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Forex Dream Chasers - The 90% rule of randomness

  • #341
  • Jun 26, 2015 3:28pm Jun 26, 2015 3:28pm
Quoting hieronymus
{quote} This statement doesn't really make any sense. Aside from that, charts are a graphical representation of the ticker tape (lacking some pieces of information like lot size etc). The "information" you're stating here is fundamentals or what?
What I mean is that whatever how we look at the problem and how we analyze it (price action, indicators, etc.) we first of all need an event, like fundamental (growth exception ,employment, monetary policies, etc.) or risk / stress (natural disasters, political turmoil, etc.), to move the price, to bring participants to take positions, heavy enough, or in herd, for us to also take a position which can be profitable.... if not we are swimming in a calm sea which can take different shapes, but which has no real meaning attache to it.

We could see some patterns in an up trend which tells us that the up trend is going to continue, to then after some time see this pattern transform itself into a sideways market, etc.

No information flow, nothing to expect..... or you have some knowledge, that other participants do not have about orders flow kicking in...

It is all a game to be pluged to the information flow, which are basically two kinds, one fundamental (economics's exception), the other other risk events (like a period of stress could bring participants to switch from speculative positioning to conservative, even of the fundamentals on a given economy have not really changed...)

That is why we could say that retail traders can some time have a hard time, because of a miss of information flow, and a miss to plugged to it correctly.

Even if we have some ways to have access to information, an other problem is that we often do not have the technology to react to this news flow as some institution can (problem of speed).


Beside that, I was not meaning that I see conspirators or manipulation, even if I know it can be the case, I was saying that at some level, other participants can accumulate positions on a market for other motives than ours, other than the one we think are at play (we come back on fundamentals). We could all think that a given currency could be subjected to go a given direction because of fundamentals, but the price could be heading an other way because some may know what we don't know.

Bruce Kovner in an interview by Jack Shwager talks for instance about how well informed the Soviet Union was, and that they were taking positions on things that other professionals at that time did not even knows. Kovner in this interview, says that some well informed participants some time knows much more that we all may know, even if we think to fully understand what is going on in a given market at a time.
  • #342
  • Edited 8:27pm Jun 26, 2015 3:55pm | Edited 8:27pm
Quoting bccorp
{quote} We could all think that a given currency could be subjected to go a given direction because of fundamentals, but the price could be heading an other way because some may know what we don't know.
Not quite.
It's getting late and I'm lazy so I can only respond to this statement. I don't trade higher TF charts, so screw fundamentals (I do look and study higher TF charts a lot though and they help in my trading). I never look at news before it comes out or the results/numbers afterwards (I do however like to know when the news is coming out), I suppose I'm in the camp that says it's all in the chart. Price may be going in that other direction than you would expect for many reasons and it could have absolutely nothing to do with what the big mover "knows". They may just need to get a few yards moved and that is the perfect time to do it, i.e., manipulate. Fundamentals may move the markets in the long run but they have much less effect day to day, so they mean next to nothing to me.
  • #343
  • Jun 27, 2015 5:42am Jun 27, 2015 5:42am
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...
Right - I think I have got it, I understand how you use VWAP to determine a random / non random market and how an institution would use this information to know what type of market we are in. I can incorporate this into my trading plan.
Thanks for giving me an insight.
It never gets easier, you just get better
  • #344
  • Jun 27, 2015 5:58am Jun 27, 2015 5:58am
Quoting Shabs19
{quote} Right - I think I have got it, I understand how you use VWAP to determine a random / non random market and how an institution would use this information to know what type of market we are in. I can incorporate this into my trading plan. Thanks for giving me an insight.
share with us ...do u buy or sell if the price goes again at the edge of the band? or how do u do?
  • #345
  • Jun 27, 2015 6:18am Jun 27, 2015 6:18am
read post #293, it is explained there.

http://www.forexfactory.com/showthre...97#post8347197
It never gets easier, you just get better
  • #346
  • Jun 27, 2015 9:03am Jun 27, 2015 9:03am
This is a random generation of 500 numbers, -3 to +3, each added to the previous. Amazing. We have S/R and trends and ranging.
Attached Image (click to enlarge)
Click to Enlarge Name: random.gif Size: 14 KB
  • #347
  • Jun 27, 2015 10:10am Jun 27, 2015 10:10am
To code VWAP is simple. But how to get real Volume data, which has professional traders?
  • #348
  • Edited 11:04am Jun 27, 2015 10:54am | Edited 11:04am
Mt4 has tick volume, it is probably broker based ticks, but should be as close to real volume about 90%
It isn't real volume, unless you go to a futures platform, but for all intents & purposes it is close to real.

