Technical Analysis Fallacy | Page 47 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

The Ultimate Fallacy in Technical Analysis 99 replies

"Technical Analysis Fallacy" thread people, I need your help 54 replies

Technical Analysis Fallacy Redux 23 replies

Statistical analysis fallacy 33 replies

Attachments: Technical Analysis Fallacy
Exit Attachments

Technical Analysis Fallacy

  • #921
  • Jan 18, 2008 7:22am Jan 18, 2008 7:22am
Quoting HapaSasa
Hi Zoran,

I can see that I need to go back and read through more of the posts but just for me to get some sort of perspective on all of this, could you give me an idea of the time frames and range of price movement you would be trading.

No matter what the numbers are you should only decide what percentage of your capital you are prepared to put at risk, the more capital, the longer the time frame possible and the more chance you have to use these skews and spirals?

regards
These are just my thoughts for the moment. It doesn't mean I'm on the right path.

I think you should read through the thread to get a better understanding. There is quite a lot of valuable information here. What fti recommends is not exactly the norm in terms of what most amature traders believe with regard to time-frames and capital risk.
  • #922
  • Edited 10:27am Jan 18, 2008 9:29am | Edited 10:27am
I'm still in larva stage, have to struggle more to become a moth.
  • #923
  • Edited 11:12am Jan 18, 2008 9:38am | Edited 11:12am
Quote
"Whether to concentrate or to divide your troops, must be decided by circumstances."

This is the method of attacking by stratagem.
It is the rule in war, if our forces are ten to the enemy's one, to surround him; if five to one, to attack him;
if twice as numerous, to divide our army into two.

[Tu Mu takes exception to the saying;
and at first sight, indeed, it appears to violate a fundamental principle of war.
Ts'ao Kung, however, gives a clue to Sun Zi's meaning:

"Being two to the enemy's one,
we may use one part of our army in the regular way,
and the other for some special diversion."

Chang Yu thus further elucidates the point:
"If our force is twice as numerous as that of the enemy,
it should be split up into two divisions,
one to meet the enemy in front, and one to fall upon his rear;
if he replies to the frontal attack, he may be crushed from behind;
if to the rearward attack, he may be crushed in front."

This is what is meant by saying that
'one part may be used in the regular way,
and the other for some special diversion.'
Tu Mu does not understand that dividing one's army is simply an irregular,
just as concentrating it is the regular, strategical method,
and he is too hasty in calling this a mistake."
Quoting fti
Hi ALL,
Anyone trading EURUSD since yesterday?
the wild side is showing, no way to survive unless with correct money management. what a ride. am still dancing, both ways.
The GBPEURYEN crosses would be killers . Be cautious. Volatility shooting off screen.

regards

I think we should have a discussion on what was discussed in lesson 2 with reference to splitting the army in certain market conditions and attacking "both ways" as in a diversion, like fti had played. At first glance it looks like a the trader is lost on the dance floor. However, what you are doing I think is allowing the mixed volatility pair to run either direction when it looks confused. One group is gaining ground while the other is under attack, when the attacking enemy tires, MM your latter group out from under the attack. In a sense you are strategically squeezing the enemies resources, until clear direction is established.

Yesterday I was in the eur/usd trade and was getting whipped about. Had I attacked "both ways", not only would the rescue be hedged, but the gains would have been advanced. This wouldn't be a normal method of attack, but when market conditions dictate, it could be a valid way to divert and split the army.

Please discuss this further and lend your thoughts. I see a lot of members and unsigned guests viewing, but little posting. This is a great thread with many thought provoking ideas and concepts that are not necessarily conventional for the forum, which is very refreshing. If we cannot keep a stimulated interest in this thread I have a feeling we will let the big fish get away. I think fti would want more ideas to be discussed but has already stated, he wants to weed out the weak and the ones unwilling to learn. Ask Ask Ask...there are no stupid question...I have lots. Please contribute ideas, good and not as good.

