Everybody hurts...sometimes...

[DionysusToast]

MrG - excellent spreadsheet... I will be using this...

 

[bbmac]

Thanks for that, BB, a simple question, which doesn't require too much sophistry in the answer, do you accept that trading FX (at our whale 5hit level) is simply an exercise in probability (arguably mathematical probability) which can reap rewards if underpinned by sound MM and an equally sound Mind?

I reject the your implicit assumption of my answer in that sophistry is 'the practice of using argunments that seem clever but are actually false or misleading.' Nothing I post here is false, to the best of my knowledge and certainly never intended to be misleading. Others though will make up their own minds.

The answer to your question is Yes, absolutely, and that is the essence of any trading edge on any instrument?.

 

[DionysusToast]

Thanks for that, BB, a simple question, which doesn't require too much sophistry in the answer, do you accept that trading FX (at our whale 5hit level) is simply an exercise in probability (arguably mathematical probability) which can reap rewards if underpinned by sound MM and an equally sound Mind?

Isn't all trading an exercise in probability?

If not - what have you got to hang your hat on?

Surely you have to have a process which you repeat and gather metrics in order to know the probability of how you trade. If you aren't consistent - you can't gather meaningful metrics. If you are consistent, the metrics tell you the probability of any one trade working.

The alternative is a crap shoot, is it not?

 

[DionysusToast]

I reject the your implicit assumption of my answer in that sophistry is 'the practice of using argunments that seem clever but are actually false or misleading.' Nothing I post here is false, to the best of my knowledge and certainly never intended to be misleading. Others though will make up their own minds.

The answer to your question is Yes, absolutely, and that is the essence of any trading edge on any instrument?.

You tell him !

I think he might have meant sophistication tho...

 

[Black Swan]

Isn't all trading an exercise in probability?

The alternative is a crap shoot, is it not?

Yes and yes..endex.

 

[trader_dante]

Not sure if this is slightly off topic but something I am interested in is the practice of adapting risk to the probabilities of the setup and wonder if people do it.

For example: Lets say you have your standard setup A that wins 60% of the time and has a 1:1 R. And then you have setup B that wins 95% of the time but also with a 1:1 R. Both setups will be winners over time but lets say setup B only happens say once ever fortnight whereas setup A happens a couple of times each day on average.

Let's say that these statistics for BOTH setups come from a huge sample trade - actual trades taken over say a 3 year period totalling hundreds of trades.

Would you bet more on the higher probability setup?

Also, note that I'm not asking SHOULD you but WOULD you?

Conventional thinking tends to be that you risk a fixed amount on all your setups but I believe those that achieve outlier results in this game, adapt their risk accordingly.

I certainly bet more on higher probability setups and wonder how other people treat these?

 

[glyder]

Would you bet more on the higher probability setup?

I used to. I can't say I had a specific rule for the higher prob set up - it was 'I know it when I see it.'
And it didn't always work out, so no more for the time being.
Its something I may revisit in time.

 

[bbmac]

.....Would you bet more on the higher probability setup?....Also, note that I'm not asking SHOULD you but WOULD you?

Conventional thinking tends to be that you risk a fixed amount on all your setups but I believe those that achieve outlier results in this game, adapt their risk accordingly.

I certainly bet more on higher probability setups and wonder how other people treat these?

Yeh, I have a rule based mechanism for risking more on what have historically proven to be to be the highest probability set-ups...and these are generally those with the greatest amount of technical confluence both in the pre-identified potential support/resistance/sbr/rbs at which price has arrived, but also the type of repeating set-up that develops there and whether this is supported by similar on the next higher t/f (+) from that being used as the trigger for entry.

It makes sense to risk more on those set-ups that you have maximum confidence in.

G/L

 

[bbmac]

Speaking of maximum confidence set-ups and risking more on them, the following scenario happened in gbpusd today. My own trading session had finished so I was not around to trade the set-up but it is a good example of the subject.

Price falls to test the low extreme of the obvious previous near-term fractal 1hr and 4hr swing lo zone (previous near-term imbalance of demand/supply=previous support=potential support) at the 1.618% fib extension of the then 4hr swing 5528-5646) At that Lo I had a 1min repeating bullish divergence based reversal set-up (that comprises my trading edge) supported by clear bullish divergence based reversal set-ups (that comprise my trading edge) on 5min and 15min..this for me was a maximum confidence set-up. Even if I hadn't had the confidence to enter on the 1min trigger, awaiting the 5min candle close as the trigger would still have been maximum confidence as it had a 15min set-up supporting it.

G/L

 

[Hilarymannah]

Arrrrrhhhh!!

 

[Scotty2Cues]

For example: Lets say you have your standard setup A that wins 60% of the time and has a 1:1 R. And then you have setup B that wins 95% of the time but also with a 1:1 R. Both setups will be winners over time but lets say setup B only happens say once ever fortnight whereas setup A happens a couple of times each day on average.

