Most are of the opinion it is a zero sum game. - page 3
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Knowing the game, versus not having a clue about how to play it.
The Blackjack example is simple because you play what is called 'Basic Strategy' a fixed rule-set that tells you what to do for each card score.
Serious players memorize these rules so that playing becomes automatic.
For financial markets it's a bit different, but it does not have to be more difficult, the problem is that there are an endless number of different strategies and not just the (single) basic strategy as in Blackjack.
This does not mean that a simple or a few simple rule-set's exist but the task is more difficult, simply because the trader has to (re)-discover these rule-set's, and then apply and stick to them, which is a complete skill by itself !
By these rule-set's you mention, do you mean finding good custom indicators?
Also there is another fact, it is a negative sum game, but does not mean it will turn out bad for any participant. + 80% of the forex trades are made by companies only making profit from the exchange itself. The person losing the money is a common guy using an international credit card, or an multinational company working on several countries, so they afford the spread, but it does not necessarely mean they lose money
By these rule-set's you mention, do you mean finding good custom indicators?
What makes you think indicators are necessary ?
Do you ask the poker player if he found a nice table to play on or if he found a nice deck of cards ?
Surely the question exposes the error in your own way of thinking.
#3 False assumptions.What makes you think indicators are necessary ?
Do you ask the poker player if he found a nice table to play on or if he found a nice deck of cards ?
Surely the question exposes the error in your own way of thinking.
#3 False assumptions.1- If you share your strategy with others (if it's profitable), it will not make profit anymore, because then everyone would use it and reach 50% win ratio, maybe even less. So in capitalism, there is no free lunch, there is no fixed mathematical model to make money on trading, they constantly change, to make money you need competition. And every custom indicator do this job, they compete with each other, and traders make backtests testing different ways of them. If you don't use custom indicators, you still need to use something that uses competition, but on trading i don't know other way to explore competition except using indicators (fundamentals, technical analysis, etc - all of them are custom indicators in the end, if you know another way, please share with us the idea
2- I would ask if he found a nice deck of cards, but poker is not compared to trading, you can use poker money management on trading but you still need a strategy to make the entries and exits on forex
More assumptions.
(as usual)
It's just to show you that you start off with the wrong idea's.
Assumptions that everybody is using indicators, i.e somebody is successful i have to know which indicator he uses, because my peanut brain can not get past indicators.
You should really try to let go of everything you assume at this point and start over with a blank mind.
But we already had that conversation and i'm not a parrot.
Go talk to Pennywise he heavily relies on indicators, he fit's your assumptions.By these rule-set's you mention, do you mean finding good custom indicators?
Yes, obviously!!
The problem is that once you have good custom indicators you have to spend a long time developing the cold, hard discipline of implementing the signals as they are given by your custom indicators. It is very difficult to learn that discipline. It takes a long time. It is very frustrating that we find it so difficult to follow the rules. But, that is the case with most of us.
Regarding custom indicators:
Most experienced forex traders will tell you that the default parameters for the MACD and the Stochastic indicators are too short.
That is correct. You have to increase the first two, the 12 and the 26 for the MACD and the first and third - the 14 and 3 - for the Stochastic till you get the indicators to mimic the price movements as close as possible.
Use the trigger parameters for both the MACD and the Stochastic, the 9 and the 3. They are simply trigger values. They are fine. The others you have to increase appropriately.
The customised MACD is the best indicator - once you get it to mimic the up and down cycles in the price movements.
The customised Stochastic is the faster of the two customised indicators. It tells you when you are at the top or at the bottom. It is a leading indicator. The MACD is a lagging indicator. Obviously, the shorter your time frame, the faster the signals, with the M1 the fastest. Forget about using any customised M1 Stochastic in your trading plan. It is too fast. We cannot make money trading the noise in the market. The Flash Traders do that. However, we and they know they are not traders. They make money, for now, from technology limited to a few because of the cost. Once the cost of flash trading comes down a lot, there will be no more flash trading because everyone will be able to do it.
Overlay the MACD on the Stochastic.
First set up the Stochastic.On the MT5 platform, go to Insert »» Indicators »» Stochastic.
Then overlay the MACD on top of it in the same Stochastic indicator frame below the chart.
On the platform go to View »» Navigator »» Indicators »» Oscillators »» MACD,
Click on the MACD and drag it onto the Stochastic indicator below the price chart.
Let go. The MACD will be overlayed on the Stochastic.
The scaling in the Stochastic frame is for the Stochastic, namely from zero to 100 %.
The MACD floats up and down the frame.
It is very useful to have the MACD on top of the Stochastic. It leaves more space for the Price chart.
Once you have arrived at your best effort for getting your customised MACD and your customised Stochastic to mimic as close as possible the up and down cycles in the price charts by increasing the MACD and Stochastic parameters appropriately, you can develop very trustworthy trading plan rules.
As I said above, then you have to spend the very long time to learn the discipline to follow those rules precisely.
Here´s an example of what I mean: This morning´s EuroDollar chart.
