Swing trading in a more conservative manner is a good place to start. I have my doubts about day trading low time frames - fees as mentioned, spreads and slippage become a greater threat, and the general signal to noise in the market is worse.

Also, tooth what is the difference in your opinion trading oil futures vs forex? I think we can all agree that some retail traders can and do have an edge in certain commodities.

The Black Swan Experiment

Bumping this thread, as I am undergoing another Forex experiment of sorts. What I learned in the initial phase of this thread is that it is damn hard to trade Forex successfully over the long term. I think the reason why there are scarcely any professional FX traders out there is because those that are good enough to succeed in FX can do so in other markets where they have more of an edge and don't have to deal with the unpredictability/volatility of currencies.

Having said that, I don't think it is a complete fluke that I returned 1,000% and now 100% on separate occasions (more on that below). I think that my downfall last time around was in thinking that trading standard TA based approaches are viable over the long-run for a retailer in FX.

But I do believe the approach I've currently developed can be viable in the short-run.

Even if it's only for beer money on the side

I started a couple weeks back with an insignificant amount I don't mind losing ($200) and have been scalping with an ultra-high risk/ultra-high leverage approach. I am trading with 500:1 leverage - any less and this won't be possible - where each 1 pip move represents 2% of my account balance. I have been targeting between 2-3 pips, which after commissions nets about 3.5% per trade. Somewhere between 18-20 trades doubles your account. One losing trade of 40-50 pips (depending on margin requirements) will wipe out the account.

I will state the obvious now... Trading this approach indefinitely WILL at some point result in a loss of the entire balance (hence the title above).

I am at the first milestone of 20 winning trades, and having doubled the account I am somewhat at odds of how to proceed....

1) Withdraw my initial starting amount of $200. The positive here is the peace of mind that you are henceforth trading with house money. The negative is that you will be starting the cycle completely over.

2) Withdraw a fixed percentage, somewhere in the range of 20-50%, and then go for another cycle. Example: $200 -> $400 then withdraw $80, $320 -> $640 then withdraw $128, $512 -> $1,024 then withdraw $205, $819 -> $1,638 then withdraw $328, $1,311 -> $2,621 then withdraw $524 (at this point that would be 100 trades in a row which is extremely unlikely)

3) YOLO it up and try for another cycle ($400 -> $800)

Here is my Forex Factory trade explorer (3rd party tracker) filtered for 2 weeks ago when I began this recent experiment... https://www.forexfactory.com/nico135...xplorer.111402

I could have told you that without ever having done a single forex trade. Basic logic get you there (highly liquid instrument, the most liquid in fact + few forex funds = the edge is tiny even for the best traders)

Yes. People paying far less fees than you can't beat it for more than they can the market, so why do you think you could ever beat the rake?
Of course it's a complete fluke - winning the money, losing the money, winning it again, losing it. It's human nature to attribute agency to random events. In reality you have no edge and never did and all that you experienced was huge variance + the slow drain of contant rake via fees ($600 or so out of the $1000 you got up to).

Graphs of others, as documented earlier by me, show the same ultra high variance pattern. This is what retail forex is - high variance with 0 EV and a steep rake.

????????????

What does it mean for something to be "viable in the short run"? To me that means you're -EV but variance can shoot you higher. Identical to roulette.


This is my solution to a losing strategy as well - risk your whole stack every trade before the long run catches up with you.

Isn't it amazing how everyone starts their challenge when they're already up?

I love that you're coming back for more punishment though.

And here's the candyman again, enjoying your butthole.



You lucked 100% in a month, and fully 35% of that went down the drain in fees. Given that 100%/month isn't sustainable (or you'd be turning $100 into $1.6 billion every 2 years), you can see how fees are gonna catch up with you. This is:

a) less fun than roulette
b) a lower edge than roulette
c) takes up more tiime than roulette
d) involves fewer women than roulette
e) is less educational than roulette
f) a lonesome comp-free zone

I'm not sure why you'd subject yourself to it apart from mild gambling addiction.

We apparently have a different interpretation of what random events are. To me, being up over 100s of trades and then losing it over a substantially smaller number of trades speaks more to human error and psychological factors than it does to "random events"

What I'm doing now, in a vacuum, is certainly -EV. The point of this is not doing it in a vacuum. I've backtested my current approach on 2017 EUR/USD data to a 95% win rate. There's no way to automate a more substantial backtest that I know of due to the fact that there aren't purely mechanical rules. The goal is to develop a method of cashing out that mitigates the black swan event to some extent.

Do they now? Was I already up when I started this thread? I mean I was up 1 single trade. But that's nothing.

Where are these hundreds of trades you speak of? I see you winning 172 and losing 196, before fees. This is after you're back to -$100.