NP
  • #924
  • Jan 18, 2008 11:07am Jan 18, 2008 11:07am
Quoting Northpro
I think we should have a discussion on what was discussed in lesson 2 with reference to splitting the army in certain market conditions and attacking "both ways" as in a diversion, like fti had played. At first glance it looks like a the trader is lost on the dance floor. However, what you are doing I think is allowing the mixed volatility pair to run either direction when it looks confused. One group is gaining ground while the other is under attack, when the attacking enemy tires, MM your latter group out from under the attack. In a sense you are strategically squeezing the enemies resources, until clear direction is established.

Yesterday I was in the eur/usd trade and was getting whipped about. Had I attacked "both ways", not only would the rescue be hedged, but the gains would have been advanced. This wouldn't be a normal method of attack, but when market conditions dictate, it could be a valid way to divert and split the army.

Please discuss this further and lend your thoughts.

NP
Hi NP

I don't think fti attacked both ways at the same time. As far as I understand that would be lining yourself up to be run over by a bus. I also played the market both ways yesterday. First I sold the Eur/ Usd took my profits and then I bought it and took profits. I could be wrong but I don't think fti meant attacking both ways at precisely same time.
Hope isn't a viable investment vehicle.
  • #925
  • Jan 18, 2008 11:23am Jan 18, 2008 11:23am
Quoting DutchAngel
Hi NP

I don't think fti attacked both ways at the same time. As far as I understand that would be lining yourself up to be run over by a bus. I also played the market both ways yesterday. First I sold the Eur/ Usd took my profits and then I bought it and took profits. I could be wrong but I don't think fti meant attacking both ways at precisely same time.
Dutch,

I didn't necessarily mean at precisely the same time, but it could still be in play simultaneously, just staggered at a strategic level, when a diversion is justified. I think they could be overlapped, but I could be wrong.
Thanks for replying.

NP
  • #926
  • Jan 18, 2008 11:46am Jan 18, 2008 11:46am
i believe the army stands for capital.

so if we are faced with a situation where we could further divide our risk, there is a good chance to make the trade a double whammy.

sayif our first entry is faced with repulsion, with proper timing and management the second wave could crush the trade into a rout.

well, thats what i thought when hypothetically thinking.
I believe by watching the dance and staying in tune with it, we could somehow catch the drift on what our chances are at winning.

i'll try to make it a point now, when i have established my direction, not all my entries are gonna be perfect, so i must somehow use a backup plan, re-enter at a newly mitigated price zone, since the odds are still in my favor.
  • #927
  • Jan 18, 2008 12:21pm Jan 18, 2008 12:21pm
jest,

yeah that's what I am talking about. at specific points of inflection when the market is pausing and possibly reversing, based on the pulse of the dance, we can hedge the original position now by playing both ways, this is the strategic entry I am speaking about. Again, your MM is specific set in place for this as is your rescue MM if needed to be deployed. This isn't so much "chasing buses" as it is coming to the end of the line at the roundabout.

thanks for the input.

np
  • #928
  • Jan 18, 2008 2:23pm Jan 18, 2008 2:23pm
I was thinking it means to have the market covered. When the direction is far from certain, be ready and attack once the action provides a directional signal. But in those cases being on both sides is fine (but tricky as he mentions).

I'm not sure about hedging. fti has not mentioned it at all apart from his OTC options at the bank. Here is a post he made and quoted below.

http://www.forexfactory.com/showthre...34#post1751534

"I dance in one direction, when there is determined trend.

Dance in both directions, where ranges when no predominant trends exist. To stretch the range.
This is a little tricky and the strategy requires adequate capitalisation.
The foundations for the MM is in the table provided, of course, for the bank, the pockets were very deep. For traders, I suggest milder or adjustments to accomodate risk appetites.
The MO is provided in the Art of War."
  • #929
  • Jan 18, 2008 3:00pm Jan 18, 2008 3:00pm
Thanks Zoran...maybe hedge is the wrong terminology, but yes playing one way when the trend is obvious, play both ways when the pair is ranging. This kinda what I was getting at. In certain market conditions when we can determine that the pulse is non directional in clarity but at points of inflection, we can attack from the rear so to speak.