You can see that both my customised MACD and my customised Stochastic mimic the Price Chart.
That is, obviously, a very useful situation for developing good trading plan rules.
The MT5 then allows you to use different time frames to good effect.
Once you have your best customised parameters, use the same ones for all time frames.
Here is the M1 for this morning:
Same parameters, different time frames.
Both the MACD and Stochastic are very old indicators. They are excellent and very well developed. But, they need to be customised. The default parameters are very limited in application.
I use the 10 and 50 moving averages on all price charts. I am convinced I would be able to develop a profitable trading plan with just the 10 crossing 50 indicator, but, only on the MT5 which provides the minute by minute increments in the first 6 minutes.
The MACD is by far the more reliable indicator of the two. It is the more likely of the two that could eventually be developed into an actual Holy Grail set of rules. That would, however, take some time. But, I can see that it is very possible.
The Stochastic is simply momentum.
The MACD is based on actual moving averages and moving averages of those moving averages, but, always on real price data underlying the final result. The Stochastic is always just momentum.
The fact that the MT5 allows us to go from M1 to M6 in one minute increments is extremely useful for developing very trustworthy indicators with confirmations on the next minute chart. It is the great advantage of the MT5.
A properly MT5 customised MACD is far superior to a MT5 customised Stochastic.
The 20% and 80% levels on the Stochastic are very, very generalized. I try to develop specific customised BUY and SELL levels for every time frame. I use blue and shades of blue for bottom BUY levels and Red and shades of red (yellow) for top SELL levels also customised for every time frame.
Time Indicator
I have found that there is a time indicator in the EuroDollar market as from the German Open to the NY close, as follows: there is a Short Period and after that a Long Move after a valid reversal in the trend, or a Short UP then Short Down, or Short UP progressing to Long UP, or Short Down progressing to Long Down, or Short UP then Short Down then Short UP then Short Down, etc, etc, etc, etc.
Obviously, I am referring to the Day Trading Trend, namely, that trend in the EuroDollar market that can be successfully traded with my customized indicators. Rule: When, during the Short Period immediately after a valid Reversal in trend, the trend DOES NOT reverse again in the opposite direction, then it will highly likely become a Long Move that could last to the end of the NY session or even beyond that to a few hours in the Asian Session.
However, if the trend reverses within the Short Period, then the market goes into a new Short Period and the rule starts again, etc, etc, etc.
There are different - much simpler - trading rules during Long Moves. It is very important that Short Period trading rules are ignored on Long Moves.
Divergence
Divergence is very important, but, not subject to absolute rules. I use (indicate) divergence all the time on all time frames. From that it is absolutely clear, time after time, that it is absolutely important to trade the rules and not the price.
Indicate all Stochastic and MACD divergences on all the charts. D for divergence on the Stochastic and d for divergence on the MACD.
The more Time Frames an indicator is divergent on at the same time, the more valid it is.
The best, obviously, is double divergence on as many time frames at the same time as possible. Trade it.
Absolute Rule: Trade the indicators, not the price.
An example of Divergence in the EuroDollar market a few minutes ago:
When you finally get your customised MACD and customised Stochastic to mimic the price movement cycles in the market, then you have to stop improving them absolutely.
You have to freeze them. You have to come to a point where you say: this is the best I can do without MicroSoft´s most powerful AI computer. Then stop changing the parameters to improve them even more. Obviously, only once you are convinced and you can see that they mimic the price charts very well.
Next you have to spend a great amount of time to get to know their characteristics and behavior under the many different market scenarios. These different market scenarios repeat themselves ad infinitum in the market. I do not back-test. I live trade test on the Demo platform.
Only after that point will you be able to use them to be consistently profitable in the market. It is a very long process.
This is what I did. I can only tell you my experience.
The Time Indicator is very useful. Once the move is a Long Up or Long Down Move, it is much simpler to trade the move because the rule is simpler. It is interesting that Long Up rules are not simply the exact opposite of Long Down Move rules. Time frames rules are not exactly the same with simply the opposite plus or minus sign. The Long Move rules are easier to remember than the Short Period very volatile rules.
The best trading days are obviously the ones with two actions: IN at 5.00 and OUT at 22.00 (GMT), that is, one way all day. The second best is two way, for example, Down and UP, like today: A Short Down Period that progresses into a Long Down Move and then a valid reversal with a Short Up Period that progresses into a Long UP move, like today in the EuroDollar market.
It can be seen from the above chart that the MACD is far superior - easier to interpret and trade - compared to the Stochastic.
However, the Stochastic is needed. I already tried to trade without the Stochastic. Then I brought it back. It is useful to know when you are at the top for a possible SELL or at the Bottom for a possible BUY.
The Stochastic only goes from zero % to 100%. So, when you get to the top and the move carries on up, you have to follow the MACD, not the Stochastic. The same goes for at the bottom at zero %.
101,7 EUROPIPS or 50,8% profit in one day at 50 leverage, so far today.
Note that the M5 MACD is Daylight Free, the ideal indicator - for today´s specific EuroDollar market.
