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Forex Dream Chasers - The 90% rule of randomness

  • #201
  • Jun 17, 2015 12:26am Jun 17, 2015 12:26am
Quoting MidKnight
I do agree with the idea that there is much more randomness in the markets than we are willing to accept. I'm open to explore that notion more through this thread and hope we can get some good exploration without too much detraction. When GoBigFX is saying to use the vwap, and then posts a chart of the futures it left me with concern. - How do you vwap the less liquid majors? Such as NZD/USD for example where the futures volume is negligible. - What do you vwap against if you had to execute on a cross rate? EUR/JPY for example. - Are you being benchmarked...

Inserted Video


The video above, and how it describes "entropy" all in all sums up why we get our arses handed to us in forex so many times. "The way things and energy can be arranged based on random motion" is how entropy is described within the video. Essentially, I look at us placing orders as the spark/catalyst of Entropy. We place orders based on market randomness, thus ignoring the basic rules which trumps the randomness of the market. The basic rules of the market is that, it will do 1 of three things no matter what TF a trader picks.
1) Extend
2) Reverse
3) Accumulate

Those three things all need one another in order for it to exist as an individual, just as Entropy needs a catalyst to interact with "randomness". To not bore you with more scientific notion, the reality is "water and oil" don't mix due to entropy, as our system doesn't mix with how the market is structured. Although, water and oil don't mix, the reality is for a moment in time, prior to the randomness of "Entropy" water and oil are able to interact with one another, or as the video simply puts it "dance", which in forex leads to a "winning" trade, the reality is the market's randomness created the victory, and not the trader actually "following the aforementioned three rules of the market"thus, once the randomness kicks in (your new order, which based on your last trade seems like a sure win) then leads to a loss thus causing you to believe that the market is random and wins are based on luck.
Market randomness in forex creates a distraction from the set rules which are put into place to cause constant wins, where as in Entropy, randomness determines if molecules can "co-exist", thus breaking the temporary bond which allows to interact positively.

In other words, our wins and losses are mainly determined by randomness and not by us actually following the rules of the market. As if we did follow the market rules, then we would be able to be efficient and consistent in our quest to increasing our account value.
Men lie, women lie, the numbers don't.
  • #202
  • Jun 17, 2015 3:03am Jun 17, 2015 3:03am
Quoting Gobigfx
So I've been wanting to write this post for a few years but I knew it would meet with a lot of anger and objection but here goes anyways. You all are living an imaginary dream. A career as a retail trader long term (7 plus years) is almost impossible, the ratio is not 5% its more like 1%. I have been trading for a very long time and the only reason that I have survived multiple market conditions is because I was mentored for 1 year as a floor trader and then for another few years as a desk trader for a few institutions. After I left the "professional"...
Agree agree agree. Good post. Will be following...
Never say never.
  • #203
  • Jun 17, 2015 3:09am Jun 17, 2015 3:09am
Market trends, then corrects, and trends again.
If randomly...then it is the art of capturing trends,to make money, and loosing the least in the process of identifying them.It´s called an edge.
This is nothing new,as old as the markets...

One thing that did change though is the robots, algos, programmed to wipe out retailers...(stop running)...any system that does not take stop running as a filter, and part of the plan, in my opinion, it is bound to fail.
70% plus of all trading today is done by robots...remember pac man?
  • #204
  • Jun 17, 2015 3:30am Jun 17, 2015 3:30am
Look here:
http://www.forexfactory.com/showthre...73#post7628273

Three interconnected links.
Any good ideas (if you have many years studying the markets!) you can send me via p.m.

News also make markets go up, down, or only up, only down, reverse, up, down, up, down, spikes...etc...
Before the news, after the news, during the news.
  • #205
  • Jun 17, 2015 3:48am Jun 17, 2015 3:48am
Quoting Gobigfx
{quote} Finally someone gets it and of course its the guy with the least to prove and the most open mind. YES I trade AFTER news events or any other Non Random event that causes price to move to adjust to imbalance of orders. Once order balance again then Randomness pursuers.
Thank you Gobigfx, please continue.

I have respect for anyone that takes a bold step to disclose their business secrets to totally anonymous people in an internet forum, opening themselves
up to hostility & ridicule before being allowed to explain themselves clearly. I have learnt many things on this forum over the years, things that work for me
and things that don't. Knowledge is always another step forward. I have learnt not to judge but to ask questions politely.

What I would like to add is that a news events effects can last for days.
I would always wait to see the effect on the currency first by looking at it's reaction across other majors.
Then establish a weak vs strong scenario and use TA to get in/ get out.

