Forex Market

[Gaijin 06]

I have one thing to add to this.. if you think at all that "institutional players and the professional traders" actually sit at screens and react to the market then you are a long way from understanding the current market.

I just used it as one example where the punter on a PC has no advantage, and probably a disadvantage over institutional traders. Any information advantage will not lie with the guy sitting at home on his 20 bucks a month live data feed.

[THEDON]

Because no trader has a competitive advantage. Therefore the long term average of all participants will be a loss, as the spreads/commission eat into returns. I don't think anyone can beat the market long term to be honest.

An above poster mentioned a period of 3 years....

My answer would be YES I have seen a great many individuals make strong returns over this period of time.

I have also numerous contacts in small funds (2 men teams) who have acted as money managers for 7 years that have made solid returns.

I'm rather bemused.


EDIT -- After reading your following post, I have to say I am more than a little bemused,

"I can't understand why intelligent people get sucked in to forex trading".


Now I'm really bemused !!

[Tiger Strike]

Good points. Thanks for taking the time to reply in detail. Yes, you are right, it is James vs The Giant. Only time will tell. That is not enough to stop me trying though....and to be honest if the insiders know so much and they can only pay me 5% a year interest let alone 0.5, they're ____ at their jobs. Also I'm playing with the casinos money (literally) so I can stay focused but detached. I have met a lot of guys who traded in Tokyo/London and few of them can hold a candle to a chart it seems.

Got into the charts in the end as I had some free time. Feeling the USD pressure so fundamentally short USD and waiting for technical signals. Long AUDUSD from last week, entered at 7100 and about to hit initial target of 7290 for 4% plus (2% risk entry). Might move stop up to plus 150 pips (+3%) and see how this one plays out though. Also long GBPUSD my charts target is 1.5130 but might close at 1.5000 if/when it gets there and watch for a while.

Have watched EURUSD break 1.3335 and am waiting for a signal to go long with target 1.3416 but getting sleepy so may leave this one as a retrace before bouncing is pretty much what I expected though its been charging so it may just shoot for it after some consolidation. Should have got in early today but hey it is Easter I needed to chill and did so with a lot of success.

Have reevaluated staying out of the market (by that I meant scalping trades not the long termers) tomorrow and will be business as usual. Busy week this one so will probably not be around. Best of luck to all.

[Tiger Strike]

I just used it as one example where the punter on a PC has no advantage, and probably a disadvantage over institutional traders. Any information advantage will not lie with the guy sitting at home on his 20 bucks a month live data feed.

Damn, I use a free feed, wonder how shonky that is? Seems pretty good to me...

[Tiger Strike]

Yes, I'm using Nickb's 4 hour method and I really like it, until I'm proven wrong I will stick with it. In the beginning it was exceptionally scary as a breakout (which happens fairly often) really moves that pair a huge distance. But once you get used to it, you welcome those big moves (well, I do anyway). I'm not making any big money, but hopefully will one day.

Cheers to that last sentence...money compounding trade by trade makes small things great things really quickly if you can keep it up consistently. Nice work!

[Gaijin 06]

That is not enough to stop me trying though....and to be honest if the insiders know so much and they can only pay me 5% a year interest let alone 0.5, they're ____ at their jobs.

What bank uses forex trading to pay it's depositors? I think you are misunderstanding how banks use the capital which savers deposit with them.....

Also I'm playing with the casinos money (literally) so I can stay focused but detached.

One of the most common behavioural fallacies out there

http://mental-accounting.behaviouralfinance.net/

Some excellent links there which talk about how people mentally segregate money in exactly the same way you just described and how that leads to investment errors as the underlying logic behind investing $10,000 of "salary money" should be identical to investing $10,000 of "casino money" - yet investors don't invest them the same way leading to sub-optimal decisions.

[Gaijin 06]

An above poster mentioned a period of 3 years....

My answer would be YES I have seen a great many individuals make strong returns over this period of time.

I have also numerous contacts in small funds (2 men teams) who have acted as money managers for 7 years that have made solid returns.

I'm rather bemused.


EDIT -- After reading your following post, I have to say I am more than a little bemused,

"I can't understand why intelligent people get sucked in to forex trading".


Now I'm really bemused !!

Can you explain why they can consistently win from a zero sum game?

[Tiger Strike]

This conversation is starting to get boring. I hoped to talk to traders here; I see why they stay away. If you're not interested in forex trading please go somewhere else. But since you like to debate and obviously spend time thinking about this I can't help but reply. Perhaps the traders here should start a new thread on "Forex Live Traders Thread" to keep out those who want to debate whether its worth it or not. We have made our decision, you've made yours. Can't we just leave it at that?

"That is not enough to stop me trying though....and to be honest if the insiders know so much and they can only pay me 5% a year interest let alone 0.5, they're ____ at their jobs."
"What bank uses forex trading to pay it's depositors? I think you are misunderstanding how banks use the capital which savers deposit with them....."

