What is your weekly return?

totally agreed. An edge has to be found before working on any pschological problems.

Indeed. I could probably run large percentages on a demo account because, well, it's just that. A demo.

I can give a near perfect example of one's psychology. Here are two of my real accounts. I can't update them because I trade with Oanda and their non-MT4 platform is not being supported anymore on myfxbook or the trade explorer here. They aren't a true comparison of each other because they weren't traded equally at all times but it's a fairly good comparison of how I trade a small account to a big account. And therein lies the problem with me (and I'm sure a lot of other people) when it comes to trading larger sums of real money instead of play money. I'm working on it ..... still

[EDIT] I forgot to say but could I transfer that same recklessness from a demo account to a real account? No, I couldn't, because I am naturally fairly risk averse and employ the low leverage strategy in my real trading.

amazing.. hats off to you I understand what you're meaning. Wish you the very best for many years to come. Btw the drawdown figures are incredible; yes that's the benefit of low leverage but the gains compared to that are brilliant. Thanks for posting it, a great motivational picture for anyone who's not too blind to see.

Very interesting thread. I've enjoyed reading it.

I believe those who are saying that weekly returns in the 10%–30% ballpark are possible, and I'll attempt to explain why. The key points are:

1. Time and frequency. There are approx 20 trading days in a month. Everything else being equal, then, the scalper who makes X trades per day is going to outperform a position trader who makes the same X trades per month, by a factor of at least 20 times; and way, way beyond that, if both are using fixed frac style compounding.

2. Now factor in the effect of risk per trade. If the scalper risks (say) 3% per trade while the position trader risks (say) 1%, we're now looking at a factor of more than 60 times the return, before compounding. (Having a database of several hundred trades behind you, to provide a good idea as to how much you can safely risk per trade, i.e. to stay within your desired drawdown threshold within a certain statistical confidence, can be a big help).

Just to make this perfectly clear, the position trader in my example is making 1% per month, while the scalper is making 60% per month, and yet both have the same edge (profit factor).

3. Low risk entries can make for fantastic RR trades. I've seen plenty of instances on shorter TFs where price turns almost to the pip on 'flipover' S/R, following a 'technical' breakout. (Apparently eohater uses MAs instead of S/R). Plenty of pairs have an ADR of 100+ pips. If you can get entries accurate enough to allow (say) 5 pip SLs, and then capture 50 pip intraday swings, then you have an RR of 10:1. Many bounces off key SR levels on majors will easily bounce 5 pips (even if the some of the moves don't go much further) which allows the trader to get SL to BE. I've seen enough to believe that, if one had enough experience with picking key SR, that this scenario is entirely possible. Let's say, for example, that in one day of 10 trades I get one 10:1 win, 3 breakevens and 6 losses, risking 2% per trade. Do the math and you'll find that even with only a 10% win rate, that's a gain of 8% ROE on that one day. Not too shabby.

If you think this is impossible, check out the concept in the 'Building an equity millipede' thread. Find the most strongly trending pairs on a D1/W1 perspective (pretty easy at the moment, they're AUDUSD and USDCHF). Now take a (say) M30 chart and zoom out as far as MT4 will allow. Let's say that (assuming an uptrend as with AUDUSD), every time price is severely oversold on a given day, you make a low risk entry (say SL=10 pips), and get your SL to BE (or take off half the position at 1:1, which also gives a free trade). Then provided that the entry point never gets revisited over the subsequent days/weeks, and you're bold enough to keep the position open, you'll see some returns of up to 500 pips on AUDUSD, over the last 3 weeks (along with a lot of BE trades, and 10 pip losses). Hence over that period I could potentially have some 500, 400, 300, etc pip returns from different entry points on different days, each for 10 pip risk. If each 10 pip entry equates to 1% of my account, then I could easily be up > 100% across that 3 week period, and all at relatively tiny risk. Just an example.

