How Realistic is This?

Beginner Questions
18

You understand that results from 18 trades have no real statistical significance, right?

When you have the results of 1,800 trades, you have something to look at and analyse.

This is part of the problem of a 4-hour chart system that trades once every 6 weeks.

It might work. It might not. It’s going be terribly difficult to tell which.

But you need to know first, so you can make an informed decision about what to do when it has a 6-month losing period, because this system, whether it has a real edge or not, WILL have a 6-month losing period at some point.

All Fib levels are arbitrary anyway. Fib levels aren’t real. That doesn’t necessarily make them invalid or a loser, it’s true. Millions of people believe in the I Ching, and thousands of people trade according to the phases of the moon (honestly, they do) and some of them swear it’s profitable. I’m not advising you to use Fibonacci, or not to use it, just to appreciate if you want to use it, that you’re using something which has never had any real, mathematically valid evidence for it published, other than anecdotal stuff produced by its own enthusiasts.

I wince when I see people wanting to trade and wanting to make money from it, however modest and sensible-looking their ambitions, when what they’re asking for advice about is something based on “moving average crossovers” and “Fib levels”. Everyone starts off in this business with the odds against them, and these two parameters just aren’t things that will help to get the odds in their favour.

19

Yep… which is why I am not using that system. I have some curiosity about it, so I will be using some of my free time that isn’t allocated to trading for further testing on additional pairs and more data. My thinking is that this system wouldn’t be used as an example in the School section if it wasn’t a valid system. While it may have a low expectancy of profitability, there has to be some sound logic behind it based off someone’s experience.

What should I be looking at to base my entry and exit rules off of? My apologies if you already stated it and I missed, I am sort of learning the lingo on the fly. The educational materials made sense when they described Fib levels as being popular spots to place orders at making it a somewhat self-fulfilling prophecy.

Or is a real edge in trading completely illusionary?

20

It shouldn’t be used that way, as an example of trade entries/exits.

Unfortunately, some of the authoritative-looking material with which the site directly and indirectly attracts traffic has no real validity.

Somewhere along the line you’re going to need an understanding of price action.

I’m not suggesting you should avoid indicators, but the people who are trading profitably with indicators also have a good understanding of price action parameters. Acquiring that takes time and experience.

Many successful retail traders are using one or two indicators (rarely more) to determine “trend”, according to their own system definitions, and then using price action to time their entries in accordance with the trend their indicators have determined.

A moving average crossover with one or two additional rules could be a perfectly good way of identifying the trend.

It’s a mistake to imagine that one can easily find a working system with a real edge and just copy it, without that understanding, and that everthing will work out ok.

It almost never does.

The reasons that’s so also need quite a bit of experience, to be understood.

Sorry for telling it like it is.

No, it definitely isn’t.

And nobody should be trading with real money without having a real edge (but of course large numbers of people are - many of them don’t even know how to tell whether they have a real edge and are just trading on a wing and a prayer and a Fib level and thinking something like “Well, it said so on some authoritative-looking website, and loads of other people seem to believe it”. Those aren’t people who are making a profit.)

But there’s much, much more to developing one than moving average crossovers and Fib levels, and it isn’t a quick or easy thing to do.

Again, sorry for telling it like it is.

21

So I could for example use that moving average crossover with RSI and Stochastic indicators to see if the market is trending on say the 1 hour or 4 hour chart, then drop into the 5 minute chart to enter/exit trades based on price action? Right now I am reading harmonic patterns in the Education section, specifically the ABCD pattern. Would looking for the ABCD pattern to complete at previous resistance be an example of using price action like you mention?

To me, when I hear price action, I think support and resistance levels combined with market trend or channel. Am I thinking the right thing, at least at an elementary level? Or do you mean something different when you say price action?

How do I progress from here to that understanding? Is it solely time and experience demo trading, with trial and error on what trade setups to use, or are there any good books / YouTube channels / etc… that can reduce the learning curve?

Thanks!

22

So I was looking at the EUR/USD 5 minute chart, and I think I see a potential ABCD pattern forming.

https://www.tradingview.com/x/5URYtplv/

I drew lines at support and resistance. Right now, I am thinking shorting (not with real money!) at around 1.14600 if the pattern completes, with target at 1.14314 and stop at around 1.14685. That would give me a good risk:reward ratio, and be assuming that previous support will be retested after pattern completion.

23

I think from four hours to five minutes is probably too big a drop, but that’s the idea.

Sorry, I have no experience at all of that indicator and can’t help you.

Yes, very much.

Here’s a thread that might help. How did you learn?

24

Perfect, thank you! I will look through the books in that list and probably order one this weekend. In the meantime, I am going to review the price action related section of the school and see if I can piece together a strategy based on price action with an indicator to help indicate the trend. I am thinking RSI most likely for that one.

