Extracted Thread (per thread starter's request)

Newton's Law of Motion

Isaac Newton's Law of Motion: (law of inertia)

"Corpus omne perseverare in statu suo quiescendi vel movendi uniformiter in directum, nisi quatenus a viribus impressis cogitur statum illum mutare." (Every body persists in its state of being at rest or of moving uniformly straight forward, except insofar as it is compelled to change its state by force impressed.)

1. First Law: An object at rest tends to stay at rest, or if it is in motion tends to stay in motion with the same speed and in the same direction unless acted upon by a sum of physical forces.
2. Second Law: A body will accelerate with acceleration proportional to the force and inversely proportional to the mass.
3. Third Law: Every action has a reaction equal in magnitude and opposite in direction.

========================
Explanation:
Newton's law of motion should be the first technical thing you must learn about charts. This law applies to charts. The law of inertia.

Prices move... Movement is motion... You need to understand how things move, how the prices move... It moves according to Newton's Law of Motion.

This is how momentum works. When you have a lot of momentum behind a trade, your risks are greatly reduced. Why?... because it would take a lot of force to change the direction. It would take a lot of force for your trade to go against you.

The Great Minds

" Excellence is my guiding principle. I strive for elegance and eloquence...
but what I cherish most, is a simple satisfaction of a job well done. "

The Secret of Indicators

One of the early things I learned about indicators are that indicators are not 100% correct all of the time. The consensus among the public (from my awareness at my current knowledge) that it is only 75% correct of the time.
.....
I'll assume and test the idea that indicators worked 75% of the time. With proper money management, in theory this idea should conclude in a positive expectancy and in profits.


========================
Explanation:
Results: Indicators don't work 75% of the time. This conclusion goes far deeper than you may think.

Indicators need to be used properly. You can't use a hammer to dig, you can if you want, but it won't be as efficient as using a shovel. Indicators need to be applied correctly to the proper market condition.

Here are the secret of indicators:

 

1. Indicators don't work effectively in consolidating markets (5-8% correct)
   
2. Indicators works effectively during trending markets (70%-90% correct).
   
3. Every signal of an indicator (buy and sell) are not to be taken.

Amateurs are too busy complaining that indicators don't work during ranging and consolidating market. No shit Sherlock! So why trade with indicators during these times!? During these times go help an elder citizen cross a road, go play with your dog, go save someone from a burning house, etc... I don't know what ever tickles your fancy. But for the sake of your account, just go do something apart from trading.

It's like what I call the Homer Simpson Syndrome. Bart placed an electrocuted muffin and Homer keeps touching it again and again while Bart laughs at Homer. Homer was too stupid to realize he's getting electrocuted because he wants the muffin. You need to realize that you can't trade whenever you feel like it. Indicators are not used in that way.

The secret, identify a trending market and then use your indicator. Only use the signal according to the trend (buy signals in uptrend market, sell signals in downtrend market). If market is consolidating or ranging... forget your indicators.

Words of Wisdom from the Masters

“Profits are made by capitalizing on up or down trends, by following them until they are reversed.”
~ Robert D. Edwards

“Profits are not limited because whenever a trend, once established, continues in a sustained fashion without giving any evidence of trend reversal.”
~ Richard Donchian

“The way to make money is to determine the trend and then follow it.”
~ William D. Gann



========================
Explanation:
These Pioneer Masters made millions in their time. If it was our time, they would have made just under a billion. It’s worth your time to listen to these Masters if you want to succeed.

I’m pretty sure everyone has an ego. And there will come a time where that ego will think it knows more than the Master. And that ego is dreaming of surpassing the Master, one day. Surpassing the Master will never come to fruition if you don’t control your ego. You see, your ego will blind you and restrain you from your true potential. While you are still a little grasshopper, it is wise to subdue your ego and listen to everything what the Master has to teach. Take everything what you can from the Master.

Here are the Masters with their words of wisdom. I’ve personally read them a thousand times. It’s very clear of what they say “follow the trend”, yet it goes in one ear and then straight out the other. Maybe its human nature that we are told to not touch the flame, but somehow we still end up touching it and getting burnt.

Looking back at my journey, if I was able to do it again, I would have focused more on what these Masters had to say instead of my ego. It would have saved me tremendous amount of time. I wouldn’t have paid much attention to marketers (I was young and naive and didn’t know any better), their words where very hypnotic, but had less to nothing in value.

