A big truth about forex - page 13
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Once again (and the last one on the subject) : the trouble comes from uneven distribution of gains and losses (or correct and wrong forecasts). You constantly assume that in a "90% correct forecast" the distribution is something like GGGGGGGGG L GGGGGGGGG L ... and that after 1 looser a gain must come for which there is no proof and can not be any proof (as I said it would make "forecasting the forecast")
As of proofs and ways it is done : You quoted exactly what I said but I also said that "you do not have to take my word for it" and I meant it (hence the link to one of the sites with a lot of studies done by people that more or less know what they are talking about). Even in the study I posted on one of the posts related to this matter, you have comparative results of 3 different ways and all of them are at the famous "90%" level. I did not post it here to prove or disapprove anything, but simply to show that there are views (and not just views) that are negating randomness in the financial markets. I am afraid there is no "simplified way" of telling what is shown in those studies. I for sure am not going to try to "chew it up" and come up with a "two sentence" simplified version that would make an "aha" moment. Things do not work that way. Sorry
of 55% percent : what was that statement about MACD with certain setings?
And of course, one more little picture, just in order to make this post colorfull
regards
mladen
Hi Mladen,
My english is not my native language so to put things straight so we would understand each other:
This is what you wrote:
The predicting part (and some of the reasons why I think trends do exist) :
Studies of different extrapolation methods showed that a simple EMA extrapolation is "good for" more than 90% for 1 bar prediction (in order to avoid any confusion with anybody, I repeat : it is a 1 (one) bar prediction)
I understand by what you wrote that "they" can predict with a 90% probability what the outcome of the next bar (ONLY the next bar) will be. Meaning a down bar or an up bar.
That means if they look to a weekly chart they can say with a 90% reliability that the next weekly bar will be a down bar or an up bar.
That means that one takes in a position accordingly the moment that the market opens on sunday evening and close that position the friday evening.
No S/L and no T/P are placed. As said only opening postion and closing positions.
But now I read that you say that no one can predict what the next one would be ??....because losses and profits are not ditributed in an even way ??...
The loss and the gain that one makes has nothing to do with the 90% reliability of predicting if a bar is going to go up or down.
The loss and profit is the effect of the prediction and not the other way around.
Included I have added a Monte carlo simulation based on the weekly chart of the eur/usd. I have even placed the test on 80% probability instead of 90%.
You fill in the hitrate in the red cell (it reads 0.2-- you need to fill it in the other way around 0.8% = 0.2).
The weekly range is according the positons that one would take. That is the close minus the opening.
As you can see if you can predict a 1 single bar ONLY even with a 80% hitrate then you have yourself a holy grail that does not need any MM at all.
And it does not matter if some weekly losses are bigger then weekly profits or the way that they are ditributed.
Even if you push that "new sequence" button a thousand times it want make any difference the way that the losses or profits are distributed.
Even stronger, if you fill in "ONLY" 55% hitrate ( 0.45) you have a no losing system over the long end. That would, with the help of an solid MM, still make a holy grail.
So if you can come to me with a system that can predict the next bar with a 55% reliability and my SuPeR_MM we would make a great team
Friendly regards...iGoR
PS. The spreadsheet with the Monte Carlo simulation is based on a spread sheet that "Michel" has made (a member of our forum).
Included there is also the spreadsheet of the weekly ranges on the euro.PS. As colourfull and a bith smoothed out
now we are getting somewhere
random?
PS. As colourfull and a bith smoothed out
Once again (and the last one on the subject) : the trouble comes from uneven distribution of gains and losses (or correct and wrong forecasts). You constantly assume that in a "90% correct forecast" the distribution is something like GGGGGGGGG L GGGGGGGGG L ... and that after 1 looser a gain must come for which there is no proof and can not be any proof (as I said it would make "forecasting the forecast") mladen
Mladen,
I do not think in terms of GGGGGGGG L GGGGGGGG L...
Proof of that is that I made a monte carlo test that would place those 90% completely randomly.
Randomly as if it would happen according a 90% reliability.
Lets stay serious for a moment.
If we say 90% reliability it can not be LLLLLLL G LLLLLLLL G and even if that would be posible then to stay in a 90% hitrate we would have a long sequence of all winners ex LLLLLLL G LLLLLLLL G.....GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG
(otherwise no 90% hitrate)
Again 90% is 90%. That means in 100 predictions there are only 10 predictions that are wrong.
