Most traders fail because of no discipline!

Good Morning All

Monokl

That is what we do on our thread and it all works. Have a great trading day.


Benjaminis

http://www.forexfactory.com/showthre...71#post9468571

techboy46

Absolutely agree. Discipline in the trading is the only thing that allows us to do business without being ruined. That is to say, to watch your trade, to be constant in Forex and to have the capacity not to be allowed to move only for the superficial.

Looking for customers?

Yes the market is unpredictable, but not random.

And that's precisely that non-randomness that allows us to make money.

If the market was 100% random (and assuming no inside information is used), all trading systems would stop working overnight, no matter how robust and profitable they were. Sure, in the short term some systems will show a positive return just by chance, but in the long run that rate of return will drop to zero (in fact it will become negative due to transaction costs, spread, slippage, etc...).

Apophenia is the human tendency to perceive meaningful patterns within random data.

If the market were not random, there would be no market.

The random walk hypothesis is a financial theory stating that stock market prices evolve according to a random walk and thus cannot be predicted. It is consistent with the efficient-market hypothesis.

SOME THOUGHTS ON THE RANDOM WALK AND EFFICIENT MARKET THEORIES
There are a select few who regularly profit from their involvement in organized markets, and there is the great majority of people who do not. Among the points which distinguish successful traders and investors on one hand from the vast majority of market participants and most of the academic community on the other, are the acceptance by the latter group of the notion of organized markets as a random walk, and the ability to distinguish organized from unorganized markets because of the so-called efficient market theory.

The most important yet simplistic implication of market logic is that anyone can now locate value in an organized (or in fact any) market. Thus, one can determine when price is below value, at value or above it. Armed with this information, so long as one has the other requisite characteristics, one can join the ranks of the few who make money consistently in the organized markets. A secondary implication of market logic must therefore be that it refutes both the random walk and efficient market theories currently in vogue among the majority of the academic community. Consider each of these long-accepted theories regarding market activity.

Random Walk
The theory of price fluctuation as a random walk (and the term itself) has been used for centuries. There are numerous definitions of random walk, and each definition varies in shades depending on who is doing the defining. According to Robert Hagins Dow Jones-Irwin Guide to Modern Portfolio Theory, random walk is a term used in mathematics and statistics to describe a process in which successive changes are statistically independent. A random walk implies (that the market's price displays) no discernible pattern of travel. The size and direction of the next step cannot be predicted from the size and direction of the last or even from all previous steps. The serial correlation is (functionally) zero. In other words, the random walk theory holds that it is impossible to predict tomorrow's price changes based on what has occurred today.

Every market is an auction market, either passive or active. In a passive auction, the individual does not take part in an active negotiation process but selects from products offered at different prices which make up the range. In an active auction, participants negotiate the range. Whether the auction is passive or active, all markets auction or trend up and down in order to fulfill their purpose, to facilitate trade. In an auction, prices do not develop randomly, but rather to fulfill the purpose of the auction.

The purpose of any market is to facilitate trade. Lack of trade facilitation inevitably causes price to move. This price movement behavior is as true in the organized markets as it is in a grocery store or any other everyday market. Thus, price changes to satisfy the condition of the market and every price is a result of the condition of the market. The fact that price moves for a specific reason further precludes price from developing in a random manner.

Furthermore, prices are not statistically independent of each other. Price, in moving to satisfy the condition of the market, provides an informational flow. In other words markets must generate trade, and in doing so, prices fluctuate, generating information about where trade is being conducted and where it is not. This information is valuable to the market participant. But true randomness does not generate valuable information. In other words, in statistically random situations, knowledge of the present is not important for it conveys no advantage. If knowledge of the present structure of a market is important and does convey an advantage - a market cannot be a random walk. Price moves because of the degree of each timeframe's participation at various levels of price.

Efficient Markets
According to Robert Hagin, The efficient market theory is the assertion that in a market with numerous investors who prefer high returns over low returns and low risk over high risk, information is of no value. An investor can attain no more or less than a fair return for the risks undertaken.

In the semi-strong form, the efficient market theory hypothesizes a market in which all publicly available information is efficiently impounded on the price of a stock, and hence a market in or item of publicly available information that can be used to predict future price changes.

An efficient market does not allow price to get away from value, since the theory holds that information is of no value since it is factored into the market, as every price must represent fair value. If price is always in equilibrium of value, then the theory presumes that prices are indistinguishable from one another in all but number. Thus, according to the efficient market hypothesis, all prices represent value, and the market is balanced at every moment: all the needs and concerns of the entire marketplace - participants in every known and unknown timeframe - are brought to the present by a price representing value for all. This seldom occurs and when it does, it is happenstance, and non-discernible except by the lack of activity.

Different participants have different timeframes for buying and/or selling; longer timeframe participants seek to buy low and sell high, and short timeframe participants must transact sooner and cannot be as discriminating. Thus, all markets including organized markets are inefficient from the standpoint that participants with differing time- frames view the most recent price with differing opinions and do not participate at the same time and at the same price. In other words, a given price is not viewed as an equal opportunity for all. The market cannot at any one moment balance all the needs and concerns of the entire marketplace participants in every known and unknown timeframe since the most recent price does not represent the same thing to all participants. In other words, no single price represents fair value for everyone.

