What I've learnt after 4 years of Forex Trading

I can certainly concur with this. Although there is no set timescale for the retail trader’s apprentice period, it is certainly most often measured in years rather than months. And 4 years is not anything extreme or unusual at all, probably quite realistic in fact…

This interests me. We talk a lot about a trader’s problems and difficulties but rarely about how it affects other members of a trader’s family and friends.

So you were not a trader yourself during your husband’s 8 years of walking the financial “valley of death”. How did this affect you? How did you feel about it at the time and how did you understand what was going on? Did you have deep concerns at any time about your financial security or your husband’s health, etc? Did you sometimes wonder what he could possibly be doing just watching charts and occasionally scribbling things down and sometimes suddenly bursting into a bubbling hysteria of excitement and mumbling incoherent terms and exclamations? :smiley: Did you learn a lot of new swear words that were previously unknown to you? Did you ever get annoyed when he was clearly miles away in his own thoughts as you were explaining something very important to him? :slight_smile:

The pressures of trading are not always entirely our own problem! My wife has gotten used to it already ages ago and just occasionally mutters as she passes by, “How are the curves today?” :slight_smile:

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Yes, it’s a random market! But professional Forex traders are able to understand the hidden meaning of market movements! So, they are trading with a high probability ratio! But, there is no connection with luck! If you opened a trade according to the market flow, then definitely you’ll get here TP otherwise not! By the way, You have spent here almost 4 years but till now you are struggling that means your learning process was wrong!

Not in my opinion.

There wouldn’t be so many people consistently making a living from it if that were true.

Making more than a living, really. Making six-figure salaries and seven-figure bonuses. Many people.

A very small proportion of those active in the market, of course, but still many people.

This depends on what you mean by “considerably” and on the time-frame you’re looking at.

The extent of moves is correlated with the time-frames.

I won’t repeat everything Manxx said but in my opinion, markets can move considerably even in the absence of news.

This hasn’t been my experience.

I think we probably trade very differently and in different places.

I use brokers that prefer me to win than lose because they’re not trading against me.

I don’t trade the news. I avoid it.

In the short term there’s always a bit of luck in it.

In the long term that evens out.

That’s why some people make a consistent living while many more people come and go and replace each other endlessly without success.

That’s not just luck, of course.

And all the people making their livings? And the institutional ones making their 7 figures year after year?

Are they all imaginary people?

Sure, it’s easier for most people to make money by selling training, services and software.

Sure, that side of it is a scammy trade.

That’s because there are so many naive noobs with unreasonable expectations and they’re a soft touch for scammy vendors.

Honestly, you do sound like that.

You made sure of it by mentioning your 4 year struggle and saying “I’ve really tried making this work for me, but no luck so far”.

It seems to me that keeping on trying the same things that you’ve been trying for 4 years probably isn’t going to help you.

Your current beliefs about the markets, and about luck and skill, and about how you can trade, make that most unlikely.

I think either a really dramatic shift in viewpoint and beliefs, or a different hobby might work out better for you.

Possibly on a minute by minute basis the market is random. And it might be impossible to gauge where price will end up in 10 minutes’ time nor how how and how low it went on the journey there. But trading forex on a 10-minute time-frame is a game for only the top rank of skilled traders.

Look at market behaviour on a multi-day basis however and you find that price action is clearly not random and can be very much more easily a route to profitable trades.

I have to see forex day-trading as the equivalent of base-jumping. A great thrill when you land OK: but not a sport that generates minor injuries.

It’s been 4 years, but been hearing the same stuff from my first month. You can see things more clear in bigger timeframes, and it will not seem so random. The only difference between long term and short term strategies, is the time it’s gonna take for you too run out of luck. I will talk more on this sometime.

Another big one is people talking about risk reward ratio. They say, if your risk reward is 4 to 1, you only need to be right once every 4 trades, and you will still be profitable. Guys, seriously? Do the math, it’s all about statistics.

If your risk reward is 4 to 1, statistically on the long term your profit will be zero; actually negative, as you are paying either spreads or comissions. If your Stop loss is 10 pips away, and your take profit if 40 pips away, it’s 4 times more probable that the trade hits the SL.