I never said anywhere I think banks use forex trading to make capital gains on savers deposits. But fair point. What I should have said is that even those large institutional traders seems to produce fairly average returns, even with all the advantages you point out. So yes, it must be a difficult market. Still no reason to not try.

"Also I'm playing with the casinos money (literally) so I can stay focused but detached."
"One of the most common behavioural fallacies out there

http://mental-accounting.behaviouralfinance.net/

Some excellent links there which talk about how people mentally segregate money in exactly the same way you just described and how that leads to investment errors as the underlying logic behind investing $10,000 of "salary money" should be identical to investing $10,000 of "casino money" - yet investors don't invest them the same way leading to sub-optimal decisions."

I agree and disagree - agree as I wasn't clear, disagree in actual meaning. If you read trading in the zone and also the merchants quote I pasted above you will understand where I am coming from. You mince my words well, I haven't debated with anyone for so long I write lazy. Can't you move to a debating club thread? The idea is to remain detached so as to make non-emotional decisions. This must be done whether the money is from savings or elsewhere. So I do invest them exactly the same theoretically but in all honesty it is easier to do this when you aren't playing with savings. Try it yourself and you'll understand. Any money I use for trading I segregate for investments and am prepared to lose it all. I don't hope for that outcome but you must remain detached whether a month is good or bad and only focus on why some trades went wrong and perfecting MM, RR and strategy.

At work today so set my stops on live trades, in profit overall if all stops hit. No idea how EA's did today but that doesn't matter till the end of the month.

[Gaijin 06]

This conversation is starting to get boring. I hoped to talk to traders here; I see why they stay away. If you're not interested in forex trading please go somewhere else. But since you like to debate and obviously spend time thinking about this I can't help but reply. Perhaps the traders here should start a new thread on "Forex Live Traders Thread" to keep out those who want to debate whether its worth it or not. We have made our decision, you've made yours. Can't we just leave it at that?

You're free not to reply, and I won't be offended.. this is a discussion forum, and I enjoy discussing this type of thing. I am interested in trading, and fascinated to see if there is any return to be made from it.. I have a risk seeking personality - my job is investing substantial amounts of money, my personal investments are high risk and I enjoy and win at no-limit poker. However, forex trading baffles me.

I never said anywhere I think banks use forex trading to make capital gains on savers deposits. But fair point. What I should have said is that even those large institutional traders seems to produce fairly average returns, even with all the advantages you point out. So yes, it must be a difficult market. Still no reason to not try.

This is really the crux of my argument; with all the advantages (capital, information, research, access) institutional traders made fairly average returns. What makes people think they can beat them? This is not like equity investing where a rising tide lifts all boats - there have to be an equal numbers of losers to winners. It is like flipping a coin.

The idea is to remain detached so as to make non-emotional decisions. This must be done whether the money is from savings or elsewhere. So I do invest them exactly the same theoretically but in all honesty it is easier to do this when you aren't playing with savings. Try it yourself and you'll understand. Any money I use for trading I segregate for investments and am prepared to lose it all. I don't hope for that outcome but you must remain detached whether a month is good or bad and only focus on why some trades went wrong and perfecting MM, RR and strategy.

I'm not sure you read the links? Mental accounting accurately states that the value of $10,000 of salary and $10,000 of casino money is exactly equal - in economists terms they can purchase the same amount of utility They look the same in physical and electronic form and if you pass them on to anyone else they would not be able to tell the difference. The money is IDENTICAL. But - people are prepared to seek and take risks with one that you are not with the other. This is illogical and leads to cognitive mistakes in evaluating trading opportunities.

This is one of the classic behavioural traps traders fall into - I would advise anyone who trades on their own account to have a thorough knowledge of prospect theory, anchoring (ESPECIALLY in forex trading) and representativeness.

http://prospect-theory.behaviouralfinance.net/
http://heuristics.behaviouralfinance.net/anchoring/
http://heuristics.behaviouralfinance...sentativeness/

In my view, anyone who engages in any sort of trading without a good understanding of these principles is shooting themselves in the foot (at best), and the head (at worst).

I still have not seen anyone explain how they expect to make money in the long term trading forex yet.

[thenoie]

This is really the crux of my argument; with all the advantages (capital, information, research, access) institutional traders made fairly average returns. What makes people think they can beat them? This is not like equity investing where a rising tide lifts all boats - there have to be an equal numbers of losers to winners. It is like flipping a coin.

I don't totally disagree with you but here we go this might help you thinking..

Yes it is like flipping a coin.. as in there are only two outcomes...win , lose....

but think of this , i am breathing, there are two outcomes. i breath , i stop breathing.. i just took 40 breaths in a row.. statistically that is amazing...

if there are were only the coin, you + another person.. then yet you are playing 2-up.. good luck you you.

but here the coin can change.. mid flight.. banks can move, economies and governments sway and change , imports exports, weather, politics.. not to mention other shmucks that have human feelings and reactions... like my favourites.. panic.. fear...

head over to the bhat-dollar.. 50-50 right now yes? bet against the dollar... its only 50/50 .. . will you?

and for the record , i work for the "casino".. they are the only players that always win.

