Howdy!
FXCM- in their “Traits of Successful Traders 2.0”(2016), states that traders are generally more profitable when markets are less active.When average pip movements are smaller, traders fair better, yielding higher win percentages…Their game plan? Trade European currencies during the off hours using a range trading strategy (RSI).
Babypips- “the busiest times are usually the best times to trade since high volatility tends to present more opportunities”: “trade overlapping sessions, European session is the busiest, trade midweek, as the pip range widens for most of the major currency pairs”…
I like opportunities, but I like higher win percentages better… Forex is clearly very exciting, and volatility really gets the heart rate going… However, if boredom is what it takes to start building my account up, so be it. The race, more often than not, goes to the turtle.
I would dearly love it if one of the “Wise Ones” of Babypips could render an opinion.
Thanks.
People vary, in their perceptions and attitudes, on that issue.
Personally, I attach more importance, overall, to opportunities than to win percentages, so I’m kind of “on the other side of the discussion” from yourself.
Clearly both are highly relevant, anyway: we can agree on that?
My overall feeling, in short, is that I prefer to make an average of 8 pips, an average of 6 times a day than to make an average of 30 pips an average of once a day. (This is oversimplifying, of course, and there are perfectly reasonable, valid and respectable points to be made on both sides of the discussion.)
For what it’s worth, if anything, I [I]do[/I] think that “attachment to high win-rates” really [U]is[/U] rather a common problem among aspiring traders, which [U]can[/U] lead them astray … and that it’s easy for people to imagine that it will be easier to make a living from a higher win-rate than from a lower one. Quite often the opposite is actually the case (for all the reasons explained by authors like Van Tharp in books like [I]Trade Your Way to Financial Freedom[/I] and Michael Harris in [I]Profitability & Systematic Trading[/I]).
On the other hand, I’d also be the first to agree that high win-rates make for a smoother equity-curve and easier-to-calculate position-sizing, both of which can be potentially advantageous to beginning traders.
Statistics and probability often really [I]are[/I] very counterintuitive.
Lexys- Thanks for your reply!As I hadn’t used Newbie Island previously, I can see a lot of people have posted the same (or similar) questions.
Since I’m new to the Forex world, I realize I have to practice -a lot, using a Demo account- before “contributing” my money to brokers…
However, it seems that, probability speaking- it should be easier to earn more (eg 1 standard lot invested for a 20 pip movement) rather than one mini lot needing to go up 200 pips; an exaggeration, of course). Furthermore, if i understand you correctly, 6 trades a day would seem to be a lot more work?
Yet on the other hand- as Mark Twain said - “There’s lies; there’s damn lies; and then there’s statistics”!!!
One potential problem with it being so very true is that it can tempt aspiring traders into unwisely large position-sizes which are disproportional to their account-capital, expectancy and degree of risk-aversion.
True … the overall learning-curve/experience-curve process may not be significantly different, but the trading itself is going to be more time-consuming, that way. It’s a way of trading that’s more suitable for people with plenty of time available.
Indeed … exactly so. Facts are stubborn things, but statistics are pliable.
I don’t know how ‘new’ you are to forex but you may find that what you think would suit you and what actually suits you are 2 different things entirely.
It can take a relatively long time to find a style of trading and a daily model/ daily structure that is a custom fit for you.
Forex tends to find your weaknesses in every area as well as what doesn’t fit you in particular . Your job is to not ignore the problems but find solutions, it’s an on going process.
FXCM’s “Traits of Successful Traders” guide looked at the average performance of tens of thousands of retail traders. While a great many trading styles were represented in this group, the majority use what could be characterized as a range trading style. That’s because for most people, it makes sense to buy at or near a previous low and to sell at or near a previous high. However, it’s counterintuitive to sell low and buy high in anticipation of a breakout.
Keeping in mind the range trading predisposition of the typical retail trader, it makes sense the FXCM study concluded that “Past performance is no indication of future results, but by sticking to range trading only during off hours, the average trader would have been far more successful over the sampled period.”
By contrast, it makes sense that for the minority of traders who employ a breakout strategy, the volatility of the most active market times could present more opportunities, which is what I think BabyPips might have been highlighting.
I know volatility works best for my automated strategies. However, these are contrarian by nature in that they use the SSI indicator to trade opposite to the prevailing sentiment. That means I look to buy when the majority are selling, and I look to sell when the majority are buying. When the market is calm and range bound, my strategies tend to underperform. However in this case, I’m referring to volatility on longer time frames than a day. My average trade duration is about 8.5 days with the shortest trades lasting about 2 days and the longest trades lasting about 1 month.
