Well, i think the time has come for me to change some paradigms. I don’t want anymore market behave as I would like, I will let her do anything and just take profit when applicable.
Is Forex like fishing ?
Is fishing like gambling?
LOL
well you may catch one and you may not… the outcome is uncertain, but if you put a trawling net in the water you will probably catch some… 
Anyway back to the subject of this thread, it’s similar to what I do, not exactly the same but I’ve been thinking along similar lines so I like it.
…can I ask why you’ve titled this thread “the correct way” when in fact you don’t know?
Have I missed some nuance here or did the first reply hit the nail on the head?
Hi aguy, just wanted to comment on a few things you said that I don’t necessarily agree with (of course we are all entitled to have our own opinion):
First, I think it is the wrong approach (perspective?) to label anything “the correct way” lol – because I generally believe that every way can be correct, if it weren’t for the humans always mucking up the process.
Secondly, you seem to believe the market is random but I would strongly disagree. I am not a math brain, so maybe I can’t quantify that statement with a formula, but nonetheless it seems too predictable to be random, in my opinion. I realize there are a lot of people on both sides of the random walk fence. Does it really matter if the market is random or not?
Your idea sounds like diversification. You said this:
The simpliest process I can imagine is to place 100 random orders with the same SL and TP. In time, the equity will oscillate along an average value which ideally would be the initial balance. All you have to do is to close all of your position when equity is above balance. If you define well your stochastic process it will happen for sure. Almost for sure, which means that most of the time will happen . Good enough to get rich.
What is the difference between this approach and just taking 1 trade? I could be wrong on this math, but seems like unless your broker is offering you fractional spreads on all those trades, that you would be paying a hefty sum just to be in the market.
Well it’s only my belief: I think that randomness can be cured with randomness. That’s why I named like that this thread. I am still not sure that the random process I use is good enough.
You are right. There are many systems that work, it’s only people that apply them wrong.
If market is too predictable why there are too many losers ?
I try to answer your question regarding one single order placed. The reason I place many orders differs from the reason I place one single order. For the later, I would expect this order to be a loser or a winer. For many orders, the system will surely be a winner , then a loser, then a winner again, and so on . The catch is in how the system of orders moves in the market. The system always place orders, it forms an statistic cloud that only move along with market. It never moves against the market, like a single not movable order would do.
I don’t know how to better explain, maybe in the thread you could find more information.
I think I understand where you are going. But how is the outcome from 100 tiny trades in a single session different from 100 larger trades over the course of a month, for example? Are you any more likely to be profitable, percentage-wise, with the 100 tiny trades vs. the 100 larger trades?
Tymen (remember him?) had an interesting view of trends, retracements, and larger v. tiny trades. In his thread, he noted something called “efficient” and “inefficient” positions. He posited that (am I am paraphrasing) the shortest distance between two points is a straight line. If every meter in a line is a pip, one would want to take the longer route between two points, i.e. ride the “randomness” and secure more pips.
This is something am struggling with in my own trading, so the comments are actually quite enlightening. I do well on short 1-3 hr bursts during the New York Session, but have never really been successful in the h4 or d1 time frame (go figure).
Dusk trader has a point, so I think that this thread has helped me personally by reinforcing the idea that we’re here to make money, not conquer the world (or excel at every possible trading strategy). Each to his or her own. Thanks for the comments, they were quite helpful.
Just my thoughts for the day, I’m sitting out most trades this week until the unfortunate circumstances in Japan resolve themselves and the markets settle to more predictable patterns.
No, of course it would be better to use large trades as components of the cloud. But remember that statistics says that the larger pool of events is the more precise the prediction will be. So we want to use the smallest lot the broker allows, in order to have as many simultan opened orders moving forward with the price. An then , it comes the large financial resources one has to have to be able to support the variations of a big lot cloud.
And of course, my broker limits the maximum open lots to 2, which is 200 x 0.01 lots. But in the same time, he limits nr. of orders to 100, so I could only trade maximum 1 lot (100 x 0.01).
In other words, it is better to take each day 50 eurs (ok, 1 to 3 days will be losers) profit with small sized orders, than having system run one month to gain anything with large sized lots. The risk is too big.
But , I think your question actually is wrong. This system is to be run until it makes an acceptable profitable maximum, not to the end of the day or month. Gone are the days when I stared to megadroid to see how much pips did every day. No, it’s a change in the mentality, it’s like “be quick or be dead”, take the profit and run.
hey aguy, do you put all your orders on one currency pair or multiple pairs ?