[Gaijin 06]

I don't totally disagree with you but here we go this might help you thinking..

Yes it is like flipping a coin.. as in there are only two outcomes...win , lose....

but think of this , i am breathing, there are two outcomes. i breath , i stop breathing.. i just took 40 breaths in a row.. statistically that is amazing...

That would only be statistically amazing if the chance of you taking another breath or not taking another breath was 50/50. Actually it is 99.99999/0.000001 or something so it's not really that amazing!

but here the coin can change.. mid flight.. banks can move, economies and governments sway and change , imports exports, weather, politics.. not to mention other shmucks that have human feelings and reactions... like my favourites.. panic.. fear...

Yup, I don't disagree with any of this. However, I am not willing to take the bets that I can react better and quicker and smarter than anyone else when the situations change mid air. I know I don't understand the complexity of capital markets, and all the forces (trade figures, GDP, government debt ratings, monetary policy, fiscal policy, tax law changes [repatriation of earnings], interest rates movements, forward and future contracts across markets and economies etc etc) that interplay to create liquidity in the forex market. I think if most people are honest with themselves they will realise they don't have a better overview than the best strategists and economists either - and these guys get it wrong as much as they are right too.

and for the record , i work for the "casino".. they are the only players that always win.

I agree.

[thenoie]

That would only be statistically amazing if the chance of you taking another breath or not taking another breath was 50/50. Actually it is 99.99999/0.000001 or something so it's not really that amazing!



Yup, I don't disagree with any of this. However, I am not willing to take the bets that I can react better and quicker and smarter than anyone else when the situations change mid air. I know I don't understand the complexity of capital markets, and all the forces (trade figures, GDP, government debt ratings, monetary policy, fiscal policy, tax law changes [repatriation of earnings], interest rates movements, forward and future contracts across markets and economies etc etc) that interplay to create liquidity in the forex market. I think if most people are honest with themselves they will realise they don't have a better overview than the best strategists and economists either - and these guys get it wrong as much as they are right too.



I agree.

I have no idea about how everything in my car works.. (they are too high-tech nowadays..) but i still drive it till the tyres smoke.....

actually talking about markets, I have excelled in finding hindsight strats... they work perfect on historic data, never on live.

lastly joe-trader is not up against super users.. his trades and volumes he is up against the ohther joe-trader
as for hardcore 0600-2100 traders I know quite a few .. and over 1/2 of they are totally fcuking useless.. and just letting the quants around them do all the work.

[GaijinGolfer]

To hopefully put this matter to bed and in the hope that you move on. Trading is not a zero sum game and yes people can make money and can do so for as long as they want.

Proof is in the pudding. I have attached my last months trading statement. I copied and pasted it in word to remove my account number and name for ovbious reasons. Nothing else has been altered. Believe me, I have better things to do than fabricate this info.

By the way I do this I do this month in month out without the fancy gear. So, if you don't mind I'd like to get back to sharing success stories and keep the positve energy flowing tiger style.

* Sorry!! I couldnt upload excel file and in word, the file exceeded the limit to upload. But thought I would post the reply anyway.

I'm not gonna waste my time on replying to your post.

[Gaijin 06]

To hopefully put this matter to bed and in the hope that you move on. Trading is not a zero sum game and yes people can make money and can do so for as long as they want.

It is absolutely a zero sum game. This is completely and utterly indisputable. Unless you think money is magicked up out of thin air the amount won by someone betting will be lost by someone else betting. Maybe you didn't understand what I meant by zero sum game, I think that is the only explanation?

http://www.wisegeek.com/what-is-a-zero-sum-game.htm

A zero sum game is a term used in game theory to describe both real games, and situations of all kinds, usually between two players or participants, where the gain of one player is offset by the loss of another player, equaling the sum of zero. For instance, if you play a single game of chess with someone, one person will lose and one person will win. The win (+1) added to the loss (-1) equals zero.

Proof is in the pudding. I have attached my last months trading statement. I copied and pasted it in word to remove my account number and name for ovbious reasons. Nothing else has been altered. Believe me, I have better things to do than fabricate this info.

I have absolutely no doubt it is possible for someone to make money trading in any given month. In fact I would expect 50% of the market participants to do so! Posting your wins gives absolutely no credibility to the argument. Did you even read the small extract of "Fooled by Randomness" I posted above? If I flip a coin and bet with someone else then one of us will win and one will lose. If I win, am I a master trader?

By the way I do this I do this month in month out without the fancy gear. So, if you don't mind I'd like to get back to sharing success stories and keep the positve energy flowing tiger style.

Please do so. I will await any justification or underpinning to peoples claims they can make money in this in the long term. Despite all the trader bluster, I'm still waiting.

[Gaijin 06]

I have no idea about how everything in my car works.. (they are too high-tech nowadays..) but i still drive it till the tyres smoke.....

Sure - me too. I am confident I could understand it if I tried though! There is a sound theoretical, observable and fundamental theory behind compressing petrol, setting light to it and driving pistons up and down to drive a set of wheels.... there is no equivalent in forex trading! Someone wins, someone loses. Neither matter nor money is created from out of thin air.

