I like to think i’m not new at this game, i’ve been doing it for quite a few years. I’m a finance analyst by profession, so I get the correct way to analytically analyse data so that the desired outcome is clear and concise.
But my god it’s frustrating when you develop a trading ‘system’ that’s worked well for a number of consecutive years and then out of the blue over a couple of months it falls flat on its face! Has anyone else experienced this? I always wanted to deny that the market was random per se, however I’m starting to come to terms that maybe, just maybe this is not a stable career to move into full time - perhaps that’s denial of experiencing failure.
Personally I think I need to attack this from a totally different angle, and not that of statistics and analytical confluence between factors that are more often than not apparent in profitable trades. That’s the approach I’ve always taken; asking myself the following question “why was that trade profitable”, “what’s the common factor between all winning trades”…now find that sequence of factors in real time and test if the trade would have been profitable more times than not… Hmmmmm…ok rant over for now
Anyone says no is lying. Everyone has who has been around for any length of time. This absolutely does not help believe me. It works for small losses but on big ones the rant is on. " All systems work sometimes; no system works all the time. Anything can be manipulated. Personally I do not think the market is random. But I’m cynical. When the market goes up someone makes money and conversely someone loses money and same when it goes the other way. Not all institutional traders work together. At least I don’t believe so. Is there some that do, okay sure . But for retail I think we trade the way the money is going and everything else is secondary
I don’t know how you trade but if you intend on making this a full time career you have to prepare for 2 things. 1. you will have losses 2. Losses are not the problem. Protecting your trading account against disasters. Go back through your trading method and see what part is not delivering. And maybe your approach does need to change. Retail trading is not a set and forget profession. Things change everyday that can affect where price will go.
Stay calm, stay patient and stay focused. My 2 cents anyway
Good Luck
Gp
I suppose the markets don’t precisely fit the definition of random, but they are certainly prone to illogical patterns and behaviour.
They’re irrational at best and unpredictable at worst.
Therin lies the challenge I guess.
Attaching systems to patterns seems logical, but are the patterns really there, or are we seeing what we want? When markets move, is this predominantly down to fundamental reasons rather than a supposed deterministic movement.
I’m rambling…so…
…here’s a half-remembered story of a traders morning meeting that illustrates the point. Each was to give their trades for the day and their reasoning behind them.
When one trader was asked why he thought the market would “go down today,” he replied,
“…because yesterday it went up.”
Sometimes that’s what trading feels like. For me at least.
Yep, you’re right - it’s a strange situation to be in, because I totally get what’s going on, why it’s happening and where I should be offsetting the risk if needed. But here’s the con, even that fails from time to time haha - I guess if you have a big enough sample size then one day all your ‘bad luck’ will align perfectly, all you have to do is sit tight, try and save the marriage and keep the kids out of the room
I like that logic, it’s proven profitable on many occasions, perhaps not as illogical as it seems - especially when gunning down the correction in PA before the trend continues its course.
I dont know what caused your loss, obviously, but when this has happened to me its been because ive slipped into bad habits/complacency after a good run. Either moving stops because im sure that price will turn, or overexposing myself with too many or too large positions.
Frustrating, but happens less as time goes by
Oh there is no loss, thankfully, I spend most of my time designing trading approaches based on stats, the system was still in testing mode and has been for the past six months - however, it was showing very promising results, it survived the 2008 Aug crash, the flash crash of GBPUSD (07.10.16) and profitable all the way to 2016 - that’s 8 years of constant profits, YoY, nice right? Then 2017, wow…entirely new sentiment in the market; what did work now has no merit.
I think it can depend on one’s trading style and whether or not you are trading short-term or long-term. When traders are solely relying on technical analysis and looking for patterns, then any bit of fundamentals can cause the market to move in unusual or unexpected ways that might seem random.
In my limited experience, I have found that it is important to be able to adapt when necessary and to be able to recognize when it is time to do so. That does not necessarily mean that you have to change strategies, but you may need to adapt it to the changing market. Simply changing time-frames or trading different pairs can sometimes help. Sometimes, you just need to take a break and reevaluate what you are doing; ensure that you are not loosening your own rules, getting complacent and/or trading too often.
Market flows in its own pattern. No one can blame the structure of the market, rather we tend to conduct all of our trading activities as per the situations prevailing in the market. Thereby, each forex trader must try to keep his emotions in control and he should try to contract his strategies as per his best foot.
I would recommend reading books like ‘The Holy Grail Trading System’ where the moral of the story is it doesn’t matter how many years of data you use to backtest, eventually every system will fail.
I personally have lost faith in expecting that backtest data will tell me a single darn thing about what the market will do in the future. I do a little backtesting on about a month to a year of data depending on the system just to check for problems/contingencies that might have escaped me when I was designing it. However the only way to know what a system will do in the future is to try it out in real time. Slow, frequently frustrating. I have no hair left.
How many systems do you trade? I know from listening to some experienced traders that they rotate through a stable trying to match the market currently in play.