Jaquille, i think you are just trying to attract our attention. Why dont you just tell us what your strategy is all about and share it so we backtest and foward test it. We wouldn’t like to waste our time reading all your endless arguements. Are you a philosopher? You are making an illogical argument with no preposition (not informative) except you can proove it. How long have you been trading and what is your strategy? The forex market is built around TRENDS my dear friend. Saddle up!!:mad:
Thanks for the answer.
You chose to read this thread. If you do not like it, you don’t have to read it again.
Hi Jaquille
This my first post ever as a complete newbie.
I do find what you say fascinating and I think it is always good to think outside of the box.
However in my humble opinion I think you are right and you may possibly be wrong.
I think you are absolutely right that it does not matter what you do before you execute a trade, whatever happen afterwards is pure luck. Where I suspect you may be drifting in your DEBUNK argument is that your theory of luck is based on a single trade and not a series of trades which by nature, statistically forms its own pattern(trend)
This pure luck turns into a pattern and this pattern can be mathematically determined to one’s advantage. What I am taking from this debate is that the difficulty is not only in the trade but determining and analysing the emerging pattern from a series of trades to determine if your trading pattern is reliably profitable or not…irrespective of trend…(but it does, i suspect, judging from posts by “Phoenix” that it statistically helps in the original trading model)
Is this way off course??
By the way, as this is a newbie forum, can anyone guide me as to what reliable components and/or good tips they suggest for a simple reliable trading strategy/plan??
No, not a single winning trade, EVERY WINNING TRADE. One uses statistics to hopefully put luck on their side.
A trading plan should be simple:
If A then Enter.
If B or C then Exit. B would be the take profit and C would be the stop loss.
A, B and C should be as simple as possible.
That is helpful…obviously the difficult part will be defining A, B and C and that will take me some time.
When defining A - Lets say my approach is to ignore “trend”, I,m guessing that I would ignore “trend indicators”?
If this is the case, what entry indicators would I use?
Thanks
What entry [B][I]triggers[/I][/B] would I use? Start there.
Of course trend following works. Most traders lose because they simply do not know what trading involves.
That opens a can of worms. Where do I start? Would you care to elaborate on what trading involves? That leads to the thread starter’s point that if trend following works then why don’t most mutual funds beat the index. One could infer from your statement that most fund managers do not know what trading involves. The next inference is that you know how to trend follow, do you? Could you elaborate?
Alright, I’m going to throw my hat into the ring here and see what happens:
First, you want to show that the trend is a concept that exists only in the mind of the trader, and is therefore a MYTH.
Since your argument is wholly based on semantics, lets start of by saying that “Myth” is a wholly inappropriate term to use. Myths are stories that serve to educate people in anything from social norms to supernatural phenomena. Your implication is that the trend is nonexistent. The trend never served as anything other than a basic indicator of market direction, which is hardly worth giving it the title of “myth.”
Now, lets start this off generally:
A trend is a sequence of events that occur in a direction.
Not very satisfying, I know, but trends occur in things that aren’t the FX market - social trends, for example. Like the trend towards equality. Not everyone is equal in all places of the world yet, but eventually we MIGHT get there, or how about a trend towards environmental friendliness? That’s a definite trend, there are more people concerned about the impact their actions have on the environment now than there ever have been before.
To make it more specific to FX trading, because that’s what this is really about:
A trend is a sequence of <bars, candles, ticks, whatever> progressing toward either a higher price, or a lower price.
Okay, we’re getting a bit better, but still not good enough. Lets try again.
A trend is a sequence of TWO OR MORE <bars, candles, ticks, etc> progressing towards a higher or lower price. The candles MUST be closed (that is, any new prices will be reflected in the next candles)
There we go!
Assuming green candles mean higher closes, and red candles mean lower closes, ANY sequence of 2 or more green candles is an uptrend. ANY sequence of 2 or more red candles is a downtrend. This is non-negotiable. This is data from the past. It shows that, for those two periods, the market, and everything that is encompassed within it (which is an awful lot of things), has decided to move price in a uniform direction.
Note: The start point of a trend can only be identified AFTER THE CLOSE OF THE SECOND CANDLE. The second candle defines the trend, if it does have a “higher low” or “lower high,” then it is not a trend, and the previous candle is not the start of a trend. Past data, you see.
The end of a trend can only be identified AFTER THE CLOSE OF A SECOND CANDLE MOVING IN THE OPPOSITE DIRECTION OF THE PREVIOUS TREND.
