predictive proof for an entire trading history, this doesn't exclude 'fleeting' predictability. Think of some of the broad biases, i.e. momentum and volatility. While momentum is often overshadowed by short-term noise, its not always. Volatility is interesting because it's unobservable. My own experience leads me to believe volatility has a slower moving permanent component, with shorter-term transient noise. From time-to-time the permanent component is unfairly priced.

In general, my personal view is that longer-term, price is driven by fundamentals. On a shorter time frame, series tend to be semi-chaotic – some predictable components that are fleeting and difficult to identify. On a very short time frame (milliseconds to seconds), predictability is not as important as the relationship you have with your broker. A good relationship with a prime broker will allow you to extract alpha not available to most.
  • #56
  • Apr 5, 2015 2:25pm Apr 5, 2015 2:25pm
Quoting gspajon
{quote} Ah Spaceduck...forex is where order flow is MOST applicable, especially in a decentralized market. Order flow balance and imbalance can be readily seen not only in each candle but also in groups of candles. All it takes is the most basic understanding of what order flow really is, and how to recognize it in real time. Relying on volume based, or 'momentum' indicators in the forex market is where many lose their path. True volume (in lots or contracts) does not exist in a decentralized market because the "big players" are confidential. However...

My word Gspajon I would not of said it better myself. It would appear we ignore the only simple "givens" in forex. By doing so we win less times then we should, and end up holding losses for way longer then we should.
Everything in life has a "counter". Especially in forex.
  • #57
  • Apr 5, 2015 3:31pm Apr 5, 2015 3:31pm
Quoting PaulJames
{quote} My word Gspajon I would not of said it better myself. It would appear we ignore the only simple "givens" in forex. By doing so we win less times then we should, and end up holding losses for way longer then we should.
Amen, Brother...
  • #58
  • Apr 5, 2015 4:33pm Apr 5, 2015 4:33pm
For those of you who are into "picking tops and bottoms". Say before hand you have your guy on a price to short say EUR/USD. Once the price reaches that price, why not SHORT once the green/red candle which touches your target is engulfed on the lower tf). Why wait on the engulf? Well if you wait on the engulf then you are following the basic rules of order flow in which the bulls (green candle) have now been officially taken over by the bears (engulf of green candle). It seems way to simplistic, but the reality is order flow is very simple.
Everything in life has a "counter". Especially in forex.
  • #59
  • Apr 5, 2015 6:44pm Apr 5, 2015 6:44pm
I do love when found a thread talk about forex trading fundamentally (not the one with fundamental news). 3 page thread with immerse power of knowledge .
reading all the post makes me even more confident to get close to the core of market.
Profiting from an unpredictable market?, never predict! I think it's all I've got from reading these thread. We'll never know how the Egg looks alike while we still shell-covered in it.
  • #60
  • Apr 5, 2015 7:19pm Apr 5, 2015 7:19pm
The London session after NFP seems a bit too random for me... So it's an extra long weekend
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