Is there anyone who has the proof it works?
You ask a very valid question. Im a professional trader for over 25 years, i.e. investment bank trader and hedge fund trader. I'm discretionary by style (as opposed to systematic) myself, but I have obviously seen and worked with colleagues who were building and using professional systems.
My experience is as follows:
1. Systems do work in FX, but in my experience, they ALWAYS lose their strength after time. They need constant tweaking and calibrating and constant research to refine ingredients.
2. What happens then, is that inexperienced FX people (programmers) will start curve fitting which renders your system worthless and full of hidden risks.
3. Sigma 3-4 events DO happen a lot in FX, i.e. prices can move extremely fast and hard (lack of liquidity during event risk), which means that stops can be triggered at the most ridiculous levels, so that your system can have much larger drawdowns than backtested since it could not execute the stop.
This is why so so so many FX systems fail. Look at Collective2 and you will see that almost all FX systems WILL fail and blow up in a spectacular way (apart from those managed by professionals). It is only a matter of time. The real cause of blowup is almost always the same: being undercapitalised and using too much leverage (see my remark about money management in point 6). A system should be very solid in ALL risk parameters and trading financials, not just detecting tops and bottoms...
4. Given the above, forward testing is the only way forward in FX.
5. The key is actually to find the most common used ingredients at any given time, since this makes a system self fulfilling.
6. I find that too many people are trying to find the holy grail in FX. There there is no holy grail, and there will never be. The real strength of a system is not so much the magic code with regards to finding entry an exit levels, but rather money management and position sizing.
7. In my view (and I once I saw a scientific report confirming this - but can't locate that report anymore), the best way to make consistent money in FX is to work with technicals, build a system around it, but execute it manually (systematic trading with a discretionary overlay).
8. If you have a very fast automated FX system such as algo's and cross arbitrage systems, you need access to EBS (the interbank electronic platform), and the fastest equipment avaliable on the planet. Hedge funds specialising in high frequency trading compete with each other on the technological level and not just the intellectual level. As an individual you stand no chance to participate in this niche.
Hope this gives you a better insight.
Wow
I second that post.
EVERYTHING you need to know is right there. Look up ValeoFX Trading Method. He is going through a 10 or 12 step series concerning a lot of your questions. Your asking the right questions keep on working, it's worth it.
Putting in a lot of hours does not automatically equate to success. Some newbie could just stumble onto an edge, and become rich is a very short period of time. While others struggle for years with no results in sight. Obviously, the more hours you put in, the great chance you have to find an edge, but that's not a guarantee. Also having brains to understand concepts like statistical data mining, and other mathematical models can be keys to an edge, but most traders are not that smart. Luck and being around the right people can make or break a trading future.
I really think trading requires a certain type of person and mindset. It is almost a obsessive compulsive person that will continue taking a beating until they can reach success. If you are already thinking about an exit strategy or how hard it is, then I think you should find something else.
There are a lot of people losing money in trading, and those losses are going to the minority of traders making money. And finding these people are even harder because you are talking about 5% of traders are consistently profitable. They are busy making money.
Overall, the key is to have an tradeable edge. Whether you find it, that's another story.
After 120 EA's that worked, then failed, and over 5,000 indicators tested, I can safely say that it is darn near impossible to create stable, long lasting profitable Forex EA's. Market conditions change too frequently, and they do not always change to any classic form of ranging, trending or flat market condition that an EA can work with. After spending about 4 years researching Forex, I have come to the conclusion it is a crap shoot at best. The allure of making a lot of money quick has only caused me a ton of frustration and much wasted personal time - Like sleep! Good luck at finding the perfect EA!
Dave
<<
@ Kenny: edge is key indeed, but in line with my previous post and what Dave mentioned, market conditions change ALL the time. So the best edge is to be able to adapt quickly to any new market condition, all the time.
That means, the laws of probability make it so that being right ALL the time is near to impossible. There may be very very few people who are always right, but this is more linked to luck.
@ Dave, you are spot on, and I value your honesty.
