Does technical analysis really click?

Hi Guys,

I am a newbie trying to learn the basics of forex trading. I want to ask the experts, successful traders a couple of questions about trading -

1} Does your technical analysis actually click ? I mean, what percentage of your trades, done based on your technical analysis, come out with a profit in them? How much percentage of your trades have you felt the satisfaction of your technical analysis actually clicking ?

2} A regular and basic advice given in forex trading is to lookout for news announcements. I want to know how often are these announcements made, on an average ? And if you want to totally avoid trading around these announcements - is there sufficient amount of period left in the trading hours for you to trade ?

3} Are you satisfied with your broker service? (If you ok with naming them -could please name your broker service, else please let me just know if you are satisfied with the service)

Regards,
Simon

This isn’t in itself necessarily a useful parameter, Simon: what matters is that collectively your winning trades consistently bank more than your losing trades cost.

A system with 35% wins and 65% losses and a reward-to-risk ratio of 3:1 makes enough net profits to be able to make a full-time living from it while one with 65% wins and 35% losses and a reward-to-risk ratio of 1:3 loses money hand over fist.

This isn’t just an arbitrary, pedantic, mathematical point: it’s hugely practically significant, too. As authors like Van Tharp ([I]Trade Your Way to Financial Freedom[/I]) and Tushar Chande ([I]Beyond Technical Analysis[/I]) explain in their beginners’ textbooks, for a whole variety of reasons methods with a 35% win-rate are actually [U]more[/U] likely to be profitably traded by aspiring forex traders than methods with a 65% win-rate.

I feel that satisfaction collectively, over the panoply of my trading, not individually over specific trades.

Yes; very much so. The ones that are likely to affect the major forex pairs (I don’t trade anything obscure) occupy no more than 1%-2% of my available trading hours.

I am. I trade mostly with Interactive Brokers and CapitalSpreads and happily recommend each.

In general, what matters is that your broker is well regulated (and not just in Cyprus or any other offshore country with “soft regulation”!), longstanding, widely recommended [I]by people who are making a living through trading[/I] (not just by other beginners), has friendly and helpful customer service, isn’t itself hugely in debt, doesn’t have a collapsing share-price of its own, and most importantly [B][U]isn’t[/U][/B] a counterparty market-maker who holds the other side of your positions and therefore has an incentive for you to lose money at the same time as both holding all your deposited funds and making up and interpreting all the rules governing the trades.

Hi Lexys,

Thank you so much for the reply and the useful information on the importance of risk reward ratio in comparison with win - loss percentage… Are you a full time trader?

Interactive brokers has a minimum of $ 10,000 initial deposit correct ?

Regards,
Simon

Very nearly (I’m still a [I]very[/I] part-time postgrad student, as well).

I believe so (they did, the last time I looked at their account-opening requirements, anyway). They’re a different world, though, from many of the brokers discussed in this forum: fast, reliable execution, EUR/USD spreads as low as 0.1 pips and commissions from $2 per round-trip according to monthly volume. Most importantly, they’re [U]actual[/U] brokers, not counterparty market-makers pretending to be brokers who have an incentive for their clients to lose.

My next-best recommendation would be CapitalSpreads (depending on where you live: US excluded, because that’s spreadbetting), and failing that, Oanda is probably about the only one I’d consider out of those widely discussed here (I’ve used them, myself, in the past, and had no great problems). Oanda does have the advantage of almost infinitely granular position-sizing, which is highly convenient and relevant for small accounts. They do also have segregated client funds and (in most countries) proper regulation and government-backed guarantees.

Hi Lexys,

I have smaller budget for funding the account, so not sure whether I can go for IB. Maybe after some profits I could look at them. I was also looking at Global prime, found some good reviews and they claim to be not counter party market makers, but ECN brokers who will also provide receipts from liquidity providers. I have a demo account and have been receiving good customer support responses. Obviously I have a lot to learn and figure out whether a broker giving out receipts means anything good or just a claim that means not much. Any idea on global prime ?

1} I need someone that allows direct hedging (atleast outside the US). Any idea whether Interactive brokers or Oanda allow direct hedging (in the same account, not different sub accounts) for their customers outside of the US?

