I am new to this site and would like to make my first post by asking an important question. I’ve also been investing and trading for less than a year. How can traders who do not have institutional or higher education experiences create consistently profitable strategies that no one else knows about?
There are a number of ways to approach this problem and of course time and mistakes are probably the biggest factors for developing success in trading. We can try to rely on economic indicators or technical indicators, but we can also look at market psychology during earnings or important news releases.
The reason to having an ‘esoteric’ strategy because it seems that mass psychology and the control of liquidity does significantly affect the success or failure of some strategies. Unfortunately there are people hitting stops or buying high. Over time they either learn from their mistakes or else they quit.
Hopefully some people here can help anyone who is just beginning with considerably low initial investment. Another problem in developing esoteric strategies that work is the capacitance of its effectiveness and variance over time. Of course scalping can be profitable if someone gets lucky, but I’m sure holding a value trap for 2 years is just as rewarding if someone gets lucky.
I have been investing in stocks and ETFs for close to 8 months and scalping the forex market for a week. I am looking for help in developing others’ strategies and my own.
Examples of an ‘Esoteric Strategy’
-----> Using cashflow statements heavily weighted to financing cashflow and an altman z score lower than 1.8 to short companies that are distressed or soon to be bankrupt
-----> Using economic and central banking news releases to play the volatility of forecasts against reality
-----> Using a bunch of technical indicators that lag less than the other laggers to catch longer time frame swings in market price
The above strategies are not meant to be advice of any kind, but just to demonstrate strategies that may be ‘esoteric’ because they’re not widely used or idealist versions of investing strategies that are well-known to the public (i.e. growth, value, fundamental, technical, automated, etc.). They also avoid using value investing and strategies that follow support/resistance with price action alone. Developing an ‘esoteric’ strategy is also assuming the premise that once a strategy becomes well-known it loses its success during volatility and over time as it gets more well-known. Whether this premise is true or not can also be up for discussion.
You have entered a hobby where there are millions of participants. Many of the very best brains in the entire world and the finest computer software and algorythms are and have been for many years employed on the hunt for “an edge”.- What makes you think that a novice can “outthink” all that serious money and endeavour ?
At some point a novice either becomes an expert or fails. Experts are the “best brains” and the computer software is the arm to their strategies. Becoming an expert is probably based moreso on luck and time rather than joining a guild of highly educated, institutional, or automated participants looking for an edge.
Its a great game to play, saying that you have or are developing a secret strategy that nobody else knows about and that it will continue to work as long as it remains a secret. It can’t be criticised because the details have to remain secret. A strategy that cannot be criticised can therefore be regarded as perfect, since it has no visible flaws. In which case I wish you good luck with your perfect trading.
I don’t think you have to become an “expert” - just “adequate” to make a few shillings.
However, the statistics do show a huge failure rate amongst new traders - so I say your desire to find a different way is commendable, and may stand you in good stead eventually.
My comment was really to save you a lot of time and energy, looking for something which will have already been researched by great thinkers.
Time - is probably the greatest requirement needed to “get a feel” of teh markets, and I think the “Feel” is probably the thing which will eventually lead to success or failure.
Thank you for the good wishes! My strategy is short-term utilizing both technical and fundamental indicators over short- and long-term outlooks. I’ve used many indicators before but the ones I like the most which I will continue to use are the RSI, SMA 60, parabolic SAR, price action in 1m-1hr-4hr-daily-weekly candlesticks, support/resistance, non-farm payrolls, central banks’ monetary policies, retail sales, CPI, GDP reports, unemployment rates, +10 year treasury yields, and trade balances. I’ve only been trading forex for a week so a clear strategy has not yet come to fruition. I use MT4 for my account and a demo MT5 for back-testing. I am working on a strategy that uses daily charts on the ninja and a scalping strategy for most of the other pairs. I haven’t developed a routine but I do have personal rules and goals for each strategy. I never leverage over 20:1 and never risk more than 20% of my account on each position (so far my positions have been between 3-18% of my account). If I had the capital I would risk less than 1% of my account on each trade with leverage at 5 or 10:1. I also limit myself to the most liquid currency pairs with exotics from where I am from (GBP/USD, EUR/USD, USD/JPY, AUD/USD, USD/CAD). In my first week (it’s been 6 business days) I have taken trades that last ten minutes and trades that lasted a few days. My win rate has been 57% for the first week because the first days included rollover costs in a losing position during the weekend + holidays. When I traded more frequently afterwards, I hit stops less and increased my win rate to over 66.6% in the last 3 days. I want to avoid hitting stops and over leveraging so when my win rate takes a hit, some of my account can be spared.
