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Technical Analysis Fallacy

Quoting fti
then sorry you're on the wrong bus. (again borrowed from leighsww
Well, I borrowed that from feb2865, so the credit is his, lol

Quoting fti
Leighsww, sorry MM gotta come later. Foundation first, ok.
Yes, I totally understand.

Quoting fti
apart from that, most parts are old and rusty,
work for a while, gotta rest, otherwise overheat and fail.
If you asked a tech specialist, probably recommend that this piece of machinery be scraped ...

... Please do not imagine and old and sickly man.
I am not young and vibrant, but far for old and sickly.
I'm sure glad that you said that last paragraph in your quote, because I was about to scold you and say, "sheesh, you're 2 years younger than me, so STOP saying you're old!!! "

Quoting fti
You see, when bulls are making money, Bears are not.
When bears are making money bulls cannot.
But the one whos trying to catch both buses will sooner be dead. Crossing the road from one bus stand to another,
Because he could be at the north stand when the south bus comes, or the south stand when the north bus comes.
or mostly in th middle of the road, when both bus comes.

Do I make any sense?
Yes.

Quoting fti
For dealers, its a different game ...

... Am I making any sense to anyone here?
LOL, okay, that whole section, I think we gotta digest more and I'm sure we'll be asking questions as soon as we recover from the after-shock :
Originally Posted by fti
You see, when bulls are making money, Bears are not.
When bears are making money bulls cannot.
But the one whos trying to catch both buses will sooner be dead. Crossing the road from one bus stand to another,
Because he could be at the north stand when the south bus comes, or the south stand when the north bus comes.
or mostly in th middle of the road, when both bus comes.

Do I make any sense?

Excellent analogy..... thank you and hope to learn more from you.....
Quoting fti
Hi ALL,

A
When I wheeling & dealing, when much younger, normally had pissed drunk sessions a lot, \
I guess you know, how brokers throw liquor at dealers, on drink outs.
Walk back next day to dealing room, still a little sober, tend to read trends better.
Don't know why, for me it works. You may like to try that.
I know its naughty influence, but it somehow works, don't know why, but it does.
So before I teach anymore "unbecoming influences, I stop there.
Just thought that I should iiform you.
This is quite a profound statement, my insight is that after drinking a lot the next day your mind suppresses a lot of the thoughts normally running through your mind. Your mind dosn't want to try to figure things out, but instead sees it as it is (Alcohol being a depressive, not depressive as in the emotion, but as in opposite of stimulant).

This is very much the ideal state of mind when trading. Relaxed, with a still mind. A still mind is one that can operate in the present moment without distracting thoughts, or trying to out think the market.

Although alcohol recovery is one way of doing it I believe many could benefit from doing even 15 minutes of meditation prior to looking at charts. This will bring you to a similar frame of mind, albeit one that is much more clear. Whenever I meditate before I look at the charts I find that I enter exactly the same kind of frame of mind you describe. Suddenly the trends and what to do become amazingly obvious then the normal state of mind with its thousand thoughts racing trying to make intellectual sense of it all (which is ultimately futile)

Just my 0.02... great postings fti... I have been lurking in the background in all the main threads you have been posting in. A+ stuff, especially the stuff I have to read over multiple times in order to really get what you are saying - as it stimulates my own thought processes going through it.
To be one with the market, you must first be one with yourself.
Quoting fti
Hi All,

You see, when bulls are making money, Bears are not.
When bears are making money bulls cannot.
But the one whos trying to catch both buses will sooner be dead. Crossing the road from one bus stand to another,
Because he could be at the north stand when the south bus comes, or the south stand when the north bus comes.
or mostly in th middle of the road, when both bus comes.

His modus operandi, is to "duck and move quickly"
so as to have a better average on the up swing towards stops to maximise his shorting near the top of the swing.
This scenerio is most effective if there are stop near levels where he las a large order to sell,
where he can help the customer sell OB and "kill the sitting duck stops" in the same blow.

regards.
Hi, fti. Thank you for your excellent explanation.