It can be seen from the above that this method of day trading involves being in the market all the time from 5.00 till 22.00 GMT in the combined European and US Sessions. Riding all Down moves and then immediately getting in on the Up move after the valid reversal and then taking profit and getting back into the new Down move and then Up in the next UP move and then Down in the next Down move, etc, etc, etc.
It is very clear that there is a different, very robust dynamic in the EuroDollar market as from the German open till the NY close compared to the Asian Session.
It is also clear that the period from the German Open till about 2 hours after the London open can always be quite volatile, but always very robustly dynamic.
The difference between the MACD and the Stochastic, both customised to mimic the price cycles on the price chart, can clearly be seen from the above final chart for the day.
They both mimic the price cycle the best during the dynamic market period from the German open till the end of the Overlap at 19.00 (platform time = GMT+2).
It being Friday often leads to a Sideways Market from then on till the close. The momentum drops considerably and the Stochastic loses its predictive market mimicking charateristic - on this time frame.
It's just to show you that you start off with the wrong idea's.
Assumptions that everybody is using indicators, i.e somebody is successful i have to know which indicator he uses, because my peanut brain can not get past indicators.
You should really try to let go of everything you assume at this point and start over with a blank mind.
But we already had that conversation and i'm not a parrot.
Go talk to Pennywise he heavily relies on indicators, he fit's your assumptions.You are actually proving my point, you know that if you share with us your system, everybody would use it and it will become 50% win system, the fact that you tell us you have a system, but don't want to share it, proves that you know that trading is competitive. The remaining question is: what do you use that is competitive, but also are not custom indicators. technical analysis, price action, fundamentals- all of them are indicators, because the definition of an indicator: " combining pieces of less valuable information to create another one more valuable information".
If you don't use indicators, basically you don't create anything new. My opinion is that you in fact use custom indicators, but you simply don't call them indicators
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To Pennyseven: please explain us more about your trading system, is seems very good, only pictures don't explain much, then we can test and confirm if it's really good
You are actually proving my point, you know that if you share with us your system, everybody would use it and it will become 50% win system, the fact that you tell us you have a system, but don't want to share it, proves that you know that trading is competitive. The remaining question is: what do you use that is competitive, but also are not custom indicators. technical analysis, price action, fundamentals- all of them are indicators, because the definition of an indicator: " combining pieces of less valuable information to create another one more valuable information".
If you don't use indicators, basically you don't create anything new. My opinion is that you in fact use custom indicators, but you simply don't call them indicators
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To Pennyseven: please share explain us more about your trading system, is seems very good, only pictures don't explain much, then we can test and confirm if it's really good
I agree with what you stated above: "you know that trading is competitive."
Knowing the game, versus not having a clue about how to play it.
The Blackjack example is simple because you play what is called 'Basic Strategy' a fixed rule-set that tells you what to do for each card score.
Serious players memorize these rules so that playing becomes automatic.
For financial markets it's a bit different, but it does not have to be more difficult, the problem is that there are an endless number of different strategies and not just the (single) basic strategy as in Blackjack.
This does not mean that a simple or a few simple rule-set's exist but the task is more difficult, simply because the trader has to (re)-discover these rule-set's, and then apply and stick to them, which is a complete skill by itself !
I discovered even if you blatantly give them the correct set they will manipulate and change them until they no longer work, and fall back into searching mode, forever searching for the secret seems to bring more satisfaction then applying it... or they have to discover it, themselves, and not being told by someone else... also destiny plays a part in all of this.
So #1 is Experience and,
#2 would definitely be Discipline.
It sounds very interesting. Do you think that like in blackjack there is just one correct set of simple rules?
Do you think every experienced trader arrives to a simple set of rules, based on experience alone (by experience - we mean relying on oneselfs observations?).
Well, actutally just reading what you write, I think I can understand what you mean, but can't be sure.
It sounds very interesting. Do you think that like in blackjack there is just one correct set of simple rules?
Do you think every experienced trader arrives to a simple set of rules, based on experience alone (by experience - we mean relying on oneselfs observations?).
Well, actutally just reading what you write, I think I can understand what you mean, but can't be sure.
I mean of course there can be more then one set's of strategy in Blackjack but the MIT Basic Strategy is the most famous one.
Many players take it as their basis and tweak it here and there trying to even improve it further.
Now it could be the case that there exists comparable set's of rules for financial markets.
Both set's have the same target, namely coming out on top of the game, most of the time.
So skill and experience, or knowing how to play these rules, and also the discipline to stick to these rules could reveal a key to success.
So how do you re-discover them, well by trying all of it and by discarding what does not work and combining what works.
This mechanism is like a learning process and when given enough time, you will naturally end up with a set that could strikingly resemble a strategy that was invented by someone in the late 60's.
The problem with that is that you always find out that it was done before, after you re-discovered it :)
Of course there are many other factors involved for example when the game is somehow rigged by external party, but this would be revealed instantly.
I have had this happen a couple of times it's quite obvious and you know it's time to leave that firm behind.