Vwap needs to reset itself at set periods, maybe at the US close each day, then we can see the required data by the time
the European session opens. It is basically a moving average of buy / sell tick volume.
I have uploaded some vwap indicators maybe they could be modified.
It never gets easier, you just get better
  • #349
  • Jun 27, 2015 10:58am Jun 27, 2015 10:58am
Quoting jmag
This is a random generation of 500 numbers, -3 to +3, each added to the previous. Amazing. We have S/R and trends and ranging. {image}

Yep market is random, just like tossing a coin.

*the above post may be sarcastic
  • #350
  • Jun 27, 2015 11:01am Jun 27, 2015 11:01am
Random numbers even do stop hunting!
  • #351
  • Jun 27, 2015 11:54am Jun 27, 2015 11:54am
Quoting jmag
This is a random generation of 500 numbers, -3 to +3, each added to the previous. Amazing. We have S/R and trends and ranging. {image}
Are you sure that this chart is truly random? Most random number generators are not truly random.
If you are good at something, never do it for free--Joker
  • #352
  • Edited 4:13pm Jun 27, 2015 12:39pm | Edited 4:13pm
Quoting jmn5611
{quote} Are you sure that this chart is truly random? Most random number generators are not truly random.
How can we tell? I generated the numbers on random.com mentioned above.
  • #353
  • Jun 27, 2015 12:51pm Jun 27, 2015 12:51pm
Quoting jmag
This is a random generation of 500 numbers, -3 to +3, each added to the previous. Amazing. We have S/R and trends and ranging. {image}
Show me a randomly generated candlestick or bar chart and randomly generated volume as well. A chart without volume is only half the equation (imo).
  • #354
  • Jun 27, 2015 1:16pm Jun 27, 2015 1:16pm
Quoting jmn5611
{quote} Are you sure that this chart is truly random? Most random number generators are not truly random.
We model the RNG as random. Or were you trying to suggest that there exists support/resistance in transistors?

Also, there's a lot of confusion about "randomness" in the thread. Random doesn't mean 50% up/down. It could be 60% down and 40% up. In either case, TA is useless, even in the 60-40 situation.
  • #355
  • Jun 27, 2015 1:32pm Jun 27, 2015 1:32pm
Quoting Gobigfx
{quote} Institutional Traders get paid by staying within the volume weighted average price do you understand what that means ? I dont think you do so let me explain it to you. When we are given a forward order from Mercedes Benz it basically states that over the course of a time period typically one or two days we will fill your order with no guarantee other then our best efforts. We do however get paid bonuses for doing our best efforts. Those best efforts are anything better then the average price during the time of the order and size of the order....

VWAP...First nugget! Keep talking. I'm listening. And learning. You are confirming my thoughts and findings so far.
  • #356
  • Edited 2:27pm Jun 27, 2015 2:13pm | Edited 2:27pm
Quoting grimReaper
It could be 60% down and 40% up. In either case, TA is useless, even in the 60-40 situation.
No analysis would be needed in this situation. Simply sell and hold, and watch your profit accumulate.

The "generate random charts" topic has been discussed many times before, e.g. here and here, if anybody's interested.
_________________________
[EDIT]

I've quoted Gil Blake's success recipe** before:

1. Focus on trading vehicles, strategies, and time horizons that suit your personality.
2. Identify non-random price behavior, while recognizing that markets are random most of the time.
3. Absolutely convince yourself that what you've found is statistically valid.
4. Use this to set up trading rules.
5. Follow these rules.

Point #2 seems to concur with what has been said in this thread, i.e. a trader's goal is to find and exploit market inefficiencies while they exist.

[**Mr Blake was interviewed in Jack Schwager’s New Market Wizards (Harper Business, 1992), see p 248]
  • #357
  • Jun 27, 2015 3:47pm Jun 27, 2015 3:47pm
random only becomes random when you no longer understand the dynamics, infact this also can be reversed.if you understand the dynamics you will understand the whole,the op understands the dynamics from his view and knowledge point and will not recognize those that have selected understanding,that is why you quarrel.

there are some that understand the whole.

you can be prosperous with a limited understanding.

most professional traders have a limited view point , and most struggle to succeed in retail.

so i sugest one should listen to the knowledge but dont be discouraged bye the perspective.

and yes the op has a very valid point .averages are the key which is not centralized to ones limited ////////////////////////////////////
  • #358
  • Jun 28, 2015 1:03am Jun 28, 2015 1:03am
Quoting grimReaper
{quote} We model the RNG as random. Or were you trying to suggest that there exists support/resistance in transistors? Also, there's a lot of confusion about "randomness" in the thread. Random doesn't mean 50% up/down. It could be 60% down and 40% up. In either case, TA is useless, even in the 60-40 situation.
Most random generators are not truly random. They assign "random" numbers based on math formula. If you google you will see this.

As far as TA being useless, I would simply ask, what do you mean by useless?
If you are good at something, never do it for free--Joker
  • #359
  • Jun 28, 2015 6:31am Jun 28, 2015 6:31am
As I understand it now, not personally acquainted with any institutional trader and would like to thank Gobigfx in explaining how an institutional trader looks at a chart. I am sure having a chart helps instead of just having calculated numbers on a bit of paper.

It all fits in with other styles of trading be it supply & demand, order flow trading, trend trading etc. so no problems for me there.

An institutional trader would look to place his clients large orders into the markets within the Vwap range and he would try to do this carefully without making the current market price move too far away from Vwap, so he would do this in small enough steps. This is the market being kept in a tight range, this is the "random" market phase. Most retail traders would get "chopped" in this type of markets, basically directionless.
This is the 90% random that Gobigfx is referring to. We can all have our own views on that percentage, but by & large at congestions & extremes of Vwap this happens. The trend phase is usually shorter in comparison. Price moving away from Vwap or returning from Vwap extremes.

He has clearly shown this on his charts that he has attached.

However when new information comes in due to an announcement by central banks or good / bad economic news, the currency will move away from Vwap.
The institutional trader would now not be able to "fill" his order favourably , (unless it was in the direction that favoured him of course). He would either
close all his positions or now "speculate" on the new direction but at the opposite outer limits of Vwap, where he would place sell orders if the prevailing trend was down and Buy orders at the extreme if the prevailing trend was up. Call it picking tops or bottoms.
You can see why sometimes even the institutional trader will get his fingers burnt.
But with his order volume he is more likely to win than a retail trader doing the same thing.

He now has a possibility of earning himself a bigger bonus than by just filling client orders at the Vwap range. Job done.

The problem has always been for retail traders is order volume information, seeing the order book in advance and high speed news information.
We are too small to be targeted by institutions, but I imagine it all adds to the liquidity pool, the "smart traders" off loading onto "dumb money".
Smaller institutional traders can also be "dumb money".

Anyone disclosing how the large institutions trade is knowledge worth gaining in my book, especially if it fits in with my trading style.
It never gets easier, you just get better
  • #360
  • Jun 28, 2015 7:10am Jun 28, 2015 7:10am
Quoting Gobigfx
Theretail world just does not understand the RANDOMNESS of trading, this is the 2nd biggest lie that you are lead to believe. If you think that price movement is predictable then you are a fool because you just don't understand the randomness of orders hitting the market from all directions "most" of the time. Most of the time... being 90% of the time ... price movement is random. So when is price movement not random ? 10% of the time when some information enters the market that changes the randomness and forces the majority of institutions and...
I am sorry to disagree but price movement in Forex is not random at all. Not only is it predictable, it is almost comical to watch it unfold. Yes 90+% of forex traders lose money. That's the way it should be, the way it has to be. Why not strive to be on the 10% winning side?

The main reason traders lose in Forex is twofold: they do not know enough about market structure and the way in which the market works and they do not have the patience to wait for the cash register to ring. All financial markets work essentially the same way-take money from the unskilled and impatient and hand it over to the skilled patient traders. Trading is more art than a science. Its an individual journey. Its you against yourself. The market never changes, nor will it ever change. Livermore and Gann faced the same market we face today. Do not wait for your opponent to change. You must change....
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