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The fallacy of Metatrader EA trading contests 18 replies

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Technical Analysis Fallacy

Quoting korn_trader
p/s: psst..did you bring along a cheerleader?
Are you like referring to me, by any chance, or would that be my self-centeredness just thinking that? :

If you are indeed referring to me, then ... lol, well, I show my exuberance for him because I feel he deserves it and to be honest, I was very worried for him in the beginning, as I saw how people completely persecuted him previously, so I wanted to at least make sure that he was well received this time, and at least be given a fair chance.

Yeah, yeah, I'm a rescuer, but I can't help it, it's that scorpion in me, I guess :

I see him as a "giver," and a man of honor and integrity, so if I want to do a little cheerleading for someone who can give/contribute a LOT to people here, then by golly I'll do cartwheels and flying somersaults if I have to!

But, I don't cheerlead for no good reason, nor do I follow anybody blindly, nor put anybody on any pedestals (although I do give high respect, where high respect is due) ... everything I do, I do sincerely (not falsely) and feel from the heart

Sometimes, I feel that he won't disclose something about himself due to his humbleness, so I do it for him if I see fit.

Also, I do scold him, as well, so I'm not biased, you know, haha.

So anyway, I hope you don't see the cheerleading as a bad thing
Quoting fiveshorts
...and the other thing I wanted to dissect is this whole concept of timeframes.

Here's my take on it, please feel free to shoot my logic to pieces:

1. There's no such 'thing' as a four-hour candle. the market doesn't halt, make a note and then restart every four hours. Likewise one hour or 15min candles.

2. The OHLC of a '4hr candle' on my EST broker platform is totally different to the OHLC of a '4hr candle' on someone else's GMT broker platform, which generates different candlestick formations one broker to the next. A strong reversal on one is an indecisive reversal on another.

If what we're trying to determine is market sentiment and subsequent price action "in the moment", wouldn't it be better to watch a line chart? I have one up right now and the close values connected as a line seem to tell a much clearer story. They seem to respect logical levels much more closely (see attached) than do the porcupine quills of candle wicks. Opinions?

If we want to go totally naked and see the market as continuum, then aren't the candles themselves working against us by representing the flow as a broken, segmented series of (pseudo) 'events'? I don't want get all esoteric, but the question keeps poking me in the forehead.

I have a trading buddy out in Dallas (I'm a Brit in LA) and he uses a GMT-based broker. Mine's on EST. It's nearly impossible for us to discuss specific market/candle structures 'cos he's seeing something completely different to me on a candle-by-candle play out.

If there's an impulsive move followed by a retracement and a continuation, that is a continuum that is most clearly depicted on a 5min chart. It's summarised on a 4hr chart. But re-revealed by looking at a '4hr' line chart.

Just need to talk about this with anyone who'll humor me...
Your view is another approach to reading the price, imho. When using candlesticks, or bars for that matter, you are breaking the price into increments (as you already noted). So you can break the price into daily segments and see what the price has "drawn", or you can break it into even smaller segments, 4hr, and see what picture the price has drawn with these 4hr pieces (candles, bars). You will see formations of some sorts, and you will see that these formations happened before, and if you study these formations enough, you'll see that before making a turn, price behaves in a certain way and draws certain formations. Thus, timeframes are used to break the price up into several pictures and then compare those pictures and try to see the same thing on all of them (from my experience, this is when you catch a momentum).

ps. this is only my humble opinion, as after reading your post i couldn't stop thinking about it and asking myself a question, why indeed do I use timeframes, and this is the only answer I could give myself.

pss. another thought just came to my mind: timeframes are used to eliminate the market noise. if the price drew each of its moves horizontally continuously, it would be impossible to read it. (i believe i just contradicted my first centence in this post )
Trax Tibidax Tibidox...
i understand your thinking behind the whole idea of no stops. but for most of us as retail traders,we open ourselves up to technology risk by not placing a S/L in with our initial order. most of us don't have redundant power supplies, pc's and internet connections. ever sit thru a storm and all at once no power, no phone, no internet you get the idea. after reading this thread i can see why we would loosen our S/L's and put them at illogical places. but imho we still need a stop in place to protect us from that perfect storm.

thanks fti for explaining to us how the market operates
scott
Quoting fti

PS:Lets see if we can get the juices flowing,
No, up there.
For all you Analyst.
In one word, can you summarise the story in the context of trading?

regards
"ranging-market"
Quoting SunTrader
Anyone who believes the market is a battlefield or wild beast or the enemy or hates their broker who trades against them, or runs their stops....... has lost before they even begin.
Slighlty disagree with you...You don't lose because you know you are going to war...You lose because you KNOW you are going to war, but you still insist to GO unprepared for the battle...