I was in mentorship program once (part of the service I paid for). He was in the US (I’m in Australia) and we would have phone call conferences. In 3 months of mentorship (paying for his service), he never did once stated to me to “follow the trend”. Mate, knowing what I know now, I feel like throwing a can of baked beans at him!... Why a can of baked beans?... it really hurts!

My words to whoever is reading this and is listening with all of your heart; Follow the trend, learn how to identify a trend, learn how to exploit the trend and learn everything you can about a trend. Drop your ego because it is blinding you and restraining your development.

The 6 Dimensions

I think I just discovered the gravity in trading. Trading contain 6 dimensions. For the past years I've been going in circles because I didn't know such nature exist in trading.



========================
Explanation:
Trading contain 6 dimensions:

 

1. 1L dimension (unprofitable)
2. 1L dimension (unprofitable)
3. 1L dimension (unprofitable)
4. 1L dimension (unprofitable)
5. 2P dimension (profitable)
6. 2P dimension (profitable)

2 of the dimensions are profitable (I call them 2P dimensions). The other 4 dimensions are unprofitable (I call them 1L dimensions). These 6 dimensions govern every trading system.

2P are greater in size and mass than 1L. 2P are less in numbers (only 2) compared to 1L (only 4). 2P takes the portion from the market and put them in your account. 1L takes your portion out of your account and place them into the market.

Professionals are effectively and consistently targeting 2P dimensions, without even being aware of it. Only by targeting 2P dimensions can you be profitable.

The 3 Type of Warriors

There are 3 type of Warriors.

In the old days (and in life) you achieve your objective through sheer brute force alone. This means the strongest survives and wins the battle. The army who has the most numbers will win the battle. Back in the old days you get the job done through brute strength. The philosophy is: the bigger the better. Success comes in strength and size. This is the first type of Warriors: Brute Strength.

Not so long ago a new Warrior emerged. It was Superior than the first Warrior. This Warrior did not come in size and strength, it came with brain power. Yes, the second Warrior is the Intelligent Warrior. The second Warrior comes in smaller size and not so much in strength, but he wins the war through his intelligence. 1 intelligent Warrior can simply kill 10 brute strength Warriors alone. Success comes in brain power, not in bigger muscles. This is the second type of Warriors: Intelligence.

In our current time comes a newer breed of Warriors. This new Warrior overpowers its predecessor Warriors. He is the most dangerous and most devastating Warrior of all. This Warrior harmonizes brute strength with intelligence. Success comes in intelligence and equally with brute strength, it doesn't leave fate at the hand of the heavenly gods. This is the third type of Warriors: Intelligence combined with brute strength.

The 6 Dimensions (round 2)

I've been aware about the so called "good trades" and "bad trades". I wonder how these type of trades fit into my model of the 6 dimensions.



========================
Explanation:
Good trades contain 2 type of trades:

 

1. Trade 1: Following all discipline, trading plan and profiting from the trade.
2. Trade 2: Following all discipline, trading plan and losing from the trade.

(These are what you define as "good trades"; following through with the battle plan whether the outcome is profitable or resulting into a loss.)

Bad trades contain 2 type of trades:

 

1. Trade 1: Not following any discipline or trading plan and profiting from the trade.
2. Trade 2: Not following any discipline or trading plan and losing from the trade.

(These are what you define as "bad trades"; Not following any discipline, trading plan, strategy or method whether the outcome is profitable or resulting into a loss.)

In the good/bad trades model, there are a total of 4 different type of trades; 2 are profitable and 2 are unprofitable. In my 6 dimension model, there are 6 different type of trades; 2 are profitable and 4 are unprofitable. I guess we just arrived at a contradiction. So, which model is correct?

Let's deduce the good/bad trades model. We can represent the win/loss ratio as 2:4 or 1:2 or 50%. Meaning 50% of the trade model will end in positive and profitable outcome. The other 50% of trades will end in a negative and unprofitable outcome.

The one objective result that stand is that 50% of traders are neither profitable and unprofitable. Give or take a few percentages, the objective results are like 93% unprofitable and 7% profitable. The good/bad trades model is way off from the current objective results.

In the 6 dimension model the ratio is 2:6 or 1:3 or 33.3%. Meaning 33.3% of trades are profitable and 66.6% of trades are unprofitable. These results are much closer and more accurate than the good/bad trade model.