" But the one whos trying to catch both buses will sooner be dead. Crossing the road from one bus stand to another,"

The above statement means that when you start to open a position, you need choose the direction either long or short, of course better to choose the direction of daily chart. When you choose to long, better wait for the retracement to get in for sake of good price and lower risk. right?

" His modus operandi, is to "duck and move quickly"
so as to have a better average on the up swing towards stops to maximise his shorting near the top of the swing. "

The above saying means that some big players just take advantage of stop loss. And it explains why we have false break-outs, since above a import price such as a previous highest price etc. And this also explains why you said better not placing stop loss, take stop loss depending the situation. Right?

Thank you very much. I learned quite a lot from you.

David
Hi ALL,

@ sovo1970,

Thank you for your kind words.
You have Leighsww to thank though,
cos' the original analogy was about chasing skirts.
Since she went naked waiting for buses, it gave me the inspiration on this analogy.
Gosh, things a nsked woman can do !!!.

@ unforseen,
Right on, couldn't have said it better myself.
now that I been on the wagon.
I try to meditate, but cos of my nature, the music does wonders too. esp Lakme theme.

@ Green_David
Normally I want to start with a blankmind,
but when I have over-nights, I would continue from there.
Don't thinmk its a walk in the park, sometimes esp when markets get confused, it can get very scary.
esp whrn the book gets very large. and it keeps snowballing on you.

When I was a young dealer, they used to comment that I had balls of steel.
But mostly after the trades, I feel very balls broken ,
and used to recover by intense wiskey sessions.
If you ever sat with positions where your hand are shaking and you mind have to hold steady and steadfast ,
then maybe you may understand.

For new traders you may be going to the little boys room more often than necessary.
I have had experiences where new dealers, vomitted on the desk before.
I am the type of trainer that throws them into the deep ends.
Ultimately their books are mine, so if they get into trouble, I have to take over.

The trick is to hold very steadfast to the position allowing the snowball build on you,
the maxim is to be able to take the punches first,
once the rubber band swings back, whack them like theres no tomorrow,
within your capacity and keep taking profits along the way untill the frenzy slows off
then square down for the next attack.
Important thing is to know your limits, if you have been snooked out of step,
once you you get the chance bail out, log stock and barrel.
Try not to turn, if you do, you may become a pig.

Now if anyone goes bankrupt doing this don't take it out on me.
I m just trying to tell you how its done. Like the WWF ppl say" don't try this at home".
We train and train to be able to reflex like that and to hold with our limitations.
Remember its not easy.
Tailor it for yourself within your risk appitite and limits.
Don't kill yourself over it. Never risk more than10% of net worth on any battle.

Stop loss are for suckers (oops sitting ducks)
Sure it gives you peace of mind , thats because you're not watching after your babies,
but at what price?
Dance the dance.
If you cannot take the heat, stay out of the kitchen,
If there's a problem. Chances is either over leverage or over trading, or undercapitalise.
These mkts you are trading in, are killing fields,
and there's lots of calm on the surface,
in the undercurrents, theres lots of killing going on.
And I kid you not.

Don't for one moment hink that, just because you learned something fromme.
You can go out with your guns blazing.
There's lots more than meets the eyes. So be cautious.
Ultimately at the end of the day, its all YOU.

If your plan is to piranya bits and pieces from the market.
Remember, that Hansel and Gretel got themselves in a cage by picking uo bread crumps.
If you are picking up crumps, try not to take on the entire market swings.

Next post, I may introduce a little chinese story to you.

regards

PS: That's one of the reasons, I don't advocate treating brokers to harshly.
Esp over a few pips sort of issues, because sometimes,
these guys also go to hell and back just to earn a littke bro.
Sometimes they have to sell their soul for your business.

regards
Quoting fti
For dealers, its a different game, because when markets are going up in a BEAR market, customers keep making them short,
their book keeps getting bigger short, but their average cost of being short keeps going up.
all they have to do is to wait for the trend to enforce and
when the market returns to the point where the buying started ,
he would make nearly the amount of money that made him short in the first place.
How long are you refering too? eur/usd is in an uptrend for 2 years now? i'm pretty sure you don't let those books geting so big now.