I currently make tests only on EURUSD. Why ?
You said you used something similar, can I ask you what or how ? I need some improvements on entry points, I think it’s time to employ some indicators ore to borrow logic from known systems.
[B]Aguy[/B] Hmm… where to start? Late looking in on this thread. (Post 3) usual daily moves of 30 -50 pips? You must not be looking at GBP/JPY, GBP/CAD, GBP/NZD to say nothing of the exotics.
Your basing your entire proposition on the market being random yes? Well I have spent better than 30 years on it not being random and I’m still here! LOL. Without getting into when to trade and on what TF consider this. Pull up a chart TF, any TF. Put a MA (any one) on a high and low. Notice PA will bounce off high and low in a tunnel in a given direction. Now look to the next longer TF, then the next and the next… and the next. What you will find is PA will behave in exactly the same way be it 5m, 15, 1h, 4h, day, week or month. I would be interested to hear your explanation?
Ok, now do the same thing you said on a coin flip process and you will have the same trends, same moving averages, same indicators. All technical indicators are means of averaging the inner statistic nature of markets (apart of fundametals for the moment).
You spent 30 years on averaging and drawing lines on a graph that represents random movements of price (not aplicable when economy move the market) and you thought that only having price moving in channels or below ora bove trend lines it is not random. Wrong, trendlines, channels, Boliinger, MACD, and many other indicators are simple calculation done on a random variable.
I don’t reject in any way the importance of technical indicators, I am only saying that it is worth to take a closer look at the origin of them.
Another explanation: since we don’t know for sure what smart money will do it means that what we expect from market is imprevisible which means that we safely could consider that random. Then we proceed to apply statistic procedures, which have a name: technical indicators.
Another explanation: let’s take your argument with channels. Let’s suppose you have a well defined channel with 3 swings in it. Let’s write an 1 on an excel table if you catch the 4th swing inside that channel and an 0 if not. Now find all the channels during a month and note 1 or 0 accordingly if you catch or not the 4th swing. The series of 0 and 1 you find is another random process, which more concrete means that channels are anotehr form of expresing the randomness of markets. Same with the probability of bouncing on a trend or pivot or fib line.
aguy, no respect meant… but I think your line of thinking is generally wrong for trading. The reason why is because you are thinking way too absolute and concrete. The market is not some mathematical formula. It is an organic body built on human emotion. Whether or not it is random or not seems irrelevant to me. Why is that so important to you?
Thank you. I have always thought that my thinking is to abstract to be aplicable for winning money.
Why I am doing that is because I (still) believe that I could find a mathematical model for calculation of the probability of winning some money. That calculation can’t be made on a single non movable object like an order ( it can but useless). I need a dynamic set of orders.
Or let me put it another way: wouldn’t you like to open an order and then move it up or down whereever it suits your needs ? (of course , the movement is not free, you have to pay some extra fee in terms of losses).
You would be surprised at how effective mechanical systems can be.
I’ve found them to be far more reliant than trying to predict market moves using more conventional trading methods.
Yes, but what happens to mechanical systems during changing market conditions? And, can’t you over-ride the system? Thus mechanical systems are not as effective as understanding simple price dynamics and market mechanics. Trading is almost entirely mental fortitude and discipline, the particular system you use has very little to do with how much money you make on average, therefore it’s best to use simple trading strategies like price action, which allow you to see the market clearly and logically and as uncomplicated as possible.
That is a rather presumptuous reply.
You don’t know anything about what comprises my parameters for entering a trade. A truly mechanical method really doesn’t need to understand “simple price dynamics and market mechanics”.
For goodness sakes, the thing only goes up and down… How much logic does one need to apply?
Warning: highly opinionated content, reader discretion adviced.
Eerr … I think this method would work because the ‘london-breakout’ works too: both being limited inside one day, trade bias takes one position just as the days volume aligns into a definite direction? And exiting when the days volume dies down (assuming ADR=100 or 140p on e$ one could catch 50p with that net). Your random walk just manages to fit into daily price-cycle. “Algorithmic way of placing [the day’s] trades”
About the coin-toss yielding a pattern discernible by moving average I dont think. The market price yields patterns because it is a result of actions of crowd(s), which act in patterned response to (socio-economic/financial) events. A perfect coin-toss is purely random.