Actually talking about markets, I have excelled in finding hindsight strats... they work perfect on historic data, never on live.

Sure, I can data mine anything you want out of a large set of data too. Overfitting is a huge problem though.

lastly joe-trader is not up against super users.. his trades and volumes he is up against the ohther joe-trader
as for hardcore 0600-2100 traders I know quite a few .. and over 1/2 of they are totally fcuking useless.. and just letting the quants around them do all the work.

I am not sure what you are saying here. Are you claiming there is some separate system which only retail punters bet on? Of course not - someone would arb any differences to the big liquidity pools away instantly. Unless you are claiming there are different prices quoted on Joe Punters forex system to what flashes up on my Bloomberg it is no exaggeration to say all market participants are connected.

As for quants - well you're not going to find me slagging off quants :-)

[THEDON]

Sure - me too. I am confident I could understand it if I tried though! There is a sound theoretical, observable and fundamental theory behind compressing petrol, setting light to it and driving pistons up and down to drive a set of wheels.... there is no equivalent in forex trading! Someone wins, someone loses. Neither matter nor money is created from out of thin air.



Sure, I can data mine anything you want out of a large set of data too. Overfitting is a huge problem though.



I am not sure what you are saying here. Are you claiming there is some separate system which only retail punters bet on? Of course not - someone would arb any differences to the big liquidity pools away instantly. Unless you are claiming there are different prices quoted on Joe Punters forex system to what flashes up on my Bloomberg it is no exaggeration to say all market participants are connected.

As for quants - well you're not going to find me slagging off quants :-)

"I am not sure what you are saying here. Are you claiming there is some separate system which only retail punters bet on? Of course not - someone would arb any differences to the big liquidity pools away instantly. Unless you are claiming there are different prices quoted on Joe Punters forex system to what flashes up on my Bloomberg it is no exaggeration to say all market participants are connected".


Incorrect. There may be seperate systems for seperate customers in seperate firms in seperate....trading networks etc etc.
I suggest you read up a little more...you sound like you think you understand the markets but......

Not a bad start,
http://www.babypips.com/

(By the time you have unravelled that then hopefuilly the traders on here will have been able to continue their dialogue)...

[Gaijin 06]

Incorrect. There may be seperate systems for seperate customers in seperate firms in seperate....trading networks etc etc.
I suggest you read up a little more...you sound like you think you understand the markets but......

And what prevents arbitrage?

[THEDON]

And what prevents arbitrage?

Quite a few factors...as I suggested, best to read up.

[Gaijin 06]

Quite a few factors...as I suggested, best to read up.

Yes yes yes. Whatever you say THEDONE. I didn't think you would be able to justify your claims. Another one bites the dust.

[THEDON]

Yes yes yes. Whatever you say THEDONE. I didn't think you would be able to justify your claims. Another one bites the dust.

If you would like me to explain....Pm me your phone number and I will call you and answer your questions.

Otherwise please leave this topic for people who it was intended for.

Cheers

[Gaijin 06]

If you would like me to explain....Pm me your phone number and I will call you and answer your questions.

Otherwise please leave this topic for people who it was intended for.

Cheers

Thi tpoix is for people who are interested in forex trading.. I am interested in learning about forex trading. But it seems nobody is willing to teach me, or correct my misapprensions. I don't think my questions are unreasonable, or hard to answer?

[tokyoleone]

If you would like me to explain....Pm me your phone number and I will call you and answer your questions.

Otherwise please leave this topic for people who it was intended for.

Cheers

I don't mind people discussing forex trading. I just hope that people new to this investing forum are aware that trading currencies is not the same as investing in bonds, stocks, or real estate, which produce actual income in the form of dividends or capital gains. It is just speculating, and while some speculators make a lot of money, others get burned, and badly.

I think Gaijin06 is correct for pointing out the other side of the story for people who come to this forum for investment ideas but who have little experience with markets.

[Tiger Strike]

Good information coming out...I have actually gotten to like this thread, thanks Gaijin 06 for stirring the pot.

One point made here by tokyoleone: "trading currencies is not the same as investing in bonds, stocks, or real estate, which produce actual income in the form of dividends or capital gains. It is just speculating, and while some speculators make a lot of money, others get burned, and badly." And yes, Gaijin 06 is exactly right to point out that forex trading is a zero sum game and to repeat his/her definition: "A zero sum game is a term used in game theory to describe both real games, and situations of all kinds, usually between two players or participants, where the gain of one player is offset by the loss of another player, equaling the sum of zero. For instance, if you play a single game of chess with someone, one person will lose and one person will win. The win (+1) added to the loss (-1) equals zero."