Putting human agency into things - in your case "human error" and "psychological factors" - is what human tell themselves all the time, even in situations that are purely random. Thousands of books have been written about and serious life decisions made on astrology, IChing, superstitions, gods, all kinds of bull**** where moron humans put agency into purely random walks. It's what we do. Humans are very low end morons when it comes to understanding noise vs signal, and are always filling in the blanks with emotional narratives. That's what you're doing here.

I mean, your edge is far less than 20%/month (unless you want to claim to be best trader in history), which means that at least 80% of what you've won is pure random chance. Bigger bet sizes don't change the EV, they merely change the variance. Already, even if take the most generous view possible of your EV, most of your returns are pure bull**** over which you have no power. It's all bull****. It's my contention that 100% of your wins and losses are bull****. You are 0 EV with a large rake, and nothing else is going on, despite what you believe. All of the psychology and human error you believe is happening is pure bull****. They're narratives you make up. You are in essence insane/delusional (in a way that most pepole are, don't sweat it), and unwilling to accept that. I mean, who would? What a horrible thing to believe, that everything you do in this area is pure self-delusion and wrong analysis.
ok

I think you're the only honest attempt ever at one of these. And even you posted when you were up 20%. By the way, I didn't realize you've been doing this since 2015 (see the image above), setting a new start date over and over.

At some point the concept will sink in that you have ZERO edge and never did have, and like all the other clowns/donks who trade forex and make and lose 1000% in months, it's just high variance with zero edge to which you attach stories, as humans do. I could get the same results are you variable betting on a random walk with leverage.

Randomness doesn't look like you think it does. The below is a few random walks. Throw some leverage and variable bet sizing and hold times into this random walk graph, and the donks trading it would be up 1000% in a 200 trades and down 1000% the next 150. Just like you were with forex over 300 trades and like many of the graphs on your trade logging site are.

I think you misunderstood what I was getting at. I didn't mean hundreds of trades won. I meant being in the black after hundreds of trades executed and then losing the vast majority in a dozen or so. That's pretty much textbook tilt imo.

But, I mean whatever. I'm not denying there's truth in what you say. Human nature isn't far off from your assessment. I just don't think it's as black and white as you imply.

Also, a second point to this experiment is to demonstrate that you don't have to have some elusive edge to make money in Forex. Does that take some degree of good fortune? Sure. So does winning 500+ runner MTTs. Does that mean every said winner is a luck box with no edge? No. Are there Jerry Yangs who are? Sure.

If I'm Jerry Yang, so be it.

This is really making me want to say **** it and choose the YOLO option lol

I think your narrative is simply wrong:



You had a few lucky trades which went hard your way, after which time you lowered your bet size, or volatility decreased in the middle. Then volatility kicked up again and you got creamed when your luck went the other way.

There is no "hundreds" vs "a dozen". Your memory is wrong.

Being in the black after hundreds of trades means nothing. Again I refer to my random walk graph:



On the top two random walks, randomly hit out of merely five, you'd be up hundreds of percent over hundreds or even thousands of trades if you were leveraged 25:1

Also, in a no edge/random walk game, if you are predisposed to "tilt" and bet larger to get back after a loss, you will always meet a fiery end, that will look exactly like tilt/bad trading caught you, when really you just increased volatility with no change in edge.

If he's trading from a technical perspective they absolutely are discrete independent events, at least no more or less so than poker hands. In neither case can you have complete confidence that the past is a predictor of the future - games get tougher, and markets are getting more efficient. That doesn't mean you can't estimate the impact of chance on a persons results.

It only seems ridiculous because you've accepted it apriori that his trades were in a single stock/currency in the midst of an overarching upward trend and he had exposure for the entirety of the process. If his entries/exits were 10 seconds apart the upswing would have almost no impact on the value of his trades.

....and it also seems ridiculous because 100 trades is so close to meaningless (for any reasonable edge) that it's functionally the same as 1. If you compared 100 to 10,000 it starts to matter.

The point still stands - if you had what would otherwise be a statistically significant sample size and you suspected that he was holding for long enough that macro events impacted his result, you could filter out it's impact more or less.

When tooth said this,

He's not really even objecting to the idea that it can be filtered, just that it would require a larger sample size to account for the magnified choke points.

That said I don't think he's made much of a case for why the choke points would amplify the impact of the randomness. I cant see why it would change it at all.

Look it's not my job to educate you or to update the broken model in your model-loving bureacratic brain. All I can tell you is my experience from years of trading, and you'll find that most traders back me up. Macro/multi week trends absolutely can affect short term trades. Let's say your strategy is to buy when something breaks lows for the day, with a 0.1% stop and a 0.5% profit taker. In a long term positive market environment that will be a winner. In a long term negative market environment, that will clean you out in no time.