These are the dimensions I discovered in search for my question why at least 90% of people fail. I can not dispute the fact that the good/bad trade model (possessing 50% accuracy) combined with proper money management SHOULD BE very profitable, BUT I personally have not seen any hard evidence of such coin tossing system to be successful. It leaves a splinter in the back of my mind why it doesn't align with the 93% rate of failure. Even if I take into account that there are the undisciplined traders, their actions STILL FALL INTO the category of the good/bad trade model (50%), but that is not the case that we are seeing in the trading community (93% failure).

The 6 Dimensions (round 3)

The 6 dimensions has taught me a lot about finding the edge within the charts. I feel awakened with a sense of new found power, like x-ray vision, where I can see where the opportunity lies within a chart. The next step of my journey is to hone my skills in capturing these opportunities, to hone my skills in targeting the 2P dimensions.



========================
Explanations:
The 6 dimensions has taught me:

 

1. that in any given entry, it is never a 50% win or lose
2. that my trade are either a 2P or 1L dimensions
3. that the odds of losing are stacked against me by a lot
4. that only by knowing where the opportunity lies, then taking advantage of the opportunity becomes less in resistance
5. that not knowing where are the opportunity, is like not knowing where the gold treasures are buried (not having a map)
6. that even with good money management, taking trades on a 1L dimension will surely end into a blown account
7. using multiple strategies into one account must have a designated budget (money management). If not, it will conflict with the 6 dimensions and will blow your account, or at best, always breakeven
8. that the 6 dimension applies to every strategy, system and method

To explain the 6 dimensions in detail would take a lot more pages. It is also hard to comprehend without animated visual aids. I will never go into it in more detail because I don't want anyone publishing a book based on its theory and my findings.

Do Your Job & Do It Right

You go to work and you perform your job. Your focus is on the job and not on the money. Forget when you are getting paid. Forget about home, you're at work. Nothing else to think about but your job.

My job is ENTRY & EXIT... nothing else must occupy my mind.



========================
Explanation:
Do you know what is your job in trading?

"Your job in trading is ENTRY and EXIT... nothing else."

Anything else you perform, focus upon and any distraction is not your job. It is like checking your Facebook at work and sending funny emails.

Professionals have laser focus. They don't think about anything else apart from ENTRY & EXIT. Set your trading plan and strategy in place. Then put all of your energy in executing your ENTRY & EXIT.

You want to become a Professional? Do your job and do it right. Your job is ENTRY & EXIT... nothing else. Do it well. Perform it consistently. Execute it precisely... You will be rewarded enormously. Anything else you perform apart from your job... and you will be punished severely.

Don't be an Idiot

www.youtube.com/watch?v=bVVsDIv98TA


You want to become a Professional Trader?
"Don't be an Idiot."

BUY & SELL Hemisphere

The result over the years had led me to discover and understand the nature of charts. The nature of charts are governed by 2 boundaries. I call them Buy Hemisphere and Sell Hemisphere.

In a 6 dimensional charting world, I like to think of the hemispheres as shadows. The position of the light will depend where the shadows will be. Just like shadows, the hemisphere is ever changing. It is not static in nature, it is dynamic in nature and ever constantly changing.

Your shadow will follow you wherever you go. These 2 Hemispheres are the market's shadow, it goes wherever the market goes.



========================
Explanation:
In every successful trading system, strategy or method, a boundary MUST be placed and/or be established.

The beauty of a 6 dimensional charting world is that you can place the boundaries wherever you like. The crucial point is that a boundary must be established.

The Buy & Sell hemisphere is like the ocean. Tropical fishes remain in warm waters, non-tropical fishes remain in cold waters, deep sea fishes and shallow water fishes remain in their boundaries, etc...

The charts are governed by 2 Hemispheres; BUY hemisphere and SELL hemisphere. You ONLY BUY in the BUY Hemisphere. You ONLY SELL in the SELL Hemisphere. You can establish the boundaries wherever you like. You can use whatever tool you want to establish a boundary. The Crucial Point is that a boundary must be established.

Skills Require Time to Mature

Anything in life has its cycle, from beginning to end. Skills also has its cycle, from beginning to end. Fruits requires time to ripen, eggs needs to be incubated for a certain amount of time.

There is no difference with skills that are developed and nurtured until its fruition. Skills learned requires time to be mastered. Any form of skills require time to mature. It is no different with trading skills.



========================
Explanation

Even if I hand you a rock-solid trading system right this minute, you will never be successful if your trading skills are not up to par. If your trading skills are not matured enough. Skills require time to mature.

Take Michael Jordan for example. Picture the young Jordan at the age of 23. Now picture the Jordan age 33. There is a big difference in the level of skill. The skill in every aspect; whether it be physical or mental, physical strength, decision making, leadership etc.

Even young talents, can you see the difference after 10 years? Justin Timberlake, Michael Jackson, Johnny Depp, Leonardo DiCaprio, Mariah Carey, Christina Aguilera, etc.

Take the pioneers of the trading world for example; Gann, Elliot, Donchian, Dunnigan, Appel, Jones, Rogers, etc. Do you really think they were successful in their first year of trading? Read their biography and get some perspective. Skills require time to mature.

The Joker

SON OF A BITCH!
You had me going for years... I've been running around in circles... I've been losing my mind, trying to figure out what the f*ck is going on. I didn't realize that you existed you dirty m*f*cker!

Now I see you... I know what you're up too... I'm not going to fall victim to you again... I own you, you're mine now biatch!

========================
Explanation:
I've nicknamed one of the 1L dimension as "The Joker".

What is "The Joker"?

In a 6 dimensional charting world, the Joker exists. The Joker exist in every strategy, method or system. The Joker is out to get every trader. Its soul purpose is to make you lose. You have encountered the Joker in the past countless of times, but you didn't know it was the Joker.

You see, the Joker is very deceptive, seductive and destructive. The Joker will tease you and will lead you into temptation. Once you bite or get lured... you can kiss goodbye to your money.

The Joker preys upon, materialistic traders, ignorant traders, arrogant traders, egotistic (or uncontrolled ego) traders and undisciplined traders.

Whatever system, strategy, method you use is not 100%. You see, every system, strategy or method is designed to do one thing; to capture pips (or profits). Now, there comes a time (always), when a big move will occur in the market and your system was unable to capture it. Or maybe your system was only able to capture a very small amount of the massive move. You then re-configure your system to catch such big moves. Let me stop you here for a moment and tell you that "You have just been played by the Joker".

No matter what you do to re-configure, the Joker will continue to exist. Once you start dancing with the Joker, you will end up broke and in tears. Every system, strategy or method CANNOT capture the market in its every turns, swings or reversals. Every system, strategy and method are governed by the 6 dimensional charting world... it is in perfect harmony and in balance. The Joker is part of the grand design to balance the equilibrium.

Professional traders ignore the Joker. Buy when it is buying time. Sell when it is selling time. The Joker will dangle 200-400 pips right in your face. DO NOT get seduced, the Joker plays upon your greed. If your trading plan brings in profits, then DO NOT DETER from your trading plan. The Joker is out there every minute to prey upon the weak.

The Greatest Danger

" The greatest danger for most of us
is not that we aim too high and we miss it,
but we aim too low and reach it. "

~ Michelangelo

Give it Respect

The market is no different, treat it with respect and it will be kind to you. I am not bigger than the market. The market is bigger than any ego. Giving it respect is equally important as being patient and disciplined.



========================
Explanation:
When you don't have any respect, you act reckless. You are more likely to deviate and break rules (this is as true in life and in trading).

In some cultures, respecting their elders is very important. Can you remember a time when you had to show and exercise respect? Your behavior were very different. You were very polite, courteous and humble. Can you remember a time when you just don't have any respect for a particular person? You behave in conflict, anger and frustration.

Trading the market requires you to be humble and respectful... or else the market will give you a big spanking.

When you treat anything with respect, you treat it with love and devotion. And anything in life that is treated with love and devotion simply grows and blossoms magnificently.

RESPECT is equally important as patience and discipline in trading. Treat the market with RESPECT. RESPECT is a crucial requirement to be a Professional trader.

The First Pullback (one of my trading arsenal)

1min is not noisy nor erratic. Classic formations occur in the 1min chart as it would on the daily or hourly charts. It just means I need to get out quicker rather than in days.



========================
Explanation:
It doesn't get any simpler than this. Pullbacks can be found on the 1min.

I've milked this setup again and again since 2006. This baby doesn't look like it's ever going to run out of milk.

I'm a firm believer of this setup after trading it week by week and day by day for the last 4 years. It is one of the most effective trading arsenal I have in my tool box.

Counter Trend (Only for Professionals)

I tried to post this ASAP live. I will comment on this later on, Since I'm currently trading at the moment.

Added comment:

3 years ago a professional trader made me a bet. For 1k bet, he will prove to me that a coin tossing system works. He will not explain the system to me, but I have all access of the live trades and the live account. He wasn't a marketer, he trades for a living. I talked him into this bet/challenge because we were both drunk at the time and we were arguing about a coin tossing system.