Thx for sharing your experince with us
"Abandon all hope, you who enter here" La Divina Commedia, Dante Alighieri
Hi semar,

When I was dealing, my threshold of pain was 500mio usd daylight
my loss trashold was 10 mio 1 day.
my scope of time was 30 minutes.
I used 5 min charts as I have mentioned
overnight positions had no loss threshold.
allowed over nights lines 50mio
actual posiyions on average 5 to 20 mio
depending on the feel and the profits already in the book.

For individual traders, I think you will have to do you own maths,
its different from one to another. When I trade for myself. I would go to 10 cts if I have to.
better make 10cts thanto lose 10 cts.
hopt this helps.

regards

PS
@ Green_David
About trends, don't think, ask her.
if she don't tell you, wait
be patient, it will show, it's not that she won't tell you.
She hints and hints , but if you don't get it
when she gets angry, she'll tell you straight, if you can catch it fine.
sometimes she don't wanna dance, she may jjust want a fling her and there,so wait.
otherwise, there are many fishes in the sea.

At tier 1 I see flow, I check whats my blotter direction,
what didi big orders do, how often they are hitting me.
where are the ducks, how large are they piling.
But as trader you cannot see flow, so watch the pips move, it should tell you.

regards
Thanks for your previous reply fti.

I actually saw it while at work (live in Australia) - but needed to get home and read again to take it all in.

Mostly I understand what you are saying - although I have a question in relation to your intraday trading compared to reading the trend off daily charts - that is the trend on Euro has been up, however you obviously get days of "bear" candles within the uptrend - would you still have been looking to buy on these days - or is this where you start moving to the smaller timeframes to determine the days move?

You have a great thread here and we have much to learn from you.

Thanks so much for sharing.
Hi Maseyw,

regarding trends,
trends mean different things to different people.

the accepted defination of a trend is a persistent direction of move,
on an up trend the highs get higher and low stays higher,
conversely a down trend, when the low gets lower and the high stays lower.

no trends move in a straight line advance or decline.
within any major trend, there are minor trends, then there are intraday trend, hourly trends and so forth.
its your choice to decide which is within your scope to cope with.

For overnight positions, its only prudent to stay with the major trend, cos' no one knows when it will kick in.
for managed daylight you should always trade the dance.
a bad position in the 5 min plays can be made good in the hourly plays, and the latter can be made in 5 Hrsly and so forth.
It depends on your own stamina to cope.
Be aware that the overnight positions are only a fraction of the daylight management.

In your example we have been in daily uptrend mode, but I did highlighted that the CB was watching and preparing.
So even though it we are in a Eur uptrend , youmust be aware of the the players, esp CB.
If you look at your daily chart , you had 3 days warning of letargy and a final warning yesterday. Today a reversal is already in progress.
So during these times either you take bigger risk to go reversal or
just wait for clearer signs.
or trade the daylight trend.

moreover there are times where there are no trends.
or trends are slowing down, we call that topping or bottoming action.
If you trade trends only, do not feel that you have to have a position.
There are times when no position is a position.
If you traded trends only, probably 70% of the time you would be aside.

When we manage daylight trading, profits attained from that activity is normally used to enhance the cost of the at risk position.
Thats why I do not place stop loss, and by virtue of the overnight being only a fraction of daylight trading.
the Cost of the overnight is normally way off the charts.

regards
Thanks fti

You've cleared things a little more for me.

I like trading daylight time.....or night time for me....I like to babysit my trade
this may sound silly, but when you refer to overnight, you refer to the US session, since you stay in singapore?
"Abandon all hope, you who enter here" La Divina Commedia, Dante Alighieri
Hi semar,

Like I said no question is silly. don't worry.