I'm not saying that the above formula has been tried and proven by me, just that I've seen enough to believe that numbers in that general ballpark are possible, if one has enough knowledge and experience of price behavior. The key is this: IF it's possible to find even a small (but robust) edge on a short TF, then the scalper has the potential to make fantastic weekly returns, merely because of his massively high turnover.

Two keys to successful trading, at least as I see it, are (i) an edge that provides some kind of consistency, and (ii) risk-adjusted-return. IMO quoting return without risk is essentially meaningless, for the reason in point 2 above. By way of example: Trader X is averaging 5% ROE per month, and Y is averaging 20% per month. On face value you'd think that Y is a vastly superior trader than X. But then you learn that X is risking 0.5% per trade while Y risks 3% per trade. It follows that X actually has the superior edge; and Y is exposed to greater risk of ruin. And trader Z is making 200% per month, but by way of some kind of martingale. Hence, unless you know the risk involved, and the MM being employed, the return in itself means little.

Finally, I chuckle (hopefully not too conceitedly ) when I read these threads, because I believe that one trader's return has absolutely no bearing on what another trader is capable (or incapable) of making. The agile retail trader is exempt from any liquidity issues, operational regulations, inertia and other inefficiencies that encumber the big banks and funds, who operate to completely different agendas, in any case; all of which makes comparing their respective performances meaningless. And, even when comparing the performance of two retail traders, there are so many variables involved (win%, average RR, risk per trade, frequency, capitalization, .....) that make a meaningful head-to-head comparison very difficult.

Folk who assume that X% is impossible because they haven't yet found a way of achieving it themselves, are possibly speaking out of proud ignorance. Heck, I used to do it myself. But I've come to the realization that, if I'm honest with myself, "I don't know what I don't know". And of course, unless I'm averaging a certain return myself – and this over several hundred trades, and many years of changing markets – then anything I might say about "what return is possible" is really nothing more than speculation or hearsay.

Maintaining an open mind is essential, if one wants to keep the opportunity for improvement continuously alive.

David

great post. I always enjoy reading your comments. They are well articulated and make sense.

You do realise that these accounts were over a year, not a week, don't you? LOL

Those drawdown figures aren't correct either. I was in more drawdown than that at times. I should have blanked the drawdown figures out.

But thanks anyway

My mind is always open. I'm always hoping to see fabulous real returns from real traders that have been generated over a decent period of time on larger sums of money. I'm sure they exist ..... somewhere. Unfortunately, real results don't seem to be forthcoming. But, I guess, I can keep on hoping .....

Nice post.

To be honest: David, I hoped you're writing a post as I saw your nick down there ;-) I always enjoy reading them! Thanks for this one and all the past ones, too. The relationship between trade frequency and percentual outcome over a certain period can't be ignored and I tried to explain this in my previous post here. I have probably over-simplified the model mentioned there since I've counted on expectancy only. I should have mentioned the significance of drawdown characteristics at least.

edit: However, I'd like to add that this whole argumentation is based on the 1% risk-per-trade figure which is considered to be "reasonable" and "proper" all over the place. But that's not set in stone; I can imagine short term traders risking much more less, simply because they trade much more frequently and their risk attitude determines them to risk some percentage/amount across a (defined) time interval, rather than per trade.
Yes of course I do realise that! I doubt the drawdown figures were actually significantly worser. The curves would show that ;-).

Thanks for the replies.

I don't intentionally post to get a positive response, I'm usually trying to unburden myself, or clarify my own thoughts by putting them on paper. Or sometimes I feel challenged to play devil's advocate, and post an 'alternative' view.

