In other words you're too stupid to figure out how to use the insane leverage offered in forex to your advantage.
People who use volatility as excuses for why they're poor forex traders are pussies.
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is there a way to calculate the probability of a market top?
- Thread starter pocoyo2014
- Start date
People who use volatility as excuses for why they're poor forex traders are pussies.
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Yes there is. A market that has no traders watching it and is just flowing along on order flow coming in that isn't price influenced is unpredictable.
Predictability is relative to human emotion levels in the market.
However, a unpredictable market can still be consistently traded profitably. One of the interesting paradoxes in trading.
Using statistical approaches you can trade consistently without having the slightest clue where price is going to be in three bars, five bars, etc...
Don't predict... Just follow a statistical edge like a professional gambler! Professional gamblers have no clue if a hand of poker is going to win or not. Predicting it is pointless. But, some make money consistently using a statical and mental edge over amateur players.
Prediction is unnecessary for making money. It does give you a bit more edge though.
I define prediction as either expecting price to be at a certain location or to follow a certain path of events. In trading it's optimal to just anticipate events and then trade probabilities if those events occur as anticipated.
However, mentally it's almost better for most people just to exclude all prediction from their trading. Not predicting or anticipating anything... Just watching the market and taking high probability trade setups if they appear. Mentally this is hard for most people as they are used to thinking in a linear fashion... Not statistically!
Eg... Most people think like this... Scenario 1: Event A leads to Event B, and not Event C.
But, in order to think statistically you must think like this... Scenario 2: Event A leads to Event B with 70% probability, and Event C with 30% probability.
Sounds simple, but very psychologically hard to do in live trading.
Don't predict... Just follow a statistical edge like a professional gambler! Professional gamblers have no clue if a hand of poker is going to win or not. Predicting it is pointless. But, some make money consistently using a statical and mental edge over amateur players.
Prediction is unnecessary for making money. It does give you a bit more edge though.
I define prediction as either expecting price to be at a certain location or to follow a certain path of events. In trading it's optimal to just anticipate events and then trade probabilities if those events occur as anticipated.
However, mentally it's almost better for most people just to exclude all prediction from their trading. Not predicting or anticipating anything... Just watching the market and taking high probability trade setups if they appear. Mentally this is hard for most people as they are used to thinking in a linear fashion... Not statistically!
Eg... Most people think like this... Scenario 1: Event A leads to Event B, and not Event C.
But, in order to think statistically you must think like this... Scenario 2: Event A leads to Event B with 70% probability, and Event C with 30% probability.
Sounds simple, but very psychologically hard to do in live trading.
Isn't that what all winning trading systems do, trade after trade?
Spikes? What spikes?
Currency pairs move 1% each day on average, while some stocks routinely move (gap) 10% or more on a daily basis.
Now try to imagine a 10% gap (spike) with a 100 to 1 leverage like in Forex!!
"Spikes? What spikes?" - xelite777
Honestly... Have you ever traded the EUR/USD or GBP/USD?
It's not uncommon to see 50-100 pip moves occur within minutes without any news catalyst... It's so common Forex traders have a unique name for candles that spike 50+ pips and collapse back down in the blink of an eye. This kind of thing simply doesn't happen in equities without a major news catalyst, and 95%+ of news events that effect equities big are well known beforehand... Like fed announcements and earnings releases.
I am not talking about smallcaps when I say equities... I only trade indices pretty much... AAPL or GOOG once in a blue moon.
Honestly... Have you ever traded the EUR/USD or GBP/USD?
It's not uncommon to see 50-100 pip moves occur within minutes without any news catalyst... It's so common Forex traders have a unique name for candles that spike 50+ pips and collapse back down in the blink of an eye. This kind of thing simply doesn't happen in equities without a major news catalyst, and 95%+ of news events that effect equities big are well known beforehand... Like fed announcements and earnings releases.
I am not talking about smallcaps when I say equities... I only trade indices pretty much... AAPL or GOOG once in a blue moon.
Isn't that what all winning trading systems do, trade after trade?
Spikes? What spikes?
Currency pairs move 1% each day on average, while some stocks routinely move (gap) 10% or more on a daily basis.
Now try to imagine a 10% gap (spike) with a 100 to 1 leverage like in Forex!!
It seems to me you are not very familiar with the Forex market, as the biggest "spikers" are not the EUR/USD or even the GBP/USD (these pairs are relatively "quiet") but the insane NZD and all its crosses, GBP/NZD being the "weirdest".
??
On any given day, you can find hundreds of stocks that move/gap in a big way on absolutely no news, and I am not even talking about penny stocks!
Also keep in mind that a 50 or a 100 pip move is a mere 0.5% to 1% move, while some Nasdaq stocks move/gap/spike 10% or more in a single day, cutting through all the stops like butter! Add a 100:1 leverage and the move becomes deadly.
??
News events that affect the Forex market are also well known in advance, you know?
http://www.dailyfx.com/calendar
Anyway, we are already way off topic, my apologies to the original poster.
Most retail traders and trading systems are logical and predictive, not statistical and probability focused.
