Forex biggest contradiction?

[Thund3r]

Hello

I would like to discuss a very interesting contradiction regarding traders, trading strategies and expert advisors.

Every trading article stresses the importance of DISCIPLINE for a trader. The discipline to rigorously follow the trading strategy.

Now, a trading strategy is a SET OF CONDITIONS (or rules) that determine entering, modifying and exiting trades. (conditions like moving average crossovers, stochastic overbought/oversold, support and resistance and many others)

So, let’s assume we have an expert advisor that executes trades using a certain strategy and a human trader who follows the same strategy.

Every article and every forum post encourages the human trader to follow the trading strategy to the letter and never deviate (unless the entire strategy changes), while, at the same time, expert advisors are doomed to fail because of their inability to adapt to continuous changing markets.

Again, a human starts trading knowing that if he deviates from his strategy he fails, and at the same time, a human programmer starts writing expert advisors knowing that if his robot doesn’t adapt to market conditions he fails.

“Adapting to market conditions” means modifying or adding or deleting a rule from the strategy, so it’s equally easy to make the same modification to the expert advisor.

So what is the difference whether I spot a moving average crossover or a program does?
What is the difference whether I search for another condition besides the moving average crossover or a program does?
What is the difference whether I trade a strategy following rules A, B and C or a program does?

I hope I made myself clear and you can see this huge contradiction. The human should never deviate, while an EA loses because it doesn’t adapt!

It seems widely accepted, although without any proof, that human traders beat robots. I can accept that, of course, the human mind is far more capable than a simple program. So, I ask again:

What is the difference? Where is the difference? What is that THING or RULE that ONLY a human eye can see? Can we give it a name and focus on it?

Is it a candle formation or a chart pattern? I don’t think so, because those can identified by a robot too, so there must be something else. Is it information, fundamental details? Could be, but there are said to be winning strategies that are 100% technical, so no, this isn’t the answer either.

What do you think is the answer? What do you think is that THING or RULE that gives humans their edge over robots when using 100% technical strategies?

And please remember, if we agree that such a “thing” doesn’t exist, then we must agree that one of this statements is true:

1. robots are as good as human traders (or even better), or
2. trading strategies must be flexible and must allow bending the rules.

Have a good night!

[tommor]

I guess many human traders follow unwritten rules in addition to their declared strategy parameters. They don’t (maybe can’t?) write these into an EA, maybe they’e too vague, maybe they’re illogical.

[A1lenTrader]

A Robot/EA can perform multiple tasks a lot faster than you can. Also does not need to use the Toilet.
or sleep

[A1lenTrader]

What do you think is that THING or RULE that gives humans their edge over robots when using 100% technical strategies?

Human is more Dynamic…

[Trendswithbenefits]

Hey Tom… Your comparison of Bot/Human trading is spot on… I too read some of that waffle on the other thread…

The truth about EA’s (Bots) is they have strategic advantages and disadvantages just like humans…

Bots don’t adapt well to changing market conditions, Bots can generate large Drawdown if left unchecked, Bots can even fail to open or close a position under certain market conditions… so they are very fallible…

A large percentage of traders don’t recognise changing market conditions, let their losses run and limit their profits and spend way too much screen time waiting for the perfect setup…

The most profitable way to utilise Bots is in Hybrid Trading… Using a Bot to open a position(s) when a set criteria is met, just as a human would… without the procrastination and wasted time at the screen. The same strategy based Bot can be used to close a position(s) when market conditions dictate… not in 20 pips, or 148 pips etc… the logic can detect the continuation of the trend, the end of the trend, high volatility such as a news release (widening spread), and close the position when a criteria is met… just like a human would without the screen time…

Much more efficient for the longer TF’s where entry/exit setups may only present themselves a few times each day, each week, or even overnight… allowing 24/5 entry and exit opportunities even when you’re away from the screen.

The most important function that a Bot can perform is risk management… A great asset on its own is adjustable Equity Protection. This can be programmed to protect your account…only want to risk 1% of your equity per trade?.. fine set the parameter, risk 0.5% of equity?.. set the parameter and walk away… if you or your Bot are adding successful trades to your account the Bot will automatically adjust the amount risked by adding more funds to each trade… If you or your Bot are deducting unsuccessful trades from your account the amount risked each trade will decrease… without a single (possible erroneous) calculation required from the trader.

This is only a tiny overview of how coded logic (Bots) can be utilised to improve your time and trading efficiency.

