The Trading System That Never Works - Page 3
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Thread: The Trading System That Never Works

  1. #21
    Quote Originally Posted by ;
    2) The plogy of shedding may be just like the plogy of winning. Here I disagree. 3) It sounds easy, but clearly it would not be.
    Hmm, I guess I said that wrong.

    What I meant to say:

    The plogy of a losing trading system that is winning when reversed is just like the plogy of a winning egy. The plogy is basically equivalent to the conscious method that you use to work out your trading system.

    Therefore, why are you looking for a losing system when you could be looking for a winning egy?

  2. #22
    Quote Originally Posted by ;
    Funny how people think they have produced some amazing new notion, that nobody else has thought of, even despite the fact that markets have been around for decades, and thousands of the best analysts, mathematics and economic PhDs, IT specialists, etc etc have been working on solutions for all that time.
    Guess some prefer to reinvent the wheel at somepoint, however, the trouble usually starts when they begin applying patents for the said wheel, wonder if Bill Gates has some thoughts on this. .

  3. #23
    Quote Originally Posted by ;
    I know the urge to dismiss thoughts put forth here because they have been there, done that, bought the T-shirt. In addition, I understand the urge to think you're smarter than the other man, so you get a thrill out of figuring out how dumb the other man is.
    I figure my earlier post wasn't that useful. But if you've been around this forum for so long as I have, you would know that a thread about inverting shedding systems pops up maybe half a dozen times every year.

    Let me try to describe it a different way. Suppose you're playing roulette and you bet on red every time. You're down $100. Therefore it would look'logical' that if you bet on black always for the next two hours, then you'll win back the $100?

    The reason roulette can't be beaten is that there is a home edge (5.26% on tables with a 00) that will always prevail, if you play for long enough. Random games can not be beaten, no matter what system (whether staking, or gameplay-based) you're using. Forex prices are not randomly generated, but the simple fact remains that not many systems are better than 50/50, and transaction costs (spread/swap/commissions etc) have exactly the exact same effect as roulette's home edge. Considering these costs apply to every trade, reducing the size of winners and increasing the size of declines, they have a substantial cumulative effect. If you're trading 20 pip moves, as an instance, and the spread is 2 pips, then the'house edge' from you is effectively 10%.

    Or put another way, any forex egy that fails to exploit on a true market inefficiency is effectively generating arbitrary signals. Inverting a random signal generator is only going to create still another random signal generator, which will therefore be both ineffective.

    If winning at forex was as simple as inverting a'really bad' system, we would all be millionaires. But markets tend to'evolve' in such a manner as to close out inefficiencies, and to whatever extent this occurs, egies have to be flexible enough to adapt so. Hence, though some egies may be more'robust' than others, there's no absolute assurance that a system that's already been profitable will probably continue to keep its'edge' indefinitely.

  4. #24
    Quote Originally Posted by ;
    but the fact remains that very few systems are far better than 50/50
    Here's an example of a egy that provides potentially far better odds than 50/50.

    At the left of the white box, price has been decreasing for a while, and has produced a conspicuous structural decrease. Price returns to that place at the ideal side of this white box. Wait till price falls below the lower side of this box, and then there's a clear reversal pattern (upward in this case, in the white arrow). This pattern provides some directional bias, and it has the logical backing the'professional' money may be using the stoplosses of buyers in the base size of this box to provide liquidity to their upward drive**. Price follows through accordingly, in this instance.

    [EDIT]
    **Let us explain a bit further. The expert money has already determined it will push price upward. Near the base of the box, lots of'amateur' traders are expecting a bounce upward from the previous swing low (in the left of the box), hence they'll possess their stoplosses (efficiently sell orders) just beneath the box, just as the textbooks recommend. Recognizing that, the expert money drives money south, beneath the box. Other amateurs will sell into this drawback breakout. So today we have two groups of sell orders providing liquidity for anybody who wants to buy. The experts jump , buying broadly around this lower low, and continuing to buy as price climbs through the box, resulting in a strong upward move. Amateurs gradually seem to buy into this move, driving price further upward, and as they do, the experts utilize this liquidity to start closing their buy positions, thus taking their (certain) profits.

    The next screenshot shows an'upside down' case of the exact same procedure. However, on many occasions price may not rise over the box top (instance: the red arrow). This suggests that the experts may have obtained enough liquidity (i.e. for the quantity of buy orders required to satisfy their profit target) without needing to make an upside fakeout. (In this event, you won't get to put an order, which at least means you won't eliminate anything.)

    This ace money egy happens repeatedly, causing the exact same price pattern to happen, on several distinct timeframes. The reason it doesn't offer you a considerably greater directional bias is that similar patterns happen, for a variety of different reasons, that can easily be confused for professional action. There are ways of distinguishing the better setups, but I will finish that, at least for today. I have taken the ribbon considerably off topic already.


  5. #25
    Quote Originally Posted by ;
    I have noticed here in the trading system forum, we are all searching for trading systems which operate as close to 100% of the time as you can. That is a little bit of an exaggeration. Perhaps people are looking for as close to 60 percent as possible, or 60 percent or above. What is consistent between all trading systems I see here are the people are searching for one which works the most frequently, or frequently enough. However, what if we changed our mindset and decided to back and find test a system which never works? That loses you money 100% of their time? Does not that seem like...
    NO - since you forgot some thing: The spread. It the spread would be Zero - yes then it would get the job done. But if you reverse the egy, it gets entirely different due to the spread.

    The spread is the biggest enemy for every trader, largely becuase many traders underestimate it. By way of example, if the spread is 0.00002 on EURUSD, that puts you on a big drawback. When the spread is higher, such as 0.00008 or perhaps 1 pip. The drawback becomes worse

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