For example... A common train of logic seen in a lot of systems is... If price has gone up for X amount of time at X speed, it will likely continue onward for a further amount of time.
Now, a statistical approach is a bit different... If a market has gone up for X amount of time increments at X speed with X Volatility, based upon this markets past behavior price is most likely to stay between X-High, and X-Low (+1 and -1ATR for example) distance from X-MA(Moving Average) with 80% probability... If price exceeds X-High or X-Low, price is likely toward mean in one time increment with 80% probability based upon past instrument and timeframe behavior. Trading in direction of trend generally compounds positive expectation.
LoL... My style of statistical approach to trading is definitely not for everyone. It's difficulty curve is similar to card counting and memorizing poker probabilities.
Oh, and thought I said I prefer high volatility and it's the best trading... I am still trading on and off in these current conditions. Money isn't that great though.
Trading conditions should be decent late next week and onward a couple weeks or so. Should be excellent trading conditions across the board in equities this fall onward into 2015.
Once long term momentum dies off fear will build and VIX will start to lift.
For example... A common train of logic seen in a lot of systems is... If price has gone up for X amount of time at X speed, it will likely continue onward for a further amount of time.
Now, a statistical approach is a bit different... If a market has gone up for X amount of time increments at X speed with X Volatility, based upon this markets past behavior price is most likely to stay between X-High, and X-Low (+1 and -1ATR for example) distance from X-MA(Moving Average) with 80% probability... If price exceeds X-High or X-Low, price is likely toward mean in one time increment with 80% probability based upon past instrument and timeframe behavior. Trading in direction of trend generally compounds positive expectation.
LoL... My style of statistical approach to trading is definitely not for everyone. It's difficulty curve is similar to card counting and memorizing poker probabilities.
Oh, and thought I said I prefer high volatility and it's the best trading... I am still trading on and off in these current conditions. Money isn't that great though.
Trading conditions should be decent late next week and onward a couple weeks or so. Should be excellent trading conditions across the board in equities this fall onward into 2015.
Once long term momentum dies off fear will build and VIX will start to lift.
Isn't that what all winning trading systems do, trade after trade?
Why would you bother trading something that is not a major? The spread is terrible... Your kind of cutting your own throat if you trade anything in Forex that is not a major.
I follow the ForexFactory calendar. It's pretty thoroughly comprehensive. There are a lot of massive spikes that have nothing to do with any emotional catalysts(News events). There was one massive spike around a month back or so on the EUR/USD during an uptrend that a Japanese bank reported on the news feeds that the market had pushed upward into a large cluster of buy stop orders.
AUD/USD and USD/JPY are not spikers. I had some great trading on the AUD/USD around a couple months ago. Volatility has kinda died recently.
I follow the ForexFactory calendar. It's pretty thoroughly comprehensive. There are a lot of massive spikes that have nothing to do with any emotional catalysts(News events). There was one massive spike around a month back or so on the EUR/USD during an uptrend that a Japanese bank reported on the news feeds that the market had pushed upward into a large cluster of buy stop orders.
AUD/USD and USD/JPY are not spikers. I had some great trading on the AUD/USD around a couple months ago. Volatility has kinda died recently.
It seems to me you are not very familiar with the Forex market, as the biggest "spikers" are not the EUR/USD or even the GBP/USD (these pairs are relatively "quiet") but the insane NZD and all its crosses, GBP/NZD being the "weirdest".
??
On any given day, you can find hundreds of stocks that move/gap in a big way on absolutely no news, and I am not even talking about penny stocks!
Also keep in mind that a 50 or a 100 pip move is a mere 0.5% to 1% move, while some Nasdaq stocks move/gap/spike 10% or more in a single day, cutting through all the stops like butter! Add a 100:1 leverage and the move becomes deadly.
??
News events that affect the Forex market are also well known in advance, you know?
http://www.dailyfx.com/calendar
Anyway, we are already way off topic, my apologies to
Anyway... I'm off to sleep! Not going to miss out on a day of moderate volatility. Gnight xelite!
Moderate... Relative to the average volatility since the fifteenth. Sheesh...
The S&P has good odds it will be moving enough to find a trade setup or two with a decent probability of over six points of movement tomorrow.
Oh, and a Tip for the OP and beginners... Stick to large cap everything! No small stocks, only major currency pairs, and only major commodities. Highest predictability, statistical consistency, etc in the big boys.
I have never managed to trade well in anything except extremely liquid active instruments. /ES Futures are much easier than the /YM (Dow Futures)... However, it may be because of the way I trade.
Moderate... Relative to the average volatility since the fifteenth. Sheesh...
The S&P has good odds it will be moving enough to find a trade setup or two with a decent probability of over six points of movement tomorrow.
Oh, and a Tip for the OP and beginners... Stick to large cap everything! No small stocks, only major currency pairs, and only major commodities. Highest predictability, statistical consistency, etc in the big boys.
I have never managed to trade well in anything except extremely liquid active instruments. /ES Futures are much easier than the /YM (Dow Futures)... However, it may be because of the way I trade.