Thoughts of a beginner
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Thread: Thoughts of a beginner

  1. #1
    Hi,

    As you can gather I'm new in this;--RRB-. To begin with, I want to state this is a great forum as everyone helps eachother, using a high amount of friendlyness, so I'm happy to be listen.

    I have been reading books and playing with a Currency Market demo account to get the mechanisms of trading right as well as trying to spot a few patterns and trying a few egies. I discovered the amount of advice from books and the net overpowering, so I took a step back and attempted to cut this business back to the bone, and come up with a few details I could be certain of. I anticipate the following is from the text books somewhere, but finding out for myself was a fantastic excercise. Also I do not like to take things on trust, I feel better when I have worked them .

    I looked in the situation of a theoretical perfect market. 1 commodity or currency pair moving using a random walk, and no home take.

    Of course over time, your expectancy of such a market must be zero. To convince myself of this I wrote a tiny app in C . First I left the price arbitrary walk and checked that whereever I put the stop and limitation made no difference to the results with time. The price was set to move up or down with a random value between -10 and 10 each cycle.
    As you'd anticipate it made no real difference.

    Then I modelled the addage that trending markets tend to continue by setting a flag to break or continue a trend and enjoying with the probability that the tendency could break. Again, it made no real difference. From 0 upto 100% chance that the tendency would break every cycle, there was no difference. Nevertheless a zero sum game.

    Then I tested the addage that you ought to let your winners run and cut short your losers by pursuing a winning trade using a trailing stop. No matter what the course was, it made no real difference.

    I believe all of the above I could have deduced by logic, since there can not be a tactic to enhance your odds in a 50-50 game.

    Then I took a look at the spread. I calculated that using a 5 pip spread and utilizing 100 pip stop and restrict you shed 10 occasions and win 9 times in 20 trades.

    It's not quite that, but close enough. This means that you need to have a better than 53% figure rate to break even.

    If you use tighter stops this raises. To get a 50 pip stop either side you need to be right 55 percent of the time, and also a 40 pip stop either side 62%.

    My simulation showed that it isn't important where the stops are, just the difference between them is important.

    I'm unsure how relevant my calculations would be on the real world, but I'd welcome any comments.

    Thanks in advance

    dave

  2. #2
    Ya but still your app does not see the big picture. You simply want it to see some things. When a trader is seeing the market, he will see the big picture, and if his system says that this transaction is a high probability one, he's motives based on background and similar situations he passed , and not through 50-50%. It's different when a human being looks at the chart and see the price action. The computer only do math, but the market is not pure math. The market has math, emotions, feelings and many other items that can not be figured out with a computer appliion.

    Plus, the computer can not gain as much experience in trading as human beings do. I feel it's another story, or else, any specialist programmer could have made a computer appliion that trades for him and make a lot of money.

    Thanks,

    Nader

  3. #3
    It feels like throwing a coin could be a similar analogy. . .basically 50-50. You'd be hardpressed to increase the odds by increasing your knowledge and research.

    I believe you CAN increase your odds with knowledge and research in Forex. In fact, I know that it's true. I'm hoping with a little more expertise, and continued research, I can improve them even more.

    Actually, I'm counting on it.

  4. #4
    Quote Originally Posted by ;
    I think you CAN increase your chances with knowledge and study in Forex.
    Let's hope so, otherwise we might as well give up now.
    One thing that I proved to myself is that you just need to have a slightly better hit rate than 50 percent to make money, which is very good news. Each of the experience and study is all about trimming yourself a few additional% on the win side of this equation.

    I presume one of the important things is to learn how to go for the copper base trades, and learning how to sit on your hands for others.

  5. #5
    I disagree in part of your analogy, no acutally, in whole.

    You're right that your chances are a bit worse than 50/50 if, and only if, you are going into the market completely blind.

    I don't like comparing Forex to Vegas gambling because it's not the same thing. Not by a long shot.

    If you are using a proven method to enter and exit the market, you along with your system determine the chances. And those chances are continuously changing.