Thanks,

Nader
Quoting opie999
Not trying to get into a big debate and I'm certainly not trying to speak for fti here but I think you may be missing something.

One of the underlying theories validating TA is that fundamental shifts, supply and demand, etc., are reflected in the charts as price action. In a very real sense, TA is just another means of studying the fundies.

Probably the most successful traders are using a combination of TA and news. It's dangerous to completely ignore either, imho.

There are few things in life that are absolute, least of all in currency trading.
the efficient market hypothesis is what you are refering....MAJOR fundamental shifts is what you should be looking for and THAT is never reflected in price until much later...example...the reducing amount of mines and supplies in copper from 1982 till 2003... that is a small quick example of what i am refering....
  • Post# 127
  • Quote
  • Dec 1, 2007 6:24am | Edited at 8:12am – Maybe my statement is wrong. I think the turtle is the market and traders are scorpion
Quoting fti
A Lesson about Human Nature.
The Turtle and the Scorpion.

PS:Lets see if we can get the juices flowing,
No, up there.
For all you Analyst.
In one word, can you summarise the story in the context of trading?

regards
Good story! But to my surprise, I never heard of this story before (btw, I am a Chinese, born, educated and grown up in China).

To me, if the turtle and scorpion are both rational and got rid of emotions, they won't trust each others' promise and therefore there will be neither crossing river, nor both killed.

If all the traders are rational and with no emotions in mind, there will be neither trading(crossing river), and nor losses(got hurt).

The market is a place of human nature, and that is the reason most of traders lost all finally. But traders still believe the promises emotionally, therefore the market goes on.
Quoting fiveshorts
...and the other thing I wanted to dissect is this whole concept of timeframes.

Here's my take on it, please feel free to shoot my logic to pieces:

1. There's no such 'thing' as a four-hour candle. the market doesn't halt, make a note and then restart every four hours. Likewise one hour or 15min candles.

2. The OHLC of a '4hr candle' on my EST broker platform is totally different to the OHLC of a '4hr candle' on someone else's GMT broker platform, which generates different candlestick formations one broker to the next. A strong reversal on one is an indecisive reversal on another.

If what we're trying to determine is market sentiment and subsequent price action "in the moment", wouldn't it be better to watch a line chart? I have one up right now and the close values connected as a line seem to tell a much clearer story. They seem to respect logical levels much more closely (see attached) than do the porcupine quills of candle wicks. Opinions?
Hi, fiveshorts. Yes, different platforms have different formation of charts even you use the same time frame such as 4H.

So what is candle or bar chart? In my opinion, they are only a record of price movements. That's all. Suppose a 4H candle, 4 specific prices are recorded during that 4 hours,i.e. open, close, highest, lowest. There are also many other prices during that period. To see clearly how the price moved in a 4H candle, you can look into 1H or 15M, 5M candles during that period of time. You may start a 4H candle from 00:06,04:06,08:06, etc, doesn't matter at all.

However by looking into visualized price records (price charts), you may see where market is probably going, and try to estimate a good timing to jump in to ride on the following price movement.

A daily candle chart is made of 6 4H candle, which is a combination of 4 1H candles, and so on.

Wish my humble opinions may help you.
Dear fti and all the fellow traders:

This is a USD/JPY trade I did last week, but with problems now(about -120 pips).

Back ground: On Tuesday and Wednesday, Dow Jones Index had two consecutive huge increases. U/J is generally positively correlated with DJIA. Bearing in mind that U/J is on a down trend daily and it has two consecutive increases of 300 pips for two days, the chances that it may finish retracement(deemed it as a retracement, since we never know it is a first wave of up-trend or just a correction) and continue down trend. (first chart)

Trade set-up: So, I decided to find a good timing to enter a short position and ride the continuing down trend. So, I looked into 4H chart on Thursday and waited for market weakness(in red shaded circle). (second chart)

After I saw the weakness, so I entered the short trade @ 109.86. After that things went OK, no big drop, but it was still going down slowly.(third chart)

Problems:

1. When I woke up Friday, and found out that after FED Chairman Benanke said interest rate policy making should be "alert and flexible". U/J went up and broke the resistance line. I didn't close immediately(that is my mistake, otherwise I would have money and won't miss the chances to add to my winning G/U short positions). Because I saw the resistance at 110.5, I wanted to see how U/J behave when reaching that price.