On another note:
I had an incredible week trading. Although I only used small resources, I applied the MM principles and the AOW mindset with every execution. There were only 10 trades. I had 9 winners of 10. The 1 loser was a rescue in process that I had to close out prematurely from priority commitments that had to be taken care of, it would have been rescued in hindsight had I stayed in the fight. I had 1 other rescue that was profitable, and one fight that was played "both ways" that worked well. I think the mindset of a completely planned battle is responsible for 95% of the victory, the MM is just a mechanism that assures greater success...at least thats how I feel. I didn't get psychologically beaten down when a trade momentarily went against me, I had a plan and resources standing by to rescue when and if needed. This confident and well planned process in my mind is invaluable to my trading. I hope others are seeing the immense potential as I am..please share and lets continue to learn together. Thanks fti.

Have a great weekend all.
NP
  • #930
  • Jan 18, 2008 4:24pm Jan 18, 2008 4:24pm
Just some thoughts on snow balling in a rescue using skew, I think that as you buy in at percieved turning points for maybe even small retracements, once you have a retracement and the PA is telling you it's stalling again to continue against you, take some profits from the swing to add to your book.
If you add to your trade, even with a large skew you might not reach the target required for a complete rescue and if you stay in with the larger position you are subject to an even bigger skew for the next swing.

To me at least, this is where you need to make strategic attacks or 'dance' with the market, as you get in the swing you can keep taking profits to keep building your book to a point where the initial lots when closed will leave you book even or at a very small loss.
If the market begins to go your way you can make a good profit as well.

In short, using the skew table is good for planning your attacks, if your attack doesn't quite work, take ground as you can and be ready for the next attack using you new gains for troops to protect the book.

Of course, if your initial lot sizes are small and you are obviously trading in the wrong direction you should cut your losses and exit.
  • #931
  • Jan 18, 2008 4:32pm Jan 18, 2008 4:32pm
Quoting Zoran
These are just my thoughts for the moment. It doesn't mean I'm on the right path.

I think you should read through the thread to get a better understanding. There is quite a lot of valuable information here. What fti recommends is not exactly the norm in terms of what most amature traders believe with regard to time-frames and capital risk.
I´ll be reading through the thread again - there is a lot to absorb and I am well aware that I am out of my depth here.

The difficulty I am having is that I am looking at this as a retail trader with very little experience (and a small trading account).
I am sure that those who are able to apply all the skewing, spirals, martingale and logarthmic stuff are consistently profitable traders, who have sufficient capital available to allow for big price movement, say 200 pips?

I´ll try to illustrate what I mean:
- an account of 2000 trading capital, just trading long with one mini lot, then after a 25 pip drop in price I go in with 2 mini lots, a further fall of say 35 pips and I go in with 3 mini lots, then 15 pips down later it looks like there is going to be a rally so I go in with 4 mini lots but the rally don´t come and the price drops some more, so having an account where I can exit all trades at once I exit after a further 20 pip drop, which leaves me with an amount of (minus 95 from the first entry, minus 140 from the second entry, minus 105 from the third entry and minus 80 from the fourth entry: total -420, giving a 24% drawdown.
If I had an account where you can only exit each order individually I would lose maybe 100 more.
Another disadvantage is that the account I have stipulates a minimum 10 pips from the price for entry stop/limit orders.

There are times when the movement is at the speed of light, so even if his mental arithmetic is equally rapid, there is no chance for the average mortal to place the stops or even exit.

Let´s say the next trade is similar - you´re in deep trouble, needing to make 100% just to get back to b/e.

- an account of 10000 would leave less than 5% drawdown.
- an account of 50000 would leave less than a 1% drawdown, which according to conventional wisdom is the amount to risk and leave sufficient reserves to fight many more battles.

The sensible thing to do, which I am not doing, is to have sufficient capital in your account.
I have demo traded and for learning the mechanics of the platform it is fine.
A disadvantage is that on some platforms the demo trades go through automatically, no delays or requotes, it just ain´t like the real thing.
It´s like the guy who was saying at 25 yards he could should the stem of a wineglass, the listener not doubting this then asked him if he could do it with a loaded gun pointed at his head.