[anon81929759]

Every trading article stresses the importance of DISCIPLINE for a trader. The discipline to rigorously follow the trading strategy.

yes, but there are many forms of Discipline and you are being general

Every article and every forum post encourages the human trader to follow the trading strategy to the letter and never deviate (unless the entire strategy changes), while, at the same time, expert advisors are doomed to fail because of their inability to adapt to continuous changing markets.

Yeah , ok
but what if the Strategy involved adapting to the market conditions
then… this would still be STICKING TO THE STRATEGY while also being flexible to market movement

I hope I made myself clear and you can see this huge contradiction. The human should never deviate, while an EA loses because it doesn’t adapt!

You have made yourself clear

NO…
The EA Loses because IT CANNOT CONCEIVE INTUITION
Ultimately a program is written by a human
it can only do what the human has told it to do

HUMANS ARE NOT CAPABLE OF CODIFYING THEIR OWN INTUITION AND DON’T FULLY UNDERSTAND HOW IT WORKS TO THE LEVEL WHERE IT CAN BE DEFINED AS PER THE “Recipe for Making a Cake BS”

this is why the EA fails
it’s not because it cannot adapt
it’s because the human has not given it the ability to adapt

a Human writes an EA to trade
the human trusts the EA to trade
but the EA is BLACK AND WHITE so to speak YES or NO, ON of OFF Computer Logic if you will

as far as the computer is concerned THE TRUTH TABLE is the word of god and cannot be bent or broken.

this is why this problem exists

It seems widely accepted, although without any proof, that human traders beat robots. I can accept that, of course, the human mind is far more capable than a simple program. So, I ask again:

it depends
beat robots… AT WHAT ?
some things… yes

other things… Not a chance in the world

What do you think is the answer? What do you think is that THING or RULE that gives humans their edge over robots when using 100% technical strategies?

Human Intuition is THE THING

and if you want me to define it even further
HERE WE GO

let’s say a person is 40 years old
well, that person has 40 years or life experience

what does that mean ?
it means that your brain learns and form Neuro connections to do certain things based on YOUR LIFE EXPERIENCES

These Neuro connections give you intuition and that intuition is fine tuned over a period of time
PROGRAMS DO NOT HAVE THIS

a Program can be fed Historical Tick Data
a Program can find patterns

however, a program cannot look back on HOW IT FELT about certain price movement 3 years ago on the EURUSD and COMPARE THAT to What actually happened

because… THE FEELING FILE is missing
because Programs do not feel, they Function and Execute Tasks

they cannot execute feelings

so… LIFE EXPERIENCE gives humans the edge

but sadly… WE CANNOT EXPLAIN IT IN ABSOLUTE FINE DETAIL
this is why robots fail when they are programmed

Hypothetically, IF WE COULD
they would not fail

as for this…

And please remember, if we agree that such a “thing” doesn’t exist, then we must agree that one of this statements is true:

robots are as good as human traders (or even better), or
trading strategies must be flexible and must allow bending the rules.

Have a good night!

No… Not necessarily

1. is not correct, because you need to define AS GOOD AS WHAT, what particular task

or

2. definitely right… 100%
   but even though the strategy must be flexible and thus forming THE STRATEGY
   THE STRATEGY can then NOT BE BENT, NOR IS IT FLEXIBLE

Get what i mean ?
because if you bend it, You are then Not Bending it nor allowing for flexibility ,thus you will fail because the markets are dynamic

[justshell]

bots work well for news traders

[Thund3r]

NO…
The EA Loses because IT CANNOT CONCEIVE INTUITION

HUMANS ARE NOT CAPABLE OF CODIFYING THEIR OWN INTUITION AND DON’T FULLY UNDERSTAND HOW IT WORKS TO THE LEVEL WHERE IT CAN BE DEFINED AS PER THE “Recipe for Making a Cake BS”

but the EA is BLACK AND WHITE so to speak YES or NO, ON of OFF Computer Logic if you will

Human Intuition is THE THING

so… LIFE EXPERIENCE gives humans the edge

but sadly… WE CANNOT EXPLAIN IT IN ABSOLUTE FINE DETAIL
this is why robots fail when they are programmed

I agree that intuition is something that robots do not have and could give humans their edge over them. However, as a novice trader, I feel compelled to give this a practical meaning.

Please correct me if I am wrong, but “adapting to market conditions” (or changing the strategy we use in a given period of time) is also done after evaluating a set of criteria, a different one for each trader. So, in most cases, this set of criteria could be implemented in an expert advisor. As a result, we must look elsewhere to find a practical definition of intuition for a trader.

The only thing left that differentiates human traders from expert advisors, as far as our discussion went, is simply the ability (or liberty) to sometimes skip entering (or exiting or modifying) a trade, even if our entry criteria is met, based on what we call “intuition”.