About daylight,
Being tier 1, my dealing room operates round the clock.
I had 3 shift of dealers,
the number of dealers are biggest on sg time.
the number of dealers are smaller on london
During london morning , both my sg dealers and london dealer team are operational
By london afternoon, up to Ny cross over whats left is the london shift.
by NY afternoon , only 1 spot dealer is in and my futures dealers are in the room , as CME take over NY afternoon dealing and most interbank activity slows to a crawl. then Wellington (twinlight zone)and back to Sg.

So when I say daylight, I mean each teams daylight, but the dealers have bigger lines during Sg daylight, due to seniority compared to the graveyard shift dealers. At all times I am on standby so my daylight is 24 hrs, esp during release of figs nights. I have a choice for selecting which sector I am active on. For your purpose you should consider when you are babvsitting , daylight.

Hope this clears it for you.

regards

Ps: for the guys that think that this USD had reversed, Word of caution, Turning only in progress, watch out for economic figs soon , refer calander!
Quoting fti
For dealers, its a different game, because when markets are going up in a BEAR market, customers keep making them short,
their book keeps getting bigger short, but their average cost of being short keeps going up.
all they have to do is to wait for the trend to enforce and
when the market returns to the point where the buying started ,
he would make nearly the amount of money that made him short in the first place.

For this to happen, he has to have a book big enough to accommadate the customer base.
AND as the market swings back towards the start point, he has to ascertain that his book of shorts, be kept constant.
This is because on the way down the customers will be making him long.
So by constantly covering back to back on the way down he maintains his book short.
So for the dealer, as long as he maintains his poise in the direction of the markets major trend,
he will always make "scalp money", guanranteed.

His modus operandi, is to "duck and move quickly"
so as to have a better average on the up swing towards stops to maximise his shorting near the top of the swing.
This scenerio is most effective if there are stop near levels where he las a large order to sell,
where he can help the customer sell OB and "kill the sitting duck stops" in the same blow.
Another senerio is where by the heavy selling is CB levels or specific sell zones,
where many teir 1 are ready to pounch on the buyers.
You must understand that only tier 1 and some big tier 2 will have this advantage.

This is the reason, why you have rubber band snap backs in the direction of trend directions,
and slow puffy moves counter trend.
Am I making any sense to anyone here?

So we use daily trend as the direction to build book size and short charts to make market for retraces.
Do discuss this on this trread, no questions are silly, just discuss until it becomes clear.
Don't understand !, argue until you understand.
Fight if you must, I will not complain.

YOU MUST GET THE CONCEPT OF MARKET STRUCTURE RIGHT TO UNDERSTAND THE CHARTS.

I didn't wnat to get into this first, but since it is being asked here we go.
I wanted to get across the basic foundations right first,
cos if your foundation is slopy you will get a slopy structure built on it.
not so unlike building a house.
Nevertheless this is also the advance level of foundation and is an acceptable direction togo.

Hi fti

I'm still trying to absorb the above with interest. I have read it a few times and each time it has made more sense but there are a few things I don't understand. Perhaps I'll have some more questions later but here is the first one. You mentioned :

"So for the dealer, as long as he maintains his poise in the direction of the markets major trend, he will always make "scalp money", guanranteed."

What do you mean by "maintains his poise"? Are you suggesting the dealer also has a position in play?

Thanks
Quoting fti
Hi semar,

PS
@ Green_David
About trends, don't think, ask her.
if she don't tell you, wait
be patient, it will show, it's not that she won't tell you.
She hints and hints , but if you don't get it
when she gets angry, she'll tell you straight, if you can catch it fine.
sometimes she don't wanna dance, she may jjust want a fling her and there,so wait.
otherwise, there are many fishes in the sea.

At tier 1 I see flow, I check whats my blotter direction,
what didi big orders do, how often they are hitting me.
where are the ducks, how large are they piling.
But as trader you cannot see flow, so watch the pips move, it should tell you.

regards
Quote
moreover there are times where there are no trends.
or trends are slowing down, we call that topping or bottoming action.
If you trade trends only, do not feel that you have to have a position.
There are times when no position is a position.
If you traded trends only, probably 70% of the time you would be aside.
Thank you fti. I will always remember your saying dancing with the market. I think it is great thought beyond mechanical technical analysis.