My research over the years concluded that it is not viable. And here was a drunk Professional trader who tells me the opposite. Cut the story short, the bet was made.

I changed the rules before the trading took place and he agreed. I figured, screw the coin; I'll decide the buy or sell and he will just go and trade what I say. I thought to myself, "let's see how you go against the market." There was a nice uptrend at the time and I told him to that every trade he makes must only be a sell. I told him to sell for 2 months and on the third month to only buy.

Cut the story short, I lost the bet. He made just over 100% in 3 months. I was there during several trading days as he traded live. Before I analyzed the whole 3 months worth of trade, I already made it clear to myself that:

"Anything below 60% success hit rate and this guy was just saved by money management and nothing else. I wouldn't conclude that a coin tossing system would be viable... if this was the case."

Well looking at the results, he had over 80% success hit rate. He placed a stop loss all the time. I figured, let's actually try a coin this time. Mate, double or nothing for another 3 months!... he agreed.

3 months of coin tossing, I paid him 2k. I lost the bet. He made another 80% on his account with a solid of above 80% success hit rate. The knowledge I gained was priceless and I'm about to share with you a little thing I found out.

========================
After my research I can conclude that:

"A coin tossing system is NOT viable"

luckily for me, I am who I am, and I have my own unique talent.

I picked up that he wasn't governed by the outcome of the coin. He himself governed the coin toss. Let me explain:

It was never a random entry at all, although it may look like it. It was like a magic show or an illusion. I would toss the coin or I would make the call to whether buy or sell,... but it was him who decided WHEN & WHERE he will enter the market. He was in control and not the randomness of the coin.

It was never (toss coin = Sell) and he would enter the trade. It was (toss coin = Sell) and then he would wait for the opportunity to sell and then enter Sell. You see, even in an uptrend market, there are opportunities to sell, but those opportunities are not at a randomness place. You can't just sell whenever you feel like it and hope for your money management to save you.

He could enter Sell for the rest of his entire trading life and still be profitable. The lesson here is that there is more than one way to skin a cat, as long as you know what you are doing (knowing when and where).

I happily gave him 2k. As he grinned (and deviously laughed) at me and continued to proclaim that he has a winning coin tossing system.

I replied, "The only way you can make me a believer of your coin tossing system is when we toss a coin, and then you must enter the market right then and there on the spot... That my friend I am happy to pay 50k and will be a believer."

He laughed out loud and he crossed his forearm into an X-shape, "NO DEAL!" (just like the tv show Deal or No Deal)

100k!?.... He even laughed louder "NO DEAL" (X-shape arms)


========================
Refer back to the images again and you can see that the counter trend made me around 40 pips, when I could have easily made 120 pips following the trend. Even as a Professional trader I don't waste my time with counter trend. Following the trend offers greater safety, lower risk and higher returns.

Focus

"Concentrate all your thoughts at the work at hand.
The sun's rays do not burn until brought to a focus."
~ Alexander Graham Bell

"One reason so few of us achieve what we truly want
is that we never direct our focus; we never concentrate our power.
Most people dabble their way through life,
never deciding to master anything in particular."
~ Anthony Robbins

Myth Busting: Trading Without Stops

========================
Explanation:
Trading without stops... Do I really need to explain more!?... I rest my case.

Trading without stops ---> Myth Busted

The Journal

========================
Explanation:
There is no excuse, you need to have a journal.

Your journal needs to be divided into 2 sections (or have 2 separate journals).

Section 1 of your journal are everything you learned, new discoveries, etc...

 

1. What did you learn about indicator X?
2. What did you learn about trading sessions?
3. What did you learn when you executed a certain way?
4. What did you discover that no one had taught you?
5. What conclusions have you arrived to?
6. What do you know and what has changed?

Section 2 of your journal are your personal entries

 

1. How did you feel?
2. What emotions you encountered?
3. What you did during the trade?
4. Curse or Congratulate

Section 1 is actually the most important of the 2 sections. Most traders make the mistake of simply just scribbling, more like diary entries. Section 1 is about retaining and developing yourself.

Any successful individual can wear a t-shirt, a pair of jeans and blend just like the crowd. You see on the surface, any successful trader looks like just an ordinary individual. But underneath the surface, they possess vast amount of knowledge and experience which the opposition do not have.

You need to expand your knowledge base. Unfortunately, even if you read the entire forum, 90% of the real trading have never been discussed and covered. And neither will it be discussed and covered in the future. Your journal is like a research facility. Without it, it is unlikely you make any breakthroughs.