I don’t know much about trading forex in practice I do know a lot about how the law of averages work.
I know that a rule for expectations trading forex can be created using the average of bad trades that actually happen (I am thinking at this point in time that it is one in every 4 for a confident practiced trader). The other thing I need to know is the exact figure of the gain on any successful trade on average. Is it above 50%? (I have based my figures on 50% gain on any successful trade that is $2.50 made on any $5 trade).
Does anyone know the actual averages of bad trades and also the average gain for any one trade as a percentage? I know enough to know that without 3 out of 4 trades being successful there could be some real problems trading as it would get to be a real gamble each time a trade was put on.
Basically I need to know if it is as bad as one in 4 trades that are bad on average and what the average gain is on any one trade at any one time to be confident that trading forex is a good option. Can anyone help me know these facts please.
Well the law of probability is 50% chance in forex - price goes up or it goes down. Pretty much what mastergunner99 said - risk management aka risk to reward will vary. Using math you could prove that 1 in 1 million trades won could have a gain of 50% or over. What market are you comparing forex to ?
dan82au I’m not comparing forex trading to any other market: I did the maths and for the exponents don’t kick in any worthwhile fashion on anything under a 50% gain on any one trade of $5 (not for a long time anyway) and so it is not really worthwhile trading unless you get back $7.50 on a trade of $5 because of the likely losses through bad trades later in the day (I’m talking about a skilled traders losses). It’s a worst case scenario I’m using. I found that the exponents don’t really kick for just under 3 months with a one in 4 loss (that’s a complete loss not with a stop because sometimes it might be that the internet connection goes completely with no warning). I’m not using comparison just the law of averages which is infallible unless you are trading forex and the world money system collapses completely then all your money is gone anyway and so is everyone else’s.
There has to be an average: a measure of losses over gains. I guess only the brokers would know that data but did think they would have shared it and it would be common knowledge. It just does not make sense to me for nobody to have done that analyses because it is the most obvious thing to do of any analyses of real time positional forex trading (I mean the position a trade is made on the graphs). So excluding the variables which dominate unless you are using an average, using an average is the best way to calculate probability. IF it is a 50% chance of profit then that is gambling I’m really asking about the amount of profit gained on average: is it 50% on top of the outlay (50% of $5 is $2.50 = $750 total). Is the average gain on average 50% or the outlay as I have calculated and based my schematic on. Someone must have this data because trading is happening all the time. I asked one person and was told their average is actually $3.50 gained on $5 any a good trade. And so pegged it back and did my calculations based on that. There has to be an average of amount earned on any one increment traded (I’m basing the $5 per trade on what I saw on my practice account for the amount used as an basic).
perhaps a trade has 50% probability of going up or down…
but with proper trade management…odds could go in ur favor
lets looks at an example
say ur long on nzd/jpy witg profit target and stop loss of 100 each
u can say this is only 50%chance of winning, but wait there’s a catch!
lets just sat there’s also another 50:50 of going up n down 50 pips…if trade goes in your favor 50 pips, u can move stoploss to breakeven or in the money
but what if trade goes down 50pips? um…it could still hit ur 100 pips target and never go down 100 pips stoploss…
so do you still call this 50:50 probability? ?
mastergunner99: The data has to be somewhere: someone somewhere must have this data. I’m thinking the brokers (or whatever those people who supply the accounts to trade with are called) will know this or should. Some one must have analysed the amount of bad trades: trades that are done using the indicators don’t always go the way they are supposed to and someone must know how many do go in the opposite direction than they are supposed to go according the what the pennant or triangle of crossover or divergence says. I’m fishing for actual statistics because then an average can be found from those statistics. Until then I am working on an average of one in four because if it is more than a one in 4 total loss then it is not possible to trade successfully according to the results that I have calculated ( I say total loss because if the stop loss is on then its not a total loss). I’m using a total loss because it is the worst case scenario and know that anything less than a total loss on every 4th trade is OK just not as good as a win while the exponents are accumulating over the long term. It is possible to navigate through one in four total losses but not any more than that (one in 3 doesn’t work at all obviously).
$5 + $2.50
$5 + $2.50
_______
$5.00
two trades yields $5
$5 - $5 = $0
if the third trade looses that $5 gained then it is back to square one and here we go around in circles with no gains ever and so it has to be that is it more than a 50% gain on any trade if one in 3 are bad trades.
if you loose that third one then the gains for the other 2 are gone completely.
That leaves a 50% gain plus a 50% gain adding up to 100% gone unless there is a stop loss and yes that does change things and makes it possible to trade if the average is as much as one in three but what if you internet connection goes and you loose that trade? It is possible and on a 5 or 10 minute trade its likely to be the lot or sure because how are you going to get in touch with your broker in that short time. I’m basing this on a worst case scenario.