So, for trend determination, we must see the chart not think/assume by ourselves. If the sign of trend is not clear, be patient and wait standby with no positions.

So, when you carry the positions over night. You will reduce the size to a safe level as no need to place a stop loss. I see.

Thank you very much. Looking forward to your Chinese story, I wonder if I ever heard of .

Cheers.
Hi ALL,

@ Zoran,
I will not go into details of how it is done, As it is dealers bread & butter issue.
Just know that that there are ways of moving price, where he can make things happen.
Just understand that he is making the interbank market and it is his market.
If his book is threatened , there are ways he can neutralise the danger.
I hope you understand the sensitivities.

@ Green_David

I believe you already know the story.

@ALL
One thing here, that makes me uneasy. This is not classroom.
Why do you all, seldom talk to each other?
Is there something I should know?
Could someone email me about it?

regards
I am really enjoying your thread, FTI. I especially like the explanation of market structure and it is helping me visualize some possible big picture strategies for trading.

I am hoping at some point, we can get to your thoughts on specific ways that we tiny retail investors can benefit from an understanding of that market structure with practical trading strategies.

My initial thoughts were that a good strategy might start by looking to trade in direction of an established daily chart trend when the 4 hour chart is extended in the opposing direction. The key would be to have small enough trades relative to capital to withstand sizable moves against you.


I actually tried to trade this way with equities (stocks and options) and had some initial success, but got into trouble because I was trading too aggressively and the overall market turned against me before i realized it was happening.

am i on the right track here or is this too simplistic? Sorry if I am getting ahead of myself and you did not yet want to discuss specific trading strategies. I found your thread because naked leigh was promoting you in her journal thread (thank you Leigh)
Quoting fti

I try to recognise the compounded formatioms in the bar charts.
A good reference to forms study wasdone by a researcher, by the name of John R.Hill,
I'm not sure if his studys are available to the masses.
They read compound chart formations.
An understanding of Hip and Lop patterns is foundational requirement.
Hi fti,

There is one book I know of, and have, by John R. Hill. It's titled, "The Ultimate Trading Guide" and co-authored with George Pruitt and Lundy Hill. I was told I must read it by the best trader I've personally known who like yourself was a true professional.

I'm enjoying your posts immensely.

Thank you.
Quoting fti
@ALL
One thing here, that makes me uneasy. This is not classroom.
Why do you all, seldom talk to each other?
Is there something I should know?
Could someone email me about it?

regards
I can only speak for myself in that I see you coming here with vast experience and are prepared to share your wisdom. My attention is on you and although I read other posts, my interest is in what you have to say. I suppose as the thread matures we will naturally start to speak with each other.
Hi fti, and all other fellow traders:

Today I applied the concept of dancing with the market.

I opened a short E/U position around 1.4820 yesterday London open. But I didn't take profit last night, and then US stock market increased. So my profits gone, but I didn't close, because I think market will dance south again. Today I closed the position with 84 pips profit.


The reason is that I saw price went down and broken 1.4730 and a bounce, but after this bounce-back I think if E/U shall go to 1.4700, it should not hesitate and bounce for a second time.The price behavior is not correct(Thanks to Jesse Livermore also!).

Maybe it is a dancing with the market. Am I right?

Thank you fti for telling me dancing story and feeling the tempo/rythem of the market!
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Quoting fti
Apologies
-no mentor, or course, or literiture can give anyone the holy grail to the secrets of success in trading in the markets.
-"and no one, sells the goose that lays golden eggs, probably the eggs, but never the goose"
Nevertheless, I will humbly attempt.