I am trading live because I believe that it is the only way to gain experience, and learn, in the heat of battle. The other thing is if I can't become consistently profitable with a 2000 account, can I do it with a 20000 account? the answer I think is that I stand a better chance but in the long run I believe I have to master the basics to be confident of staying in the game.
The idea of going away and don´t come back until I have say 20000 in my account doesn´t appeal to me.

A bit long but I couldn´t make it any shorter,
have a nice weekend,
regards
  • #932
  • Edited 5:20pm Jan 18, 2008 5:09pm | Edited 5:20pm
Mick, I agree with most of what you have to say except cutting the loss. I'm thinking to dance with the changing circumstances with an endless series of maneuvers.

In other words, we are constantly moving with the market. If the trend changes, we rescue our position and then trade with the trend. Easier said than done but practice does help.

So which part of Aus are you from?

Hapa, with 2000 in your account, I'm thinking you should start with micro lots instead of mini. I think it's important to get the phsycological factor in when trading with real money but if uncomfortable you may be underfunded. Find a suitable bro-ker if need be.
  • #933
  • Jan 18, 2008 5:57pm Jan 18, 2008 5:57pm
I agree too regarding cutting losses, I have to say that by the time it's too late I need to rescue anyway . There are times though where this is necessary though I guess.

If you consistently keep taking losses prematurely you will eat away at your book. I think the trick is to start your position really small so even a bad move against you doesn't hurt. These moves generally have a rubber band effect to some degree which can be capitalised on using skew to size your counter attacking units.

For me a 'position' is just that, a toe in the dance floor of the market or a small recon troop on the battle field if you like, how much you enter into the battle then depends on how the battle is playing out.
Once you are commited to battle, whether you joined a winning battle or not, you need to use your strategies for sizing and deployment of your troops to capitalise on the terrain/conditions as they present themselves.

>> So which part of Aus are you from?
I'm from the south coast of NSW, yourself?

edit: Sorry Zoran, I figured you were from
Aus too but I noticed on your profile you from the UK, which part?
  • #934
  • Jan 19, 2008 3:10am Jan 19, 2008 3:10am
Inserted Video
  • #935
  • Jan 19, 2008 7:24am Jan 19, 2008 7:24am
That was really funny FTI, let me add to the fun.


Inserted Video
  • #936
  • Jan 19, 2008 3:36pm Jan 19, 2008 3:36pm
Quoting fti
Hi ALL,
Anyone trading EURUSD since yesterday?
the wild side is showing, no way to survive unless with correct money management. what a ride. am still dancing, both ways.
The GBPEURYEN crosses would be killers . Be cautious. Volatility shooting off screen.

regards
fti,
I was wondering about the dance steps you took on the 17th with the eurusd.
Where did you start ?
Did the steps include 4613 area to 4690 area and a repeat of those steps?
Did we take steps from 4690 area to 4655 and back a couple times ?
  • #937
  • Edited 5:49pm Jan 19, 2008 5:37pm | Edited 5:49pm
Quoting MickD
I agree too regarding cutting losses, I have to say that by the time it's too late I need to rescue anyway . There are times though where this is necessary though I guess.

If you consistently keep taking losses prematurely you will eat away at your book. I think the trick is to start your position really small so even a bad move against you doesn't hurt. These moves generally have a rubber band effect to some degree which can be capitalised on using skew to size your counter attacking units.

For me a 'position' is just that, a toe in the dance floor of the market or a small recon troop on the battle field if you like, how much you enter into the battle then depends on how the battle is playing out.
Once you are commited to battle, whether you joined a winning battle or not, you need to use your strategies for sizing and deployment of your troops to capitalise on the terrain/conditions as they present themselves.

>> So which part of Aus are you from?
I'm from the south coast of NSW, yourself?

edit: Sorry Zoran, I figured you were from
Aus too but I noticed on your profile you from the UK, which part?
Hi Mike

This is taken from lesson 2 "The Battlefield"

02.02
Defensive Infinate response.
---------------------------------
-He must always by ready to implement a contingency plan when traversing encircled ground.
-When trapped in fatal ground, he is in an irredeemable position.
He must order his army to fight resolutely to the bitter end.

