Top Ten Trading Methodologies

[oilfxpro]

gtatix,


My personal take on this is that any successful mechanical system should be linked to a persistent market inefficiency. If you choose to keep this in mind, then I think you'll find that you'll save yourself a huge amount of time and effort wandering off down dead-end alleys !

Good luck
rog1111

Rog

How do u find persistent market innefficiency in forex?Any examples?

Testing😛rofitable strategies on back testing may not perform as well in the future, because the fundamentals driving the market may have changed.Systems will produce different performance in different market conditions

OILFXPRO

 

[dcraig1]

Rog

How do u find persistent market innefficiency in forex?Any examples?

Testing😛rofitable strategies on back testing may not perform as well in the future, because the fundamentals driving the market may have changed.Systems will produce different performance in different market conditions

OILFXPRO

Indeed. I find this a convincing reason to not trade forex. There are probably 20K tradeable stocks accessible though IB worldwide, not to mention various futures, options, commodities etc. There is bound to be some inefficiences in that lot somewhere.

You can to some extent control the rules you play by in choosing the instruments intelligently. In fact that may be where an edge in trading is to be found.

If you are trading stocks, you have lots of inputs - broad market direction, sector/industry, stock itself: both technical and fundamental. You can also diversify, which is probably the only free lunch there is in managing risk.

In forex the material to build a system on is pretty limited. Maybe some TA, some macro economic stuff, some fundamentals. But you only get to choose from a limited number of pairs. You don't even have volume and even if you did, it's not really clear what meaning you would ascribe to it. (OK you can get volume on Globex fx futures).

As far as I can see the only thing going for forex is that you can open a tiny account and trade with ridiculous leverage.

 

[belflan]

As far as I can see the only thing going for forex is that you can open a tiny account and trade with ridiculous leverage.

I'm sure you agree this is no advantage at all

Glen

 

[dcraig1]

I'm sure you agree this is no advantage at all

Glen

Quite so. You may or may not get lucky for a bit, but sooner or later the game will be all over.

 

[Directional]

Have you heard of Boltzmann machines by the way? I put up a post with a link to some info if you are interested.

I've heard of Boltzmann, but I'd certainly be curious to read more about his work. Is this in relation to machine learning in regards to the markets?

 

[oilfxpro]

I've heard of Boltzmann, but I'd certainly be curious to read more about his work. Is this in relation to machine learning in regards to the markets?

Hi

A system can be programmed to read the market conditions and trade accordingly , but it requires a lot of coding to make such a program.It can read current market conditions .


OILFXPRO

 

[trader_dante]

Indeed. I find this a convincing reason to not trade forex. There are probably 20K tradeable stocks accessible though IB worldwide, not to mention various futures, options, commodities etc. There is bound to be some inefficiences in that lot somewhere.

It is the people that trade a market that cause the inefficiencies. They trade on their emotions. They sell bottoms and buy tops. I find trading FX no different to stocks, commodities or bonds.

 

[dcraig1]

It is the people that trade a market that cause the inefficiencies. They trade on their emotions. They sell bottoms and buy tops. I find trading FX no different to stocks, commodities or bonds.

If you don't mind me saying so, I find this just a bit too glib and reductionist. Has the recent decline in the equities markets been because of peoples emotions ? Not really. I'd say that it is the rather alarming prospect of bank failures and the possiblity of the collapse of the system of credit that brought it on.

Of course it might of stirred up some emotions but that is another matter.

Has the reaction of the market been a bit overdone and irrational ? Only time will tell.

 

[trader_dante]

If you don't mind me saying so, I find this just a bit too glib and reductionist. Has the recent decline in the equities markets been because of peoples emotions ? Not really. I'd say that it is the rather alarming prospect of bank failures and the possiblity of the collapse of the system of credit that brought it on.

Of course it might of stirred up some emotions but that is another matter.

Has the reaction of the market been a bit overdone and irrational ? Only time will tell.

But if the recent decline in the equities markets has has a fundamental reason then it's not an inefficiency, is it?

 

[grantx]

TD,

"They sell bottoms and buy tops". While the wisdom of this may be questionable, buying/selling breaks of tops/bottoms is a reasonable strategy.

Grant.

 

[trader_dante]

TD,

"They sell bottoms and buy tops". While the wisdom of this may be questionable, buying/selling breaks of tops/bottoms is a reasonable strategy.

Grant.

Hi Grant - you seem to pop up everywhere! 😉

Yes, agreed it is a reasonable strategy. I'm just referring to that mistake most of us have made where you see some serious momentum, wait for a retracement, no retracement comes and instead the market carries on going ..up we surge...price pauses, then onwards and upwards we go again and then you come to the conclusion that there isn't going to be a retracement - this is it - the big one - something must be happening...in you go...and you buy the top. 🙂

I see the pros do this a lot too.