So, what people try to do? Find an edge?, find a market situation where it’s more probable that the market direction favours you? You cannot do this in a random market. Actually, you’re right, it’s not exactly random, only because we can predict that the market will move (very probably) when news comes out. But that’s it, you cannot “probably” guess the direction of the move. So at the end, it might not be literally random, but I will correct myself:

  1. This market behaves like a random market.

Let’s talk more about finding an edge. What people will try is technical analysis, fundamental or a combination of both. Of course, those who use fundamentals, will tell you that you cannot program a bot. Why not?, I can tell my bot not to trade when news are coming (there are economic calendars), and I can stop them at any time. And about managing a trade, I can tell my bot what rules I use to manage my trade. So don’t tell me I cannot do bots. Actually, bots will do better than humans. Face it, it’s 2017 already.

Let me share something for fundamental analysts. I would like to get your opinion on random behaviours. No need to go very far. This time, It’s oriented to short term traders. I will post long term examples sometime. For now just let me tell that probably you will run out of luck when something like Q4 2008 eurusd happens again, and the thuth is you cannot predict when it will happen, so it will catch you by surprise.

Back to short term:

Take a fundamental event, for example, “Mario Draghi speaks”. This is what happened the last 4 times (All examples EURUSD M15 Timeframe)




This one is actually funny:


Each time, the behaviour is random. Fundamentals don’t give you a clue about what direction the market will go. It all depends on what people speculate, and the volume they put into the trades. So we go back to… will you be lucky? Until when?

For technicals, for the moment let me share this YouTube video:

I could add some more ideas, but much of what I’ve found is well explained here.

Have a nice day! :smiley:

I wonder why this reminds me of those who proved that the bumble bee simply cannot fly - it is aerodynamically impossible. But the bees just quietly go on flying…

Thanks for the interesting perspective. You have a nice day, too! :slight_smile:

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Exactly!

Forums always attract some comments from those who imagine the markets are entirely random.

Some even try to persuade others around to their own point of view.

Those bumble bees are in fact visibly flying around their heads while they try to do it.

… because it puts into perspective how difficult it is to teach yourself how to make money

in financial markets…


SIGNATURE:

this is who I am:

http://forums.babypips.com/member-spotlight/63702-pipmehappy-full-time-music-teacher.html

I am NOT a professional trader, so any comments or ‘advice’ from me are either things that

I taught myself or sources that I am as sure about as anyone can be. I cannot help but share

with the community; please do not be mad at me if I get things wrong, I will be the first to

admit not knowing something as well as the next man/woman on Babypips… :slight_smile:

Funny really, it all depends on whether you want to see the glass half empty or half full.

If you look at those examples that the OP provides, supposedly to prove his case, he states that they are all 15m TFs. Well, if one is a short-term intraday trader like me (and I think maybe you, too…) then this is a normal trading TF and one would normally wait until after the number or speech has occured before entering a trade - well, if we look at those charts they are nearly all followed by a directional move that lasts for a few hours or more- I mean, how long does a 15m trader normally wait before joining in!! If he going to wait an hour or two before making up his mind then I would agree that the chances of making a profit are pretty well zero - but not because of any curious random-like properties of the market’s movements…

and as for programming a bot, well I think that has been covered already…

Absolutely! if only more people would realise that it demands a lot more than a broker, a platform and a set of lines.

…But the fact that so many fail is not the fault of the market. The fact that any market moves in erratic and illogical steps as it responds to the real and large forces that are impinging on it is a major challenge and it demands skill and experience and understanding to survive in it - just like riding the rapids in a canoe, blindfold and in the dark, if you like! :smiley:

But in the final analysis, people do succeed, companies do succeed, banks do succeed…but others do not, and it is easier to blame the supposed randomess of price action rather than admit personal failure to learn from experience…and then to preach to the world that because I didn’t make it then no one else can either…

You PMH, are different, you have learnt a lot, picked yourself up and learned and tried something different,that is why you will get there.

But there are others that seem to reflect the Einstein quote about doing the same thing over and over again and expecting a different result…

Absolutely, Manxx…

There has been statistical or anecdotal discussion on Babypips about stocks/commodities vs. forex:

the ‘buy and hold’ in stocks is a more linear journey (if, IF you get your initial stock-picking right,

and time it well), to give one example…Would some FX aspiring traders be better applying all

their skills learnt in forex (one of the most difficult markets for beginners, by some accounts)

to other asset classes? It is not for me to say, but I just wanted to put this idea out there that

people who struggle with Forex sometimes do better in other asset classes, maybe because

foreign exchange (as you explained SO WELL in one of the threads) is such an enormous

mixture of money flow from companies, individual funds, banks, governments, travelling tourists,

and every possible transaction that happens to be in your chosen currency… It is really hard

to ‘nail’ what makes EurUsd tick from day to day, for instance, versus what makes a company’s

stock move - there is nobody accountable for EurUsd, whereas a company has a CEO, his/her

reputation, and there are earnings announcements, etc. plus you can track it against the S&P500,

for example, and put a context onto it… I don’t know what I am talking about, really, but do you

see what I am trying to say? That forex is made so palatable to beginners when it should be

the last thing they start practising trading on (if they/we should practise trading at all, well, that

is a whole other discussion)!!