    You C model of random price flucuations would also be incorrect. Even though you are able to state that slight flucuations are random, major trends and even secondary corrections often are forecastable. You can not simulate market movement . If it were that easy, I'd have programmed the secrets of this world years ago.

    And whether the market were random, the 1.5 trillion in currency movement every day wouldn't be nearly so large.

    My suggestion prior to actually trading, research on what the market is until you decide what it isn't. If you have already decided that the market IS NOT a winning game, that IS what it will always be to you.

    Good luck with it.

  6. #6
    Quote Originally Posted by ;
    I disagree in part of your analogy, no acutally, in entire.
    I guess I did not explain myself well enough afterward, since I do not disagree with you.

    Allow me to try again.

    Afford the poker analogy, or any game of skill chance. The first thing to do is totally understand the chances and mechanics of this circumstance. Strip back the thing to its bare essentials. That was all I needed to do and nothing more.

    That is a beginning point. On top of that you include the knowledge and ability to improved on that slightly less than 50-50 chance you've got. All I needed to do was understand the chances as a beginning point, and how to improve on them with ability.

    I do not believe I tried to suggest that the market is totally random, otherwise what's the purpose of trading???? You might too go to Vegas.

    Perhaps the fact that I resorted to some C app created confusion? I might have worked out all of the above with a pencil and paper, I just was not so confident in my understanding of stats that's all.

    Thanks to everyone up to Now for the insights. ;--RRB-

    dave

  7. #7
    Quote Originally Posted by ;
    I think you CAN increase your odds with wisdom and research in Forex. In reality, I know that it's true. I'm hoping with a bit more expertise, and continued research, I will improve them even more.
    I concur. The reality of the market is that you create and influence your odds to a remarkable level. I think, and don't anyone take this the wrong way, that striping it down to the bare essence to determine your raw odds before going into is a strange and pessimestic view.

    I would not want to start anything by knowing how screwed I could be prior to beginning. Ordinarily reward is a much better motivator than risk.

  8. #8
    Well it. It gives me a feeling that here is the statistical foundation to start from. The fact that I just have to boost my batting average by 3 percent to start to gain makes me feel quite optomistic!

    Like I said, I'd be a fool to put in a poker game with no idea of the chances of the way the cards will probably fall.Which doesn't mean that a skilled player can not win a poker match. Quite the contrary, the more knowledge you have the better.


    I guess we're all different in the way we aproach stuff.

  9. #9
    Quote Originally Posted by ;
    WellI am not sure of what you really did, but I think that you created a little situation to simulate the market, is that correct??

    I have a little pdf file for Joe Ross which I want you to read and then place back your opinion

    What I will say in brief before you read the pdf, is that your appliions or program or computer is viewing what you would like it to view. It sees only what you imagined it to view, and that is the greatness of the Human Mind or Brain over computers along with all machines.

    Thanks,

    Nader
    Hi Nader,
    Which of Joe Ross' books is this chapter out of? I've considered buying his books, but they're pricey and I do not know which one to buy first. Any suggestions?

    Due

    Dial

  10. #10
    Quote Originally Posted by ;
    Strip the thing back to its bare essentials. That was all I wanted to do and nothing more.

    That is a starting point. On top of that you add the wisdom and skill to improved on that slightly less than 50-50 chance you've got. All I wanted to do was understand the chances as a starting point, and then how to improve on them with skill.
    Your perception is good sounding logic. However I believe that the point that MB is trying to make is there are ways to start understanding the market that could create unpleasant barriers. When I read him I feel he is speaking from a trading plogy point of view. There are egies to go into the trading world that are plogically valuable and manners that put you at an immediate disadvantage that will be rather difficult to reverse once chased as a way to begin. While MB might be unable to articulate what he is trying to get across in a manner that get's past your beliefs concerning the correctness of the reasoning I think he can have an excellent point. Trading is art, science, intuition, creativity, logic, and also tends to attract out from individuals just exactly the opposite kind of behavior that would make them powerful. A successful and seasoned trader will often sense a problem and attempt to share it but the attempt might be wholly lost on the person to whom it is communied. Do not let that happen just because someone could be speaking from a mental point of view and you might be listening from a quantitative or statistical point of view.

    FT

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