Forex Dream Chasers - The 90% rule of randomness

Sure price is "random" or in other words: Not predicatble. BUT...That does't mean you can't make money.

[hi g. Understand what u are sayit don't you think abstrong trend is predictablequote=Gobigfx;8325400]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" world of trading I lost a lot of money and even recently lost some money trying to figure things out and it was rough but overall I have survived and prospered. The biggest lie that you have been told is that "Price movement is predictable" and simple to understand and that some indicator or chart reading method will somehow turn you into a professional trader. Before I address this lie I want to discuss what a true "professional" trader looks like from my world. As a professional institutional trader we got salaries and bonus's (if we preformed well) but we didn't make income from trading profits. We made income from working on trades the firm gave us to manage. So for example Mercedes Benz gave the firm an order for 100 million Euros to hedge the current price vs where they think it will be in 30 days when they deliver their cars to America. They signed a Forward Agreement and our desk gets the order to fill. If we get better then the volume weighted average price over the period of time we get a bonus. Thats what 90% of the forex / currency exchange market is. Large orders that are being "worked" by either an institutional client or a large order thats being placed by a Macro Fund. Some orders are from the producer of products and an equal number are from the consumer of products or services and it all depends on each companies position whether they are buyers or sellers and their time horizons. At any give time we could be working 100 very large orders a day all at different prices and directions based on different time horizons. This goes on at over 200 large institutions day in and day out. The retail 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 their clients to adjust their positions to account for the new information. Just look at any chart and look at when price moves and if you count the total number of bars where price moves in an opposing or changing direction you will see this is about 10% of the time. The rest of the time is just Random Noise of orders being filled back and forth. Your all staring at all that random noise and your all trying to make sense of the wrong information. Be careful out there folks[/quote]

Price is not random at all. You just need the right strategy for the right pair at the right time in the right time frame. Is such a strategy predictable? IMHO, Yes.

You can only know the probability of the occurrence of the next price. And this probability is not 100%. There are different ways of analysis, different strategies, but they only give to understand about the likelihood of a price change.

A legit question to the OP, you writing is similar to Wyckoff's view, also an ex-floor/institutional trader.

If order filling is a large component of the market as per your experience, is it a legitimate exercise then to look for the evidence of these large order and to ride them?

For example, your Mercedes order is starting to influence the market too heavily, becoming the market as you said, so you have to stop filling the order temporarily. Since you have stopped a large influential part of demand(or supply), then the market will react accordingly. In the demand case, the prices will stop going up and start to fall, simply because there isn't enough money available to keep it propped up, as your orders dwarfed everyone else's even though you tried not to.
If you can spot the time when the demand dries up, and short the stock, until demand picks up again (you enter back into the market) then you profit.
Obviously you couldn't do this with any large order, only the retail sized orders can ride the market like that, otherwise they will have the curse of moving the market against themselves as well.

So the big money orders have to ride the news, the big market changes, as you say whilst the little guys can ride the moderate market movers such as yourself with no need of big market change.

Now the trick of this approach is that there are 200 more big orders being filled at the same time on the same pair (even across multiple pairs) however one side is likely to have more push/pull than the other, resulting in some sort of movement. This is of course rather random, however surely there are times when those big orders on one side are working somewhat harmoniously, those times being the small % you want to spot as a retail trader.
You cannot deny that sometimes you see a moment of obvious sudden selling/buying, either propping up the price and trying to boots it to get that tasty bonus, or simply trying to keep the bonus from disappearing.

How many times did you do that OP, try and keep your bonus from drying up by dumping buy/sell orders? Does it work much? Are you forbidden to do it? Cheers.

Its your truth. And it's an interessant one. Thank you for sharing.

But is it the only truth?

I mean, does all the profitable traders (the 1 % according to you) are trading like you?

Green pips to you

[/quote]


hi stef3an

not disagreeing with your post,i totally get the post.price for sure randomly travels in ranges allowing for drift and time horizons filling orders from multiple participants with as many purposes.

Through out the last 15 years i have had to exchange large sums of pounds into various currencies .the last large transactions was in 2010 /11 .pounds into dollars.we were a consortium buying up bundles of properties in the states from the banks.we were all uk based.half a million dollars to a million dollars at regular intervals .our bank would give us the range and the best averaged exchange .if present price was towards the top of the present range we would be advised on holding for the price to trade back down to lower range and a extremely good forecast on the likely change in the present range.on occasion we were offered strikes using deferred interest on deposits.i would say 90 % of the time they were correct on the advise they gave us on both the range and the strikes and the time horizons.

This actually has helped me tremendously as a intra day, scalper .

My over all conclusion being ,is that yes 90 % of the time price is traded in a somewhat random way ,but this random transacting has parameters ,it has averaged price ,it has extremes ,ect ect.these can be plotted and traded in the same fashion that my bank advised me on when to hit the wire and when to hold.