You can scatter thoses 10 losing trades wherever you want in 100 trades it will make a holy grail. Even if you put 10 losses in a row and then 90 winning trades or 90 winning trades then followed by 10 losing traders or 45 winners and 10 losers and then again 45 losers.
Again that is why I made that monte carlo simulation to show you that I do NOT think that way because the spreadsheet can choose out those 10% winners just randomly ( there is a button on that sheet that you can click on so it will everytime choos a compleet new sequence of 80% reliability-- it is not 1 result, you can click on that button as many times as you want)
That is not forecasting the forecast but simulating a 90% hitrate (in the case of the spreadsheet even "only" 80%) in a reliable mathematical way.
But you brought me on an idea with your second last posting when you talked about my MM.
Severall people here talk about trend and cycles.
If there is such a thing as trend or cycles then that means that we can do a simple test as when a bar is up then next bar go long. If a bar is down then next bar we go short.
If one looks to the chart on the euro between 1990 and now then we can see 2 clear moves. The first one down and the next one up.
So if there is such a thing as trend or cycles then normally we should come to a hitrate that is higher then 50% if we go long when the previous bar was up and short when the previous bar was a down bar. Because that should clearly lead to more winning trades then losing trades if you trade according that logic of trend.
Well the total hitrate over this compleet period was 52.2%. For me not convincing enough to say that it is clearly more then 50%.
Because this kind of 52% hitrate one could have the same hitrate after spinning 1000 times a ball on the roulette table or flipping a coin 1000x times.
But I took it a step furder. I placed that result ( going long after a long bar or short after a down bar) in to my SuPeR_MM.
On the chart you can see the result without any MM on it. An equity curve that shows an equity curve completely in line with a 52% hitrate.
The other chart shows the result when traded with my SuPeR_MM.
To say the least quite amazing.
Spread sheet at the bottom of this posting
Regards...iGoR
PS. I'm not following you with the MACD and certain settings and 55% ?...
...
Don't you just hate when it goes like this ?
(no colors this time)
Anyway, no more spamming
Happy trading to everybody
mladen
.... Madeoff and not Madoff...
I think they are referring to the fact that Madoff 'Made Off' with....
LOL
Keit
hey!! i agree that the market shows some crests and troughs...but it is seen following a pattern over different time patterns. If the charts over a long period of time are studied, then we can make out the pattern which the market follows. There mostly commonly is a threshold which shows us events repeting
Don't you just hate when it goes like this ?
Anyway, no more spamming
Happy trading to everybodyTell me who I have to kill to learn your trading system
hi
hi cockeyedcowboy,
sorry for late reply , thanks for your comment on my ebook, major and minor trend depend on your time frame , if you see that in 1 H so you can determine the trend only in 1H, to see more global trend you can switch to 4 H or even daily chart just overlapped it and you can find the strong support and resistence
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Forex Indicators Collection
hi cockeyedcowboy,
sorry for late reply , thanks for your comment on my ebook, major and minor trend depend on your time frame , if you see that in 1 H so you can determine the trend only in 1H, to see more global trend you can switch to 4 H or even daily chart just overlapped it and you can find the strong support and resistence
===================
Forex Indicators CollectionI look at only the time frame I trade, if your trading the 1H then you can find the primary trend contained within that time series. By looking at higher time frams for trends you are in effect trading the trend of that high time frame. If one trades the 1H and looks at the 4H for trend dirction he is actually trading the 4H chart and useing the 1H for entries. Ones is kidding himself when he says the higher time frams are to find direction to trade the lower, you are ineffect trading that higher charts direction.
When I said that one can find the primary trend contained within your time series it is the time frame you are looking at and trading If you look at the higher time period it may have no trend or even the opperset trend direction that is contained with in the period your trading which will make you take trades against the primary trend of your data set, causing only losses.
by finding the primary, secondary and minor trends contained within the the time frame you are looking at and trading one can alter his trading based on your price data, and not data that may contridictory to what your trading.
This may sound totally operset then what some are saying, but study the different charts. When a trend change occoures it occoures on the lower time frams and builds to the higher ones. The 4H may show an uptrend and the 1H a down trend causing you to go long on every railly in the one hour chart thinking it will continue the uptrend on the 4H chart, only to loss when the downtrend on the 1H chart continues and later filters up to the 4H period. A lot can happen within that 4 hour difference between these charts. If your swing trading the one hour chart then dont try to postion trade the four hour or the daily charts. Stay loyal to your trading scope.
I can not disclose the method I use as I learnt it from Rob Booker, and I don't think he really meant to reveal it.
Keit