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Forex Dream Chasers - The 90% rule of randomness

  • #261
  • Edited 7:39am Jun 24, 2015 6:09am | Edited 7:39am
Quoting hanover
So what might the drivers/causes behind a 'non-random' move be? Just to get the ball rolling, I would guess that high on the list are heavyweight bank/institutional maneuvering; macroeconomic factors (interest rates, QE, central bank agendas and rhetoric, risk on/off, trends in commodity/bond/stock prices, perceived strength of national economies, ......); unexpected or highly deviant red news outcomes; and occasions of severe (perceived) 'mispricing'. From what I've seen and heard, institutional traders perform a lot of FA, along these very lines....
This is EXACTLY what I wanted to ask Gobigfx. What specifically do those institutional traders consider as factors that would move the market to non-randomness? He mentioned in his post that we all study the tornado but they study the butterfly that will flap their wings and cause the tornado. So what do THEY consider as "butterflies" that will cause the tornado a.k.a the non-randomness of the market? He mentioned central bank agendas, announcements decisions, what else? Economic numbers? NFP's gotta be one. What else? 10-year bond yield?

And in terms of price movement, what would Gobigfx qualify as "random price movement"? So any time when there is no major news or economic numbers or fundamental factor changes? And Gobigfx mentioned in his post that it is still possible to profit from random price movements and he mentioned that the institutional traders used VWAP as guide and would not let price deviate too far from VWAP levels when working their orders but which levels ov VWAP do they look at?

Gobigfx has provided some good insight into the realm of forex trading by starting and participating in this thread but there are still a lot of questions for which I would really like to know the answers. So I wish he comes back and answers them for us.
Make your losses in demo. Earn your profits live.
  • #262
  • Jun 24, 2015 6:43am Jun 24, 2015 6:43am
Still waiting for the product
  • #263
  • Jun 24, 2015 7:21am Jun 24, 2015 7:21am
Quoting DavidRP
Still waiting for the product
Yeah, you'll be waiting a long time. This thread must be a new record for least substance! Two charts from the OP with no explanation. Unbelievable.

I think FF should install a button that if enough people push it the thread goes in the trash bin and the OP is no longer allowed to start a thread!!

Enough said.
Enter Signature
  • #264
  • Jun 24, 2015 2:53pm Jun 24, 2015 2:53pm
Simply put, traders basically fall into a category of either "waiters" or "followers" in their trading methodology. If you're a 'waiter', you're choosing your entries and exits based on things you personally are 'waiting' on. These may be support & resistance lines, trend lines, trend wall breaks, fibs, crossovers, and the list goes on and on. In other words, you're predicting the market based on 'your' understanding and/or belief as to how the market will respond to these images you see on a chart.

A "follower" on the other hand, takes a completely different approach. They wake up each morning and say to themselves "I have no idea what the market will do today and I don't care. I just know when it decides to move, my chosen strategy will tell me it's on the move and I will 'follow' it until such time it reaches a point of exhaustion", and it will tell me based on a predetermined probability within my chosen strategy, it's time to exit". A 'follower' will always approach the market being "reactive" as apposed to being "proactive" and trying to predict the market.

It is important to note that it is common for 'followers' to have win rates of only 30 to 40% at best. They take many small losses in exchange for the longer, more profitable moves. The game is a simple one - make more with your winners than you lose with your losers. It is also interesting to note that if you study the most profitable traders in history, you will find the vast majority were 'followers'. Now, we can say that they had no choice due to a lack of today's technology, but maybe they would tell us that we've allowed all of this artistry on our screens to disguise the simple fact that "a price goes up so it can go down and a price goes down so it can go up". Simply put.
  • #265
  • Jun 24, 2015 2:59pm Jun 24, 2015 2:59pm
Quoting Warburg
Simply put, traders basically fall into a category of either "waiters" or "followers" in their trading methodology. If you're a 'waiter', you're choosing your entries and exits based on things you personally are 'waiting' on. These may be support & resistance lines, trend lines, trend wall breaks, fibs, crossovers, and the list goes on and on. In other words, you're predicting the market based on 'your' understanding and/or belief as to how the market will respond to these images you see on a chart. A "follower" on the other hand, takes a completely...

Following is what I have been trying to do.

Numerous methods of doing this.