The trend, as an object, involves no future promises, or information. It only involves past data.
Nothing whatsoever about the trend is up for debate, it is solid, and based on fact.
Trends can exist in all different time frames. They can even go in different directions on different timeframes! Oh my! Mindblowing stuff here.
The thing I think you have an issue with, jaquille, is the subjectiveness of trendlines. That I’ll agree with, not everyone will draw every trend line the same way, some people look at different timeframes, some people look at different numbers of candles, and draw their information from there.
This does not negate the existence of the trend, as it is just peoples INTERPRETATIONS OF THE TREND.
See what I did there? The trend exists regardless of your analysis of it. It is data, pure and simple.
As for the effectiveness of trendlines- three words: Self fulfilling prophecy.
Really, it works just as well as any other method for using historical data to predict the future.
Also: Mutual fund managers don’t trade the same way you trade forex or individual stocks. They seek to minimize risk, not maximize return. Mean-variance optimization. That’s why individual investors often earn more (percentage-wise) than mutual fund managers. That, and the derivatives hedging and stuff that goes on kind of balances out and prevents huge wins (and huge losses*) from occuring. Both their goals and methods are different from ours, so saying “just trade with the trend” is not an option at all.
*huge losses still occur - see: Proctor and Gamble’s loss of half a billion or something like that in the '90s, the recent banking crisis, or just google “derivatives loss” and see what news articles you come up with.
Hopefully this all makes sense.
An entry trigger is the very LAST thing anyone should worry about, figuring out an entry probably contributes less than 5% of the work you need to do, and its trivial in comparison to the harder aspects that need to be addressed. If everything else is in place a completely random entry will work (and for some methods, probably even preferable).
Please provide a list comprising the other 95+%.
If everything else is in place, it’s impossible for the entry to be random. If the entry is random, then so is the risk.
I think the biggest part of trading is CONFIDENCE.
When you actually begin to understand what trading profitably entails, you will realize that you are facing uncertainties at every turn. Experienced traders accept this and place their trades and set their stops and they make money because they have confidence in how they trade.
Then you see new traders who are desparate for certainty, and you wish you could convince them that there is no certainty in these markets. There is only confidence in your ideas and your risk management strategies. Confidence that is built on taking many many trades and experiencing many different types of price action.
So I read this thread and I see people asking the wrong questions and answering the wrong questions. It’s all so pointless! Stop wasting your time and start looking at the MARKETS, you know, that place where all the money is being made!
If you really need somewhere to start, I can sympathize. So start with support and resistance. Study what the foreign exchange market is and how it operates. Figure out how support and resistance is a real concept based on how real traders are trading this market. Then all you need is a lot of screen time and a few thousand trades under your belt.
95% of people don’t make money because they don’t have any confidence in what they are doing. They come on here and get some ideas here and there, write some rules, and think they have found certainty. But during periods of failure, confidence will keep you on track, and certainty will not be there to support you.
trade managment (exit strategy), money management(that’s the easy part too)
I think that equals about 95% ?
oops almost forgot the psychology thing… but that’s the Vulcan in me
That’s to obvious & simple!
People’s heads need something to do so they can loose themselves in complicated fog & things the markets couldn’t care less about.
How many people look at price when looking at their charts?
They rather look at their trend lines, waves, bands & the rest on their charts.
Having a discussion/debate/lessons without price is laughable.
It only shows how disconnected some people are from this weird “thing” MARKETS.
95% of people don’t make money because they don’t have any confidence in what they are doing. They come on here and get some ideas here and there, write some rules, and think they have found certainty.[B] But during periods of failure, confidence will keep you on track, and certainty will not be there to support you.[/B]
And commitment.
That’s the cause of system hopping & sense of being lost.
Running from A to B to C & back to start all over again.
It turns into an endless loop for some people.
Does anyone else see the fallacy in these definitions or am I the only one?
Trading does not have to be complicated. The analysis and method does not have to read like a mystery novel with plots and subplots.
If a short entry is made at the low line, the trade will either end with a profit or a loss.
If a long entry is made at the low line, the trade will either end with a profit or a loss.
The next time you are going to enter a trade fill in the blank:
[B]If a _____ entry is made at _______, the trade will either end with a profit or a loss.[/B]
The open, high and low for the day are known levels at any given point in time. Where price is in relation to the daily open, daily high and daily low can be measured in pips and in time. There is no debate or interpretation.