Forex Daytrading a Losing game?

[IluvVol]

Quote from kiwi_trader:

The article is rubbish.

Typical of the "I can't do it so no one can" type of thinking we see amongst failures in this game.

Kiwi, I dont think thats what the OP wanted to say or hint at. Why dont you add value to this discussion. THe following does not add value: 1) the OP just does not know how to trade in the short term thats whyt he wrote that, 2) My short term trading works so this proves the opposite. So, then how about a guy who won in 3 years several lotteries, drawings, and many other things that are completely out of the norm? Its a true story there is this US senator/congress man (need to look it up again if interested) who did that. Whats the probability of this happening? Does that mean the expected value of playing lottery is positive? No it CLEARLY is not.

So, do you have a 5 or 10 year (or plus) track record scalping and can show that you are profitable above a typical equity index return? I dont think so, nor have I ever heard or seen anyone with such track record. But I have seen track records of hugely successful traders, trading longer term (such as Boone Pickens, Jim Rodgers, even Tudor Jones and others from the TA camp). I am not believing in fully efficient markets but markets are absolutely efficient enough to not let a high school kid read some indicators off a chart, put on 5 minute trades one after another and make a bunch. And this would not even require a high school kid or anyone with an IQ above 80. Sorry but I dont believe markets are volunteering their treasures that easily.

Good luck with your method, whatever it may be, but I think you should at least add value if you decide to participate in this discussion.

 

[Pippi436]

IluvVol: you are asking for proof? The only one i see making claims here is you. I think its on *you* to prove your claim that longer term charts are less erratic than short term charts. Any hard hard analysis to support your theory?

P.S. can is see your 5+ year trackrecord on how successfully you trade your daily charts, being profitable above typical equity index return please? Thanks.

 

[mogul]

The only thing long term charts (daily +) offer is that the spread (if that's what your broker charges) is less in relation to the movement of price.

But with some pairs (eg eur/usd) the spread charged is so small that even 5min charts can be traded.

The advantage with smaller time frames is that the compounding is greater, in that more trades can be taken over the same time frame.

There are just as nice trend moves on an intraday basis as there are on a long-term basis.

The main difficulty I have experienced with time-frames less than 3hours, is that since the fx market is really a 24 hour market, many trends start up in the middle of the night, so they are harder to catch from the start.

 

[IluvVol]

Quote from Pippi436:

IluvVol: you are asking for proof? The only one i see making claims here is you. I think its on *you* to prove your claim that longer term charts are less erratic than short term charts. Any hard hard analysis to support your theory?

P.S. can is see your 5+ year trackrecord on how successfully you trade your daily charts, being profitable above typical equity index return please? Thanks.

Lets not confuse what I said. I made a difference between short term trading time frames and longer term time frames. I dont care what short term charts look like versus long term charts. And if you read my previous posts carefully then I have provided sufficient backup to get this discussion started. I dont have to prove my profitability to anyone except myself and family. I am happy, however, to elaborate on my claims or reasoning, provided. So....what do you disagree or agree with? Lets start from here...you have not provided anything valuable for this discussion so far. Lets hear it....

 

[IluvVol]

Quote from mogul:

The only thing long term charts (daily +) offer is that the spread (if that's what your broker charges) is less in relation to the movement of price.

But with some pairs (eg eur/usd) the spread charged is so small that even 5min charts can be traded.

The advantage with smaller time frames is that the compounding is greater, in that more trades can be taken over the same time frame.

There are just as nice trend moves on an intraday basis as there are on a long-term basis.

The main difficulty I have experienced with time-frames less than 3hours, is that since the fx market is really a 24 hour market, many trends start up in the middle of the night, so they are harder to catch from the start.

I agree in theory. Yes, of course you can take more trades with shorter time frames, but you get stopped out more often or, if you chose to take the risk and stay in once the market turns against you may end up with some larger losses that eat up your small profits. Isnt that exactly what kills a trader? I call it a high risk/low reward trade scenario. On top of that you have the much higher costs of trading versus lesser trades.

I admit this question cannot be answered generally, I think each trader needs to determine which style fits him/herself the best. So, yes there are SOME traders who make a decent living with short term trades. BUT, I would assert that a way higher percentage of short term traders goes belly up over time than the percentage observed in position traders. So, if you are sure you max out your profit by taking trades short term then do so. But I definitely believe that it is much better for a beginner to position trade over a longer time frame. Basically, reduce positions but trade over a longer time horizon, trade the longer term trend, the odds are much more favorable as I lined out with specific examples in an earlier post.

 

[Elite Loser]

trading the euro :

buy
buy
buy
buy
buy
buy
buy
buy
sell

i don't think that can be called daytrading

 

[Cesko]

I dont have to prove my profitability to anyone except myself and family.

So, do you have a 5 or 10 year (or plus) track record scalping and can show that you are profitable above a typical equity index return?

Honestly speaking, I am not interested in how profitable you are, and how you trade.

IluvVol can you see your own bullshit above????
By the way, Kiwi is right, the article is rubbish just like your dribble.Anekdoten's chart is perfect example of setups you could recognize if you actually traded.
He does trade. You, Sir, don't. Good day.