This is the exact reason I like forex. Unlike bonds, stocks and real estate which experience bubbles as people over-inflate prices beyond their true value, bubbles which go on to pop and leave people badly burned, forex is a true market where the sum equates to zero. There is no deception, no over-inflation, no bubbles and subsequent popping which lead to depressions and/or recessions. It was the same speculators in the investment markets tokyoleone is talking about that have led to the current state of the economy - not the spot forex traders. I ask you who are the real speculators? (note I'm not talking about forex futures here, I do not play those games, strictly the spot market)

Currencies go up and down, sure fundamentals come into play, but only over long time-frames...technicals drive direction. There is always a chance for profit, there is never a bubble popping, it is simply an exchange market. Sure your money is worth more or less in another currency over time, but that is part of the world economy - nothing is rigid. Gaijin 06, you enjoy and win at no limit poker. Do you win simply because of the law of averages which you talk about above? Anyone can throw money in the pot and get lucky, please don't boast your skill here and assume people only win at forex by chance. But I would think if you really enjoy and know poker you understand there are pro poker players, people who win much more than the law of averages and statistics would assume. Why is this? I would speculate that it is because they play using a system - they have worked out what conditions are worth betting on and when it is better to fold, just like Kenny Rogers talks about. Can you agree that by using such a system, though there will be numerous times you will get burned by other novices getting lucky due to the law of averages, over time you will be profitable?

Now in a game of cards you are forced to play when it is your turn, and you are forced to bet the rising minimum. So those with more money hold the advantage, can control the game and can slowly bleed opponents dry depending on how much leverage they have; as you point out a lot earlier in this thread. But the fact is, in the forex market this is not the case - you can enter with an amount of your choosing at the time of your choosing, control your risk, not enter when you do not think conditions are favourable. You can find a set of conditions, a system, that proves to beat the law of averages over time...and though you will experience loss beyond a shadow of a doubt, if you get it right and use a proper risk to reward ratio and money management you will win more than you lose over time.

This is our goal as forex traders; and I hoped in this thread we could work on finding those sets of conditions that over time lead to favourable outcomes and a positive equity curve; and leave those who invest in bonds and real estate to sit in their ivory towers as prices crumble around them and the world revolts; while we drain money from the same banks that suck the wealth and blood from our fellow men...because they are the other side to the zero sum game and that is why I will succeed in finding a formula that works for me...because I have a reason greater than wanting my own investments to grow.

I think the main problem is you asked who here can prove they have made money for more than three years but you are asking in a forum which seems to have three people trading live and only one who has been doing so for any period of time. If you are really interested in an honest appraisal of your question I would ask it in forexfactory, but I highly doubt those successful traders would bother posting as that question is as repetitive in those forums as monkeys tapping keys, as repetitive as gaijin monkeys teaching English in Japan and asking "how was your weekend?"

[thenoie]

In order for a zero-sum game to take place, the buyer/seller must both at loss/gain at the same time, not further after the transaction took place.

There’s nothing such as zero-sum game at forex market nor stock market.

as negative-sum and positive-sum are also a potential outcome.. it cannot be a zero sum game.


as for making money on speculation.. it is possible.

as for free teaching.. "there is no such thing as a free lunch..."

[Gaijin 06]

This is the exact reason I like forex. Unlike bonds, stocks and real estate which experience bubbles as people over-inflate prices beyond their true value, bubbles which go on to pop and leave people badly burned, forex is a true market where the sum equates to zero. There is no deception, no over-inflation, no bubbles and subsequent popping which lead to depressions and/or recessions. It was the same speculators in the investment markets tokyoleone is talking about that have led to the current state of the economy - not the spot forex traders.

That is an interesting point, and one I had not considered. I agree that you can make money in the forex market at any time, whereas you are much harder pushed to make money in equity or bond markets where prices are plummeting. However, my counterpoint to this would be that the long term direction of equity prices is upward and buy leaving your money invested over a long period of time you are likely to make money without actually doing much work. Simply buying a developed market index tracker and leaving it for 20 or 30 years is enough - perhaps switching into less volatile asset classes as you near retirement.

Gaijin 06, you enjoy and win at no limit poker. Do you win simply because of the law of averages which you talk about above? Anyone can throw money in the pot and get lucky, please don't boast your skill here and assume people only win at forex by chance. But I would think if you really enjoy and know poker you understand there are pro poker players, people who win much more than the law of averages and statistics would assume. Why is this? I would speculate that it is because they play using a system - they have worked out what conditions are worth betting on and when it is better to fold, just like Kenny Rogers talks about.

This is exactly the point I wanted to get into when I brought poker up. Poker is also a zero sum game, and you can even equate the table rake to commissions/spreads on forex trading. You can also win and lose a lot of money very quickly, or you can make small trades and win/lose a small amount of money - depending on your risk profile. As such, I think it is quite an interesting comparison to forex trading.

The differences I see - there are no unknown external factors in poker. You have the same information, the same technology, the same observations to make as anyone else round the table. You are not an an inherent disadvantage, and the gap between the pro's and amateur's is narrow. You will never beat Tiger Woods at golf, but you can easily knock a WSOP bracelet winner out of a poker game.