Confession time: I believe that I've been guilty of being too negative in the past, and have unwittingly narrowed my own outlook as to what's possible, in the process. My suspicion and loathing of certain types of system vendors has led me to a default view of skepticism: "if it sounds too good to be true, it generally is". Moreover, I've postulated that if the big banks and institutions, who can employ the veteran traders, top market analysts, math dons and IT gurus, can average only 10%-20% ROE per year, then why should I expect to do any better? I've taken to heart quotes like (for example) the one I read from Paul Tudor Jones, that he can count on the fingers of one hand, the number of traders he's met that have been able to maintain a profit factor of 2.0 over their career. Or Keynes' quaint epigram "the market can remain irrational longer than the trader can remain solvent". In taking all of this kind of stuff on board, I've probably saved myself from being scammed out of a lot of money, but I've also unwittingly and subconsciously capped my own potential...... and in an activity that offers the greatest entrepreneurial opportunities of probably any field of endeavor!

I find some of the comments in this thread refreshingly encouraging. If TheCaptain, and others following eohater's thread, can make 20%-40% per month, then it's possible! But I need to start searching for the right kinds of techniques. Read on, and I'll share some ideas in a minute.

However, here are some preliminary thoughts:

1. I need to ask myself "what is ultimately my goal?". Is it to try to make articulate points, win arguments and possibly kudos and vouches on forums; or is it to become a highly profitable trader? And given this, how would I best be spending my time, and (most importantly) am I doing so?

2. I shouldn't concern myself with what returns others are, or aren't, making. None of this has any bearing on what I might be able to make myself. Comparing myself, and my own performance, with others', is not going to change either my market knowledge, or my account balance. If eohater and his mates are banking 100k each week, you can bet that they don't give a rodent's hindquarters about whether you or I believe them, or not. A profitable trader is not selling anything, and he has no reason (let alone obligation) to prove anything to anybody.

3. Continuing on this theme, why get involved in arguments and intrigue about vendors, systems, or concepts, trying to prove or disprove their credibility? I look all of the effort expended in (for example) the Jacko 'forex mentors' and 'James16 is not credible' threads, and wonder what motivated folk (myself included) to plead their case so vehemently for or against, each of us speculating what might or might not be a scam, and (at the time) without any real evidence. Again, I realize that I've possibly been too cautious; a more magnanimous, entrepreneurial, lateral-thinking attitude might have served me better.

Anyway, I said that I'd share some ideas. OK, take 'em or leave 'em:

I've slowly come to the view that one of the biggest hindrances to progressing as a trader might be 'loss avoidance'. I see threads here about why traders shouldn't use stoplosses. I see methods posted in the Trading Systems forum where every man and his horse attempts to add (mainly indicator-based) filters to reduce the percentage of losing trades. I see martingale-like approaches that are aimed at recovering recent losses as quickly as possible (but why should a recent loss be more important, in the context of eventual bottom line, than any loss?). But what if these folk are looking at it backwards?

By way of complete contrast, supposing (for example) I look for setups that allow a 10 pip SL instead of a 20 pip SL. I'm going to double my RR on every resulting win. As long as I can somehow find price patterns and situations where I'm not going to get stopped out twice as often, then I've improved my overall expectancy (profit factor). Now supposing I can find areas where price is more likely to bounce far enough to allow me to get my SL to BE on a fair number of occasions, so that some of the (frequent) losses become free trades. In other words, use the stoploss constructively, as a weapon of attack, to create low risk entries. Every pip worth of loss that I eliminate, by exiting losses early, adds to my eventual bottom line.