I hope you get my reasoning now and thank you very much for replying to my post and for your input I really appreciate it as I do for dan82au’s reply also it is very much appreciated. For me I must do the maths and know what the statistics say or I am not confident to trade because I don’t gamble full stop.
mastergunner99: 35% ( a 1.777% gain) is just a fraction over one in 3 losses and for the exponents to kick it would take the best part of a year using 20% of what is in an account started with $150. Actually it would likely take more than a year for the exponents to kick.
mastergunner99: you don’t seem to understand what I am asking. Its not about mathematically decoding forex it’s about using the law of averages which are infallible. I have used this in business management for 20 years (as well as simple work situations: when I was told a record could not be broken I broke it using this same law of averages because it is a simple implication of common sense) it is simple and beyond logic. All I am asking is for simple data which anyone who is trading should know. If you can’t answer my question I don’t understand why you would say anything. Either it is that or you just have no understanding or you just want to be heard for some reason. I don’t wish to be rude but you already have been twice. If you have not got the information I need (which you should have incidentally) then please don’t say anything. Its about working with the variables while knowing the lowest possible loss and gain. Its about very simple uncomplicated facts: the maths uncomplicated them. Forex is not different than doing a menial task such as crushing core samples of ore for a bonus. All you need to know is how the law of averages works and then you know if it is possible to get the bonus or just have the status of breaking a record made by some ignorant cheating younger person who had help making that record in the first place. All I am asking for is the data please, if you know it or know how I can get it then please let me know.
I’m interested in what you’re doing. I don’t have the data as I understand it that you are asking for. I would guess that there are some great uses for averages in forex that are situational, like success rates for pin bars, high percentage set ups based on market structure being in ones favor, etc. In baseball the last 20 years have shown that you can achieve interesting things by looking at the numbers. I wonder if that would be harder in forex on a macro level, as it seems like the environment is always shifting. Imagine trying to compare yearly batting statistics, but not knowing the pitchers mound was raised or lowered until after the season had ended. I’m looking forward to what you cone up with.
First off, I don’t think mastergunner was rude to you at all. It sounds as if you are getting frustrated because you aren’t getting the answer you are looking for, but I think the problem lies a little bit with your question. You question is confusing and it doesn’t look like you currently know much about the process of trading.
I think, from reading your posts, you are trying to figure out if it is possible to have a positive expectancy while trading forex. The thing you don’t seem to be getting is that as a trader, you have control over how much you risk on each trade by using a stop loss, and how much gain you target in your pre-trade plan. And because of this, each trader and each trading system will have different variables and figures.
So, you are asking for an average win loss ratio and using an assumed 3 wins to 1 loss in your calculations and assuming a risk:reward ration of 1:0.5 As you’ve seen, this type of ratio will provide a positive expectancy but if your win rate changes to 2 wins and 1 loss you break even.
However, another trader could have a system that only wins 50% of the time, but each loss is $1.00 and each gain is $3.00. You would say this is a 200% gain and this would be a system with a high positive expectancy.
You see, each trader looks at the market in a completely different way. There are hundreds, if not thousands, of different indicators and algorithms that all produce different statistics. Then there are millions of permutations when combining two, three, or more indicators into a trading system.
You need to backtest whichever variable, indicator, or pattern you are interested in to come up with your own statistics on win:loss ratio, optimum risk:reward ratio for you trading style, and whether your trading style is +EV or -EV.
Well, well, well… You are having agreat start here… Not confident enough to trade, but confident enough to tell experienced traders to be quiet. I think Gunner is doing you a favor, and he hasn’t been rude in his replies…
I agree with Gunner that the data that you are looking for is not available to us. And I don’t see how brokers can make it (How can they define what strategy you are trading). There are different kind of traders… We have the position traders, who perhaps place 2 trades a year… We have the day traders, who enter perhaps 1-3 times a day… And we have the High frequency traders, who may enter a trade a couple of hunderd times a day…
Than these traders also trade on different currency pairs, or even multiple pairs at the same time.
They may also trade different styles or strategies at the same time (Guilty).
They may also stop trading for a while because of holidays, or to recover from big losses. (Breaking the data line to provide consistent data on their individual style). Or they may skip trades because they are not true to their system they are using. [I know individual traders don’t count, but you there may be thousands of traders that are not true to their system, what would impact the data your are looking for).
And, not to forget, the inidividual news events that may screw up trade set-ups for many and many traders, although their trade would have worked when it did not happen.
How would this result in an average that applies to the median trader? I think such a rate would be polluted by this high number from the High Frequency Traders and the mix up of the different pairs…
I think when you look at the forex, this is a bit more complex than an business environment where you can strictly define a product, client groups, processes… The forex is more where all the companies (from different industries and geographical areas) are combined…
No, I don’t have the data and I still reply… Because you may be looking for it for a long time and it may probably be wasted time… So I am afraid that you should starting to GAMBLE, or look for a nice compacted market, such as individual stocks.
BUT: You may find such data for individual traders on myfxbook.com. there traders keep records of their actual trades. Maybe this will provide you more practical data to apply your law on.
Well all I can say is that what the guy said was an insult he compared me to a fictional character that was named after a dog and dismissed what I was doing outright all I needed is what you have said in these few replies. To be fare I don’t want to dampen anybodies enthusiasm to answer and interact in these forum quests.
Anyone who has a clue about this knows that what matters when trading is the distribution of wins and losses. There is mathematically a probability distribution of results with various positive and negative values. The fraction of wins and losses is only part of this, the size of the wins and losses is equally important.
docious seems to have the misguided idea that there are universal statistics for “a trader” which involve winning 3/4 of the time (or whatever). Traders vary a lot. Moreover, the average trader loses money. You are not going to turn the methods of an average trader into profit in any way at all. You need significantly better than average methods with a solid edge.
Not confident enough to trade, but confident enough to tell experienced traders to be quiet. I think Gunner is doing you a favor, and he hasn’t been rude in his replies…
Perhaps we got used to things like that…