2. 110.5 did show some selling power, but U/J couldn't break 110 for several tries (you will see this in 15M chart). Hope came to me again. I just missed the second chance to close with about 20 pips loss.

3. U/J went up again, and broke 110.5. However it formed a kind of shooting star, so hope came to me again. I missed the third time to close with 60 pips loss.

Now U/J is 111.31, this trade has 130 pips loss and eats up half of my profits. So what to do? I will wait on Monday, if U/J went up beyond 111.75(highest on Nov 14), definitely I have to close no matter how price will go after that, just imagine that my G/U, U/C didn't make profits and last week no gain. Am I right? Comments please.

David
Attached Images (click to enlarge)
Click to Enlarge Name: UJ DEC1.JPG Size: 93 KB Click to Enlarge Name: UJ DEC1-4h.JPG Size: 109 KB Click to Enlarge Name: UJ DEC1-1h.JPG Size: 172 KB
Quote
PS:
Originally posted by fti : PS:Lets see if we can get the juices flowing,
No, up there.
For all you Analyst.
In one word, can you summarise the story in the context of trading?
TQ FTI for sharing and the opportunity to learn from you. Fear & Greed is my summary of your story. The river signifies the market flow and greed=turtle and fear=scorpion....The opposite river bank is our target price but gets choppy halfway and we bail out and closed our position henceforth killing both our greed and fear...

Sometimes too many TA indicators doesn't really help but instead give us conflicting decisions making ......will try to learn more about naked dancing with limited indicators (1 or 2) as double confirmation.
Green David, on my charts, USDJPY ended the week looking bullish on all 4 timeframes (see the attachment). But also there is a resistance on the way on all 4 timeframes, previous support which now becomes resistance on weekly, 50% fib ret. on daily, 127.2% fib expansion on 4hr, and test of TL from below on 30min. So, chances are that there will be a bounce down at around 111.49-59, but who can tell... would be nice to hear the others, and fti.
Attached Image (click to enlarge)
Click to Enlarge Name: usdjpy.gif Size: 80 KB
Trax Tibidax Tibidox...
finally, someone blesses me with unbelievable information more valuable than a trading system. i cried. the scorpion's the scorpion's the big boys, it's paws is the market, the turtle was me until i read fti's post.

question: why can't a successful trader just trade the news, it's so much easier? or is it just me lazy ass talking.
Quoting jku
question: why can't a successful trader just trade the news, it's so much easier? or is it just me lazy ass talking.
Are you successful at trading the news?

If you are then, my opinion is ... keep doing what you are doing.

I have come to realize, mostly from this thread, that it doesn't matter what dance you dance, as long as you learn the dance well and become good at it to become a successful dancer at it.

When I first started trading, I was doing shorter-term, shorter-timeframes. I was okay at it, but I realized that my commissions ate up my profits. So, I decided to go the longer-term, longer-timeframe route. I was so convinced by my own experience that this was the only way to be successful and have consistent profitability, that I tried to convince others that this is the way to go.

However, I have come to realize, after especially seeing how fti trades and just understanding more and more about the dynamics of trading, learning to read and feel the pulse of the market, etc., that there is no particular dance that is better than the other, it's simply a matter of becoming a master of the dance of your choosing and becoming successful at it.

Some people get slaughtered trading the news, while others do quite well. Some people make more money trading short term than long term, while the opposite is true for many others.

If you may be clumsy dancing the waltz, then perhaps the fandango is more your style.

Bottom line is ... dance the dance that suits you best and become a master at it. However, make sure that you have what it takes to dance that dance, otherwise you may end up with a broken leg that will be hard to recover, thus ending your dancing career very early in life.
Originally posted by Leighsww

I have come to realize, mostly from this thread, that it doesn't matter what dance you dance, as long as you learn the dance well and become good at it to become a successful dancer at it.