I have a system that I've been tinkering with for several months, and I've just started to write an EA for it. (I've been snowed under with other programming projects, so I haven't been able to trade much, over the last 3-4 months). In a nutshell, it's similar to the DIBS and millipede ideas: about finding low risk entries on intraday charts, and then allowing those trades that manage to survive to grow as big as possible, over days and possibly weeks. Look at daily/weekly charts, and you'll see that macroeconomics (e.g. crisis in Europe; crisis in the US; disparities in carry interest rates; etc) create some great long trends, and hence potentially huge RR trades. As economic shifts cause rebalancing of national (or should that be notional? ) currency strength and weakness, then I'll look to recycle any profits into other relevant pairs. But with all of this stemming from finding low risk entries on short TF charts, and then having the patience to willingly accept the many trivial losses and breakeven outcomes, in order to catch some really big moves: ride just one long trend and ALL of the surviving entries made along the way increase their profit simultaneously, effectively creating exponential growth. As long as the macroeconomic shifts occur slowly enough, there will always be long, clean trends in the longer TFs, created merely by pairing the strongest economy/ies against the weakest; hence I believe the concept is potentially very robust. Having said that, I realize that nothing is necessarily easy or guaranteed in this game; the best that can be hoped for is some kind of an edge. Whatever, the above represents the culmination of my 4-5 years' worth of research into forex thus far: I've been seeking a methodology that that prioritizes risk management, while nonetheless allowing exponential growth, and is based on principles that are likely to remain rock-solid for a lifetime.

OK, I've rambled on for long enough. I hope that I've provided some fresh ideas, and inspiration. Let's all reflect on the positives in this thread, and focus less on "is it possible for others to do it?" and more on "how can I optimally go about improving my own chances?"

David

I wasn't going to say anything, but reading your posts over the years you always came across as a real Negative Ned. Haha!
I still need to make my way through that thread, but I've spot browsed (here and there) and do find it interesting.


Yeah, I'm guilty on that one. Looking back it was kind of silly. Live and learn.

Wish you the best on that one! The idea of Infinite yield is appealing and something I try and apply (not very well unfortunately). I'm really going to try to apply myself in the metals markets. I'm pretty good at letting things run (swing trade) but not great at very long term (year+). Baby steps.


As far as this thread goes, I see the potential in the high %'age trades everyone is talking about, BUT this was started in the rookie section and I think baby steps make sense. If one is not profitable gunning for 50% per month maybe a fine long term goal, but try and be profitable in the short term first. Even if it is just 1%. At least you are taking baby steps to get to your goal.

My trade explorer shows an awesome month, but it's demo and it was just luck.

it's an irritant of mine that people 'school' rookies into the mindset of low ROI and basically beat the potential out of them, and this is what a lot of people do. it comes down to the following fact : some people win big, some people lose big, some people win big with little risk, some people lose big with little risk, everyone loses big with unwieldy big risk. (i want to be win big little risk). you are either on the positive side of profit or you are on the negative side. there is no fence-sitting with trading... you have the skills and knowledge and are going forward, or you are losing money.

if rookies then believe that their weekly return should be a fraction of a percent then they begin to frame everything trading-related around this notion. someone looking to reconcile their returns on a per week basis is likely intraday trading and therefore it becomes nonsensical that their numerous trades per day / week would net them a fraction of a percent capital gain... that's a non-existent edge and zero skill and they are basically break-even and bound to lose over time.

the whole % gain question and argument is moot anyway, as evidenced by the mindset some have in regards to little vs massive accounts. what really matters is ROI. clearly someone who has a billion dollars to play with but is playing on penny-accounts isn't going to be making much % gain on total capital at their disposal anytime soon, but if they are tooling with a penny account and smashing the small lot sizes for profit then their ROI is going to be large compared to that of someone who can't trade out of a wet paper bag regardless of their large or small capital available.

as with everything related to trading nothing is as simple as it appears. a simple question such as "what is your weekly % gain" is just too open-ended to have any simple answer fill it. what is the sound of one hand clapping...

edit : or would a better question be for people to ask "what is your return on risk?" ?

LVG,

Yes, I wasted a lot of time there, too. And, equally as bad, I've also allowed myself to get involved in pointless arguments over trading semantics and technical theory: whether entries are more important than exits, whether MM like hedging or martingale is viable, whether indicators are superior to 'price action', and so on. It's becoming obvious to me why real trading pros avoid this kind of stuff, and indeed avoid forums in general: there's no incentive for them to help others (why should they?), and they're too busy getting on with the business to worry about debating semantics, especially with folk of lesser knowledge and experience. I guess I'm just stating the obvious.

