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Forex Dream Chasers - The 90% rule of randomness

  • #281
  • Jun 25, 2015 3:24am Jun 25, 2015 3:24am
@medici, @Warburg, @TranceTrader
Many thanks for your comprehensive explanations.
  • #282
  • Jun 25, 2015 5:58am Jun 25, 2015 5:58am
Quoting Davit
{quote} This goes against the very idea of a TREND!If price is random how did we get EU from 139 to 105 Random?True if you trading 1-5min charts but not true H4 daily weekly.I disagree with your entire outlook. Many examples of strong trends like AN AU NU GN GA EN EA etc list goes on. {image}
An event that occurs every few years, it is in between when all you have is random flux, trading range, that the only way to determine if your winning trades are not just pot luck shots is the Adverse Excursion ratio.
See http://www.moneycontrol.com/glossary...sion_2218.html and http://www.automated-trading-system....-trading-edge/
  • #283
  • Jun 25, 2015 6:02am Jun 25, 2015 6:02am
Quoting Xela
{quote} (I know you're not talking to me but ...) to be fair, the essential underlying point of the OP's post, though he hugely overstates it, is correct, i.e. that many amateur traders spend most of their lives being "fooled by randomness" - as Nicholas Nassim Taleb famously put it, in his book of that title. Unfortunately, though, some of the assertions the OP makes, doubtless in an attempt to lend credibility to his perspective, are themselves laughably mistaken, as illustrated in my post above ... so he's not exactly helping his own cause!
Problem with Taleb is that his black swan concept is rhetorical tautology: either there will or won't be a significant event by the law of exlcuded third, which is the basis of our Platonic language. Google Taleb+tautology . All conclusions from a rhetorical tautology do not follow logically, this must not be confused with logical tautologies. Google logical fallacies tautology.
  • #284
  • Jun 25, 2015 6:17am Jun 25, 2015 6:17am
Quoting alexpi
{quote}No strategy is meant to predict the market. Every strategy is meant to give you information on where the market is going
Sounds like an exercise in linguistic perversion.
  • #285
  • Jun 25, 2015 6:40am Jun 25, 2015 6:40am
Quoting grin
{quote} Sounds like an exercise in linguistic perversion.
Haha it does indeed but there's a huge difference in the mindset.

If you expect prediction you will be much more easily emotionally influenced when you lose and it makes the whole experience much more esoteric. You'll feel you're in the know when placing the trade, but then feel as if someone else, "They", are in the know more than you and that's why you're failing.

If you understand that you're trying to follow the market and you're failing in following the market that opens the door to learning how to better follow the market.

Small difference in wording, big difference in practical behaviour on the market.

Edit: The second mindset also makes it much easier to accept when you've missed a trade
i.e.

I could have followed the market but it's already gone and coming back now, no point trying to take my revenge and print the same trade at the same location because the market seems to be going in another direction now.

against

I predicted that it will fall/rise and it fell/rose but I missed it (sometimes with the added "but price hit my stop loss just before that")! Now it's coming back and I'll predict the same so I can profit (make back what I lost)!
  • #286
  • Jun 25, 2015 6:48am Jun 25, 2015 6:48am
Also it's much better, psychologically and egoistically, to ask "where is the market going" rather than "where will the market go"

The second puts the pressure of failure much more heavily on you and makes it that much harder to accept a loss.
  • #287
  • Jun 25, 2015 7:46am Jun 25, 2015 7:46am
I am not a professional trader, but i am a professional physics professor. I want to share with you my ideas about randomness.
Randomness does not exists.
It may exist at the quantum level (i think it doesn't, but someone would disagree with me) but surely not in the classical(i.e. every day life) level.
What i mean is that price is random as much as a coin flip. While you can't possibily know the outcome, it s actually not random: it's a simple question of mechanics.
So, price is random in the sense that you can't know where is going, but surely will go somewhere.
So, the correct statement is not "market is random", but "market is too complex to be predicted". this is whole another story.
While this is obiouvsly true, it's not true always. There are times in which the source of the force moving the market can be understood, for instances during qe times, or while a pair is involved in heavy carry trading. As a trader you should trade those situations and avoid the others.
So, in theory, market is tradable and people can be profitable. But everyone knows how many of us is profitable: less than 5%.
I would like to add something more.
"the market is random, so you can't be profitable". In theory this sentence is not true.
Suppose the market is random, so you are right 50% of the times on average. opening and closing randomly some trades you would end to lose just the spread. But if you can find a system to "let your profit run and cut your losses short" you would find yourself making money. So even in a random market you could profit, just as a black jack player.
Ubi maior minor cessat
  • #288
  • Jun 25, 2015 8:16am Jun 25, 2015 8:16am
Quoting FXMori
I am not a professional trader, but i am a professional physics professor. I want to share with you my ideas about randomness. Randomness does not exists. It may exist at the quantum level (i think it doesn't, but someone would disagree with me) but surely not in the classical(i.e. every day life) level. What i mean is that price is random as much as a coin flip. While you can't possibily know the outcome, it s actually not random: it's a simple question of mechanics. So, price is random in the sense that you can't know where is going, but surely...
Well said.