The process of hedging seems to be better than SL trading to me. Still in the learning process and trading with a DEMO account.

2} Also, how is the Interactive brokers trading platform and ease of withdrawal of profits ?

Regards,
Simon

None at all; sorry.

(Be careful, in general, if looking at online reviews, to ignore any incentivised or promotional ones, e.g. with account-opening affiliate-links on the same web-page: the web is full of “review sites” which exist only or mainly on that basis - it’s all “concealed marketing”.)

I always wonder why, when “beginning traders” say this, but it’s none of my business at all, of course.

(My own opinion, which may not be relevant to you but I’ll volunteer it anyway, is that if the methods you’re looking at necessitate that, you [I]might[/I] be better off looking at other methods instead. Not everyone here will agree with me about this point.)

I [I]believe[/I] that with Oanda, this can be done only in a separate sub-account (but it’s not something I’ve ever wanted to do, myself, so I could easily be mistaken.)

[B]https://www.100forexbrokers.com/brokers-for-hedging[/B]

Not my perspective at all: to me it seems unnecessarily complicated and can increase dealing costs. There are no circumstances under which I’d dream of trading forex without a stop-loss in place.

Withdrawing money is no problem at all.

They have two different trading platforms available: [B]PAGE NOT FOUND | Interactive Brokers

I have occasionally seen comments in forums that people don’t like their platform, compared with NinjaTrader, for example. But that’s personal preference, isn’t it? There are people who don’t like shopping at Waitrose and prefer Marks and Spencer.

Independently audited figures have been published online (sorry, I can’t immediately find a link to them) which shows that IB has a very significantly higher proportion of successful traders than other brokers monitored. Experts and longstanding successful traders do tend to use IB. That’s not entirely because they have more money: these things cut both ways, and there’s also an element of its users being more likely to be more successful because they’re there, rather than at a retail counterparty market-maker/bucketshop.

Hi Lexys,

Thank you for the reply and your opinion on hedging…

I found the global prime reviews on forex peac army … Not sure if FPA reviews are reliable… Need to look at this further…

Yes, I have seen many discussions as to whether hedging is better or SL. And both sides stick to their side no matter what… Yet to figure out which is best… I had a 50 pip SL cleared out a few days ago (obviously got the trade on this wrong and also need to learn more on where to keep SL)… After about 20 - 25 trades on the demo, I am up by about a $150 . Many $20 - $40 profits, a couple of 100 dollar ones, a 500 $ loss etc … If a statement is made as " Hedging gives you a second chance, whereas SL does not", what would you say ?

Regards,
Simon

I’ve seen it said (and I believe, though I can’t of course prove it) that some/many favourable reviews there are “shill reviews” planted by broker employees. To some extent it may be possible to form an impression, in specific instances, by seeing the poster’s post-count and range of other subjects on which they’ve posted.

In general, laudatory reviews in forums from first-time posters and those from members who have posted on only [I]one commercial[/I] subject should be looked at askance, in my opinion (but I’m a notorious skepchick).

You must be doing something right, then! :slight_smile:

In general, I think it’s fair to say that “doing more of what works and less of what doesn’t work” is part of the learning process. (This necessitates having good written records not only of numerical parameters but of your reasons for opening/closing trades, and so on, to be able to analyse confidently what worked and what didn’t.)

That I can always get stopped out and re-enter (and sometimes do so).

I set my stop-loss to a level at which, if the price reaches it, my reason for entering the trade would no longer be valid and I wouldn’t want to be in it. It’s still (sometimes) possible for prices to continue, from there, to re-instate my original reason for opening it, and I don’t miss those profit opportunities by having stop-losses in place whenever I have an open position.

If I ever traded without stop-losses, I [I][U]know[/U][/I] that I’d eventually have a disaster, and it only takes one. It’s absolutely unthinkable for me. People letting others trade their funds have all kinds of stop-losses, automated alarm systems, and so on, permanently in place and pay people large salaries to ensure that they’re maintained and absolutely reliable, and I wouldn’t trade my own money without my home-made approximation of those methods, and they include a broker’s stop-loss (even though they’re not 100% reliable). As successful trader and now author Nassim Nicholas Taleb has so repeatedly pointed out, black swans are actually [I]much[/I] more common than people generally realise. :wink:

My perspective has always been that successful trading isn’t about profit maximisation: it’s about [I]risk management[/I].