I have managed to stay alive and do well in FX for over my entire career, but it has been a very difficult and tiring ride and I think the best edge is perseverance, risk control and consistency (so I agree with what Kenny said on this matter as well). I never had mega spectacular results, but always made 15-30 percent annually. My "risk of ruin" (risk of blow up) was always extremely small, which ultimately nows is being paid off and helps my credibility as people invest in my trading.
I have seen "startraders" sitting next to me, producing 100-200 percent return for 2 years and then blow up in 2-3 days...
I can warmly recommend Nassim Taleb' s book, "Fooled by Randomness" in relation to this subject. It is one of the best books I have ever seen, explaining the role of luck in life and trading.
Good luck in your endeavours
Guys, Let me ask you a question. The rule of thumb is "cut your losses and let your profits run". I get that idea, however I have very specific entry and exit strategy right now. When I take an entry I set a take profit of 25 pips, now LOTS of times it will run much further than that, am I cutting my throat by not letting the pips run? My thought process has been, I can get 25 pips, I'll just increase my lot size to grow my base (of course w/ mm in place). I think another reason I do this is the fact, Who knows were it will end? 25 pips or 250 pips?
I really think trading requires a certain type of person and mindset. It is almost a obsessive compulsive person that will continue taking a beating until they can reach success.
I totally, absolutely agree with the above quote.
Guys, Let me ask you a question. The rule of thumb is "cut your losses and let your profits run". I get that idea, however I have very specific entry and exit strategy right now. When I take an entry I set a take profit of 25 pips, now LOTS of times it will run much further than that, am I cutting my throat by not letting the pips run? My thought process has been, I can get 25 pips, I'll just increase my lot size to grow my base (of course w/ mm in place). I think another reason I do this is the fact, Who knows were it will end? 25 pips or 250 pips?
Basically I would say yes. But this depends on how you trade and what kind of system you have. I personally are a swing/longer term trader [and I trade on daily candles] so I would never take profit on 25 pips, I would even claim that it's almost random at that level *most of the time*.
This article might interest you,
http://www.forexfactory.com/attachment.php?attachmentid=103891&d=1208454213
Trading manually allows our own brain to be used to add to the analysis of indicators. But when it comes to EA's, we are limited mainly to indicators or some other math calculations we dream up. It is always disheartening to see a 200 pip trend occur when we have restricted our TP to lets say 25 pips. Some people try starting their trade with 2 versus 1 minilots and cash-in 1 minilot when TP hits 25 pips and allow the second minilot to run if a trend is in progress.
When it comes to EA's, fast reaction technique ends up giving you good profit, but also can cause your account to be ate up by the spread and slippage. Manual trading gives you better insight (By using your brain also), but can you react fast to get out if the trade reverses without taking a sizeable loss. I have focused my research mainly on EA's because prime trading in the U.S. is in the late and early morning hours - staying awake really messes up ones life!
Repainting of indicators is another problem with EA's. 98 - 99% of indicators repaint. So the history of an indicator on a graph is pure bogus. Unless you study the indicator under demo live trading do you find out the limitations of the indicator - History results of an indicator is seldom the same as live trading results - Very frustrating to find out.
Good luck to all of you.
Dave
<<<
Good Article
Basically I would say yes. But this depends on how you trade and what kind of system you have. I personally are a swing/longer term trader [and I trade on daily candles] so I would never take profit on 25 pips, I would even claim that it's almost random at that level *most of the time*.
This article might interest you,
http://www.forexfactory.com/attachment.php?attachmentid=103891&d=1208454213That was a very interesting, thank you for posting that. I think I need to learn some solid exit strategies and let the pips run a while. Now, even that opens up a pandora box of possibilities.
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
You agree to website policy and terms of use
hello, im quite new in FX. But have done a lot of research already. And the question, which is bothering me is it really worth putting a lot of hours into working out FX trading systems?
I know for the securities it's working there are some managed futures funds,which generate a consistent performance.
But how about FX? there isnt an offiical provider, which has the proof,that it works over many years. Sure there is backtesting. But it always depends with which broker data did you backtest and over which time period.
Is out there a crack who could really generate a consistent performance over some time?I^'ve never seen a bank statement or heard in the media. about somebody who has made it rich with an FX system.
Before i put many hours into learning that. is there anyone who has made stable profits over years?
thank you