Forex trading for me is a blend of ideas.
It never gets easier, you just get better
  • #206
  • Jun 17, 2015 4:00am Jun 17, 2015 4:00am
Quoting Shabs19
{quote}I have respect for anyone that takes a bold step to disclose their business secrets to totally anonymous people in an internet forum
I was under the impression that this stuff was not secret at all, it's just obnoxiously ignored in favor of the esoteric.
Congratulations ScalaFX for coming out of the closet!
  • #207
  • Jun 17, 2015 4:21am Jun 17, 2015 4:21am
I think no one was exactly wrong, just the way how each individuals look at it, but I look at it this way

If market is totally random, it will be hard for government to implement policies to control the market, eg such as QE, interest rates, etc.

What make everyone different is each person's views, but somehow when a policy is implemented, it will directly or indirectly cause the crowd to do almost the same thing. Eg, Government increase huge tax on buying of properties, what will most do? And the non random pattern will be less buyers, etc.
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The only winner is the one who survive the longest...
  • #208
  • Jun 17, 2015 4:30am Jun 17, 2015 4:30am
As I said before, what is random for one person is not random for someone else. I plot support and resistance (S&R).

Let's take EURUSD as a good example as it's fairly liquid and cheap to trade. Try plotting S&R on a chart leaving gaps of around 20 to 30 pips between the lines. Very straight forward. Use the D1, H4 and H1 timeframes (I used MT4 speak as this is what most people know) to establish these lines. All basic stuff available on many forex websites.

Then trade using the M5 or M15 charts. What you will quickly see is that price often (85%) interacts with these lines. That doesn't suddenly make trading easy but what it does do is demonstrate that price 'reacts' in certain ways for a good percentage of the time. Entering trades on or very near key lines gives you very clear notice of whether a trade is working out or not - this is an edge or advantage. You don't need fancy software to do this just a MK1 Eyeball.

What you will quickly notice on say 15 min charts is that price will move between price zones. A side ways area of price action (PA) has been referred to as 'random price action' but for me it is not, this PA (around 80% of the time) is contained within clearly defined zones which were marked up BEFORE price came to rest in that area. In another 10% of cases price will 'stick' to the line itself (a sure sign not to trade).

In simple terms; you can quickly make a set of rules of times when you should and shouldn't be entering trades. Remember the key is in minimising losses rather than focusing on the gains.
  • #209
  • Jun 17, 2015 6:15am Jun 17, 2015 6:15am
All that really matters is not what you see but what the Institutional traders that are manging 90% of the volume of ORDERS see.
  • #210
  • Jun 17, 2015 7:07am Jun 17, 2015 7:07am
Quoting Gobigfx
Notice how there are only about 11 bars during this entire move were price moves to lower VWAP extremes. This is the Non Random Behavior of Imbalance Everything else Except the top levels of VWAP is Random !!! So is this 90% if the time ? Thats all for now. {image}
Bro, good to share your way of finding imbalances. I trade something like that, but different methods.

Eg in my post, just after a low timeframe spike down, I sense the price will come back to catch this "imbalance" hence the pending order. If I were to trade that execution manually at that point of pending order trigger level, I will most likely see it as a bullish candle and enter a long instead. Sometime in live, price action vibrate, and it may cause us to view it differently. I think its all about finding the spot/region where non random lies and trade it according to plan.
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The only winner is the one who survive the longest...
  • #211
  • Jun 17, 2015 7:29am Jun 17, 2015 7:29am
The large institutional traders will have a plan before the market opens, governed by recent or upcoming news events and will likely position themselves
for a major push in price. Saying that, they will also respect past historic levels where they know past major moves occurred from and will duly note them.
Their orders will also be filled by groups of smaller institutional traders. The institutions will make their money by speculating or by commissions where they
cannot lose.

What they will do is, using their order volume is deflect the price a little but enough to entice the opposing orders to enable them to accumulate or distribute
their volume. They will not do it all at once, but in stages. We cannot anticipate stage one of their action, but hopefully we can get in, on the second or third
part and ride the trend period, before the next stage one starts again.
All news events ultimately will be reflected on the price chart, we can only know for certain which direction after the news event, all we can do is get in at
a price favorable to ourselves with the lowest risk & the highest probability. We cannot move the markets, we just go with the order flow.

How you do that, is up to the level of understanding of markets and your risk profile.
It never gets easier, you just get better
  • #212
  • Jun 17, 2015 7:43am Jun 17, 2015 7:43am
The 10 %seems pretty realistic as suggested by the op.

Although as some have mentioned the random,accumulation,range or whatever term we use during these 90 % periods ,i believe can be traded in a variety of ways.after all they have band widths .

here is an old paper on order flow to begin ones own research.lots of good information out there.

good debate if the penis sizes find a hole .