There is another similarity - big stack vs small stack. The small stack might have a better hand, but the big stack can bully him out of pots... I think this is analogous to an institution with a lot of capital which can tolerate small losses in the short win to back a winning position whereas a small trader is forced to close out at a stop loss.

Can you agree that by using such a system, though there will be numerous times you will get burned by other novices getting lucky due to the law of averages, over time you will be profitable?

Definitely, short run losses can cripple anyone - regardless of any skill advantage.

Now in a game of cards you are forced to play when it is your turn, and you are forced to bet the rising minimum. So those with more money hold the advantage, can control the game and can slowly bleed opponents dry depending on how much leverage they have; as you point out a lot earlier in this thread. But the fact is, in the forex market this is not the case - you can enter with an amount of your choosing at the time of your choosing, control your risk, not enter when you do not think conditions are favourable. You can find a set of conditions, a system, that proves to beat the law of averages over time...and though you will experience loss beyond a shadow of a doubt, if you get it right and use a proper risk to reward ratio and money management you will win more than you lose over time.

I disagree, I think capital is very useful and those without it are at a competitive disadvantage. Sure, there are ways to minimize this but ultimately having more capital is always going to be better than having less.

This is our goal as forex traders; and I hoped in this thread we could work on finding those sets of conditions that over time lead to favourable outcomes and a positive equity curve; and leave those who invest in bonds and real estate to sit in their ivory towers as prices crumble around them and the world revolts; while we drain money from the same banks that suck the wealth and blood from our fellow men...because they are the other side to the zero sum game and that is why I will succeed in finding a formula that works for me...because I have a reason greater than wanting my own investments to grow.

My question is, what is that system? I don't believe that there are undiscovered trading strategies in the forex market that work in the long term. There are too many market actors, too many people poring over the data sets, too many PhD thesis', too many quant models sniping, too much technology wiping out arbitrage chances in milliseconds, too many intelligent people trying to derive positive absolute returns.

I think the main problem is you asked who here can prove they have made money for more than three years but you are asking in a forum which seems to have three people trading live and only one who has been doing so for any period of time.

I didn't ask anyone to prove they have made money (since I believe that some people can and will make money in any given time period), I asked to be educated on what strategies people have that they think can beat the market.

[Gaijin 06]

In order for a zero-sum game to take place, the buyer/seller must both at loss/gain at the same time, not further after the transaction took place.

Once all positions are closed, it is a zero sum game. Until your positions are closed, you simply have an realized profit or loss.

There’s nothing such as zero-sum game at forex market nor stock market.

I am truely disturbed by the number of people who are trying to say this is not a zero-sum game.

as for free teaching.. "there is no such thing as a free lunch..."

Yet another person unwilling to defend his beliefs in honest debate.

[thenoie]

Once all positions are closed, it is a zero sum game. Until your positions are closed, you simply have an realized profit or loss.

I am truely disturbed by the number of people who are trying to say this is not a zero-sum game.

Yet another person unwilling to defend his beliefs in honest debate.

If it was a Zero sum game, 1/2 the players would win ?
so i have a 50% chance in winning at forex !!! awesome

[thenoie]

Once all positions are closed, it is a zero sum game. Until your positions are closed, you simply have an realized profit or loss.



I am truely disturbed by the number of people who are trying to say this is not a zero-sum game.



Yet another person unwilling to defend his beliefs in honest debate.

Actually i have decided to come back to this..

When do all the positions close in the FX market?
How does time play in the "game" what about brokers?

I found this nice little example...

Suppose you place a friendly bet with an acquaintance on the outcome of a football match. Each of you puts up an equal amount of money, let's say $100, and at the end of the game, one of you will walk away with $200 and the other will be $100 poorer. That is a zero-sum game in its purist sense; unless the game ends in a tie, there will be one winner and one loser, end of story.

Now let's apply this concept to the currency market; suppose you enter a long position on EUR/USD and at the same time, another trader takes a short position in the same currency pair. The broker simply matches the orders and collects the spread. This is exactly what the broker wants, to keep the entire spread and maintain a flat position.

Does this mean that in the above scenario one party has to win, and one must lose? Not at all, in fact both traders can win or lose; perhaps one has entered a short-term trade and the other has entered a long-term trade. Perhaps the first trader will take a profit quickly, but there is no rule that states the second trader must close his trade at the same time. Later in the day, the price reverses, and the second trader takes his profit as well. In this scenario, the broker made money (on the spread) and both traders did, too. This destroys the oft-repeated fallacy that every Forex trade is a zero-sum game

[Tiger Strike]

Hmm...

This is exactly the point I wanted to get into when I brought poker up. Poker is also a zero sum game, and you can even equate the table rake to commissions/spreads on forex trading. You can also win and lose a lot of money very quickly, or you can make small trades and win/lose a small amount of money - depending on your risk profile. As such, I think it is quite an interesting comparison to forex trading.

The differences I see - there are no unknown external factors in poker. You have the same information, the same technology, the same observations to make as anyone else round the table. You are not an an inherent disadvantage, and the gap between the pro's and amateur's is narrow. You will never beat Tiger Woods at golf, but you can easily knock a WSOP bracelet winner out of a poker game.