Whether I'm right or wrong, or whether folk agree or disagree with me doesn't matter. All that should matter to me is my own effort, and performance.

Anyway, thanks for the good wishes, and I likewise wish you happy hunting with your trade explorer.

David

I think you are probably onto something but I challenge your "many insignificant losses" and your "long clean trends" statements. You acknowledge that your losing trades will be very many and your winning trades very few. All trends retrace massively eventually if not completely reverse. In my 5 years of fx research I have found that you are going to need to pyramid into those long trends to have any hope of recovering from the losses. That is the only way I have found for a trending system to recover from the whipsaw during consolidations. I believe this is the best way to profit from the market however, it is psychologically extremely difficult to do.

This is a hypothetical example to illustrate the difficulty of the technique for anyone interested. Its not an attack your system that I know nothing about and you acknowledge yourself is not going to be easy.

Lets say your many losses have drawndown 10% of your account over a six month trading period. Finally you snag a decent trend and by pyramiding you recover your loss. The trend continues in your favour and after only one more month you are 10% in the black. Unfortunately the trend retraces 50% of its move over the next three months and stops out your positions at breakeven to give you a nill return for the year. Very frustrating! remember it took 4-5 years of "research" to come up with this system and its first year it hands you nothing.

The following year a similar thing happens and you end up with zip again.
The third year you finally pull 20% in front again only this time you protect 50% of your gains. The market retraces and stops you out with a 10% return. The market then continues in your direction and would have produced a 100% return with pyramiding had you still been in. This is psychologically virtually unbearable and has detrimental effects on your life.

The fourth year you leave your stops wider to keep you in the game this time. You drawdown 5% after three months. Your system finally brings the account 50% in front by the 6 month point and you are ecstatic - Finally your a winner after all your hard work and suffering. Then the market does what it does, reversing completely and stopping you out for a 10% loss.

You have nothing but losses to show for 5 years research for four years trading. You are physically, mentally and financial much worse of than you would have been working your job and loving your family instead of chasing the forex dream. How many people would have lasted even past the first year with nothing to show for there efforts?

The fifth year a mega trend occurs that had you followed your plan would have returned you enough to retire on. Unfortunately, you took the extra time you have now that you were made redundant and your wife and kids have left, to do more research to find something better. You did not participate.
You were right, but you lost because of it was not psychologically possible to follow your own winning plan

I am the negative nelly in this debate and the above scenario does not help my cause, I am the dream crusher it would seem.
However, if just one noob out of the thousands that come here realizes that:

1. there are no 10%/day/wk/month holy grail systems that are going to make him rich quickly and easily. To search for this is not only futile but greedy, the one of only two reasons for failure in this game

2. trading is mostly psychological and this is where the work needs to be focused

3. That it is a zero sum game and your opponents, are some of the worlds smartest, experienced and well equipped people in the world

Then thats one out of a thousand that has any chance of success. Im sorry, that is the reality and if you are not facing the reality, you are not in this game at all.

I have some good news

1. that the majority of the psychological barriers to success can be taken care of with risk management

You can virtually eliminate the psychological pressure of performing in an uncertain environment just like Patience does. You can continue addressing the area of your own psychology to improve you performance over time, just like Patience does - the only one to proof consistent returns over more than a week in this thread so far. Boring I know, but trading is not for entertainment, you have FF threads for that

2. you dont need 10%/day/wk/month to make it.