 

[Anekdoten]

Quote from IluvVol:

Anekdoten,

I dont know how profitable you are and dont know your setups, time frame, capital, leverage, whatever. But it does not matter.

All I like to say is that your chart that you attached does not prove ANYTHING. You said that this is a chart that shows 2 typical pattern. I reply to this: Give me ANY chart, any day and I pick you some patterns that you might recognize. Besides that, I can do the opposite for you: Pick any pattern you want and I find you several days on which those patterns occurred. This means NOTHING, and certainly does not prove that short term fx rates are NOT RANDOM. The point is that yes, on your chart the pattern as you described it occurred but you said that in retrospect. Did you know BEFOREHAND that the pattern would develop? Did you know that and position yourself accordingly? NO, I bet you did not, because the pattern became apparent AFTER it was formed. So, I dont think this proves ANYTHING.

I am not saying your stuff does not work. Honestly speaking, I am not interested in how profitable you are, and how you trade. This thread is about supporting or criticizing the OP's claims. Just saying it works for me or you does not mean anything as there is no backup. Sorry but no proof, no nothing!!!

So, if you can come up with facts that support your claim that in the short term rates are not completely random then I am very curious and my ears are wide open. But I also believe that in the short term rates are pretty much random and that OVER TIME (transaction costs, slippage, sudden spikes that cause you to close at a larger loss than initially anticipated , and many other factors) trades in the very short term are not profitable. There is enough empirical AS WELL AS academic evidence/research out there (I am happy to point you to statistical tests, research papers) that support the claim that in the short term fx rates are pretty much random.

Of course everyone makes money some times, even on very short time frames, be it for luck or other reasons, but over time I dont believe that anyone can profitably trade fx by scalping the markets. The risk-reward ratio is just not favorable enough because too many factors (as mentioned above) are negatively impacting short-term traders.

IluvVol,

I think of price as my patient and I'm the psychologist. Have absolutely no problem reacting to it's mood swings and determining if it's feeling down up or flat and how to react accordingly. Of course many times price is acting schizophrenic and during those times I must take a step back to formulate a new diagnosis or consult with the patient's history.

If you are interested in more details, feel free to check my journal in the appropriate section of the forums.

Anek

 

[mekas]

Quote from IluvVol:

I think actually all of your critcism is invalid:

"all" my criticism is invalid? So you actually believe that if everyone knew the opening price of some commodity/currency/security tomorrow everyone would be able to be a millionaire as a result of that knowledge?

a) If all movements in short time frames were random, all movement in longer time frames would be random as well.

-> not true. Stock prices move very randomly in the extreme short run. However in the long run stocks have clear upward drift. Guess why you have a positive drift term in stochastic calculus for a Geometric Brownian Motion (which is used to model stock prices). However, in the short run the price can go up or down with equal probability. This is just one example but the same holds for example currently in commodity markets. The odds of oil going up over the next few weeks/months are very favorable. Well, do you claim this also is true for the next 5-10 minutes? Nobody knows where oil will be from no till the next 5 or 10 minutes. At least there are no clear odds to where it would trade.

"very randomly"? So there are degrees of randomness and since "very" is less than "completely" you concede that prices in the short term are in fact not "completely random". If stock prices were able to be completely modeled by Geometric Brownian Motion with an upward drift then you could have no trading/investing edge at all, and would only make money long term by buying and holding a large collection of stocks.

b) If you have the "odds on your side" with a strategy the more you are able to trade that strategy the more likely the true odds will assert themselves. So given two trading-strategies with similar odds the one that lets you trade more frequently has a greater chance of giving you a result closer to the actual odds.

-> True in itself. But who says that the odds are on your side for a 5 minute trade? You dont know, nobody knows. Its pretty much random. It can spike up totally against your short and you either need to cover at a loss, or you keep it running and it goes further up and you cover later at an even bigger loss or it comes back and you GOT LUCKY. I hope you dont call this luck your odds, that would be very worrysome. The same does NOT hold for longer term trades. Longer term trades require smaller positions or deeper pockets, but the huge benefit is that you omit the random movements that can often kick you out of trades in the short term for no apparent reason.

Why do random movements in the short term only "kick you out of trades". Wouldn't random movements also help you hit your profit target as well?
The fallacy in your argument is that just because you can't predict where the price is likely to be for every 5-minute period during the day this doesn't mean that you can't predict price movement for selected 5-minute periods during the day. A short term trader is not compelled to always be in the market predicting the next 5-minutes. The trader needs only to wait until such a time the near term price movement has a higher probability to go in a certain direction and trade during that time.

 

[GaryN]

Quote from mekas:

[B The trader needs only to wait until such a time the near term price movement has a higher probability to go in a certain direction and trade during that time. [/B]

Thems my sentiments, too. Momentum is momentum on any timeframe. Seems like most disagree with the article which is encouraging because I am not interested in longer timeframes. I may have to change my sleeping habits, tho, because as previous poster said, a lot of good trades begin in the wee hours of the morn, EST.