 

[mp6140]

Mp -- Ah That It Wasnt So !

Hi Grant - you seem to pop up everywhere! 😉

Yes, agreed it is a reasonable strategy. I'm just referring to that mistake most of us have made where you see some serious momentum, wait for a retracement, no retracement comes and instead the market carries on going ..up we surge...price pauses, then onwards and upwards we go again and then you come to the conclusion that there isn't going to be a retracement - this is it - the big one - something must be happening...in you go...and you buy the top. 🙂

I see the pros do this a lot too.

=============================================================
"the early bird gets the worm" unfortunately in this case, and I have to admit Ive done it myself, more often than I should admit. To add insult to injury, I have often ridden that uptrend (or down) to its logical take profit point gaining many a pip, exited and watched and then RE-ENTERED based on my indicators and my own personal greed (IM NOT GONNA LET THE NEXT MOVE GET AWAY !!!!!)

of course, we know the next move is down, and Im LONG, alternately kicking myself and laughing my head off because I wasnt looking at the clock and forgot the one very important rule --- "what goes up, must come down !" and it will come down at a specific time !

fortunately, Im usually working with the trend, so I hold my long, enter a counter trade and wait for days and days for that stupid long to come home to roost (which it invariably does) but suffer the chagrin of holding a multi thousand loss (im holding a $5200 one now) for what seems like forever !

EXCITEMENT and GREED ---- the handmaidens of HUBRIS !

We humans are an interesting lot, are we not ??

mp

"one wave short of a shipwreck !"

 

[Mathemagician]

But if the recent decline in the equities markets has has a fundamental reason then it's not an inefficiency, is it?

If the decline is not an inefficiency then the runup preceding the recent decline is. There has been PLENTY of time to get a profitable short entry in the global equity indexes following a very good long trade. I trade on about as long a timescale as anybody and have been short global stocks since late last year.

jj

 

[new_trader]

Hi

A system can be programmed to read the market conditions and trade accordingly , but it requires a lot of coding to make such a program.It can read current market conditions .


OILFXPRO

😆

 

[dcraig1]

But if the recent decline in the equities markets has has a fundamental reason then it's not an inefficiency, is it?

I would argue that it could very well be regarded as an inefficiency. The whole market was overvalued and did not correctly factor in the problems in the US housing market and the derivitives mountain built on top of it.

What makes it inefficient is that much of the information about these problems was publicly available and in hindsight (a wonderful thing hindsight) rather obvious. Yet the market did not efficiently factor it into price.

 

[nine]

What makes it inefficient is that much of the information about these problems was publicly available and in hindsight (a wonderful thing hindsight) rather obvious. Yet the market did not efficiently factor it into price.

LOL. The things I could have taken advantage of if my foresight was just a little closer to my hindsight.

 

[Pat494]

I would argue that it could very well be regarded as an inefficiency. The whole market was overvalued and did not correctly factor in the problems in the US housing market and the derivitives mountain built on top of it.

What makes it inefficient is that much of the information about these problems was publicly available and in hindsight (a wonderful thing hindsight) rather obvious. Yet the market did not efficiently factor it into price.

As trading gets more and more efficient, traders imho should realise that the bar seperating winners from losers is being constantly raised. Whereas moving averages, stochastics etc. were quite adequate to make profits just a few short years ago, today they are not. To keep up with the 5-10% that are profitable it is necessary to run ever faster rather than jog.
This must affect markets too in mysterious ways ?????

 

[dbphoenix]

As trading gets more and more efficient, traders imho should realise that the bar seperating winners from losers is being constantly raised. Whereas moving averages, stochastics etc. were quite adequate to make profits just a few short years ago, today they are not. To keep up with the 5-10% that are profitable it is necessary to run ever faster rather than jog.
This must affect markets too in mysterious ways ?????

Or pace oneself so that he can reach the finish line.

 

[counter_violent]

I would argue that it could very well be regarded as an inefficiency. The whole market was overvalued and did not correctly factor in the problems in the US housing market and the derivitives mountain built on top of it.

What makes it inefficient is that much of the information about these problems was publicly available and in hindsight (a wonderful thing hindsight) rather obvious. Yet the market did not efficiently factor it into price.

Given that price is correct at all times...how do you explain that the market did not correctly factor in all the problems.

It clearly was all factored in.

For Three years, all I ever read on T2W was that prices can't go any higher.

cv

 

[gtatix]

I can't get the link to link SO.... go to you tube and carry this search with you to find the video. There will be three or so videos pop up so you don't have to search far to find the correct one. The video is titled exactly the same as the search and will be - at least should be the FIRST VIDEO.
type this search in youtube: the next generation of neural networks
you tube is here: YouTube - Broadcast Yourself.