If you can proof 10% a year or better with low drawdown then your trading is among the best investments going on the planet. Due to a sensible attitude to risk you will have people lining up to invest with you and offers from funds to manage accounts. I know, it happened to me after I made some consistent returns over only a 6 month period. I was offered multi million dollar accounts to trade from more than one source. Imagine that, I was a noob that toasted many accounts, studied countless threads and systems, spent years developing my own, lost 30k in the process and then that happens. I was tripping to say the least! Unfortunately, I could not handle the extra psychological pressure of what was occuring to me at the time and when they were testing my performance, I choked and tanked the account in a week trying to show how good I was. I was so close and then greed and fear took it away again. Lesson learned, you must be detatched from the greedy and feaful majority of market participants, not one of them, if you are going to have any hope of success. If you can do that, the world is your oyster

MACDoug,

Thanks for your comprehensive reply.

My goal is to become profitable for my own benefit, not to prove to others that I'm profitable. Whatever the outcome, I won't be journaling my results or performance on a forum, simply because I don't see how it would be useful to anybody else. People will believe whatever they want to believe, as has already been amply demonstrated in this thread. If anybody from eohater's group posted a statement showing consistent returns of 30% (or whatever) per week, disbelievers could simply allege that the statement is a fake.

With regard to my approach, you've presented a scenario that has made a lot of assumptions. I've no idea how well or badly I will fare, only time will tell. I've already explained how I'll be attempting to get around the "many insignificant losses" and "long clean trends" issues. At this point, I'm not in a position to speculate further than that, and nor would I wish to.

You say that "there are no 10%/day/wk/month holy grail systems that are going to make him rich quickly and easily." I don't understand how anybody can categorically state that a certain level of return is impossible, without having an omniscient view of every possible approach that could ever be devised, and an omniscient view of all possible future market conditions. And I've never understood how one person can speak for everybody else, whose methods, experiences and performance are completely unknown to him. Moreover, as I pointed out in my original post (#184), given that one has some kind of edge, there are many ways to multiply or accelerate it (some at the risk of increased drawdown, albeit); and that return in itself is meaningless without reference to the many other variables involved, most of all risk. But I'm just repeating myself.......

I don't understand the rest of your post. You say that psychology is the main barrier (supposedly toward attaining > 10% per year)? Then what if a trader goes a long way toward mastering the psychology element? I've always maintained that if psychology was the primary barrier, then more EAs would be profitable. I think the big challenge is finding a method with an edge that's net positive across several hundred trades, and many years of changing markets. Once a trader has a track record that satisfies him that he has such an edge, then I expect the psychological issues would (for most people) be significantly alleviated. And if it's not possible to attain such an edge, then everybody who's profitable has merely been lucky, and luck can not be sustained indefinitely.

Perhaps you're right, and I'm naive. Well, all I can say is that my research, and my thought processes make sense to me, and I'm going to proceed without preconceived notions as to what might, or might not, be possible. That is my prerogative. One thing I can be sure of: whatever others might choose to believe, it will have no impact on the outcome, however things turn out.

David

Two things I would like to add:

I'm not sure why people state EA's will fix psychology. Yes they can automate the trading but to me the real psychology is fear and greed, the money aspect, so whilst the EA auto trade the owner still has to place the $ pip value on each and every trade.

Secondly, regardless of % gained per week, don't we really need to know whether the trader has positive expectancy.

To use expectancy calculation: (1+(Avg Win / Avg Lose)) * Win % -1

Then for every dollar traded you can expect that much return. For example if you end up with .3 or above you will make 30 cents for every dollar traded. Now if your confident you have positive expectancy and understand that then you can trade accordingly knowing your long term outcome.

Would this not be a better calculation to understand the overall success. I think if a lot of traders understood expectancy and did this calc, they might find there great system may only produce minimal return for effort put in or even worse negative expectancy.

Actually I'm sure it would make interesting reading what some expectancy's are.

Two brilliant posts David thanks.

I feel the best education anyone can get is to spend time in quality live trading rooms and spend time with profitable traders.

I am not only talking about the instructors here but many of the students have been there to improve their game, in fact more often than not the students were better traders than the teachers but as you know we never stop learning in this game.

It has been a priceless part of my journey and I have been lucky to have been in the same live chat rooms with many profitable retail traders, scalpers , swing traders, fib traders, fundi traders, MA traders.