SIGNATURE:

this is who I am:

PipMeHappy: The Full-Time Music Teacher

I am NOT a professional trader, so any comments or ‘advice’ from me are either things that

I taught myself or sources that I am as sure about as anyone can be. I cannot help but share

with the community: please do not be mad at me if I get things wrong: I will be the first to

admit not knowing something as well as the next man/woman on Babypips…

I do understand what you are saying and it is a very relevant issue. I am not sure if I can explain what I want to suggest here, but I will try!!!

What we are talking about are really just different levels of risk exposure - but it is actually more than just that - it is also how visible and influential the changes in profit/loss are on our “investments”.

I would agree that in theory a long-term position in stocks is maybe a more linear and comfortable form of investment, but in practice is not necessarily so. As you mention, there is access to company info and management, but you never really know how competitive a particular company is in its field or how it is being managed financially…and there are thousands of different companies to invest in! Is it not just as demanding to research thousands of companies as it is to study one currency pair?

Surely it is precisely for this reason that investors will choose to invest in a fund that does the research for them and through which an investor can construct his portfolio in terms of risk by country, industry, company classification and so on. One can choose a mix of sectors, or values (e.g. environmental, ethical grounds) or pretty much anything else these days…and then you can go one step further and take a view on a stock market in total and invest in an index!..and here we are back at the beginning with a leveraged position in a generalised instrument without identity or specific management or any of the other negatives of currency trading.

Basically, we are swapping one kind of risk for another.

But that aside, I think the real reason why forex seems a bigger risk is because it is traded on leverage and without the actual capital that the position actually represents. This makes the profit/loss changes highly visible and extremely emotive. If, for example, you invest USD100,000 in a share portfolio and at the end of the week its value has dropped by USD100 you’re not likely to even shrug your shoulders because you know that it will “come right” in time and, relative to the investment, it is not a significant amount.

But if you take a 1 lot EURUSD 100,000 position with a margin account containing USD500 of your life savings and it moves USD100 against you then it is a VERY different situation and a very serious threat to your capital. I believe it is exactly this high profile perception of the profit/loss in leveraged forex trading that creates the situation that it is hugely risky. We are comparing losses relative to our margin account equity and not relative to the actual, theoretical, equivalent amount invested in the trade.

To put it into perspective, I may have, say, USD 10,000 in my margin account, which is far more than I need to cover my positions. When the EURUSD rate was around 1.0400 I might think, “why not withdraw some of my margin here while the dollar is so strong”…and now when it is around 1.1200 I might think, “hey, why not put some back into my account here”. The point is there is no serious analysis here nor any real concern whether I hit the top or bottom. The theoretical EUR value of my USD account fluctuates all the time anyway . but the move in trading terms would have been hugely successful! :slight_smile: It is just how we see it and how big the position is relative to our actual cash.

The only reason why we trade on margin is because we can make a disproportionately large profit relative to our meagre capital based on a hypothetical investment of money that we do not actually possess. But the risk of loss is equal and opposite to the potential for gain. Therefore loss is disproportionately painful with respect to our actual capital.

I don’t know if this really makes any sense at all, but food for thought, anyway…! :smiley:

Great post, Manxx!!!

Thank you!! :slight_smile: A worthy, worthy answer!!

SIGNATURE:

this is who I am:

PipMeHappy: The Full-Time Music Teacher

I am NOT a professional trader, so any comments or ‘advice’ from me are either things that

I taught myself or sources that I am as sure about as anyone can be. I cannot help but share

with the community: please do not be mad at me if I get things wrong: I will be the first to

admit not knowing something as well as the next man/woman on Babypips…

Just a few of questions for OP, who is not crazy to believe these things btw.

  1. Are all markets random or is it just FX?
  2. Have you been doing this full-time for 4 years or as a hobby?
  3. What have you done during those 4 years? What have you studied?