[Trendswithbenefits]

Bots work on 1 or 0, true or false… no intuition, no consciousness… but this is also what befuddles a large percentage of traders… over thinking their trading…moving SL’s… increasing or decreasing TP’s…Applying intuition can lead to “tampering”.

I have average coding ability and currently developing a Bot that exhibits some intuition… a Grid/Hedge system, a work in progress that opens positions, modifies pending orders, closes losing positions when the loss is at its smallest, so on and so on… if you watch it when trading on a 1 min Chart you would swear that a human is HiFi trading… but the strategy is using pure mathematics and a lot of it. See below…

Using a number of mathematical formulas it opens and closes positions until it has made a parameter set amount of profit (or pips) and stops. Carbon based individuals cannot apply the math or logic as quickly or as accurately as automated logic can to achieve the required result.

Does it work all the time… hell no… it is possibly successful ~80% of the time, which is similar or better than the average carbon based trader…When the logic is applied and I stress… under the right market conditions. Traders must understand that even Robots need to be managed, constantly tweaked, lengthen the Period parameter in a volatile market, shorten profit targets in a low liquidity market etc. etc.

(My) Bots are most successful when used in a “hit and run” strategies… get into the market make the pips in the shortest amount of trades or time and get out… thus negating the “changing market conditions” that definitely compromise a Bots performance…

@Thund3r

The only thing left that differentiates human traders from expert advisors, as far as our discussion went, is simply the ability (or liberty) to sometimes skip entering (or exiting or modifying) a trade, even if our entry criteria is met, based on what we call “intuition”.

Exactly, but cleverer programmers than me have much more sophisticated logic that could be set to overcome this issue as well.

FX trading is about applying disciplined criteria, and applying it time and time again, which is the strength (and weakness) of coded logic, wash, rinse, repeat…wash, rinse, repeat…

[anon81929759]

However, as a novice trader, I feel compelled to give this a practical meaning.

of course…by all means
defining a meaning provides clarification.

Please correct me if I am wrong, but “adapting to market conditions” (or changing the strategy we use in a given period of time) is also done after evaluating a set of criteria,

yes it is
but to GIVE MEANING TO THIS, you need to go deeper
and ask the following first

What does ADAPTING TO MARKET CONDITIONS actually mean.
and… don’t give the general definition. give the deep deep definition

yes. there is evaluation , but part of this evaluation involved human intuition that machines do not posses , therefore a computer cannot evaluate like a human can.
in a manner of speaking
you could say that the logic program that allows a human to evaluate problems and assess them is different to the way that logic program allows a computer to do the same thing.

(or changing the strategy we use in a given period of time)

No… you don’t change the strategy
You have 1 strategy
now… that 1 strategy can have multiple mini strategies that can change with the markets
but the top strategy that says … RESPECT THE LOWER STRATEGIES , must not change
because CHANGING IT would involve NOT ADAPTING to market conditions.

So, in most cases, this set of criteria could be implemented in an expert advisor.

Theorectically… YES
but, Humans cannot define it, which is why you can’t code it

As a result, we must look elsewhere to find a practical definition of intuition for a trader.

Have done so for 3 years,
Not willing to try again
but you feel free to do so and let me know if there is something that i have missed.
i doubt you will find something, but feel free to try.

The only thing left that differentiates human traders from expert advisors, as far as our discussion went, is simply the ability (or liberty) to sometimes skip entering (or exiting or modifying) a trade, even if our entry criteria is met, based on what we call “intuition”.

No… this is called FEAR
FEAR OF LOSS

this is where emotion takes control over logic.

if a human is doing the right thing, and changes their mind in trading, so as to not take a trade,
THERE MUST BE A LOGICAL REASON FOR IT

you could program this into an EA. TO A POINT

but again, it’s more than just
PLACE THIS TRADE IF THIS CRITERIA IS MET
BUT
IF THIS CRITERIA IS ALSO MET WHILE THE ABOVE IS MET… DO NOT TRADE

that’s one thing
but another logical decision to not enter a trade would be as a result of past life experiences.

you could program this into a program
but…
THERE IS TOO MUCH INFORMATION TO PROGRAM INTO THE DATABASE
also
EACH EXPERIENCE WOULD NEED TO BE DEFINED BY CODE AND EXPERIENCED AS THE HUMAN EXPERIENCED IT
you can’t do that, that’s why the machine is at a disadvantage.

[Derix]

Only after reading the article I began to understand how real described things are. Indeed, some of them have a right to exist. And also some regularities occur as described in the article too.