I know categorically there are people making incredible weekly growth on their accounts.

Almost all use precision entries, exits and stops based on priceaction with absolute belief in their methods and years of experience.

I realise traders with years of chart study will not wish to try to find live trading rooms that may help them become profitable / more profitable at this stage in the game, my point was to add weight to the short term verses long term profitability argument and suggest possible avenues for novice traders starting out.

p.s. all the liverooms I was a member of have closed down now for whatever reason.

Good luck.

I was not having a go at you or your system, just voicing an opinion for your consideration about the possibility of pyramiding ala Jessie Livermore to increase the profitability. I wanted to explain for the benefit of less experienced traders how psychology plays such a huge part in the success or failure of this very difficult but effective technique. I apologise for using your excellent post to make my points

The rest of the post is not referring to your post at all. I can confidently repeat that there are no consistently profitable systems able to achieve 10%/day week or month consistently, the market is much to efficient to sustain those returns for very long at all. You don't need to be omniscient to know this. Does anything in your 5 year experience cause you to disagree with this statement?


I'mwith Patience, i would love to see someone do this and I would be ecstatic for the trader who does. I don't say consistent good returns of 5% + per month is not attainable. What I do say is that it isn't going to be achieved easily or quickly or at all by following a mechanical quant or indicator based system found in the system threads here on FF. You don't need to be omniscient to say this either. I have called out for proof when traders claim these results and so far none has ever been produced in all my years here at FF. I have exposed two scammers and got nothing but abuse for questioning the loyal followers leader until they ran off with the money.

If you want to believe outside this framework that's fine but, for the noob traders who come to market with such expectations it is lambs to the slaughter. The reality is they will be extremely fortunate to still have an account left after one month primarily because of this expectation. The trader who is keeping it real will beat the macho pissing contestants and there ridiculous claims hands down every time. Who here can show a return greater than Patience's over 12 months? Anybody?

Im done here with this argument, I wouldn't listen to me either when I started or even three years in.

Its just that I have learnt that having no goal or expectation regarding returns is very helpful approach to trading. You are free to do your thing whatever that maybe and accept whatever you get, even losses for what they teach, with gratitude. This unrestrained mindset provides freedom in the moment and freedom is what you come to the market for in the first place. Having already achieved your goal, the result of your trades is not important and from that mindset superior performance is far more easily achieved. This is the psychology required for trader performance. No agenda to force onto the market provides a much clearer view of what is actually occurring before your eyes in real time - not after the fact. I could go on and on but I am wasting my time and energy here aren't I?

That's the point. I think that events determining the entries/exits have to be clearly defined and based on as much objective (non-arguable) conditions as possible. However, there has to be some rubber-band catalyst (aka trader's discretion) in action. Otherwise, EAs could do the job for us. I'm a poor wanker with little experience in this field yet but I have played a bit trying to find some pure mechanics (not indicator-based and not curve fitted) that works (PF>2) over an extended period of time. I have found a few but that several hundred trades (and these are no home-runs) are spread across the whole past decade. If I go through the visual backtest and tweak the strict rules with discretion, I get much more trades, but then it's no more mechanics and the additonal (discretional) approach is very hard to describe "loselessly"; let alone quantify and code. The problem with many "systems" presented here and there is they pretend to be a lot more mechanical than they actually are. That's why indicator-based systems fail; it's not because the lag, it's because they pretend mechanical simplicity which doesn't actually work that way. Even price action methods demand for a great amount of discretion, but at least, they force the trader to have a closer look on how the market works. Mr. Douglas says: most methods work, most traders fail. I dare to ask: how can one trade disciplined when he doesn't know exactly what to do? And how can he patiently wait for something to happen, if he only has a meager idea of how should it look like. I honestly believe most of negative psych stuff has its origin in being uncertain of having an edge or not, especially after a losing streak. And I believe most trader failures (including mine) were result of believing to have an edge after some winning streaks, while in fact, there was none.

