50/50?

I was going to post this to a thread I saw this mentioned on last week but I cant remember which thread it was, someone said the odds of a good trade in forex is much lower than 50/50 which didnt make sense to me at first, it seemed obviously it is 50/50 the price can only go up or down right ?
Then I got to thinking about it some more and I realised he was right, but its not because forex isnt 50/50 its because if the way we are taught to trade.
If you blindly chose buy or sell without even looking at the chart then walked away and came back the next day the odds are 50/50 whether you made profit or made loss.
But who would trade that way ?
Nearly all the tutorials on forex come back to the same thing, predicting reversal points, this massively reduces the odds of a good trade, I don’t know the exact statistics but if you count the bars between reversal points they only happen once in a while, then we are always taught to set a stop loss so, not only are the odds of hitting the reversal point at least 10-1 against, then even if your trade would have turned out good because the reversal point you missed came up some time later, the trade can be stopped out already even further increasing the odds. Seems to me there couldnt be a worse possible way to trade than that, there must be a better way.
As the guy who posted the orignal 50/50 comment said, you can guess buy or you can guess sell, but 90% guess wrong.
I guess he was right.

I have been thinking about this one, being a beginner. :slight_smile:

I read everywhere the market is only trending 30% of the time. The rest of the time it is ranging. Therefore all you have to do to make money, is not buy or sell against the trend in that important 30% of the time.

If you can avoid that, you will always make money in a ranging market. Assuming you have the patience and margin to hold onto you trades for long enough whilst the market chops up and down.
That covers 70% of the time.

If you can then identify the trend accurately, you will always make money for the other 30% of the time.
As all you have to do is buy or sell with the trend, then once again, have the patience and margin to ride out any pull backs.

Sounds simple!

I look forward to being corrected…

Actually I think you are right AND wrong SDC. It’s not reversal points or any of that which screw traders up, its risk reward. Most informational websites make it a point to drill a 1-2 Risk-Reward ratio. For example, I am going to say price will move 20 points for me and I’m proven wrong if it goes 10 points against my buy in price. Now, price could go 20 pts and I win. Price can go up 10 points and reverse 20, now I’ve LOST.

I don’t believe it’s probability that is the problem. I think it’s a lack of understanding and respect for the power of the market. I also think a lot of training materials give traders a false sense of confidence. A lot of people come here because they want to make money without doing any work. I am growing to like these people because as I grow and learn more, it’s essentially THEIR money I’m making (for me to be right, someone needs to be wrong).

Edit note: Please don’t think this is any reflection of my thoughts on the learning materials. I believe there is a lot of value in the learning materials, especially on this website and others like it. I think it is more about traders coming into the game thinking it’s going to be EASY or something.

Don’t be scared to start a debate, thats why I started this thread I wanted to know what everyone thinks about it both for and against. Everyone is entitled to their opinion, and everyones opinion is valid and anything you have to say that might help us all make better trade decisions is more than worthwhile.

Does someone really have to lose money for us to make money ? I’ve never really understood that part of it.

Actually if you think about it in a more logical sense it’s quite the opposite. If you buy into a pair, you believe price will rise. Price cannot rise unless more buyers enter the market. Therefore, for you to win, the majority of people entering the market AFTER you have to be going in the same direction.

That said… maybe we could amass a giant army of traders and make price movements on our own! :stuck_out_tongue:

And Cubanpip is making me all paranoid about whether or not I’m offending people with my opinion, so I’m sorry if I am in any way shape or form!

Good question, wondering myself. I always thought a big portion of money profitable forex traders come from people who are not into forex trading and are just exchanging currency for different purposes. i.e. international trade

Yes, the money you make in pips comes from someone on the other side.

Every time you hit buy or sell to close a trade, and you are negative, it goes in someone else’s account.

Crazy game this forex thing.

[B]Yes, forex tends to be a zero sum game.[/B]

[B]That is why it is so difficult to win any money.[/B]

Imagine a flock of seagulls all fighting over a small bucket of chips on the beach.
[B]The noise is deafening!! [/B] :smiley:
And what a fight it is!! :eek:

Too many seagulls and not enough chips!!
Its every seagull for itself!!

