Technical Analysis Fallacy

I cant scale it to M1 from which i trade it... But look how often are actions... this is M5 chart

no not really, i didnt panic actually its all foreign capital, but i would have like to have kept that foreign capital and bank it on monday, to start the week anew.

what did go through my head however was
" the euro is at a key level with a rejection from 1.41600 area, sitting by 1.42 downside momentum is decreasing, seems like we are getting ready for a bullish corrective wave. I will ride this sucker till price begins to decelerate, might re test the 1.43 level"

scout in, " gotta watch the sitting duck area ( i circled it in my chart) price might hit the bullish stops and suffer set back at that point i will add in fibo to average a better bullish price"

ok...... its not acting right, its acutally resuming bearish bias....... i will await exhaustion of sell off and attempt a 3 troop rescue.

" big down side price slide...... down...down....down...ok now i just have to hold my ballz and attemp a rescue but i cannot find a good entry area, sell off has to much conviction"

" ok got it after 200 pips under water with a 1 scout 3 troops, it will take 15 troops to bring the average to b/e in 35 pip upward move, it seems to be consolidating now and this is my chance.....ok almost at b/e i could either exit here or wait"
" damm now its losing upside momentum...im in danger of a big snow ball loss, i can attempt a last resort rescue but with Europe closed, new york is not pushing price the way i would like, the weekend is coming and it might actually gap down... im over exposed now with 1,3,15= 19 troops in battle, my position is dead in the waters any way lets pull the plug"

It seems that you was predictive. And hoping for the last rescue opportunity, despite you were already in the state, where you probably should kill it because of danger. Think of why you get into it? Isnt it because you predicted some ducks or that and here can be these? The market is always right. - No predicting, no "want" picture of the market, just dance and be active. Flip if the trend is clear.
minus 200pips scout? Along that way, there were opportunities to rescue and get off... You have been frozen mind probably... hope mode...
- and a question for you. You was thinking about some ducks to send it up, they wasnt they... and... break down... why did you hold that position, when your initial idea was dead???

thanx fana, i predicted the corrective wave that did not happen, i calculated the stop hunting might bring price down for better average, but it did not happen.

you just touched a key point, I was RIGID in my mentality of trying to rescue the troops, if instead of rescuing the scout i would have flipped, since bearish bias was now clear, i might not have lost this trade. i was obviously going against the trend, trying to fight an uphill battle. the AOW says we must not meet the enemy as he goes down hill by sending our troops uphill.

killing the scout and trading the right direction would have been smarter, i see that now after your positive feed back and the fact you mentioned i should have FLIPPED.

its okay though i my account is intact just the foreing capital would have been nice.

Unfortunatelly there are no shortcuts... you have to experience it on your own... And never stop with improvement... As Niels already mention : "There is always a room for improvement". Happy weekend.

definately fana.

i am trading to gain knowledge not to make money.
i promised FTI i will be one of the greatest traders of our time, and if god is willing and gives me health. i WILL achieve that, to help people with my profits, open center, employ the unemployed, teach my children how to trade, open businesses and have the power to do good. that is why i trade.

the moral law- financial independence, and to have power to help the poor. to be one of the best speculators of our time and people write books about me or i about the markets

as we know the moral law ensures that the people remain loyal to the ruler and follow him inspite of their lives, i have the will, and the hunger. i will achieve it.
thanks to FTI and all of you here.

i have much ground to cover, many battles to fight im 25 yrs old, and i am very bright 4 months trading and already making profits, i wonder how good i will be in 10 years, and as our noble FTI who i look up to. I will be helping people for free.

I think quite a few felt that the USD Bull**t looked a bit tired by friday, in and of itself.
One thing that may have worked this past week was trying to buy "in the hole" rather than "on the hop".
It would of looked as a short tenure attack sequence with small adds if there's promise,like Mamood shows us in his trading blotter.
Also, remember sometimes no position is a position, so yes some rigidity.
And yes, I got caught too.

the flow is powerful

Have anyqone seen him ....ihaave sent him text and I'm no reply

Here is some light hearted fun for the weekend that I found from another thread.

http://www.youtube.com/watch?v=9Glag0EJbNo&NR=1

You should actually probably also watch parts 1, 2 and 3 as they are really interesting from a trading perspective.

Hope everyone can enjoy and relax on the weekend. Ray

Hi FTI, have been studying this thread lately from page one, and i realized that there is a lot more than meets the eye, so i have been taking notes in an attempt to decifer your words. this is what i have come up with so far. so please correct me if im wrong in the understanding of all your teachings, and i humbly ask the senior members to pich in as some new readers might enjoy the views, discussions regarding this information. i have also done some research as to understand further


FTI mentions that no mentor, course or literature can give you the holy grail, the key to unlocking our path to millions by trading the markets. If people possessed such key they would not give it away. He says that the way people are using technical studies noawadays is wrong. Wrong in the fact that we must not base our trades on indicators, or type of charts, they all display past price, the market is not 2 dimentional and mathematically predicatable, “rigid”.