There is another similarity - big stack vs small stack. The small stack might have a better hand, but the big stack can bully him out of pots... I think this is analogous to an institution with a lot of capital which can tolerate small losses in the short win to back a winning position whereas a small trader is forced to close out at a stop loss.

Quote:
Originally Posted by Tiger Strike
Can you agree that by using such a system, though there will be numerous times you will get burned by other novices getting lucky due to the law of averages, over time you will be profitable?

Definitely, short run losses can cripple anyone - regardless of any skill advantage.

Quote:
Originally Posted by Tiger Strike
Now in a game of cards you are forced to play when it is your turn, and you are forced to bet the rising minimum. So those with more money hold the advantage, can control the game and can slowly bleed opponents dry depending on how much leverage they have; as you point out a lot earlier in this thread. But the fact is, in the forex market this is not the case - you can enter with an amount of your choosing at the time of your choosing, control your risk, not enter when you do not think conditions are favourable. You can find a set of conditions, a system, that proves to beat the law of averages over time...and though you will experience loss beyond a shadow of a doubt, if you get it right and use a proper risk to reward ratio and money management you will win more than you lose over time.

I disagree, I think capital is very useful and those without it are at a competitive disadvantage. Sure, there are ways to minimize this but ultimately having more capital is always going to be better than having less.

You took one argument and argued the pieces of it which is easy to do but doesn't solve it. My points are:

Institutional traders may have better systems but I don't think that really is an advantage - charts are charts; its what you make of them that matter. The free software provided called MT4 is all one needs really.

I never said capital is not important; I said it is not as important as in poker. Sure capital is important but you are not forced out of the game by larger players as in poker - you set your own limits and with the small lots you can buy in forex you don't need a lot to give yourself a lot of room for stops with controlled and minimum risk - there is no bullying as even institutions can't drive price beyond a certain range. The whole where to put a stop thing is a long topic to get into and is more suited for conversations about trading systems not arguing whether one can win long term or not.

My question is, what is that system? I don't believe that there are undiscovered trading strategies in the forex market that work in the long term. There are too many market actors, too many people poring over the data sets, too many PhD thesis', too many quant models sniping, too much technology wiping out arbitrage chances in milliseconds, too many intelligent people trying to derive positive absolute returns.

You never asked that question - you asked if anyone had succeeded for more than three years and then got into a debate over whether or not it was possible. I do understand where you are coming from. How can one man beat the bankers, the mathematicians working for them, the mega-computers poring over data etc. etc. I too believe in investing in other markets not just trading forex. But I do feel your eyes are blind to education and opportunity. You begin with the assumption something is not possible and need to be convinced otherwise...which is hard and not something I wish to do. I've debated enough and frankly I am so out of practice at arguing I don't think I can win. Good luck with your investments...perhaps you can start another thread detailing what investments you think are sound? With your knowledge and experience I would be interested to see your side.

I didn't ask anyone to prove they have made money (since I believe that some people can and will make money in any given time period), I asked to be educated on what strategies people have that they think can beat the market.

You never asked that either. You began here by stating all the reasons why someone cannot win, asked to be convinced otherwise and then continued debating back. Your cup is full. You don't wish to be educated about strategies, it seems you are here to argue (or debate as people like to call it). If you were the one managing my money I'd ask you to spend more time doing that rather than browse this forum. If you are truly interested in learning strategies this is not the place to do it. forexfactory is the best spot.

I truly believe that for you there is absolutely no way you can win in forex as that is your context and your belief system. Those who believe otherwise can do so. This is beyond economics, it is something intrinsent to the way our thoughts create the world around us. There is a fantastic text called "The Science of being rich" which I can't find online now, i do have it saved in pdf somewhere and will upload to 4shared if you're interested. And again, please start a thread with your investment ideas...I'd like to see your side.

[Gaijin 06]

Actually i have decided to come back to this..

When do all the positions close in the FX market?
How does time play in the "game" what about brokers?

I found this nice little example...

If you can't see the glaring problem with that example, then I really don't think you should be discussing forex trading!

[Gaijin 06]

Institutional traders may have better systems but I don't think that really is an advantage - charts are charts; its what you make of them that matter. The free software provided called MT4 is all one needs really.

Everyone can see the same charts. How do you have a competitive advantage in this zero sum game?

I directly addressed this point in my first post.

2. Technical trading analysis - with the volume of academic and internal research dedicated to finding exploitable trading patterns it is almost inconceivable that you can derive any alpha from simple technical analysis - any persistent oppourtunities will have been exploited away long ago. Remember there are tens if not hundreds of banks who have been doing this for years and decades. Advantage: neither.

If you can explain how you can read charts better than everyone else in the market then I am willing to believe you have an advantage.

But I do feel your eyes are blind to education and opportunity. You begin with the assumption something is not possible and need to be convinced otherwise...which is hard and not something I wish to do. I've debated enough and frankly I am so out of practice at arguing I don't think I can win.