I totally agree with the above statements. I want to ask a question, but first I want to state that this questions is not about which is better - SL or Hedging. The question is, as you said you wouldn’t want to trade without a SL… I am of the same opinion… I wouldn’t ever want to trade without managing it correctly. The question is - wouldn’t hedging put a lid on the amount of loss as a SL would? Like I said, I am not trying to state anything about which is better… Just trying to confirm that even if, as you believe SL is better than hedging, hedging still provides a protection right ? You would still be having a limited loss with hedging as you would with a SL?

Please answer from a purely absolute perspective rather than a comparative perspective (comparing SL and Hedging) - Hedging still limits the loss - correct ? Or is it actually incorrect and subject to exceptions ? What are the exceptions ?

Regards,
Simon

I rarely use a stop, I explain why in my Balls of Steel thread. Its not for everyone and should be used with care. However, I suppose I do have a mental limit as regards how far I am prepared to let a trade go against me, just haven’t used it yet

Hi Guys,
This has been very helpful. But Jesus so how exactly do I find out whether a broker firm is legit? I mean what other source should I consult before using them? Other than what they say on their website and reviews on other forums?

thank you for this very helpful thread. I’m very new to trading. so if a broker offers me incentives for loosing I should run away so fast? I know there are risks in trading but should that be a red flag?

Hi Simon,
I saw that IB also has a $2, 000 account for Indian residents. times like these I wish I had Indian citizenship lol. they seem like a safe bet.
Malla

Hi lexys,
just one more thing before I get kicked in the teeth for trolling-I was thinking of using these guys and wondered if you or anyone has heard of them or used them before. according to their website, they’ve been in business for over a decade and have over a million clients. the 10K for IB is over 130,000 in SA Rands and that’s like all my money. I was hoping to at least start small, like $500, and saw that with them you can start with $100.

Personally, I wouldn’t touch them with a barge-pole. They’re a Russian company, and their UK branch Alpari-UK, famously went bankrupt last year.
[B]
FAQ For The Bankrupt Alpari UK Clients - Forex Broker News[/B]

You’re not doing anything like “trolling”. :wink:

(Have you looked at Oanda?).

The majority of the traders that are trading and getting regular profit mainly use technical analysis, they do look at news but their main trading methods are technical based. So yes technical trading really clicks.

Hi Simon,
I think it is worth keeping in mind what technical analysis is trying to do. It is not a separate entity to fundamental analysis, it is its [I]shadow[/I]. The price is moved by real supply and demand for the various currencies and that real supply/demand is based on changing factors (and [I]perceptions [/I]of these changes) such as trade, interest rates, investments, and so on.

If you trade according to fundamental analysis you are essentially trading your own conclusions about these changing factors.

If you trade according to technical analysis you are essentially only concerned with identifying what the majority of the market is doing and trying to do the same. The less you allow your own views on fundamentals to influence your decisions the more objective your technical view will be.

So, in that light, the question whether TA clicks depends on 1) whether underlying price movements are big enough to get in and out with a profit margin in between (unless you are selling options) and 2) whether your technical analysis is accurate enough to identify the underlying core movement within the price “noise” and 3) whether you are capable of objectively and practically following your TA.

This is, of course, a very simplistic description :slight_smile:

Hi Lexys,
Thank you kindly for your response. I was initially just looking at alpari since IB isn’t an option just yet. i was looking at this and thought the uk firm was bought by the Russian firm. Oanda I hadn’t heard of until I joined the forum and this thread. let me just say I’m very grateful to have come across this thread. its super informative to a newbie like me.

I can’t afford fundamental analysis. Fundamental data costs. In a business where cutting costs is paramount, I simply forgo those costs.

-Adrian

Besides, I have enough funnymentals already…

I am personally a 90% technical trader, often at times, by looking at news events I’ve only get confused. So I’m trying my best not to look at news but those events just eventually been reminded by someone on skype or fb :frowning: