$1,000,000 QUESTION

forex live trades, setups, charts

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TheRumpledOne
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Postby TheRumpledOne » Thu Sep 20, 2007 3:20 am

"However it is a fact that only 3 things can occur and 1 of them will actually occur which are the price goes up, goes down or stays flat. "

Yes, price only moves one way per tick.

The price could go one way 10 pips, reverse and then go 20 pips, reverse and close at the open price.

The "problem" is one trader goes short at the open and gets stopped out for a loss only to see the price eventual go their way.
IT'S NOT WHAT YOU TRADE, IT'S HOW YOU TRADE IT!

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casinoman
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The "problem" is clearly identified

Postby casinoman » Thu Sep 20, 2007 7:26 am

The "problem" you have pointed out is the identical problem that is faced by all traders and the amount of the price movement that is relative to the trading time frame they are using. Also, traders have a tendency to pick one particular organization of a number group to illustrate a point.

(1) "The price could go one way 10 pips, reverse and then go 20 pips, reverse and close at the open price."

OR, using these same number sets, the price could just as well:

(2) Go up 10 pips, go up 10 pips and reverse going down 20 pips to the open price, or
(3) Go down 20 pips, go up 10 pips and go up 10 pips to the open price.

Assuming the trader is using a 3 pip stop loss, plus the 1 pip difference in ask/bid price, plus 1/2 pip in & out commission - the trader will lose 5 pips (excluding any slippage) each time they are stopped out (lose). The trader's goal is to net 6 pips gain per trade. With a 50-50 proposition the trader would exit at a gain of 18 pips (allowing for 1 pip comm in/out).
( .50 * 17 pips ) - ( .50 * 5 pips ) = 8.50 - 2.50 = 6 pips

Therefore in the 3 different sets above of your numbers, the results are:

#1 Stopped out for a net -5 pips, re-entered when price retraced to open which is the close Results = -5 stopped out + -1 re-entry/exit = -6 pips

#2 Stopped out for a net - 5 pips, price re-traced to open at close so awaiting entry next bar = -5 pips

#3 Sold at +18 pips -1 pip enter/exit and awaiting entry next bar = +17 pips

Average of the three possible senerios from same set of number sets:
( -6 + - 5 + 17 ) = +6 pips

The "real problem" with these senerios is that the yield is extraordinaily high ( 1.20% ) which then requires either a 50-50 proposition or a greater price spread movement. Assuming that the yield is reduced to 40%, how are the factors changed?

At a 50-50 proposition - lower spread required:
( .50 * 9 pips ) - ( .50 * 5 pips ) = 4.50 - 2.50 = 2 pips
( .50 * ( 9/ 5 )) - ( .5 * ( 5 / 5))
(.50 * 1.80) - ( .50 * 1 )
.90 - .50 = 40%

At a 44% win & 56% lose proposition - higher spread required:
( .437 * 11 pips ( - ( .564 * 5 pips ) = 4.81 - 2.82 = 2 pips
( .437 * ( 11 /5)) - ( .564 * ( 5 / 5))
( .437 * 2.2 ) - ( .564 * 1 )
.96 - .56 = 40%

Either instance translates into the same yield. Let me tell you, with a 40% yield you'll bust the world! Actually, you'll bust the world with a 1% advantage given enough time :)
"Technicians never die - they just chart away"
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Postby TheRumpledOne » Thu Sep 20, 2007 11:12 pm

"Either instance translates into the same yield. Let me tell you, with a 40% yield you'll bust the world! Actually, you'll bust the world with a 1% advantage given enough time"

So you are saying the million dollars is just waiting?
IT'S NOT WHAT YOU TRADE, IT'S HOW YOU TRADE IT!



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casinoman
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Pick up your Million!!

Postby casinoman » Thu Sep 20, 2007 11:47 pm

You bet your sweet bippy the mil is just waiting to be picked! Just have to modify some basics in your theory - can't shoot whole wad each time or will almost certainly will experience gambler's ruin (getting BUSTED).

Darn, wish I had discovered forex years ago. Gotta love the voltility - made to order for my style (method). Like last night with JPY and today with GBP made soooo much money afraid to tell wife for fear of her wanting to use my precious bankroll for something frivilous like food, lol.
"Technicians never die - they just chart away"

Trade like a Lemming but don't jump off the cliff like the others

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Postby jgear55 » Fri Sep 21, 2007 3:34 pm

So price goes inyour favor within the 60minutes no matter what?

has anyone tried this every hour?

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casinoman
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Nope - Nope - Nope

Postby casinoman » Sat Sep 22, 2007 4:35 am

jgear55,

"So price goes inyour favor within the 60minutes no matter what?
"

Nope! You may have mis-understood the essence of the proposed 1,000,000 Question.

The proposal was:

(1) "If its a 50-50 chance that the price direction of the next 1 hour candlestick is either up or down" and is based on the concept that over a period of time there will be as many up as there are down hour candlesticks. Over this period of time the total amount of the ups may be greater than the downs and vice-versa, resulting in the all the candlesticks for the period of time combined into a single candlestick that is either up or down.

(2) "The price ranges in the average hourly candlestick 27 pips" which means whether the price is up or down the movement range is 27 pips.

(3) "A person could flip a coin to choose the direction of the next candlestick" which translates into using any random means that is 50-50 to select a direction to take for an entry position of the next candle.

(4) Take a very short stop loss of 6 pips and take the "calculated risk" that the price will move in the randomly choosen direction taken anticipating the price will move up 10 pips of the average 27 pip movement range.

My responses were "proofs" of the validity of the positive aspect of the proposal, it could be done if a person were a "glued to the screen" day trader.

As for myself, I do not know of anyone using this specific method. I do something very-very similar in concept but different methodology.
"Technicians never die - they just chart away"

Trade like a Lemming but don't jump off the cliff like the others

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Postby TheRumpledOne » Sat Sep 22, 2007 7:42 pm

I never said anything about "50/50".

What I know is the price will range and it has to leave the "buy zone" in order to range.

The "trick" is to accurately enter the trade.
IT'S NOT WHAT YOU TRADE, IT'S HOW YOU TRADE IT!



Please do NOT PM me with trading or coding questions, post them in a thread.

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TheRumpledOne
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Postby TheRumpledOne » Sat Sep 22, 2007 8:41 pm

Guessing which way the price is going at the open of the candle may not be part of the answer!

The entry may before the candle opens.

But once the new 60 minute candle opens, knowing it will range can earn you extra pips.
IT'S NOT WHAT YOU TRADE, IT'S HOW YOU TRADE IT!



Please do NOT PM me with trading or coding questions, post them in a thread.

4x=0
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Postby 4x=0 » Sun Sep 23, 2007 11:36 pm

I had an idea. most of the bars retrace. after the open they go up before they go down and down before they go up. Once price goes up, sell. Goes down first, buy.

casinoman
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A thousand apologies!

Postby casinoman » Wed Sep 26, 2007 12:32 am

Tro did not say anything about a 50-50 proposition. I mingled my previously posted evaluation analysis with Tro's initial posed question in answer to jgear. However, I still stand by my original evaluation.

For the poster who stated that you could risk 10% for a 4% return, if you do you'll end up busted!

If you have a 4% return (expectation) the maximum you can afford to risk from you bankroll on an individual trial is 4% - even that is stretching the optimum. In order to have an expectation of 4% you must win $104 - 51% of time to losing $100 - 49% of the time.
"Technicians never die - they just chart away"

Trade like a Lemming but don't jump off the cliff like the others

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