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Originally Posted by Abbaddabba
The question isn't whether the effects exist, it's a matter of quantifying them relative to the margins he's trading at.
There's no formula, my bureaucratic, big picture model friend. Experience and looking at the results of others gives you an idea. They're far more valuable than doing mean and SD and confidence intervals on his sample, which is close to worthless at this stage.
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If you're not going to consider the relative scale of it's impact you could use that line of argumentation to dismiss any sample size no matter how little the currencies shifted.
Not really. There has been a tremendous and very straight bear run on USD right when he started, dropping it to multi year lows. Once he's traded a few different markets and market conditions (or stayed out of them, which is maybe even more valuable), we'll have a better idea.
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250 instances of 2 minute exposure over a period of 6 months with a 5 cent appreciation is what, $0.0000005 of structural appreciation for the average exposure? What do you think is a more appropriate way to estimate the impact?
You're not thinking about this properly. Like most things, there is no way to estimate it outside of experience. It is an unknown.
We know from looking similar data that 600% heaters over 300 trades are normal even for huge lifetime losers. We know they are fairly common.
Also, his average trade duration is 6 hours, not two minutes. He appears to take positions with a stop and let them run otherwise. Which is death in a flat or volatile market, solid gold in low volatility directional one. His profits are all USD pairs, and most (I haven't looked at all the data) seem to be shorting the USD. His delta pick is exactly at chance at 49.5%, so there's no demonstrated delta edge. Is he finding setups where his risk/reward is excellent, or is he getting lucky in a market that suited his trading bias? Impossible to say or even estimate.
And again, your model is just failing here. Read again what I wrote about options on breakdowns in an up-ticking market. Your hilarious (fraction of time)/(total time)*appreciation formula just doesn't capture the choke points that traders trade where these effects are vastly magnified.
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We can go month by month too and look to see if he happened to take positions in the best possible scenarios. Or we can go day to day to measure the same. We're not dealing with a high degree of confidence though - these unknown variables are a big contributor to the randomness.
The way to analyze this would be to look at his reasoning when he takes his trades, like jb says. A dumb "reversal setup with 30% stop" is going to get killed in a normal market and crush in a prolonged directional run driven by news events. Most markets, most of the time, are the former and not the latter.
Most worrying of all in his stats are the commissions. I hope this is a mistake. If not he's drawing stone dead in the long run and needs to walk away or find a far cheaper broker:
You can't be paying pay 33% (or 50%, not sure how the commission is accounted for) of 700% profit. Because your long term expectation in forex is way below 33% of 700%.
Last edited by ToothSayer; 09-02-2017 at 11:17 AM.