However, the point being the we don't commit the entire army to any one battle but we must be ready to assist in running battles.

2.02.01. You are the General, therefore you must carry a General's mindset always.
General Code : Never leaving the army in the battlefield cut-off from support.

But there are limitations that we must define beforehand. So making constant adjustments to keep within the limits is crucial.

2.02.02 Preparation for Battle ( Money Management )
Your moneys are your only ammunition.
Therefore never deplete it under any circumstances.
therefore your gearing should never be inexcess of 30%,
for young dealers start with 10% and work upwards.

Also, keeping the account in proportion means that we don't have to start trading in lots. We can start with mini-lots with 10 times less capital or micro-lots with 100 times less capital but at all times having sufficient capital. We can then slowly build up but always keeping the size/battle at a comfortable level (and that level will be determined by skill/experience).

"Managing a large group is no different to managing a small one if the organisation(structure) is sound.

I'm currently living just north of London in Hertfordshire, however, you are correct. I am also from Aus (but not born there). I grew up and spent most of my life in Melbourne.
  • #938
  • Jan 19, 2008 5:45pm Jan 19, 2008 5:45pm
Quoting fti
Leon,
Yoyo and gum ball???

Generally analysis of the forex markets is confined to broad analysis of the relationship between,
1.The Allied stronghold currencies, eg the cable , EUR(lately), AUS, etc
2. The USD
3. The inferiors and exotics. eg DMK (retired), YEN, CHF, etc

Therefore the romance of the 3 kingdoms.
I may discuss that if we have the opportunity to, after we finish the Sun Zi Bing Fa.


regards
Hi fti

Would your three kingdoms relate to the following point in "The Battlefield"?

He must not venture into the focal ground, a hub of several converging roads,
without tacit support from allied feudal warlords.
He must not linger at desolate ground, which is uninhabitable."

I suspect we need to keep an eye on some key currencies? Care to expand on this?
  • #939
  • Jan 19, 2008 8:11pm Jan 19, 2008 8:11pm
Quoting Zoran
Hi Mike

This is taken from lesson 2 "The Battlefield"

02.02
Defensive Infinate response.
---------------------------------
-He must always by ready to implement a contingency plan when traversing encircled ground.
-When trapped in fatal ground, he is in an irredeemable position.
He must order his army to fight resolutely to the bitter end.

However, the point being the we don't commit the entire army to any one battle but we must be ready to assist in running battles.

2.02.01. You are the General, therefore you must carry a General's mindset always.
General Code : Never leaving the army in the battlefield cut-off from support.

But there are limitations that we must define beforehand. So making constant adjustments to keep within the limits is crucial.

2.02.02 Preparation for Battle ( Money Management )
Your moneys are your only ammunition.
Therefore never deplete it under any circumstances.
therefore your gearing should never be inexcess of 30%,
for young dealers start with 10% and work upwards.

Also, keeping the account in proportion means that we don't have to start trading in lots. We can start with mini-lots with 10 times less capital or micro-lots with 100 times less capital but at all times having sufficient capital. We can then slowly build up but always keeping the size/battle at a comfortable level (and that level will be determined by skill/experience).

"Managing a large group is no different to managing a small one if the organisation(structure) is sound.

I'm currently living just north of London in Hertfordshire, however, you are correct. I am also from Aus (but not born there). I grew up and spent most of my life in Melbourne.
Ahh, sunny Melbourne eh?

Thanks for that post, I've been really bogged down of late with my business and getting going for the new year so I'm a bit behind on the AOW exercises but will make an effort to catch up this week.
  • #940
  • Jan 20, 2008 2:02pm Jan 20, 2008 2:02pm
Quoting MickD
Ahh, sunny Melbourne eh?

Thanks for that post, I've been really bogged down of late with my business and getting going for the new year so I'm a bit behind on the AOW exercises but will make an effort to catch up this week.
Yep, good 'ol Melbourne. The only place you'll get four seasons in one day. Great city though!

I'm open to debate if others have different interpretations (with regard to "The Battlefield").
18 traders viewing now