im trying to locate a recent paper which i will post ,which breaks the order flow into relevant groups of participants .this shows the split is much less than the op suggests and why some retail are able to successfully trade very short term flows.
Attached File(s)
File Type: pdf 7.dellacorte-1.pdf order flow.pdf   1.0 MB | 1,120 downloads
  • #213
  • Jun 17, 2015 9:14am Jun 17, 2015 9:14am
The definition of random is the following “made, done, happening, or chosen without method or conscious decision”. Uncomfortably, all traders have a method to place position, as well the central banks and big players. Traders use pattern for trading and its conscious decision, central banks move the value of currencies on conscious decision too. Then, when the price moves, it’s not specifically a rolling dices as a pure hazardous and random result. The price moves because players decide to make a move on their advantage. We don’t really know what will be the action-reaction between players on each move because they have a motive and that why this artefact seems to be random. Why all players use strategy to beat a random context? Are we a lucky player on each move?
  • #214
  • Jun 17, 2015 12:09pm Jun 17, 2015 12:09pm
Quoting fxcodus
The definition of random is the following made, done, happening, or chosen without method or conscious decision. Uncomfortably, all traders have a method to place position, as well the central banks and big players. Traders use pattern for trading and its conscious decision, central banks move the value of currencies on conscious decision too. Then, when the price moves, its not specifically a rolling dices as a pure hazardous and random result. The price moves because players decide to make a move on their advantage. We dont really know what will...
This isn't a good definition of random for this context. Try this one instead:

Quote
Statistics.
Quote
of or characterizing a process of selection in which each item of a set has an equal probability of being chosen.
In other words, non-skewed or non-trending. When the market trends you tend to either get one or both of the following: more up/down bars and/or larger up/down bars. The distribution of up/down bars and up/down bar size in non-trending periods tends to be fairly equal. In trending periods the distribution is skewed.

But the OP's use of the term "random" seems to imply the looser definition for random of "not predictable" based on the context. I don't believe the OP's use of the 90% figure is anything other than an estimate, given the number of bars that appear in what is deemed as a "predictable" zone, vs the number of bars that are seemingly not predictable according to the OP's screen shots.

Also, it is worth noting how many of this forum's members (particularly those who seem defensive due to having their beliefs challenged) seem to have poor reading comprehension skills or a problem with jumping to the wrong conclusion rather than simply attempting to learn what is meant. Random is not the same as "can't make a profit." Can you predict if the next bar's close in the next 5 minutes will be up or down? Can you do it accurately enough to scalp every 5 minute bar? If you say yes you are fos. Also, of you say you can predict the outcome of your next trade with 100% accuracy you are also fos. If you could, you would only trade when you knew it would work out and would have 100% accuracy. Your next trade's outcome is random or unknowable in advance even though the mental/mechanical process generating the trade is (usually) not random, and the statistics regarding expected system performance may be well known.

Next bar close on shorter timeframes is fairly close to random by the statistical definition. But I don't know of a lot of traders who try to take advantage of a new trade on every 5 minute bar or make a new prediction on every 1 minute bar. Trade holding period plays a larger part than most realize into whether a trading outcome is positive or negative over a long run of trades.

FOMC in < 1 hour.
  • #215
  • Jun 17, 2015 12:19pm Jun 17, 2015 12:19pm
Quoting diceman555
im trying to locate a recent paper which i will post ,which breaks the order flow into relevant groups of participants .
Speculators, Dealers, Brokers, Commercial Hedgers, and Sovereign Entities are all the participants in this market.
All posts are my personal opinion
  • #216
  • Jun 17, 2015 5:08pm Jun 17, 2015 5:08pm
Of course if one looks at the market from the fundamental perspective, market is definitely not random, the market is 100% predictive. If one know the underlying reasons of the price movements (buyers and seller, news, sentiment, etc.) he would be able to predict the market perfectly. But does he have all the information or can he absorb all the information?

If you look from the technical analysis perspective, the market is 100% random. It moves without a reason (from technical analysis point of view).

Therefore, it depends on how you look at it and how you interpret randomness. I believe the OP interprets from the technical analysis point of view.
  • #217
  • Jun 17, 2015 8:55pm Jun 17, 2015 8:55pm
Quoting Gobigfx
{quote} So why are you here ? Why are you spending your time in a trading forum if your such a success and you can see this so called un random behavior so well ? I've been a member of this forum for 3 years and have come in maybe 5 times in the last 3 years because I have been busy making $$$ why would I come in here ? Open your mind because if you do this thread will be the best one you've ever read.

i'am here because:

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  • #218
  • Jun 18, 2015 2:03am Jun 18, 2015 2:03am
Quoting Gobigfx
Notice how there are only about 11 bars during this entire move were price moves to lower VWAP extremes. This is the Non Random Behavior of Imbalance Everything else Except the top levels of VWAP is Random !!! So is this 90% if the time ? Thats all for now. {image}
I knew you had something to offer despite the 1st 10 pages getting on my nerve. my instinct about you was right. keep it up and please haters, give him some space please. we MAY something from Him.
  • #219
  • Jun 18, 2015 2:17am Jun 18, 2015 2:17am
there is no secret ingredient..

--kongfu panda
  • #220
  • Jun 18, 2015 3:10am Jun 18, 2015 3:10am
Quoting zxdtrader
there is no secret ingredient.. --kongfu panda
I disagree; the 'secret' ingredient is experience and practice.
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