FXCM stats worthwhile? AUD/NZD has the best win rate to trade?

Hey guys, not sure if anyone has ever commented on this article, or statistics such as this, but if you know of any threads about stuff like this please link them for me!

So i'm just curious, are stats like this worth anything? Why would AUD/NZD appear to give a better win rate to retail traders compared to AUD/JPY? With a 22% higher win rate, it sure makes me wonder!

Has anyone found broad statistics like this helpful in picking a pair to trade, a time of day to trade, etc?

http://www.dailyfx.com/forex/educati...ders_Make.html

Please do not fall for this fallacious line of thinking.

No matter what your edge is, the probability of success on your next trade is never more than 50/50. That's right, you with either win or lose. I am put a break even in the loss column, since there is always an opportunity cost and the cost of commissions/spread. Not only that, if we include break even as a third outcome, the probability of success goes down from 50% to 33%.

Let's take a closer look at this.

Assume there is a room with 10 people. 7 are women (70%) and 3 are men (30%).

If I ask you what are the chances that the next person through the closed door is a man, the correct response is 50%. That's right 50%. While there are only 3 men and they are less than half of the total number of people, they represent an equal chance of coming through the door.

And so it is with trading. You may have an edge that produces 80% winners. But the probability of the next trade being a winner is only 50%. As traders we are hoping that our edge will present itself over time. So that in the last 10 trades, we will have won 8 of them. This, however, does not alter the fact that each individual trade only had a 50% probability of success.

The win rate is one thing, the expectancy is another one.

E= (Probability of winning x Average win) - (Probability of losing x Average loss)

You only have the probability side of the equation. What if I tell you than on all pairs, retail trader's average loss is greater than the average win?

Because it is...

I'm not sure if I completely follow your logic there. Surely the probability of success for each individual trade is independent, so the probability of winning multiple trades is the same as the probability of winning one trade? So, if the probability of winning one trade is 0.5, then the expected value of multiple trades is 0.5?

Hey thanks for hijacking my thread with your conspiracy theories

do the folks who fail as traders sometimes stick around the boards as ghosts to haunt everyone else?

Sorry BobbySpider, and good comment.

Hidden Gap the fact is Your Win/Loss "Expectancy" Has alot to do with your Skill and aptitude. If you are a phenominal trader (Sample Trading Statement included) As my Mentor is and i aspire to be. Your Win Loss percentage will be phenominal also.

Craig.

P.S My Win/Loss is Maybe 30% and i really couldn't care less as i'm making great money. All depends on your individual system. If your system has 10% winning trades with astounding Reward to risk and it's succesful, that's all that really matters.

Hell's teeth, FXCM don't half twist things around.

Not sure if that guy is being deliberately misleading but his logic is full of holes; simply mucking around with R:R does not turn a rubbish strategy into a good one, or rather if it does, it won't sustain. Retailers on average use inverse R:R to sustain a higher win rate, because - consciously or not - they trade mean reversion. If, as he suggests, you simply let winners run and cut losses short, they will change said strategies to positive R:R at the expense of lower win rate. Nothing complex about it. He cherry picks a static example to prove his point but it does nothing of the kind.

So to your point - retailers trade mean reversion. In 2009 where those stats came from, AUDNZD ranged well, AUDJPY trended heavily. So retail sat on trending positions and blew through their accounts, but handled a bouncing range well, thus the win rates

Same reason - retailers on average are winners in the asian session, not in london / US. The conclusions are pretty obvious...

I spent a couple of years using retail positioning to inform directional trades - I wrote a thread about this a few years back if you want to dig it up.

Hi Triphop, (Zero 7 is one of my favorite musical groups!)

You might be interested to know that in an updated version of his article David Rodriguez adds that "Our data shows that 53 percent of all accounts which operated on at least a 1:1 Reward to Risk ratio turned a net-profit in our 12-month sample period. Those under 1:1? A mere 17 percent."

The chart itself is telling you an incomplete story. By reading the chart,one would conclude that the AUD/NZD has a higher win rate than all other currencies therefore giving you the false impression that trading the AUD/NZD gives you a greater chance of making a profit.For example if the 71% of the AUD/NZD trades that were winners had an average gain of 20 pips and the 29% of losing trades had an average loss of 60 pips, the AUD/NZD trader would be worse off despite having a 71% win rate.The article itself emphasizes the point that it is not about the win rate but it is about your risk/reward ratio. With a high risk/reward ratio,you can have a win rate that is less than 50% and still be profitable.

Hi Jason, yeah, keeps my stress levels down!

Now I don't want to be a nitpicking SOB, because I wouldn't advocate negative RR....

But...

...correlation isn't causation. Just because winning traders have positive R:R doesn't mean simply turning your R:R from negative to positive will change your win rate (unless it's on a daily plus TF in which case you catch the long tails price distribution).
You can prove this with simple random trade simulations - your risk reward is absolutely not the main determiner of profitability.
If it was, retail client positioning would be the most valuable directional indicator there is. It's not bad, I've studied it a lot, but it isn't smoking

Truth is, to trade negative R:R successfully, you have to know your market and your edge as it applies to it. Versus... the eur/usd thread

Hi Guys

My Plan is to make 3 Trades a day every day this week. The criteria for the Trades will be they must be atleast 2 - 1 Reward to Risk. I Plan to Risk Aproximately 1% of my Capital per trade. My Goal is to Win atleast 10 of the 15 Trades and that will give me a minimum 15% Return on my account for the week.

If anyone is interested in following my progress, my Trade explorer Name is Tama.

All the best with your trading guys, stay positive, be phenominal.

Craig.