Over the longer term the performance of such strategies reverts to mean zero returns, minus commissions and opportunity cost, best case scenario. The main reasons are that you do not know who the players are and which way the arbitrageurs will move if they do, you do not know the inventory of specialists and whether they will try to increase it or decrease it and you do not know if big trading firms will decide to lock their profits or add to their positions. Let me give you a specific example of what happened to a friend who trades forex. He kept telling me what he has noticed that when currency X is up against the $ before interbank trading starts then currency Y will start moving up against the $ after an hour or so because, as he claimed, traders of currency Y were a bit slower than those of currency X. Fine, he had a few good trades and suddenly one day he got hit big time. Currency X was up 100 pips before the opening and he took a position in currency Y. After five minutes or so, currency X was up 150 pips and currency Y was down 75 pips from his entry price. Then, news came out and currency X plunged against the $ and that added to the loses of currency Y. The net result was that accumulated profits from the past six months were erased instantly cause of a bad trade. Ron
If the Bible says it is sin, I am against it........If the Bible says it is good, i am for it.........not for me to judge......May God bless each and every one of you.........
The best leading indicator would be to pick a few of the regulars posting here, and fade them at every opportunity.
It's not a "bad trade" it's INCREDIBLY bad risk management. To risk profits from 6 MONTHS on ONE TRADE... I did something similar (losing 1/3 of acct) only in the very beginning of my learning to trade.