They will not work. Most people who trade retail fx loose. This is what people call “dumb money”. As for GBPUSD, the upside is limited to 1.57, but most likely under 1.53
I believe most small retail Forex traders will be wrong, these small retail traders are now net short on the GBPUSD so I’ve gone long on the GBPUSD and will hold that position, for now.
But why do you think it is that most retail traders will always be wrong, if they’re just clueless it should be 50/50 but it’s not. The majority of smaller traders are usually wrong. Why? Why should the market do whatever it takes to make the majority of it’s participants wrong?
You have to take into account the different time frames. Both long/short can be profitable in any circumstance if they are holding the positions for different durations.
Retail traders are not “usually wrong.” Retail traders are usually unprofitable. There is a huge difference. If you can’t figure it out, then you better start looking.
Yea, that’s what I thought. They are unprofitable, not wrong, they don’t know when how when to exist, or even if they know, they often disrespect their own rules and fail to trail their stop loss levels, and sometimes, they even fail to set them in the first place.
But the question is, is forex trading just like a coin toss? Is it really 50/50? I guess it is in most cases.
Almost every Forex Sentiment Indicator tells me that on the GBPUSD and the EURUSD small traders are net short and large traders are net long.
I’m questioning why the majority of small traders would be net short when the majority of large traders are net long. My own theory, and this is just my idea I’m looking for the ideas of others to help me gaining a better understanding, is that small traders tend to ‘gambling’ trying to pick tops and bottoms rather than simply go with the trend.
Yesterday I wrote “The date is the 16th of June 2010 and the market is at 1.4731.” on this thread, I’m sticking with it. Lets see how I do, I’ll post when I exit my position.
I don’t believe it is the case, I think way more than 50% of small traders will enter in the ‘wrong’ direction, fading the trend by trying to pick tops and bottoms - only at market turning points will they be right, usually when the trend is in place it will continue and the market (for some reason) will do whatever it takes to make the majority of it’s participants (who are usually small traders) wrong. Actually, it’s more like the majority of participants will do the wrong thing, the market doing it is just what it feels like is happening.
How do you know how long their positions are for? Also, how do you know this is geared towards small retail traders. From my understanding, retail trading doesn’t even move the market. So I’m curious as to where this indicator is extrapolating its data.
I don’t disagree with you on the fact that G/U is bullish at the moment. I’m more or less confused at the logic you’ve used to generate the same conclusion as I.
FX is no different to anything else in life. In order to get good you need to put in the effort and countless hours. You wouldn’t expect to ‘ace’ an exam without putting in some serious learning and revision right? Same with FX.
Without the smarts 50/50 or worse. With the smarts 70% win and better. My monies short GBP/USD over the coming week.
Sorry it’s taken me a while to respond to some of the comments here, I don’t like to just leave threads but I had to go away last minute and have been without Internet access.
People have asked questions about the indicators and how do I know how long these positions are on for. People have also mentioned different time frames.
I can’t post a link because last time I did that I got a warning but apparently I can when I have more posts.
Anyway, if you look at the COT indicator and look at the ‘non-commericals’ in large contracts you will be able to tell which side the large speculators are on. If you look at the sentiment indicators from the likes of DailyFX and OandA you’ll see which side the small traders are on. Usually, the large and small speculators are on opposite sides. It doesn’t matter to me how long these positions are on for, I’ll hold my position for however long the market moves in favour of it, until I get a signal otherwise or I’m stopped out or my time-based exit is hit.
Here’s how I trade -
Determine the trend I do this by looking for a new 3 month high or low, or a change in sentiment, or a very large move over several days. For around two weeks now the small retail traders (the dumb money) have been net short by around 60/40 or 1.5 to 1. A sign that the market will go up.
I enter in the direction of the long term trend - with a large stop loss and a time based exit.
If the market continues to move in my favour I open more positions, in strongly trending periods I’ll have lots of positions open as more are added before the opens ones have ‘expired’ I usually use around 1 month for a time-based exit. A new position won’t be added until all the previous ones still on are in profit. I’ll exit when the positions expire after a month and no new highs or lows are made, or if I’m stopped out (not likely), or if I get a strong reversal signal.
Time frames. If the longer term trend is moving in a different direction to the shorter term trend the longer term trend will usually ‘win’. The short term trend is therefore merely a correction. Entering in the direction of the trend gives you an ‘edge’ that will eventually take your position into profit if it remains.
Here’s what I think is happening -
Large traders and banks move the market. When they are trading mostly in the same direction they create a trend. Someone takes the other side of this, mostly commercials but some small dumb money as well. This ‘dumb money’ (small retail traders) don’t understand that it’s in a trend end every time a new significant high or low is made they bet that it’s a reversal. This continues until the commericals and the dumb money catch on, at which time there is nobody left to take the otherside of the smartmoney’s trades. So the market turns. At these turning points the dumb money is right (even a stopped clock tells the right time twice a day). When the dumb money is right these small traders exit taking a small profit and start being wrong again fading the new trend. . . . .
Status of my trade -
We met resisitance at 1.50 today but as I write my call is up by around 250 pips. If 1.50 is taken out I’ll BUY EVEN MORE GBP/USD. If 1.53 is taken out I’ll buy even more, ditto for 1.56. If/when these key issues are taken out small speculators will most likely be even more net short than they are now and most likely be wrong…
My position is now 342 pips in profit and 1.50 appears to have been well and truely taken out.
I can’t place another trade from where I am but someone can do it for me back in the UK - 1.50 is taken out and what happens? According to OandA’s open positions ratio, [U]66.16% of their traders are now short as the market rockets[/U] - hardly 50/50 is it? - shorts now out number longs by almost 2:1 as small traders fade the move that is looking more and more like a the start of a new up trend. If it closes above 1.57 I’ll say that it was the start of a new uptrend for sure.
Anyway, the trade entered at 1.4731 won’t time out for around 3 weeks so time to enter another and increase the position, add to winning positions only. Go on the opposite side of the ‘dumb money’ and if things change, change your opinion.
The first position is now around 450 pips in profit. And the Open Positions Ratio on OandA now reads that 61.89% of traders are short and 38.11% of traders are long. As most small traders are usually wrong I’m betting on more GBP/USD gains and looking for a decent level to add to my long position.
I’m will to do a day by day commentary on this forum to explain my thoughts and how I use this indicator - but only if there is at least one person actually interested in hearing them. If nobody replies to this I’ll stop posting on this thread and assume that nobody wants to read it any more.
The COT report shows that large traders and small retail traders are net short… however the commercials are net long…
I see we are sitting just about the 38.2 fib from the drop from 1.68ish. I would be watching carefully as it is possible that this is merely a pull back and a good opportunity to sell… not to mention the daily upper trendline is comming into play (since nov 09)… I don’t see 157 anytime soon, but of course anything can happen…