Stocks have inflection points and they're affected by broad conditions. One of my key trades on short term options on a down trending stock is to sell/close them into spiking volatility, such as when they run through a key point. Whether that's a brilliant trade or a multi bag profit left on the table trade, depends nearly entirely on the market conditions. If the market has a positive daily or weekly bias, it's near certain that I'm not leaving money on the table. If it has a negative daily or weekly bias, the trade becomes questionable. That's despite these being 2 minute decisions and 10 minute holds.

A lot about the market is unintuitive and fails to conform to statistical analysis, even over multi year time frames. How do you think you would have done statistically analyzing 2002-2007 (5 years of data, billions of data points) with what came after? The distribution doesn't conform to the assumptions required to apply and draw inferences from statistical methods.

Translation: Trade the market that you have, not the market that you want.

Eeek. Had a fun time on GBP/USD today.

I got hit by a pullback just as I was about half a pip away from my target. Had to sweat about 50% drawdown before it resumed north and eventually hit my level.

I've agreed that macro trends would significantly impact micro trading with sufficient exposure.

Again, i agree that macro trends impact micro trades given sufficient exposure. Let's put that aside. The specific point of contention is the part where you argue that selling into spiking volatility would result in your "choke points" leading to volatility in outcomes an order of magnitude higher than what is otherwise observed in the sampling. Do you stand by that?


If warren buffet took 10s of thousands of positions over 10 years where the market averaged 8%, would you overlook his history of success entirely because the market did well? If you wanted to judge his credibility you'd probably, on the most primitive of levels, compare his annual results to what the market was returning and judge him relative to that. This is the same concept as what I'm explaining except laying out the framework for how to do it quantitatively.

Congratulations. This is hilarious by the way:



22 trades in a row winners. Odds of doing that by chance are 1 in 4 million if each trade was a 50/50 flip. I apologize in advance for giving fuel to your (wrong) theory that you have any skill whatsoever, or more accurately, that retail forex is anything other than zero EV gambling minus rake.

Each trade isn't a 50/50 flip. I'm using a 25:1 risk/reward that's been backtested to a ~95% win-rate. The trade-off is the likelihood that you will wipe out in one single trade eventually. It might come tomorrow, it might come 3 months from now.

And, we're in agreement to some extent. This is a form of gambling. But it's not at all representative of how retail forex is to be traded whatsoever.

I'm sure I'm not the only one who doesn't understand how that's possible when you're straight buying/selling a volatilite instrument with two directions.

Even a "hold forever to the downside and sell as soon as an upside target is hit" won't have that kind of runrate; they're still flips and it seems unlikely that 95% of entry points have a guaranteed move your way in a reasonable time frame.

I'll be the first to admit that 95% isn't an exact measure. I say that because I've only tested it on 2017 charts. I'd much prefer a 5-year look, but doing that without a software backtest would be insanity and unfortunately I don't think that would be possible anyway with what I'm doing (maybe it is, but I don't know how.)

The reason the hit rate is that high is because I'm targeting a microscopic move with virtually zero spread when a currency pair is solidly trending.

He may be using technicals but it seemed to be in a winging it kind of way. Doing stats on those trades would be like mixing together your Hold'em and PLO results, and tossing in a few backgammon games.

Ya know... When I started this, I said to myself, “A big plus to this is limited exposure in the market - after all, you’re just going for a couple pips 2 to 3 times a day. The chances of getting caught up in a big unforeseen news event will be pretty slim.”

The USD starts rocking along, I spot a signal to go long USD/CHF, and immediately after that, the news breaks about Flynn.

I made the call to get out after about -30 pips as this was definitely going to be the Black Swan - no two ways about it. And seeing there was still momentum, I got back in shorting the USD to try and get a little back.

All in all, I ended up pretty close to where I started two weeks ago. Not much to say. You run good, you run bad.

But not discouraged. I’ll pick it back up next week.

Maybe God just doesn't want you trading forex.

Also, a Black Swan is something like the CHF pegging event a couple of years ago, which wiped people out in hilarious fashion and no one saw coming or credited as possible. Today was a foreseeable event, in the sense that unexpected moderate moves like this on political events are likely to happen many times a year, albeit infrequently.

Jesus, the nittery.

Yes, the CHF debacle was definitely more of a black swan. I’m just hijacking the term in the context of my ill-advised adventures in FX. Although, in my opinion if it isn’t scheduled, it qualifies.

We’ll call it a Brown Swan, how about that?

Grey Swan would be more accurate, "brown" implies shades of red, the metaphor doesn't work.

edit: then again:

ZING!! Lol.

No worries. This just means I get to re-start it legit, and not "when I'm already up."

Come trade options and get rich. Medium risk 15 bagger today if you were watching the market and had a pair (not me for the latter). Kicks this forex **** to the curb.