This way I have something that I can start back testing with and at least get some more practice on the charts and using the various drawing tools while I refine my system.

25

@jseymour84, it sounds like your strategy is purely technical. Have you tried testing it on a shorter time frame to see if the results are of similar quality with a higher trade frequency? You mentioned you were trying to get free data on your NinjaTrader demo with us, and the shortest time frame you could get from NT was daily.

Do you actually use their platform to automate your strategy? If not, you could retrieve more historical data with shorter time frames using an MT4 demo.

26

@FOREX.com : Yes, the strategy is purely technical. I don’t really know enough about fundamentals to really trade on them, and I am currently studying up on Gartley patterns and price action strategies. I don’t do any automating. The only reason I started with NinjaTrader is that I saw a trader that does trading blogs on YouTube use it so I figured that was as good a place as any to start.

For a platform, the only things I am looking for is easy to use charting and the ability to place orders directly from charts, along with the ability to adjust stops by dragging them up and down - sort of like how TradingView does their simulated trading. I’ll try out the MT4 demo to see how I like that.

If you couldn’t tell by now, what I don’t know about trading could fill the Library of Congress 3 times over :slight_smile:

27

Good question, there. Sometimes lower win rates are actually more profitable overall because of the increased numbers of trades that accompany them on a shorter TF.

1 Like
28

@jseymour84, thanks for those additional details.

The reason we asked if your strategy is purely technical is because then there should be no reason you can’t test it on shorter time frames provided you have the appropriate historical data. Shorter time frames should give you more trading signals, and since this is a demo account, there’s no harm in seeing if the strategy yields positive results with a higher frequency of trades.

Since you don’t automate your trades, you’re not married to a specific platform. And as it happens, FOREX.com offers all three platforms you mentioned (NinjaTrader, TradingView and MT4), and we offer free demo accounts for all three as well.

The reason you might want to consider MT4 specifically at least for you demo testing is because you said you wanted more free historical data. With MT4, you can download data for shorter time frames from the MetaQuotes history center as shown in the following video.

We’re all here to learn from each other. :+1:

29

Thanks! I will definitely get an MT4 demo account on Monday :slight_smile:

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30

Best conversation I have read in a long time, thanks @jseymour84 for asking on the questions that r in the back of most beginner traders (or I should speak only for myself). @LaughingCharlie, “telling it as it is” is very refreshing. We might be beginners but we not dumb, the ppl promising “from $2k to $75k in 2 months” actually drain my energy levels (I know BS when I see/smell it).

I feel rejuvenated & I admire how methodological @jseymour84 is approaching this, I am inspired to do the same.

1 Like
31

Is 3% realistic, Yes, is it realistic for you and your system, that can only be answered through months of real life trading, and even if you do make 3% or more per month over the 12 months, that does not mean you will make same over the next 12 months. On my own thread I am on a 10 of 11 trade win streak but I know this is not a sustainable and I am not going to make financial plans based on a 90% trade win rate. Bottom line, you can not work from a fixed profit % or win%, and markets change, so what worked really well this month might lose money the next two months

Good luck

32

Thanks for sharing. I understand that history doesn’t indicate future performance and that it will take me months to develop my own system for earning 3% per month average, and that some months can swing really, really low and some can swing really, really high. I just wanted to make sure that 3% was a realistic target to aim for in the long run.

My dream is to someday reach the point where I have generated enough profits to build a diverse investment portfolio (including stocks and bonds) that generates $60,000 a year passively through dividends, and make the other $40,000 - $60,000 from actively trading forex and possibly options.

If I can average a 3% return per month after ten years of active trading, then I have a good chance at making that dream a reality before I hit retirement age. Once I get that passive income rolling, then I can quit my job and live full time as a trader and enjoying the ability to travel and take control of my own time.

Also, is there a place on the forums where I can have sort of a running diary of my travel down this path, or would I be better suited setting up a free blogspot or wordpress.com blog?

EDIT: I went ahead and setup my own blog on wordpress.com. Doing so gives me somewhat more control over the platform, and I think it provides a better reading experience. If anyone wants the address, just let me know.

33

@jseymour84 you mentioned you already set up a blog on wordpress. That’s great!

You might also be interested in the following section of BabyPips.

https://forums.babypips.com/c/trading-discussion/trade-journals

All the best :slight_smile:

34

Thanks, lots of new stuff to read and once I start demo trading I will create a thread to document what I do there as well as my blog. :grinning:

1 Like
35

It depends on your trading system, even you can make more money if your trading strategy is well enough! By the way, may I know your experience? How many months you used your system on demo?

36

I am still working out my trading plan and system. I have 5 years of data downloaded for 5-6 different currency pairs and am working out a trend continuation trading system. Once I have that done and backtested, I plan to spend 3-6 months trading it on a demo account.

37

Nice plan, all the best! Hope, you’ll be able to cover your plan on demo according to your session plan.