There is a way of finding weakness on any currency pair and increasing probability at being right on trade while comparing defined weak spots together in most relevant forming components of any currency pair.
They think they are smarter than I am.
  • #289
  • Jun 25, 2015 8:40am Jun 25, 2015 8:40am
Quoting FXMori
I am not a professional trader, but i am a professional physics professor. I want to share with you my ideas about randomness. Randomness does not exists. It may exist at the quantum level (i think it doesn't, but someone would disagree with me) but surely not in the classical(i.e. every day life) level. What i mean is that price is random as much as a coin flip. While you can't possibily know the outcome, it s actually not random: it's a simple question of mechanics. So, price is random in the sense that you can't know where is going, but surely...
I think the distinction is that "random" is being used here in its colloquial context. The same way "theory" is used colloquially when it should really be hypothesis.
  • #290
  • Jun 25, 2015 1:00pm Jun 25, 2015 1:00pm
I would say the market is a very 'complex' order filling machine, composed of many parts - traders/algos at its core - all with varying actions and expectations, all connected in intricate ways. The randomness (aka 'complexity') appearing when cause and effect are subtle over time.

Whatever i smoked, man, that left my mouth dry.
  • #291
  • Jun 25, 2015 3:55pm Jun 25, 2015 3:55pm
Quoting grin
it might be simple, but not very good analogy. trading is betting on the direction the wife is going ahead of time.
I now believe that it's ultimately an exercise in semantics and terminology.

What some folk describe as "following price" is effectively an implicit "prediction" that price will continue in its current direction (which is arguably a question of perspective, anyway). My viewing this as "prediction" is reinforced by the approach that I use, for both entries and exits.

If we want to be even more pedantic, "following a system" could also be viewed as being ultimately an exercise in prediction, where the prediction has already been encoded in the system rules.

Hence I agree with you, whatever uncertainty might exist (at the RHE of the chart) necessarily creates a need for "prediction". I also agree that the 'wife' analogy is meaningful only if one has already adopted a "following price" perspective, i.e. it's effectively a self-referential explanation.

But again, it ultimately comes down to semantics and terminology.
  • #292
  • Jun 25, 2015 4:27pm Jun 25, 2015 4:27pm
If you are following your wife and you noticed that all the related family members had passed through the doorway leading to the kitchen ,i would suggest heading towards the kitchen,its not guaranteed that your wife will follow but at that moment in time the probability has increased.

If your trying to follow your wife and all the relatives are bumping in to each other with out any purpose i would let her wander , until they displayed some sync and agreement on were the hell they were going before i followed her again .
  • #293
  • Jun 25, 2015 5:56pm Jun 25, 2015 5:56pm
Quoting Shabs19
Summary of the first post: 1. Majority of Retail traders are not successful in the long term. We are led to believe the opposite by the marketeers / internet forums. 2. He was an institutional trader that was doing the normal day to day business of the bank, moving currencies for large clients. There was some speculation involved, but that did not matter as they probably made the commissions anyway on the transactions. His bonuses did not depend on his individual performance. 3. Left his job at the bank & decided to enter the world of forex speculation,...


Close but not exactly.

Left my job and tried to trade using charts (at the bank we don't even have charts lol) only the order book. Trying to look for the same thing on charts is were the break between institutions and retail happens,

This is the whole point

You are all not looking at the same thing we are looking at ... so this is a serious issue because there is so much random noise and price levels that are not of any importance to the big money.

We are only interested in the market when it leaves VWAP and thats where the truth of the future price is decided.

Once the market leaves VWAP "we" the largest of the large will have to either A. Stop buying or selling or B. We will have to accelerate buying or selling to make sure we don't get screwed by the other bigs.

We lose clients if we cant get them better prices then our competitors.

So the challenge to you each day as a trader is to watch and see if the market remains in the randomness of VWAP or if it leaves VWAP. Once you see that you have future prices. Either back into VWAP or continuation.

Guys I can't make this any easier then that !
  • #294
  • Jun 25, 2015 6:07pm Jun 25, 2015 6:07pm
Quoting Gobigfx
{quote} Close but not exactly. Left my job and tried to trade using charts (at the bank we don't even have charts lol) only the order book. Trying to look for the same thing on charts is were the break between institutions and retail happens, This is the whole point You are all not looking at the same thing we are looking at ... so this is a serious issue because there is so much random noise and price levels that are not of any importance to the big money. We are only interested in the market when it leaves VWAP and thats where the truth of the...
Since you are using a term VWAP (volume weighted average price) which has a precise definition, i want to ask you what do you mean when you say "market when it leaves VWAP". Can you define VWAP are you referring here -- perhaps VWAP over last few mins, VWAP since open, VWAP over last week etc.
Think : Trade : Live Life
  • #295
  • Jun 25, 2015 6:37pm Jun 25, 2015 6:37pm
Quoting Gobigfx
{quote} Close but not exactly. Left my job and tried to trade using charts (at the bank we don't even have charts lol) only the order book. Trying to look for the same thing on charts is were the break between institutions and retail happens, This is the whole point You are all not looking at the same thing we are looking at ... so this is a serious issue because there is so much random noise and price levels that are not of any importance to the big money. We are only interested in the market when it leaves VWAP and thats where the truth of the...
that doesn't verify the markets are random! there is cause and effect, sitting on top of the market as a "big guy" just means the time frame and intent are different, whether you like it or not you are governed by predictable or market prices the way just a bigger scale and different requirements.
its like the stock "big guy" fundamentalist .. they buy if over the 200ma and sell if under , based on the acceleration of the 200ma etc.. they offload faster or buy more . looking from a bigger perspective, they may not need charts or analyse this the same way , they look at PE and other data to determine value for money , the fact remains in all cases .. whether anyone likes it or not ...

the market is governed by Price and time and volume in affect 3 fundamentals they cannot be broken as this is what is used.