Let's say that these statistics for BOTH setups come from a huge sample trade - actual trades taken over say a 3 year period totalling hundreds of trades.

me being picky; 3 years with 1 setup every fortnight isnt even close to a huge sample. Hundreds of trades doesnt even count as a huge sam ple, to get accurate probabilities i think you need thousands

Its quite scary when you look at poker. You need hundreds of thousnds, maybe millions before you can have confidence in win rates. So someone with a postive win rate after thousnds of hands can actually just be running good and will end up losing.

 

[Scotty2Cues]

Not sure if this is slightly off topic but something I am interested in is the practice of adapting risk to the probabilities of the setup and wonder if people do it.

For example: Lets say you have your standard setup A that wins 60% of the time and has a 1:1 R. And then you have setup B that wins 95% of the time but also with a 1:1 R. Both setups will be winners over time but lets say setup B only happens say once ever fortnight whereas setup A happens a couple of times each day on average.

Let's say that these statistics for BOTH setups come from a huge sample trade - actual trades taken over say a 3 year period totalling hundreds of trades.

Would you bet more on the higher probability setup?

Also, note that I'm not asking SHOULD you but WOULD you?

Conventional thinking tends to be that you risk a fixed amount on all your setups but I believe those that achieve outlier results in this game, adapt their risk accordingly.

I certainly bet more on higher probability setups and wonder how other people treat these?

assuming 1:1R, and assuming 100% confidence in probability values:
for the setup with 60% success rate, each trade makes an average of 20% of R,
for setup with 95% success rate, each trade makes average of 90% of R

 

[Scotty2Cues]

Would you bet more on the higher probability setup?

Also, note that I'm not asking SHOULD you but WOULD you?

Conventional thinking tends to be that you risk a fixed amount on all your setups but I believe those that achieve outlier results in this game, adapt their risk accordingly.

I certainly bet more on higher probability setups and wonder how other people treat these?

well if the the setup was a garaunteed, bona fide dead cert, 100% successful set up , I would bet my whole account (maybe) and if it has 0% success rate then I wouldnt bet anything....

 

[Scotty2Cues]

me being picky; 3 years with 1 setup every fortnight isnt even close to a huge sample. Hundreds of trades doesnt even count as a huge sample, to get accurate probabilities you need thousands

Its quite scary when you look at poker. You need hundreds of thousnds, maybe millions before you can have confidence in win rates. So someone with a postive win rate after thousnds of hands can actually just be running good and will end up losing.

http://forumserver.twoplustwo.com/25/probability/variance-winrate-simulator-674065/

 

[Scotty2Cues]

OK - SERIOUS QUESTION...


Why is no-one trading the 3 hour, 42 minute, 24 seconds and 234 millisecond timeframe?

If this would be nonsense - can someone explain why it's any less valid than 1,3,5,15,30,60, 1h, 4h, daily ?

Do the markets only respect these sounding numbers?

maybe because its not a nice number,

1hr, 4hr, 8hr (some charts have this or just combine two 4hr bars) are factors of 24h

1min, 5min, 15min, 30min charts, are factors of 60min which is a factor of 24

isnt that how we are programmed to think?

 

[DionysusToast]

Exactly Scotty!

Chop it up, into convenient slices, with nice comfy numbers and then analyze the crap out of the slices.

I like the quote from Timsk up above "The market is a movie, not a slide show", sums up my sentiments much better than I ever could.

 

[trader_dante]

me being picky; 3 years with 1 setup every fortnight isnt even close to a huge sample. Hundreds of trades doesnt even count as a huge sam ple, to get accurate probabilities i think you need thousands

Its quite scary when you look at poker. You need hundreds of thousnds, maybe millions before you can have confidence in win rates. So someone with a postive win rate after thousnds of hands can actually just be running good and will end up losing.

I doubt I will do thousands of trades in my lifetime, so I guess I will never know whether I was lucky or had en edge.

Thanks for that. And Happy Christmas.

 

[scose-no-doubt]

Lucky

 

[Scotty2Cues]

I doubt I will do thousands of trades in my lifetime, so I guess I will never know whether I was lucky or had en edge.

Thanks for that. And Happy Christmas.

Maybe wrong but sensing some sarcasm there. I wasnt even talking or thinking about if someone has an edge or not, was about how big a sample you need before you can start applying reliable probabilities to setups

 

[MrGecko]

Exactly Scotty!

Chop it up, into convenient slices, with nice comfy numbers and then analyze the crap out of the slices.

I like the quote from Timsk up above "The market is a movie, not a slide show", sums up my sentiments much better than I ever could.

Well, the thing with atypical time slices (like 2 hrs 43 mins and 15 seconds or whatever) is that nobody else will be seeing exactly what you're seeing... for technical analysis to "work" (whatever that means), lots of people need to see the same thing and arrive at the same decision - which is why there are established timeframes that most people look at when making these types of decisions.

On the whole, though, I agree with you - particularly on an intra-day basis, I find Volume/Range/Tick bars to make more sense. Also alternative chart types, like PnF and Market Profile. However I do think Daily / Weekly / Monthly chartws have their merit.


And that is a great quote Tim.