a strategy that works!!!

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FARHANG
141
FARHANG  
You keep hearing the old saying over and over again that over 95% of forex traders lose money but yet a great deal of people join in day in day out in hopes of being one of the 5%. Everyone thinks they have something special about them that no one else knows about. You learn all about technical and fundamental analysis, you learn how to control your emotions, manage your money and limit your risk but somehow, someway after all these years spent dreaming and trying, you end up one of those 95%. then something hits you, maybe you read about it somewhere, maybe someone tells you but you start thinking to yourself, if I can develop a strategy that proves to be successful I can pick myself up to be among the winning 5%. Maybe I can even write a program that would do exactly whatever the strategy entails and therefore there will be no emotions involved and I will make really good money. You start learning about writing EAs and MQL and etc. and the process of strategy testing begins. No strategy seems to be working well at all the years of backtesting. it seems as if the results are quite random, as if all the books you read about technical analysis were pure BS. You start working with one indicator after another...maybe if I use this indicator with that one with these parameters that would be the answer. No? what about this one? all this hard work gone in vain. friends keep telling you there is a way and their "logic" is that "history repeats itself". Well OK but how is this going to make me any money??? it seems that history is repeating itself less often than I need to grow my account balance! They keep saying that history repeats itself but have they found an instance of history in forex that repeats itself so often that makes it beyond random??? I guess not because I've read their books and there is no such thing. makes you really wonder if there is such a thing as a strategy that works, if there really is a winning 5% other than brokers. I haven't seen one who is by definition a winner in forex. maybe forex is just a phase that will pass eventually.Maybe.... Maybe....
not quite the post you expected hah?well life is full of surprises.
eurotrader
278
eurotrader  
If you give up now you will be in that 95%. If you keep on trying eventually, hopefully in this lifetime, you will end up a winner and belong to that club of 5%. Derivative trading like FX margin cross trading is a zero sum game so all the money from the losers has to end up with some winners.
Phillip
803
Phillip  

farhang you have to think outside the box, its an old cliche but with forex it is very true. If you are limiting yourself to the same old tired linear thinking that comes with trying to optimize indicators and so on then yeah you're probably not going to get the kinds of results you are seeking.

There was a time when mankind had no idea they could reach the moon even though they could see it quite clearly with their own eyes. And when they did finally step foot on it their method of travel (Saturn Rocket + Apollo lander) did not look like a highly optimized version of the Galleon or Steam Locomotive. They had to develop an entirely new method of travel (rockets, computers, etc) before the goal could be met.

You can see the objective, it stares you in the face every time you pull open a chart, but you are crazy if you think you are going to get there by optimizing the same tools of trading that were invented before you or I were born.

If that means you need to become a rocket scientist then so be it, no one said it was going to be easy, but to be sure if you aren't willing to become a rocket scientist and think outside the box you are never going to get to the moon. You can't keep tinkering with your car's engine thinking someday somehow if you get the power-band and horsepower just right you'll be able to simply drive to the moon in comfort and style. Go build yourself a rocket.

eurotrader
278
eurotrader  
I was a rocket scientist and I used to build large industrial robots. I've been trading derivatives for more than 12 years now since 1998 and I am still hanging on. I almost gave up after losing fair bit of money in stock index futures. Then I discovered FX and automatic trading and it is much better than futures as the continuous and liquid market seems to respond my way of technical trading rather very well. Now instead of losing 50 grands a year last year I lost only 5 grands and this year I started making a few grands.

Instead of using these useless indicators one has to build his own comfortable, simple, and robust technical system for one to make money from the FX market. As long as your system makes money at least 60% of your trades you are a winner.
gordon
2325
gordon  
EuroTrader:
...is a zero sum game so all the money from the losers has to end up with some winners.

Yes, but it costs money to play the game, so a large portion of it ends up with the brokers, banks, etc. And a large part of the winning 'players' are institutional HFT's which u have no hope in competing against.

eurotrader
278
eurotrader  
One should always consider the cost to play the game as the unavoidable business expense, i.e. a fixed expense to maintain the business plus the sliding variable expense depending on how often and how big one plays. And the best thing about that expense is 100% tax deductible. Only the losses and the winnings are considered the earnings or revenue (negative OR positive) contributing towards the loss and profit respectively for the one's business of trading.