I'm not blind to the education, I've asked for anyone to enlighten me. So far. not a single person has done so.

I truly believe that for you there is absolutely no way you can win in forex as that is your context and your belief system. Those who believe otherwise can do so. This is beyond economics, it is something intrinsent to the way our thoughts create the world around us. There is a fantastic text called "The Science of being rich" which I can't find online now, i do have it saved in pdf somewhere and will upload to 4shared if you're interested.

Sure, please upload it.

I am afraid that I don't accept "context and belief" that are "beyond economics" as a valid trading strategy either to be honest... I only invest or speculate in ideas that I can see have merit and nobody has even made a stab at explaining the merits of forex trading so far.

[thenoie]

Can you explain why they can consistently win from a zero sum game?

you seem to me, to be mixing some theories..

answer this question.

chess is a zero sum game, (not counting a draw)

but if Kasparov plays 500 people who play chess often will he come out even?

[Gaijin 06]

you seem to me, to be mixing some theories..

answer this question.

chess is a zero sum game, (not counting a draw)

but if Kasparov plays 500 people who play chess often will he come out even?

The sum of 500 games (+1 for a win, -1 for a loss) will be zero. Kasparov will win more than he loses. Are people claiming they are to forex trading what Kasparov is to chess?

By the way, computers beat the best chess players.

[thenoie]

The sum of 500 games (+1 for a win, -1 for a loss) will be zero. Kasparov will win more than he loses. Are people claiming they are to forex trading what Kasparov is to chess?

By the way, computers beat the best chess players.

Ok, we can work with this...

yes Kasparov will win more then he loses.. maybe 499+ 1-

Why? he has a better raw ability than the people he plays....
He (now) also has better experience, and a better collection of possible outcomes (in chess there are many paths to that outcome.. but one 3 possible results)

On a side note.. if i showed you a perfect trading system that reads the market data, and trades with 99.9% profit i would not put a cent into it.. how will it react when say a human acting on free will shoots the president of the US? or a tsunami hits Japan?

Remember forex trading is a combination of Economic factors Market psychology and Political conditions, each person has a different perception of these.

I Don't trade the numbers I trade the traders.

[Tiger Strike]

I'm convinced. Forex is for dummies.

ready to start that new thread yet Gaijin 06? I have money from my forex accounts sitting in limbo...

[THEDON]

And what prevents arbitrage?

I will try to explain in laymans terms

Arbitrage fund -- Prime broker -- liquidity providers


The PB doesn't care about the fact there is arbitrage involved.
The liquidity provider will either.
A--Increase spreads .-- in which case the triangulation formulae for an arb system is enjoyable--plus many more....though alot are of course obsolete (please clarify arbitrage style).
B-- Not realise in which case you can hit them for 6 months max


The key point is the channel, in this case it's Fund--PB--LP, no one else is included. Also no-one using their credit cards--bank transfers--corporate firms are listed though they are of course inviolved in the pricing....however what would happen if the system was...AF...market maker ?

[THEDON]

I'm convinced. Forex is for dummies.

ready to start that new thread yet Gaijin 06? I have money from my forex accounts sitting in limbo...

Post of the week.

[Gaijin 06]

I will try to explain in laymans terms

You failed!

Arbitrage fund -- Prime broker -- liquidity providers


The PB doesn't care about the fact there is arbitrage involved.
The liquidity provider will either.
A--Increase spreads .-- in which case the triangulation formulae for an arb system is enjoyable--plus many more....though alot are of course obsolete (please clarify arbitrage style).
B-- Not realise in which case you can hit them for 6 months max


The key point is the channel, in this case it's Fund--PB--LP, no one else is included. Also no-one using their credit cards--bank transfers--corporate firms are listed though they are of course inviolved in the pricing....however what would happen if the system was...AF...market maker ?

You claimed there are pricing differentials on different systems; I said they will be arb'ed away if they exist. Obviously the differences need to be bigger than the spread (this is self evident) but I can't understand a word of your post. The terms by themself make sense, but when you combine them they don't form a cohesive whole. Rather like picking words from a dictionary and slapping them together - the result will be disjointed and without meaning.

[THEDON]

You failed!



You claimed there are pricing differentials on different systems; I said they will be arb'ed away if they exist. Obviously the differences need to be bigger than the spread (this is self evident) but I can't understand a word of your post. The terms by themself make sense, but when you combine them they don't form a cohesive whole. Rather like picking words from a dictionary and slapping them together - the result will be disjointed and without meaning.

That's absolutely fantastic .

[thenoie]

You failed!



You claimed there are pricing differentials on different systems; I said they will be arb'ed away if they exist. Obviously the differences need to be bigger than the spread (this is self evident) but I can't understand a word of your post. The terms by themself make sense, but when you combine them they don't form a cohesive whole. Rather like picking words from a dictionary and slapping them together - the result will be disjointed and without meaning.

I actually found his post insightful but maybe that is just me.

but do tell me you stated pricing differences would be "arb'ed away if they exist" is this a part of the zero sum? sound positive sum to me..