Hi Leighsww

I so agree with you. There is no set method or timeframe that is going to agree with everyone. Just be happy when you have selected something that you are happy with and is working for you.
Hi All

Moderators, Please removed Desiderata post No 52.
The reason is because it seems Desiderata may still be copyrighted.

If you don't know Desiderata and need to read it.
You may like to google it.

Funny, but is seems to me that with the upgrade, our rights to edit posting is removed, is this true?.....???

regards
Quoting David
Now U/J is 111.31, this trade has 130 pips loss and eats up half of my profits. So what to do? I will wait on Monday, if U/J went up beyond 111.75(highest on Nov 14), definitely I have to close no matter how price will go after that, just imagine that my G/U, U/C didn't make profits and last week no gain. Am I right? Comments please.
Quoting David
(you will see this in 15M chart)
David ... looking at the 15m chart, there does seem to be a resistance at 111.20, as it hit it 3 times. Also another Fractal to the downside below the previous Fractal has appeared so it's looking promising that there's a chance of more downward movement.

On the Daily and 4hr, Fractals have appeared, as well, so there seems to be signs of some downward movement there (but as we know, Fractals can redraw, so nothing is guaranteed).

By looking at the price action, I'm reading that there might be enough of a continuation of the downtrend to where you may be able to recoup your loss and even TP if the Daily downtrend continues.

Here's what I would do ... when the 15m shows another pullback and another lower high Fractal appears, I would wait for the breakout of that Fractal candle (or better yet, go down to the 5m to get a better idea of the entry point), then enter another short position to bring the Basis up (ex: 110.86 (add position) + 109.86 (original position) = 220.72 / 2 = 110.36). Then when the price lowers to 110.34, I might exit one position to lessen the load if I'm not confident that the longer term downtrend will continue in the short-term, yet leave the original position in, but now the basis will be 110.36 for the original position (P.S. this is a little bit of that MM that fti will teach later - haha, I hope I'm doing it right, but fti can correct me if I'm not).

Anyway, since you're already in the trade, you will have to decide whether you want to hold your original position that long, in the case where the downside trend doesn't continue in the short-term, cuz at this point, it could just go into a consolidation for a while, maybe throughout the holiday season (December), who knows, so you may be waiting a bit for it to hit your TP target.

Okay, that's my assessment.
There are many interpretations for the turtle and the scorpion story...

1- Don't risk too much in return of nothing

2- Always expect the un-expected (River Choppiness)

3- Don't expect a scorpion to act differently this time - A scorpion IS a scorpion (It's never different this time or any other time)

4- NATURE is always NATURE - HUMANS are always HUMANS - MARKETS are always MARKETS

5- Never get yourself into Trouble

6- Never get yourself in situations where you can't get out - Never get yourself in killing like situations

7- Only accept your reasoning

8- Don't be a hero


A one sentence summary is "NATURE is Killing"....

A one word summary is "Idiots"....


Thanks,

Nader
Quoting fti
Hi All

Moderators, Please removed Desiderata post No 52.
The reason is because it seems Desiderata may still be copyrighted.

If you don't know Desiderata and need to read it.
You may like to google it.

Funny, but is seems to me that with the upgrade, our rights to edit posting is removed, is this true?.....???

regards
There is a time period where you can edit and/or delete a post. Believe it might be something like the first 24 hours or maybe just by midnight of the day it was posted.
Hi ALL,

Since Leighsww is cheerleading for me ( keeping this thread very lively )with running around naked and doing cartwheels and flying somersaults, I thought that I should do my part and have a go on the exercise as well.

For the record, I met Leighsww, on this forum in someone elses thread.
I was banned for a while for carrying their thread OT.
Leighsww contacted me to give me a backup of my postings and I got to know her better. She tried very persistantly to try to get me to start a thread at FF, as she thinks I can help some of the new traders, who may be seeking to learn about the markets.
I believe that she also felt that she would enhance her understanding, on what little that I tried to highlight to her. So here I am for a little time.

I see Leighsww, as a classy lady, with a big, kind and chilvarious heart.
A standup type of person with artistic and analytical accrument.

Thanks Leighsww.
cont.

Leighsww, Please reread from my earlier postings
"....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...."

For some of you, your education is still in progress.
Therefore I will only explain to you, why I do somethings the way its being done, once the lesson is complete. Therefore I shall not be going into certain subjects which have been highlighted, until it is appropriate.
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