Stating The Obvious and The Quest For Wisdom
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Thread: Stating The Obvious and The Quest For Wisdom

  1. #1
    The past year of my'trading existence' has consisted of a lot of research, thinking that was contemplative, and a back. In this thread I do a lot of stating the kind of stuff, but after putting in a couple of years at this I feel that this simple substance is worth spending time with.

    Here is a really fundamental truism to get started. The market's functionality dictates your yields. By market functionality I mean the combined action of all participants to maneuver price to point B from point A. As a trader, you are completely dependant on others to move price away from the price where you maintain a position on the market. You won't profit or incur loss if people do not continue to trade (other than the loss of the disperse and interest payments, oh and liquidity --you would never see your money if you were the last individual to trade). The point is that you're dependant on others. To make money you must maintain the market going the ideal way before other traders are willing to pay more than you paid for your currency.

    The point or goal of trading is to make your money grow. Duh? (of course you can find utilitarian traders, but I am discussing speculators here). Trading is just a way of investing. It baffles me every time I hear somebody say”I am not an investor, so I am a trader!”
    I guess'trader' just suits the ego that far better and investors enjoy Buffet are boring and do not understand what they are doing.

    Alright, so back into the market's performance. Your equity curve which extends upward and into the right is connected with the market. EUR/USD enjoys 20%, you're super rich, so you buy 1 billion USD worth of Euros @ Parity (1.0000), using no leverage and you park them on your bank account to earn interest while price rises in the FX market. 1 year later EU is now trading @ 1.2000, you have lined up new investments and you need to trade back into greenbacks. You now have $1,200,000,000 USD. You profited a trendy 200 million, i.e. you made 20% on your own unleveraged funds (overlook interest earned for simplicity's sake). The yield seen on your equity curve is perfectly connected with all the standard market yields in EU. The point is that the market IS your equity curve either negative or positive. Now lets bring leverage into the image.

    So that you're not rich but working extremely hard towards that end. You have $10,000 and want to invest it through leveraged trading. You like the guy that is rich, buy EU in parity. You have your money with Oanda plus they let leverage up you believe that is nuts but you're inclined to leverage your trade @ 10:1 or 10% margin. So your $10K USD becomes 100,000 and since Euro and the USD are in parity you're now Euros. A year later, you're very pleased to see EU trading @ 1.2000, and your wife won't eliminate your back to that new mini van she is wanted. So you trade out of your long position @ $20K profit, or a 200% profit. Your equity curve represents a 200% return when the market only appreciated by 20%. This is of course as a result of your use of leverage. Instead of describing leverage simply as being the ability to trade more income than you have on your account, leverage magnifies normal market yields by the variable of this leveraged rate you're using. We used 10:1 leverage, therefore motion in the market multiplied by 10 is 200%. In the event that you were willing to incur the risk of using 100:1 leverage, these returns could have been 2,000%. Plug in your own numbers idea. I boring most of you, but thinking about leverage this manner helps me to better understand what is really happening when I use it.

    This Is a Superb time to talk about losses. As I mentioned before, make a return on your money, or of speculating through trading, the point is to invest. The moment you are investment but divesting your money. Including the minute that you start a trade and cover the spread. You're losing until the trade turns positive. In which they shed light on the expectancy, fXPetra and many others have written here on FF. This is a serious and really important problem that anybody has to carefully consider. The most important impliion here is that every trade you open starts it's life as a loser. If your trading style is term that is short and you're making trades a week/day whatever, the question becomes how many trades can you become winners? Just how a lot of these trades will wind as a realized loss? Can you find that the real and scary statistics? If you find yourself in this type of position and you can't appear to figure out why your equity curve is going backward (or worse), it would be wise of you to devote some quality time thinking about this matter and working to fully grasp and understand the idea. When you understand the problem, ask yourself just how a lot of your trades could have turned into quite large winners. You'd be amazed how many of them would. If some of you had been EU only a few weeks to a month ago while tinkering with the market, how could your trading differ if you left them alone? If the market is willing to pay you more why don't you take it up on the deal?

    So am I trying to find a longer term and less frequent trading strategy here? For retail traders, yes, for my dealer, no. But you want to aggressively trade and quickly compound your profits so that you'll get rich quick like that shine spreadsheet advised you- you would be at only 20 pips per day. That is got to be easy you tell yourself and you rush off looking for those easy pips. Why after 1,2, 5 years of trading are you not a multi millionaire? (I concede to those of you who've really made it happen, should anybody really has as a retail FX trader that overtrades according to my definition and started with less than $10K). It goes right back to the question that I asked in the previous paragraph, just how many losing trades can you become winners? If you return a couple more paragraphs you would observe the response is since you're dependant on others to do this for you. Hence that the question could cohere more with fact if we took you out of it: What proportion of your losing trades will be produced winners by the activity of other market participants? Bear in mind, 100% of your trades are losers. Bring leverage into the picture and think about the acceleration of losses it brings. Couple leverage with overtrading, and it is not hard to see why so many traders bite the dust.

    I mentioned that it would be alright when my dealer/broker continues to trade as frequently as he wants. This is because he is on the other side of this coin. His trades start out as winners since he makes the disperse and offsets the trade with orderflow. Occasionally he will lose, but based on the spread, he is operating in the world of positive expectancy and will profit over the long term. He aggregates and infers fundamental information from his orderflow that he can speculate on, front run, you name it. He is simply operating from a place on the market and it makes sense to create numerous trades.

    A lot of you know me as a fib enthusiast. I started my journey here in FF right around the time Skunny started his”Indior Free Trading” thread. Being the moron that I was, I was quick to drink the Kool-Aid. I bought into the concept that there has to be some oriented means to trade. In retrospect, this is a thing to pursue. Not the dealer who deals with positive anticipation wins every time. Pursuing the Holy Grail (searching for obscure/secret/hidden technical patterns) will cost you a lot of money and could put years between you and profitability. Now that I got that out of the way, is there significance in technical studies? To that, my answer Now in time . Just how many times? It's really hard to say. All of us who've been around for a while know that if you choose trades based on technicals the focus on money management becomes intense. This is due. You are dependant on other traders to move the market in your favor.

    Technical research to me are only points of reference. I really don't care what it is, trend lines, MAs, fibs, S/R, pivots, ect, they put our nerves at a ease when it comes time to putting money at stake. The goal/purpose of TA is to find a statistically significant advantage that raises the likelihood of turning a losing trade into a winning one. That is the most important thing. Because there is no holy grail based in TA, your treatment of those trades that become winners (and all the winners ) will define the reward and losses that you derive from your trading endeavors.

    I apologize if this was a complete bore; I only wanted to condense all my'out there' trading thoughts into one spot. There can be more to come, maybe not. Feel free to agree/disagree together with me. In case you have some insights you have learned that you feel would assist newcomers and the neighborhood in general, please discuss .


    Thank you for bearing with me,

  2. #2
    Quote Originally Posted by ;
    Well, much like any other tool, order flows still has to be incorporated in a method and exchanged together with discipline. Therefore, if you are making money in the markets, you likely have some order flow analysis already incorporated into your system even if you're not aware of it. Move exhaustions and levels could be predicted by using a chart if you have an eye for detail, at least that is how I've been doing it at the last 4 years.
    Really had to dig deep to find this thread ?

  3. #3
    Quote Originally Posted by ;
    quote really had to dig deep to find this thread ?
    Yeah cause you're an idiot and there are so many such as you on FF that I have to dig for weeks to locate something interesting. When I finally thought I lost you, there you are losing 30 seconds of the time.

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