Thanks for the explanation.
  • #266
  • Jun 24, 2015 3:00pm Jun 24, 2015 3:00pm
frustrating
Attached Image
  • #267
  • Jun 24, 2015 3:45pm Jun 24, 2015 3:45pm
Quoting Warburg
Simply put, traders basically fall into a category of either "waiters" or "followers" in their trading methodology. If you're a 'waiter', you're choosing your entries and exits based on things you personally are 'waiting' on. These may be support & resistance lines, trend lines, trend wall breaks, fibs, crossovers, and the list goes on and on. In other words, you're predicting the market based on 'your' understanding and/or belief as to how the market will respond to these images you see on a chart. A "follower" on the other hand, takes a completely...
IMO I don't see any difference between "waiters" and "followers".
All do the same. They "wait" until they "follow".
  • #268
  • Jun 24, 2015 4:22pm Jun 24, 2015 4:22pm
Quoting hanover
{quote} Can you (or anybody) explain what is meant by "following"? At the right hand edge of the chart, I believe that all we can do is predict. Either we assume that, if price is moving in one direction (up or down -- on our chosen time horizon), it has > 50% probability of continuing to do so; or we assume that, on the basis of its being overbought/oversold, and/or having reached some apparent barrier (e.g. S/R, supply/demand zone, pivot, round number, MA, etc etc or confluence of these.....), or for whatever other reason, that the move is exhausted...
Okay, fair point. The short version of what "following" the market means to me is simply avoiding the smaller, noisier time-frames.

The background theory goes like this... day traders and commercial banks are active Monday to Friday, in and out with a short term focus. A sharp move on a Monday can quickly be cancelled out by the Tuesday, price oscillates within a range on the back of the steady stream of orders coming in from subjective players across market.

To identify something to follow, I look at longer time-frames (weekly to be exact). I wait for the Friday close, the Monday/Friday players have dropped out and net change is what's left. I look at the net change in direction on the weekly close vs the previous weekly close, I try to workout whether the market is in equilibrium or moving in the line of least resistance. If the conditions are driving the market in a specific direction, the net change will show it. Now it's not as simple as just comparing two weekly closes, that's too simplistic but it's the first tick in a box to catch my attention. Once I've waited long enough and feel I have something to follow, I jump in.

I use the following to categories market behaviour (my own theories):

  1. Range Theory: Supply & Demand in rough equilibrium - overall conditions remain constant
  2. Breakout Theory: Price breaks out of range due to conditions change
  3. Trend Theory: Price now moves in line of least resistance until it finds new market equilibrium/consensus.

When I'm convinced I see a trend, I jump on.

Again, this is a small extract from my methodology, once the signal is confirmed, my entry/exit/monitoring, MM and pyramiding rules take over.

  • #269
  • Jun 24, 2015 4:31pm Jun 24, 2015 4:31pm
JPSteidlmeyer describes it best (for me).
1) End of a distribution (looks like the market has "stopped" trading... very sideways.)
2) New Step 1 = confident, direction / vertical movement called initiating activity. (looks like large directional bars, open and close of the extremes)
3) Step 2 = At some point price finds value and becomes more two way / overlapping bars. Still wild and active but two way action.
4) Step 3 = A bit quieter, market retraces / tests the Step 1. Sometimes fully retraces, sometimes just builds more sideways.
5) Step 4 = Back to a stagnant, stopped market.

I haven't done it justice but that's the gist of it. I find the easiest / quickest money is to be made in Step 1. You know very quickly if you are right or wrong. The rest is range trading where you need patience - waiting type mentality. I am assuming the OP is talking about Step 1's. They only have a duration of about 10% of the sum of the rest of the Steps. Sometimes there's a Step 1, then a 2, then another Step 1. (a trend!)
Attached is a deliberately well chosen example. Like I say, for me, I look for a Step 4 and trade the break out / directional move. It is fractal and I do apply this to 4 hrly time frames.

Maybe this is nothing close to what the OP was alluding to. Anyway, I hope it helps.

Sorry, attachment is not uploading....
  • #270
  • Jun 24, 2015 4:54pm Jun 24, 2015 4:54pm
Quoting heldav
Yes, I agree that its a shame this useful post has disintegrated into the usual aggressive I- know -it -all responses. I think the level of rudeness is totally unacceptable - helpful suggestions/criticisms are whats needed. Orolos post is perhaps the worst - why the need for so much venom and rudeness? i have absolutely no respect for people who make nasty jibes like this. You know the saying - that men with the smallest di.....s always drive the biggest cars? It seems to me there are very few females on these forums - maybe they just quietly read...
Heldav, people like this need a shock and awe coz they continue to place posts, as in this example quotes that are ridiculous and its time to be firm I guess , I don't think I was rude but factual and firm, hard YES. well mrs Helday , if you understood what was being said and the complete nonsense then maybe you would arc up!