Rather than being efficient, all organized markets are effective. They are effective from the standpoint that they produce and regulate trade, bringing into play all participants over time. In other words, the market facilitates trade from all participants, not with each individual price, but over a large sample size. The fact that participants with different timeframes exist precludes a price dominated by one time-frame from being fair value for all. The efficient market hypothesis overlooks the existence of participant timeframes.

The assumption of "randomness and the efficient market hypothesis" assumes that the market - price movement over time -conveys no knowledge or information. Instead, it assumes that if a trader profits from a market, he has resorted to predicting, and his luck will sooner or later run out. However, one need not predict the future in a market of uncertainty. It is impossible to always accurately predict future events. But we can monitor the market, understand its present condition and how current price relates to the market's current assessed value, and from this, we can logically deduce probable behavior, and adjust our assessment from the new information the market provides as it unfolds. And by extracting bits of market-generated information, we can deduce and change.

The Academic Community's Ball and Chain
One rule that most successful individuals and businesses have incorporated into their operating procedure is not to pursue any endeavor in which they face a disadvantage before correcting those things that create their disadvantage. In other words, it is important to continually assess and reassess what is producing successful results, discarding what does not yield success.

Yet, the academic community continues to pursue the refinement or studies based on fallacious assumptions about the market, particularly the random walk and efficient market theories. Gaining knowledge from experience has not been practiced by the academic community, not out of malfeasance, but because in modem society knowledge can more easily be gained from a formal classroom teaching environment. Instead of examining reality, rethinking fundamental market assumptions and seeking a new course of thought. The academic community continues to pursue the disadvantage as taught in the classroom.

This is not meant to be a pedantic indictment of the academic mindset. Clearly, it is difficult in most institutions to gain a true evaluation of reality. It is even more difficult within an institutional setting for the status quo to change, regardless of whether what is accepted is correct or not. The academic community is not guilty of anything worse than not taking a leadership role in thinking logically about markets. But times have changed.

Those who understand the condition of the market (where price over time is building value) are conveyed an advantage from which they can profit whereas those who focus on prices against each other must assume randomness and no understanding

J.Peter.Steidlmayer Markets and Market logic
http://www.forexfactory.com/showthre...53#post8653953

Its the market that makes the trader.

you are exactly right discipline is the most important thing, but it is against our human nature, this is why people have to understand the trading environment and what it does require before start trading.because if you can understand the trading environment , it would be easier for you to adapt this new environment.

Hello,

I will share with any newbie or student of the trade business what I have learned over the past 3 years and still unprofitable. This is because of not discpline, but basically, I have no clue how to trade, what to test for, how to backtest, how to backtest accurately, what stats to look at, etc.?

1. Take Your Time and Do it Right. You will see tons of traders on the internet trading 3, and 4, and 5 contracts. Don't do it. Trade 1 contract. I even struggle with this. There is no rush to success.

2. Forget the discipline and all the emotions and psychology stuff and Learn how to trade using Fake money. Worry about the emotions and mind games later.

3. Find a profitable system that you trust. Meaning you spent days and weeks and even months and years going over every angle of the system for flaws. Check the system for drawdown. You may start trading the system with real money and get 5 losses in a roll. What will you do? Keep on trading it cause your data says over time you will earn money.

4. Again, if you don't have system you can trade every day with no feeling attached and you trust it based on past historical data, you may not succeed. You may get a few winners, but the market will catch up with you.

From a guy who lost $7000 trading so far from changing how I trade from one day to the next.

Oh yeah?

So if the markets are random, how come you are making money trading (according to your track record) ?

Lucky.

True, its a matter of finding the right methodology and implement it in your trading with discipline all the time.

Absolutely.

Numerous studies have shown that prices are NOT normally distributed but have a fat tail.

This fat tail proves that the markets are not random.

And bumblebees can not fly.

https://investingcaffeine.com/tag/th...fast-and-slow/

Market results is random to a point that when you put a trade now regardless of how good the entry condition is or all your indicators are beautifully aligned for such setup(a high probability trade setup so to speak), still you cannot be sure that such particular trade will be a winner, so in that sense market gives random results.That is why market is unpredictable in nature because of its randomness characteristic, no way that a trader will know in advance how many will become winning or losing trades in his next 10 trades, in this fact alone justify the randomness of the market, I guess this issue is not debatable, it is a matter of putting things in the right perspective,Peace to all!

So let's me get this straight TooSlow.

You started at least two threads on how to profit from certain chart patterns BUT...
1: You believe that the markets are random.
2: You believe in the Random Walk theory.
3: You believe that prices have no fat tails but are normally distributed.

Do you have ANY idea how absurd your position is ?

Anyway.

Why are you focusing on me instead of talking about the topic?
Are you in politics?

Nobody is focusing on you, we are merely reacting to some of your posts.

Fellow posters on this thread, let us keep our discussions relevant to the topic and trading, let us respect each others opinion,no personal attack as much as possible, what is important is we will learn something from anybody and it can help us all becoming a better trader!