Sorry for being largely OT, just wanted to emphasize the importance of a working method for any positive % outcome. It's not that easy as it seems.

excellent post, the questions posed really get to the heart of the matter. Pretty good stuff from a poor wanker I must say

Mechanical rule based system vs trader discretion. Both Mark Douglas and Van Tharp talk in terms of expectancy but you cannot know what the expectancy will be going forward. The theory is great for casino"s where the odds of every game are fixed and will repeat with certainty but I dont believe it is applicable at all to trading. The market is a dynamic, constantly changing system and although systems to trade it may not be, individuals certainly fit the same category. That is the challenge we face, particularly when extraordinary results are desired. If it was as easy a +b = c as Douglas maintains it is, we would all be rich while robots did the work for us and he wouldn't need to write books

I believe, along with discipline and risk management, human discretion is required, and that is what makes profitable trading so challenging. It is why psychology is so important. I am not talking about positive thinking or affirmations or similar feel good pop psych. I agree these things will not produce winning trades where no edge exists. It is about minimizing the emotional impact on your decision making process. This way you are able to asses the information on hand with sufficient clarity to be able to get the direction, entry and exit accurate enough times to be net profitable.

Its hard work, I dont like it, give me a mechanical rule based system that will hand me pips effortlessly any day but after 3 years, 24 pages of code and 30k losses searching, I have abandoned that quest.

@ciscosmithy:
Agree with you about expectancy being a key measure. I've tended to use profit factor, which is similar (PF expresses it as a ratio of winners to losers, hence PF >1 is positive; while expectancy, measures it as a difference, hence EV > 0 is positive).

@jag1966:
I take great encouragement from your "incredible weekly growth" comment and also your "....precision entries, exits and stops based on price action...." tells me that I'm spending my time sensibly by focusing on ways of finding superior low risk entries on shorter timeframes. It also makes perfect sense to me that a winning mindset can be attained only through ".....absolute belief in their methods and years of experience".

@MACDoug:
I think I might have misunderstood aspects of your previous post (#193) --- I apologize.

I like the DIBS and millipede approaches because they do allow room for pyramiding, exactly as you say. Over the last 12 months I've grown to understand the power of pyramiding, during the prolonged moves that do occasionally occur.

What you say about the market closing inefficiencies makes perfect sense to me. But (1) I don't believe that a tiny retail trader will generate enough volume to create an inefficiency that will disrupt existing orderflow. That gives the little guy a huge advantage, namely that he can exploit what to him are inefficiencies extremely accurately, i.e. without slippage, while hiding under the radar among the billions that are swimming all around him. Hence (2) this means that the little guy is, at least from his own perspective, not actually competing against seasoned experts in a zero sum game, to the extent that he can simply trade the patterns he sees, without fear of causing any kind of market 'retaliation'. In other words, he is simply playing a game of numbers against a giant machine, and his opponents' agendas and levels of expertise are irrelevant, just so long as he can find a way, that (on balance of probability) is capable of beating the numbers and patterns that confront him.

I like your last paragraph very much, about lack of expectation creating its own kind of freedom. Makes a lot of sense to me. Reminds me of a vaguely similar post by topherhk88 where he concludes that "….but I have found that it is a complete surrender to the randomness of any one trade that allows for a grounded confidence in a statistically significant outcome over many instances".

@tritom:
Nice post! I especially concur with your comment about "The problem with many "systems" presented here and there is they pretend to be a lot more mechanical than they actually are. That's why indicator-based systems fail; it's not because the lag, it's because they pretend mechanical simplicity which doesn't actually work that way." There are so many nuances that a trader employs that are so obviously second nature to him, yet he doesn't realize are extremely difficult to nail down mathematically. I've seen this time and time again from the EAs that I've programmed for clients over the last few years.