For what it’s worth here are my current beliefs.

-There is a lot of noise in FX markets, but there is some signal too.
-Profitable traders are either the shyest people in the world (about proving their success) or they don’t exist
-As OP hinted, the biggest challenge in trading FX is dealing with retail FX brokerages, most of which are not trustworthy. If you’re an American, the FIFO rules compound this difficulty.

  1. I cannot tell about other markets, as I have not made deep analysis as I have done for Forex. For Forex I can tell that due to the random behaviour, any type of system applied will have a negative expectancy on the long term, statistically speaking.

  2. Obviusly I cannot dedicate full time to a non profitable job. However, I have invested many hours during this 4 years. At least the equivalent of 1 year full time.

  3. It’s a lot of topics, but practically I’ve gone through all general knowledge that can be applied to this market:

All type of indicators and Oscillators, Fibs, Elliot Waves and patterns, Price Action, fundamental analysis, money management.

I have loaded historical data in Databases, and loaded a ton of indicators. Studied combinations of indicators, pattern detection to profile possible “edges”. Some of my own ideas, and also ideas by others, like 3 ducks, HGI. You backtest any pure technical system, and you can will blow your account sooner or later. Filter trades with some fundamentals, you’ll take a bit more to blow up, becase filter = less trades. Combine systems, when you add up… you blow.!

Sorry guys, I know 1% of traders are bumble bees, and we are lucky to have at least 5 of them replying to this post. How probable was that!! :35:

What makes you think fx markets are random? Does this coincide that it means profitable traders don’t exist? This comment about randomness I see a lot here, however I fail to see how this is the case. There is a reason why trading is a game of probabilities…

It is not a question of shyness. Why should someone have to [I]prove [/I]their profitability to anyone? And in any case, even when someone [I]does [/I] ocasionally show evidence of their profitability it is only met with scorn, doubt and sarcasm and accusations of lying, fabrication of results and deceitfulness as well as accusations that they are really only trying to sell something to gullible newbies - hardly conducive to offering evidence of anything!

When people offer opinion and/or advice then it is simply up to the reader to decide whether it is useful to them or not.

Whether a poster is profitable or not is totally irrelevant to another poster. Each and every trader is ultimately on their own when it comes to profitability- and you know why? Not because of any properties of the market at all - it is all down to the personal abilities and characteristics of the trader themselves. But most will not accept that. They will blame the markets, blame their “advisors” blame the brokers, blame the weather, the Central Bank spokesman, the internet connection, the interbank conspiracies, the randomness of life itself, in fact anything that will give them an excuse not to look in the mirror at the real culprit.

There are surely few careers that make you stare at your own mistakes and failings as transparently as trading forex. It is a humbling business that does not tolerate laziness, abuse, arrogance or unwillingness to accept one’s mistakes. It is hardly surprising then that profitable traders who have learnt the lessons and the humility, respect and dedication that markets demand are just a little reluctant to make a number of their results. Shyness or modesty, call it what you like, but until a trader can find his own feet in this trading environment then whether someone else is profitable or not is not the slightest bit of use whatsoever.

However, I want to believe that before you opened REAL trading account you have passed through DEMO account. Perhaps if this is the case were you not making PROFITS in your DEMO trading account, i don’t think there is much different b\w these 2 accounts. I suggest you go back to DEMO account and fortify yourself. Alright, thank you.

You raise a (positive) interesting issue here!

There seems to be two opinions about using demo accounts. One argument goes that a new trader should only trade on demo until they have achieved a consistent success rate for, say, 6 months, and only then go live. But the other camp argues that a demo account excludes the psychological element that is oh so critical to successful and consistent trading, and that it is therefore better to trade live from the beginning but with micro lots where you are dealing in a few dollars or even cents.

Personally, I believe in both. A demo account is not a bad idea for even the most seasoned of traders when testing new ideas and strategies. I use a simulator provided by my broker pretty much every weekend rerunning and practicing and improving and testing my trading over and over again through different time windows. Is that not what any professional should do to keep their head above water?

On the other hand, successful trading is about the trader and their expertise. This requires a live market even if the actual amounts are small. And, lets face it, if a newbie doesn’t have a few hundred dollars to spend on their learning and skills development, then they shouldn’t really even be here.

What a fantastic, masterful post, Manxx…

It says everything that needs to be said…

Thank you.