Since the late 70s and into the millinium.
Many "engineers" have made public, their inventions of reading probabilities into Technical Indicators. Many Technical Analysis Gurus came to the forefront to sell their research findings. To name a few,
The Grand daddy being Charles Dow and his Dow theory which later lead to the creation of the Dow Jones Indexes.
Rene Descarte who introduced the Spiral studies.
Leonardo Da vincci who fostered the fabonacci principles,
W.D. Gann, who introduced Cyclic Studies of Squaring time and price.
R.N.Elliot, who introduced the Elliot Wave Studies
W.Wilders.Who introduced the mathematics of calculating overbought and oversold markets by his introduction of the DI+,DI-, ADX lines and the Relative Strength Index.
The Stocastics, MACDs, ……………………………...etc

If one was to impliment all these studies onto their charts. What you will see is a beautiful piece of art, displaying very impressive hog wash, that do nothing but dazzle the uninitiated. If anything else it 'll confuse you even more.

Then you have the charting specialist who have introduced many ways to chart eg,
Linear Charts, HiLoClose Bar Charts, Japanese candlestick charts, Point & Figuring, John Hill's Bar Chart congestion & reversal patterns, reverse point waves, pivots, fractuals, ………..etc

Today, we find lots of originally and mutated techniques and methodologies available to the Chartist or Technicians.

What many fail to realise, is that all these studies, basically are statistical tables plotted in graphic form to present a "picture" to assist traders in their decision process. The maxim being, that a picture tells a thousand words.

"It is not theirs (the charts) to reason why,
But to signal Sell or Buy,
For the traders to do or die,
Hoping that the signal does not lie,

I would, from my many years of studies, go so far as to say, that they all work, some more than others but they all do serve a purpose. (to give traders, the "guts" to do or die)
If I may borrow from the quotes of Sir Winston Chirchill.
"That you can lie to some people all the time, all people some of the time, but not to all people, all the time."
Similarly, theses studies can work in some market conditions all the time, all market conditions some of the time, but not all market conditions all of the time."

Think about what I've just quoted very carefully.

The problem with some people and some professional Technical Analyst today ( being a certified Technical Analyst myself ) is that they use the Technical studies as if, it were the "Holy Grail" of trading & their pathway to the millions.

How far that is from the truth.
Any person with a good brain on their shoulders, will ultimate come to the realisation that these are just tools. Tools that are built on historical and lagging databases. Moreover the rigidity of the parameters used in the studies imposes rigid responses to changing market conditions. Have we forgotten that the market is a live beast that learns and adapts to trader behaviours? Many have forgotten that the market is the sum total of the behaviour of the participants engaged in the market place. These tools are used for measuring the markets health, not so unlike the thermometer to a doctor, or the measuring tape to a carpenter, just a tool.

Then how is it possible that these studies themselves can be considered the "Holy Grail"?
It may be due to ignorance (being new and uniniatiated), lazyness, or just plain stubborness ( a little knowledge is a dangerous thing). Of course it is not nice for me, to tell you about those who have "a little knowledge", trying to scam those who know less than them. That's another story.
Some do so, because of a very new disease discovered recently, the sickness of "the chance".
If you use the Technical studies as your "Holy Grail", I have only one word for you, GAMBLER.

I put it to you, that, to consider your Technical Studies to be more than what they are is a "fallacy" in trading the markets, not so unlike martingale gamblers' fallacy. It can lead you to a very dark place.

What many traders do not know, or may fail to recognise, is that your success in taming the markets, is comprised of a mix of ingredients. Not so unlike in baking cakes.
I suggest three very important ingredients. One is " Market Structure ", the other is "YOU", then Capitalisation. Of course there are many more components, for the moment these seems of dominant importance, in my humble opinion.

I hope you will think about what I've said very carefully.
I shall try to push these doors ajar for you slowly to show you the light at the end of the tunnel (please hope its no on-coming train), God willing.

regards

could not agree more about it's fallacy

technical analysis is nothing more than voodoo...your better off just flipping a coin....if it worked everyone would be rich...use your brain and study hard the fundamental shifts because THAT is the only thing that moves the market simple supply and demand
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