The difference between the 'big guy" and the retailer is one is looking to massage the market on the biggest picture , the other is looking to snapshot a small part of the big picture, unfortunately some think they can snapshot and expect the big picture to occur. Even George Soros could only temporally become the 'big guy' but I can tell you this , he already "predicted the outcome " and used the cause to his effect.

if you had a system that gave you 80% accuracy , pinpointed a price within +/-5 pips for every "move" and gave timing down to the day or down to a few minutes , would you say that this close to predicting or would it be clever calculations which manage to track and benefit from the cause and effect of the big picture "big guys" . At the end of day , if this is possible and proved would it then change your view ?

as an example , proof is in the results, if we have a guy who makes 600% pa on forex and does this successfully in a world wide competition so it is well and truly audited, does this mean this guy just randomly got it right more than the next guy ... I think not.

All the movements and changes on the market are reflected in the price , you cant hide it or control it, one big guy moves one way another needs to do something different. A professional looks and finds these effects and profits from them , he/she doesn't cause it or try to find the cause , by the time he does that its all over .. ala interest rate changes .. do you think other than the few people who get the info early cause the market to change , the instos' get the info first set positions and then news is released ,the flurry and who haw are everyone else getting smashed around on the spike then the movement from where it came from .
  • #296
  • Jun 25, 2015 7:01pm Jun 25, 2015 7:01pm
Hi Gobigfx,

Thanks for replying, just trying to pick the meat out of your posts.

If you are saying the institutions are not looking at charts, just prices, then vwap must mean where prices consolidate in a tight range just before a major News announcement or event and you are observing a build up of orders on the order book which retail traders have no access to.
This tight market range is where a lot of orders are changing hands but the ovearll market price has not moved until one side of the orders dries up.

Are we looking for breakouts from congestion with high volume prior to the breakout ? This information would be available on futures platforms not on MT4 or similar platforms where the order book is manufactured by the marketmaker only.

Am I any where close now ?
It never gets easier, you just get better
  • #297
  • Jun 25, 2015 7:42pm Jun 25, 2015 7:42pm
So, what solution for retail trader in practical then?
Quoting Gobigfx
{quote} Close but not exactly. Left my job and tried to trade using charts (at the bank we don't even have charts lol) only the order book. Trying to look for the same thing on charts is were the break between institutions and retail happens, This is the whole point You are all not looking at the same thing we are looking at ... so this is a serious issue because there is so much random noise and price levels that are not of any importance to the big money. We are only interested in the market when it leaves VWAP and thats where the truth of the...
  • #298
  • Jun 25, 2015 7:50pm Jun 25, 2015 7:50pm
Market is sometimes random and sometimes non random. Its difficult but possible to make it as a retail forex trader. Join in on the nameless thread where i trade the nonrandomness of the market when i find it available
  • #299
  • Jun 25, 2015 7:53pm Jun 25, 2015 7:53pm
The market is not random, the people here that say it is do not understand or have the correct analysis tools to make this comment. The market is pure supply and demand, what you can see every day is the market going to these areas of supply or demand to get the orders.

To say that the people chasing these orders are just randomly entering the market on a whim is just foolish. You may not be able to say exactly where a market is going by when but clearly that does not mean its random, it means that you lack the tools to uncover its driving force.


There have been people through out history that have understood the market and called tops and bottoms with precision accurate to the day and price level.

I would make a call on this forum now about the SP but sadly most people here would not even look at their charts when the date was due.
  • #300
  • Edited 8:16pm Jun 25, 2015 8:00pm | Edited 8:16pm
Quoting Hurst
The market is not random, the people here that say it is do not understand or have the correct analysis tools to make this comment. The market is pure supply and demand, what you can see every day is the market going to these areas of supply or demand to get the orders. To say that the people chasing these orders are just randomly entering the market on a whim is just foolish. You may not be able to say exactly where a market is going by when but clearly that does not mean its random, it means that you lack the tools to uncover its driving force....
Youre right brother. Very right. you got the right attitude. I want to make a bold call
to prove the part non randomness of the market.
USDJPY IS CURRENTLY DISCOUNTED. ITS TRUE VALUE IS BETWEEN 124 AND 125. SO EXPECT TO GET BACK ABOVE 124. IF YALL NEED MORE PROOF THAT MARKET IS NON ALWAYS RANDOM BUT SOMETIMES NONRANDOM LET ME KNOW
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