If You Are a Bad Forex Trader, Just Do The Opposite
by Trader Rich
I can’t tell you how many times I’ve heard people say this, "If you’re a losing trader, just do the opposite of what you were thinking and you’ll be a winner." I can’t begin to say what a misconception I think this is. Don’t you think that if this were true, all the losers would be doing it? What if your target price is unrealistic or your stop is too tight? What if the market is trading sideways? It wouldn’t matter what direction you traded, you would lose either way.
Anyway, I thought I’d post an interesting email I received from a guy who is looking for bad traders to help him make money. I asked him what the incentive for the "bad" traders would be to send him their every trading move. I don’t think the guy is on the wrong track. It might be beneficial for anyone’s success to study the behavior of losing traders. The toughest thing he’s going to encounter is finding traders who will admit they’re bad traders and would provide information to someone who wants to profit off of their losing.
I found your site as I was looking for someone to help me implement my new system. I have won the FXCM king of the mini as well as placed third in interbankfx contest (on different months).
I do trade well…however I thought of a system that is essentially perfect. As you are aware about 95% of new traders lose all their money in the first 30 to 60 days of trading forex. That last 5% is left for people breaking even, making a small profit and those chosen few that can live off forex.
Point being this: New traders are perfectly bad traders. Their emotions take over, they get out at the wrong time…get in at the wrong time, take profit too early, let bad trades keep running, over margin etc etc etc.
Therefore if one does the EXACT opposite of a new trader then one would have about a 95% chance to double or more their money every 30 – 60 days. Essentially $100 could become almost 1 million in one year and over 2.6 million in 18 months.
Where I need help is finding new traders that will notify me the second they enter a trade, which direction, currency, leverage, stop, take profit, and of course if they get out early for profit or loss I need to know basically as it happens.
I would trade the opposite with two exceptions. Only trading the small pip spread currencies and perhaps only trading with the interest rate – that would help to offset the small pip spread. As well of course I would use percentage for leverage. (If they have $1000 in their account and trade $10 pip then I would trade $100 pip if I had $10 000 in my account … or $1000 pip if I had $100 000 etc.)
There will be times I would also have to accommodate the leverage size to make sure there is no margin call if the rookie trade actually hits their profit. I only want to be taken out of trades when the rookie trader closes a trade (or they are margin called out).
If this backward system makes sense to you please let me know. Perhaps through your website you have access to these perfectly bad traders.
I can only imagine the endless rubbish that arrives in your inbox.
lol. Craig, I can always count on you to add some humor…. Thanks.
I’d be very surprised if this system was as profitable as it initially sounds. I suggest most new traders fail because they don’t understand (or employ) robust position sizing and so over leverage. Doing this they could easily double or triple their account with a couple of good trades before blowing their account with one or two bad ones. If they double their account (or more) and you have leveraged just as hard in the opposite direction then you just blew your account before they did and so don’t have any money left to profit when they fail.
That’s how I see it – have I missed something?
I agree Adrian. I don’t think a trader fails necessarily by going long or short on a particular trade.. it’s how they size their positions. I’ve seen several different studies where traders went into positions based on randomness and made money in the long run…
I think that emotions are the first enemy to defeat… if you control your emotions you trade more efficiently
I can almost guarantee that this guy won’t be in business for long…or he will just sell his curve-fitted systems to the feckless masses instead of trading them himself.
These guys are a dime a dozen.
I can almost guarantee that this guy won’t be in business for long…or he will just sell his curve-fitted systems to the feckless masses instead of trading them himself.
These guys are a dime a dozen.
Trading a well tested mechanical system takes the emotion out of your trading and gives you confidence in your trades – saves you the head trips – like thinking you should fade yourself….or that you should get short your p/l ; )
The idea is correct. However, the opposite of trading forex should be interpreted as NOT trading forex. Capital preservation is guaranteed with this system.
Doing the opposite to a failing beginner is not likely to make you money as most beginners are noise traders who are almost random in their behaviour. This is kind of like betting on a coin flip. For example, if you bet the opposite of what you might normally bet on a coin flip, you will make no more money than if you bet on the next flip using your original idea.
If he wants to make money this way, rather than asking for trading signals from newbies, something that might be worth considering is that the smart money is taking profits when most retail traders are just entering their trades. A potentially profitable way of trading might be to look at the net long or short positions on a retail traders site like Oanda (see: http://fxlabs.oanda.com/cgi/fxlabs.pl?id=1), and counter trend trade retail positions when the market appears oversold. Just a thought. I don’t know how you would back test it, given the data is not easily available.