So it is with forex.
[B]Tonymand, (Honorary FX Member), [/B]has said that trading forex is like wrestling crocodiles for a living!! :stuck_out_tongue:

What about what Robbkore said isnt this also true ?

That is more along the lines of how I had thought it was, as long as everyone does the same thing everyone can make money ?

It’s not the retail trader community that moves the markets.

We’re just bugs on the windshield of it.

I’ve read that the trading community is the biggest mover of the markets. Take into consideration that chart patterns tend to work because many traders act on them. If this assessment is true doesn’t that prove my earlier point about movement? On top of that look at the typical daily patterns, most of the markets move at snails pace Friday - Sunday night.

We can probably argue the specifics of WHY as I’m sure most large multi-national companies that typically engage in currency exchanges on a large scale don’t do it over the weekend.

[B]Almost[/B], you forget the broker, he makes money no matter what.

What comes to mind??? CASINO. :D:D

That’s also why forex is no different then the gambling, despite that so many people deny that. Including Tymen. :slight_smile:

The oddity is that if we hypothetically assumed that one day the market decided to be 100% bullish, there would be no bears to sell the currency to and there could be no profit-taking. There always needs to be a counterparty to your trade. Before this could even take place, though, as we approach a supply of 0, we approach a demand of infinity. In theory, at least.

I don’t think ForEx works the same as typical stocks and transactions (someone please correct me where I am wrong!!!). I believe technically you are swapping currencies with borrowed money. Like if you walked into a bank and said “I need to exchange this $10k for Euros”. The banks is not going to say no.

Hey guys. Commenting on tha original post; I like ta think of forex as a good old fashioned game of blackjack. Except here, ur allowed ta ‘count cards.’ For any one of us ta be successful, we have to increase our probability of being right. So learning about price action, market psychology, money management, etc. is essentially our method of ‘counting cards.’ So yes, it’s informed gambling. But… it’s a lot better ta say ‘Hit Me!’ (buy/ sell) when ur aware of what’s goin’ on on tha board. Idunno 'bout u guys but I wanna get REALLY GOOD at ‘counting cards’…

I agree, at any rate, being good at forex is probably better than plain gambling.
I don’t know about you guys, but the one casino allowed to operate in my country has completely eliminated card counting from play. Because they shuffle the deck after every play. So, the house edge is constant, even with the perfect strategy.

I’m not certain about forex as yet, but assuming pip spread of 1 and 50/50 chance of winning, it’s a tiny house edge. That, and at least forex allows you to ‘card count’ by analysis as daydreamin mentioned.
I’d go for forex any day. In fact, I plan to quit gambling altogether.

PIP spread of 1 sounds good, (yes I have a Oanda Life Account) many times they hit me with 3 or 4 pips and 1 time even 11 pips. :rolleyes:
Yes forex is still a nice game. :slight_smile:

Yeah well the 11 pip thing only happens minutes before a major economic report and weekends. I tend to avoid those anyway.
Worst I have gotten is a 3 pip spread.

Probably should stay away from this one but :

I think people are trying to simplify some points of Forex and complicate others. It is true for you to place a order there has to be someone willing to provide that transaction. If you use a ECN broker they will even have posted offers that they currently have and at times you can make money on your order because price has moved past a point and the order is still active.

That is probably why you also pay a commission… But the name Foreign exchange is just that. Currency exchange ,different companies or even countries will only accept certain currencies for services or goods. If you just got a multi billion contract and want paid in USD. they may have to convert their currency regardless of the current price.

You would think that knowing this was coming up they had been working to get the best exchange. But if the market isn’t agreeing they could lose thousands on just the exchange. Plus trying to forecast currency futures is more like equities trading.

I would never ever be in this business if I thought it was gambling. With the correct education and proper learning techniques. Anyone should be able to arrive at a great deal more than a 50/50 chance. You should be able with proper trade and Money Management even come out ahead by just flipping a coin. Close the losers fast and let the winners run. If you picked gbp short Friday with plenty of signals to support it by the way. and let it run 250 pips. Take a lot of losers to wipe that one gain away.

Plus for myself and I am sure others the ONLY thing holding me back from ubber goals is myself…

                        Trade Well Ken