And to finish off ,yes its alot simpler to trade the gaps between these periods of price

statistical number 5% success and 95% fail is happen to all field. from 100 new venture capital its only 5 that survive, its happen in all. not only in this currency trading world. that is law of nature.

in my opinion some aspect which make lot of people fail on this business is because of wrong or bad concept on their head.
1. about forecasting and predicting. its true that forecast predict its only "predict" its not absolute. but lot of people use and approach it as an absolute, not approach it as
probability of outcome. because approaching as an absolute thing like physic law and math law forgot to create a simulation model anticipating for several outcome, not making what I called "what if scenario".
2. word trading conception, because this business yes it is about buy and sell currency in pair make lot of people forgot one crucial thing. that is "gambling". this forex is not gambling, but in my opinion this is a twin brother of gambling which is speculating. speculating is different with gambling but because it twin brother of gambling than there are some gambling characteristic on it. what people remember is only the trading aspect forgot the gambling characteristic.
3. absolutely "lack of champion mentality". the mountain is so high, as long as my foot always walk step ahead how even high the top I will reach it, but if I stop thats the end.

hi stef3an not disagreeing with your post,i totally get the post.price for sure randomly travels in ranges allowing for drift and time horizons filling orders from multiple participants with as many purposes. Through out the last 15 years i have had to exchange large sums of pounds into various currencies .the last large transactions was in 2010 /11 .pounds into dollars.we were a consortium buying up bundles of properties in the states from the banks.we were all uk based.half a million dollars to a million dollars at regular intervals .our bank would give us the range and the best averaged exchange .if present price was towards the top of the present range we would be advised on holding for the price to trade back down to lower range and a extremely good forecast on the likely change in the present range.on occasion we were offered strikes using deferred interest on deposits.i would say 90 % of the time they were correct on the advise they gave us on both the range and the strikes and the time horizons. This actually has helped me tremendously as a intra day, scalper . My over all conclusion being ,is that yes 90 % of the time price is traded in a somewhat random way ,but this random transacting has parameters ,it has averaged price ,it has extremes ,ect ect.these can be plotted and traded in the same fashion that my bank advised me on when to hit the wire and when to hold. And to finish off ,yes its alot simpler to trade the gaps between these periods of price[/quote]
nice man!!!can u share with us more?

To make the assertion that price is random you must first define what you mean by random.

If by random you mean that future prices cannot ever be predicted with certainly, then you would be correct because that would involve predicting the thoughts and actions of all market participants.
If by random you mean that each price tick is a 50/50 chance to be an up or down tick, you would be wrong. Price data is leptokurtic with fat tails, which simply means mean-reverting most of the time and trending some of the time.

Its been awhile and I thought this thread needed a bump.

its random and not random. maybe the rule 60/40 or 70/30 . you cant hit 100% correct , try hitting 40 and 30 with bigger R:R lets say 1:3x.

somehow like a professional texas holdem player and a casino cheat , people can make a living out of it . at times the poker player gets bad beat but he will prevail in long term. youtube phil ivey .

Poker ALWAYS has 52 cards never 53 never 54 always 52

Trading has 52,000 traders some days and 1,000,000 traders other days thats the difference.

There is no constant in Trading only randomness 90% of the time.

I started this thread for a reason and the main reason is that I want to help people to see the truth.

So just assume I am right.

If price movement is random 90% of the time what could you do as a trader to prosper from this fact ?

feel free to answer and if I see sincere participation I will tell you soon.

i think you are so intelligent that you should be somewhere else hahahah

Ok We assume 90% as a fact,so, how we detect the other 10%?

OK so once you accept the fact that the market is 90% random what should you do.?

1. Stop over trading
2. Trade only when there are events that will force the market to move = Fundamentals


IF you do these 2 things 90% of you will stop losing money this week. Most of you are doing the complete opposite and thats why you are losing money.


I know this is simple and vague but it is the answer to your success.

Nice summary. It's at the eye of the storm that decisions are made and need to be made. Kinda explains the intensity of the challenge at hand that seems to account for that low success rate.

Ok, how do you code this in to an EA? Can you offer a specific set of rules so that I can code and we'll see how the results are?

This is another reason so many retail traders fail. You simply can't code this into and EA because there are always too many factors effecting price movement and too many different players.

EA simply can not take all these various factors into account. What is required is sitting down and analyzing the context of the situation.

I will try and give you some example of what I mean.

At 10 am today Consumer Confidence comes out.

Step 1 is to wait to see the numbers.
Step 2 is to see if there is any variance in that number = Is that number a big surprise or is that number as expected.
Step 3 IF that number is a big surprise then ask your self 3 questions A. HOW much of a surprise is it in relative terms B where has the markets come from prior to the number ? has the market move enough in favor of that number or C can the market move in light of that number because it caught institutions off guard.

If the number has already been priced into the market and the number is relatively opposite of the price move prior trade in opposite direction
If the number is as expected but the market has moved expecting a bad or good number trade in opposite direction
If the market has moved and the number has relatively moved the same prior to the number then no trades

I know this is vague but this is a skill that you need to acquire that is best learned by watching reaction both prior and after fundamental changes.

I will try and give some chart examples later when I have time.