I don't think anyone, especially the small fry like us, should not be competing against others at all. Just follow the herd or the big boys like Soros or Rogers. Only problem is it is extremely difficult to find out which direction the herd is going to go in next 5 minutes. The wise ones who know that direction most of the time will eventually become a member of the Winners Club of 5%.
gordon
2325
gordon  
I was referring to your statement: "...is a zero sum game...". What I mean is that if 95% of retail traders lose it does not mean that those losses go directly to the other 5% as implied. In reality a large portion is being paid to 'enter the game'. And another portion goes to institutional traders (especially HFT's) which have a higher success rate.

My last statement is of course arguable. Statistics are not widely available to the public as to the success rate of the big players. So this is just IMHO. I might be wrong...

Edit: I also forgot to mention that most retail traders use 'Market Maker' brokers, so technically when they lose, the broker wins (and that loss also does not go to other retail traders). These Brokers are smart - they break up their customers into groups. Those with the lowest success rate are traded against, while those who are better are passed on... Hence they keep a large percentage of the player's losses for themselves.
LanJos
186
LanJos  
i feel this post, i have been on your block, i have thumbed through every piece of literature i could find, i have purchased systems, EAs, payed for trading lessons and seminars; technical analysis consumed my every waking moment for three years.. i would open demo accounts to practice with my new knowledge, i felt like it was prudent to test myself before risking real funds that i grinned away for as a assistant branch manager of my local bank. it seemed amazing how quickly i could grow a demo account. but dont you know? as sson as i fund a real account it seemed like the market was fighting me individualy. a system that dominated the market for the last several months failed epicly just as i traded it with real money: my funds dwindled at record speed. that was a couple of yeas ago. I lost faith in a lot things i believed in, like pivot points and fibo levels. i spent so much time studying harmonic patterns it still makes me sick to reminisce. then right when i was throwing in the towel, i had... well it was an epiphany. i stop listening to every website and forum i stop studying indicators and systems and i defiantly stopped purchasing products from developers and educators and i start making up my own mind. that's when things changed for me, now i trade full time and i have a pretty decent lifestyle because of it.

i guess what i am trying to say is the 5% that earn consistent profits probably had to fail... then they had to have enough gumption to stick with it.

on a side note, i have absolutely no faith in completely automated systems... i do use automated tools to help me manage open positions though...
Bluesky
161
Bluesky  
Well I might be in this 5%. I hope not to lose my humbleness, but my last 6 months are constant results.
Do I use automated trading? nope. Do I use indicators? nope.
Do I use methods? trying to, but the best method is the common sense ( a part of course for the review of Pivots, Resistance/Supports, Higher timeframes etc.)
It's quite a lot of work but once you control your emotions you can see it quite as a day to day job, but with no boss!

Quick note: not cutting losses could go well for a while, but the time it doesn't... well, game over.
I see it like the security screening at the airport.. useless for the 99,999% of times, but you cannot take them out.
A clever way of cutting losses is not necessarily StopLoss, but hedging.

Cheers!
David
Brian Dee - Random Trader
1759
Brian Dee - Random Trader  
EuroTrader wrote >>

Instead of using these useless indicators one has to build his own comfortable, simple, and robust technical system for one to make money from the FX market. As long as your system makes money at least 60% of your trades you are a winner.

If losses are well controlled then 50% wins can be a successful system
Some manual traders accounts I have seen, show they hover around the 45-55% region - works for them...
As to indicators - well it all depends how you use them..
Something to reliably calculate daily Pivots/S1/R1 etc is great, others to show extreme overbought/oversold is good too
But.. as you go down to the smaller timeframes and factor in live data from todays ECN/STP feeds, the pure indi based systems do suffer
If nothing else the variable spreads we commonly have now do mess with many EA's, especially when they open mid-bar
Of course backtesting live and forward trading demo data do not suffer from these issues, which leads to disappointment..
I see a lot of other peoples code & all too often the current live data feed patterns are not catered for
My 2c worth
-BB-

Brian Dee - Random Trader
1759
Brian Dee - Random Trader  
EuroTrader wrote >>
simple, and robust technical system

Thats what I like to see :)

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