No proof of trend being friend in FX

[GotGold]

Has anyone got any proof that usable trends exist in Forex?

Just done tests on trends and reversals using several currency pairs which show that there is approx 50% chance of trend continuation and 50%chance of reversal. This is true over 10, 50 100, 200 point moves.

This is important. Does anyone have any evidence that trends are more commen than reversals over any resonable time frame?

If the answer is no, then finding an 'edge' will be very difficult.

comments?

 

[donaldduke]

GotGold,

Trends have always been less common than reversals.
The general idea is that when you get a trend you ride it to a big win and when you
get a reversal you stop out for a small loss.

If you can get a 50% (or even 25%) probablity of a continuation you can make alot of money.

 

[GotGold]

Thanks for reply: We can test this theory quite easily.

50 point moves on Euro/$ over last 30 days.

Rules

50 points to begin a trend means 50 points lost from total trend length.
50 point trailing stop loss means 50 point lost from trend length

How many points are left?

Answer (calculated over last 30 days)


20 trades
11 times 50 points winner =550pips
9 times 50 point looser = 450pips

charges 3pip (spread) times 20(trades) = 60 points

100-60 = 40 pips profit.

Not a lot.
A lot worse on the Yen
What I'm saying is that the basic premises for trend following don't work because of losses at the beginning and end of the trends.

 

[donaldduke]

GotGold,

30 days is not enough.

You should use several years of back data to test your system.

Also day trading trends is a lot harder than swing trading trends. Because you
have more commisions (and spreads) to pay.

 

[GotGold]

Losses at the beginning (setting up of the trend) and at the end (trailing stop loss) cancel out all or nearly all of a trades profit.
We have all experienced this as traders. Getting round the problem is difficult, especially as reversals are extremely common in forex.

 

[donaldduke]

GotGold,

In general trend trading is supposed to be medium to long term, in day trading the profit factor
for trying to catch big moves is going to be smaller than for swing traders, however you might get more
oppurtuinity as a day trader so it could still be quite profitable.

Day trading doesnt have a reputation for being the hardest type of trading for no reason.

Theres an old saying in the markets: "Day trade the ranges and Swing trade the trends".

 

[GotGold]

good post, thanks, this has given me a new angle to work on

 

[noises49]

Last Year

No comparison between this year and last., which was one long trend. Stick around!

 

[Buk]

wondered where you'd got to (on here anyway :cheesy: ).....too much Calif sun & excessive pip collection no doubt!!.....keeping your eyes on those Pivots??

 

[a_gnome]

Have to agree with Donaldduke here. Over the last 30 days the FX markets have been going no where fast (look at a daily chart) so I would expect any kind of trend following system to perform poorly over this period.

I would also agree with the fact that you want a longer time-frame for trend following to work well - there is a lot of noise over the short term. I can say that it is defintely possible to create trend following systems which make money in the FX markets.

 

[Buk]

yep, as Noises points out....the long, ambling trendy moves have been a real tug this year with the consol panning out on the daily/weekly - a case of stepping down into the hourly/30min & catching the smaller waves this year.....a tad choppy here & there, but climbing on & off around the key 00/50's has still notched up a reasonable return.....I guess the recent reports surrounding the increase in trader participation re: FX explains some of this years choppiness.....more speculative cash pouring into the melting pot with folks scaling in & out on an intraday basis??

 

[GotGold]

Been measuring the lengths of trends. This has been on a PIP REVERSAL BASIS. I.e 10, 20 ,50, 100, 200 point reversals.

Conclusion:
When averaged out, FX markets dont trend significantly enough to trade on, except when looking at the VERY LONG TERM PICTURE (300-500) point reversals on the weekly, monthly charts)

 

[Buk]

depends what you call "significantly enough to trade on"?!

down to your strat/expectations/style/alloted time (& frames) I guess......

plenty of pips to snaffle on there if you stay on your toes.

 

[GotGold]

My point is that in shorter time frames, I have found the odds on trend continuation or reversal are close to 50%.
Same with flipping a coin. Is a trend of 5 heads in a row tradable? No because of a 50, 50% chance of reversal, same in the FX (except for long time frames)

 

[GotGold]

What i'm saying is that trend following is an illusion (just as 10 tails in a row looks like a trend).
unless the trend following system is heavily optimised, then it won't work.

Love to be proved wrong here!

Is there anybody out there who consistently profits from day trading FX?
If so then what style of trader are you (not asking for your system here). Pattern, momentum, breakout etc?

 

[rizwanuk]

Doomed

If you are right and there is really no trend we all are doomed!

 

[donaldduke]

GotGold,

Calm down, theres no need to shout!. You can profitably day trade FX. There are many
strategys posted on this board.

Look at recent posts by Buk. He day trades FX, youll find some example charts
of his recent trades. You can find a members recent posts by going through their profile.

Also there is JonnyTs Spot On mechanical system which you might want to have a look at.
Do a title search for 'Spot On'.

 

[GotGold]

Yes, surely we need to examine statistically whether trends exist before we commit precious capital in pursuing them ( and making brokers rich in the process).

If you can find tradable trends in FX, anywhere but the LONG term, then post here.

 

[GotGold]

DD
OK, I admit it, I'm probably getting a bit stressed here.
Systems are being cut to ribbons in this sideways markets.... Prob not the only one.

 

[Roberto]

What i'm saying is that trend following is an illusion ... Is there anybody out there who consistently profits from day trading FX?

There are some such people here, yes; but whether they will be willing to enter into any conversation with you, given your style and tone, is another matter altogether.

If you read many of the threads in these forums you'll see many consistent postings from people consistently profitting from Fx trading. Some of them even discuss their systems in detail and give daily results over periods of years. But in my experience, such traders are not quick to jump into discussions with strongly opinionated people, because they rapidly become time-consuming, stressful and inconvenient.