Its tiring and annoyance from dumb arse comments like this and I guess this just sparked a rebuttal to ensure that person knows ( im sure he does ), ive seen these people enough times to know and it did bring me to a level of unusual venom ( granted) as to my manly hood. well I can tell you I don't need anything to make it bigger as it is already very well endowed and have never had any issues in that department, therefore don't need toys or big cars, actually I drive a smaller car.

as to the comment about reading the news section and joining other females, im lost as to why you would make such a comment , unless your trying to entice a rude comment, im not rude and I am a gentlemen to women for your reference, I respect them and admire them, some make better traders than guys.
if you felt I was harsh then it was meant to be, too many of these type on here and it gives no value hence why I rarely respond to such, but yesterday was wonderful day and I "predicted " a prefect setup in the aussie for the 4th time in a row, so when randomness came up it was a red flag and the bull needed to be slain, that's all from me .
  • #271
  • Jun 24, 2015 4:58pm Jun 24, 2015 4:58pm
Quoting rolandW
{quote} Heldav, I dont see where the 'useful' post in this thread was, other than the apparantly the first post where the OP said the market was random... I dont think that that is particularly helpful to anyone. A couple of charts in retrospect which are supposed to point us in the direction of what the OP was talking about? Sorry, i dont see where the helpful stuff in there comes form. This is not being rude, this is being matter of fact. The post really descended into rudeness, with OP questioning people's intellect for not believing what he...
right on the money , thank you, not to mention insulting everyone that trades forex ( forum name is forex factory )
  • #272
  • Jun 24, 2015 8:20pm Jun 24, 2015 8:20pm
I'm opening my mind but this just half of information...
  • #273
  • Jun 24, 2015 10:46pm Jun 24, 2015 10:46pm
Beginners (myself included) should pay attention. Only fools think they can successfully trade day in, day out. Nobody has the type of information that would allow them to daytrade profitably over a long period, no matter what indicators and charts they use. The market is too efficient for that. Pay attention to the fundamentals first, and trade on a weekly or even monthly basis if you want to give yourself a chance.
  • #274
  • Jun 25, 2015 12:12am Jun 25, 2015 12:12am
Quoting Trenderer
Beginners (myself included) should pay attention. Only fools think they can successfully trade day in, day out. Nobody has the type of information that would allow them to daytrade profitably over a long period, no matter what indicators and charts they use. The market is too efficient for that. Pay attention to the fundamentals first, and trade on a weekly or even monthly basis if you want to give yourself a chance.
how did you come to this conclusion ? is this for Forex only ? or all markets ? please explain , thanks .

there are many traders I know and personally I've run a strategy / system for over 3 years intraday without issues? in fact I have simulation runs with 5 year data intraday and still profitable... im am interested how or why the market efficiency would restrict day trading( intra day )

Fundamentals are always second to the market, using Monthly and weekly is great step towards knowing the overall trend and direction.
  • #275
  • Jun 25, 2015 12:41am Jun 25, 2015 12:41am
Quoting Gobigfx
Look for those times that the market MOVES and follow it because its in the Non Random Moves that you will find the highest probability of future of price..
This is all Forex is about really. If you fail to wait for the time when price moves and choose to decide where price will go before it starts going anywhere, without basing your decisions on any small- to large-scale KEY past events (whether news or past PA, supports, resistances, demand zones or supply zones, order flow or flip zones, moving averages, or whatever) or current PA development, you will lose money and even blow accounts. Every. Single. Time.

The fact is everything works. You just need to apply it without letting your stupid ape mind ruin you (including myself in this ape mind part of course ).
  • #276
  • Jun 25, 2015 1:19am Jun 25, 2015 1:19am
Quoting Orolo
{quote} Fundamentals are always second to the market, using Monthly and weekly is great step towards knowing the overall trend and direction.
Fundamentals are first and furthermost, charts are merely reflection of cumulative sentiment over certain period.
  • #277
  • Jun 25, 2015 1:45am Jun 25, 2015 1:45am
Quoting grin
{quote} Fundamentals are first and furthermost, charts are merely reflection of cumulative sentiment over certain period.
Sorry bro but
bank manipulation is the first and furthermost...
  • #278
  • Jun 25, 2015 2:00am Jun 25, 2015 2:00am
Quoting CrucialPoint
{quote} Following (I also don't mean to be a smart ass with this response) Get your wife to stand still. Now stand behind her. Then tell her to walk wherever she would like to go. Now, follow her where ever she go. Notice that you didn't even predicted whether she was going to go; left or right. If you don't understand that my friend, well I guess your cup is full Peace, CrucialPoint
so simply put.
  • #279
  • Jun 25, 2015 2:11am Jun 25, 2015 2:11am
Quoting alexpi
{quote} so simply put.
it might be simple, but not very good analogy. trading is betting on the direction the wife is going ahead of time.
  • #280
  • Jun 25, 2015 2:26am Jun 25, 2015 2:26am
Quoting grin
{quote} it might be simple, but not very good analogy. trading is betting on the direction the wife is going ahead of time.
No, that's not what you should be doing.

No strategy is meant to predict the market. Every strategy is meant to give you information on where the market is going and you're supposed to follow the rules of that strategy in order to follow the market.

Every strategy gives wrong signals on where the market is going occasionally. That's why you need to take into account that 40-50% of your trades will be losers and plan your risk management accordingly.

If you're trying to use Forex strategies to predict the market http://nowsourcing.com/blog/wp-conte...g_it_wrong.jpg
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