The market is comprised of humans, and humans behave differently. There are many players that move the market and many reasons for the forces of supply and demand and liquidity. To try to “predict” the market by past laggin statistical studies is “FALLACY”. All the technical indicators and studies, techniques and systems that are used today to trade the market where created for a purpose, one must understand them, but not follow them blindly.

The financial markets is a place that allows buyers and sellers to sell financial securities, other derivative and tangible assets. In a financial economy the markets facilitate the rasing of capital, the transfer of risk, the transfer of liquidity and facilitate international trade.

There a re many models and theories regarding the markets, lets take into account for example the Efficient Market Hypothesis, which in a nutshell indicates that prices cannot be predicted by looking at the past as the past action was driven by past events and the markets are inherently random due to the fact that the information that drives the market is priced in already. And the future price will move according to future information. Although humans are infficient in nature the sum of all particiapants make the market efficient as it give equilibrium.

Behavioural finance however states that market inffeciencies occur due to the inefficient psychology of the market participants, human error will be priced in the markets as well, and sentiment, greed, fear, will play a role on the movement of price. Humans tend to repeat their mistakes one can attempt profit from current inefficiencies.

Furthermore, predictive analysis such as elliot wave, pivot points, fibonacci are nothing but assumptions and opinions of where price MIGHT BE in the future, and because humans cannot predict the future such studies should not be regarded as the wholy grail. Lagging indicators give you statistical analysis of past price action, but cannot fortell future events either. The markets move in the now, and the movement of millions of market participants cannot simply be summerized in a simple mathematical formula.




further on technical analysis


leonardo did make public his studies in his notations which much later lead to the wide use of fibonacci principles in technical analysis. It was his initial studies made on the human anatomy, in how the human body extended itself and sub divided into systemic proportions that sparked later findings in the use of fibonacci and string sequence in their class of studies. These studies may survive today by the newly coined names of the golden sections

technical analysis never did exclude the fundamentals from core of analysis, but made the assumption that all fundamental factors that were market sensitive would have itself present within the data of the price movements, thereby facilitating a complete analysis of all relevant fundamentals. Basically the componets of time, and volume, as inputs for data messageing. At advanced levels componets of volatility and derivatives of the “greeks” were also used

gambling can be carried out based on a myrad of underling components as basis for risk taking. But TA becomes common denominator when its the attitude in the persuit of greed, rather than a respond to calculated risk, based on technical analysis expertise. Ie balck boxes models, breaks and crosses trading.

Technical analsis has its foundations in the after the fact market data analysis and is used to detect systemic responses of markets.
Remember stay with the trend is your only friend.

There have been intense arguments in many newbie analyst circles that historical informaiton can predict the future, support and resistance level and lots of orders are placed at those key levels. From my engagements in the markets as a marketmaker, fx spot interbank we actualy capitalise on these sitting duck levels by sweeping for them, esp the stop zones.

It is rather disturbing that some traders are over cowding their minds with too much indicator reads and neglecting the feel the trend aspect of which most lag indicators were devised for. Their over dependance on predictive indicators creats a very dangerous mindset for prudent trading.

There has been a big growth of black box systems being sold by so called analyst that promotes and sells the fallacy that technical analysis is mostly predictive in nature using certain “secret” parameters. I have seen during my time that most fail over the long run, and it actually damages the outlook to technical studies.

I guess the question at hand is, how can historical data, predict the future? If it could, well have no more markets to trade. The fact that people builing assumptions into past data and passing tat as mainstream technical analysis just goes against the grains and fundation, that technical analysis was built upon

WD Gann, using math and Astrology could predict the future with accuracy, would you believe that. When he died even his son John Gann disputed his father ability to do so. The unfortunate thing is that he carrried his methodologies to his grave left us guessing on what he actually did.
There are actually true siences and mathematics in the most traditional technical analyhsis models and as time passes I find it distasteful that more and more superstition is creeping in. more and more artistic engineering is created to mask the fact that traditional TA models were never predictive at all.

Market structure

you see brokers are not all bad people out to get everyone. They provide a service of creating a replica model of the interbank markets for the consumption of the small traders at large. Of course their motivation to do so is profits but nevertheless they provide a service.

At the very top of the battlefield command is the FED they are the owners of the market. Whatever you may trade its normally against the USD. Even the crossess, so in perspective you will always be walking into their radar. They have their chief Ben who have a whole squadd of people crunching numbers to determine their postions and whether there're things they could od to improve their position.

Then down the food chain there's the other Central Banks having their radar on their respective currencies. The hands and legs of the FED are the CB dealers who's responsibilities are to police the markets. Making sure that its behaving itself. Its chief responsibility is to acertain that there's no riots in the market so long as things are peaceful they leave everybody alone to do their thing.

Then just under them is the tie 1 bank dealers. These dealers are normally marketmakers to the interbank market, nad have very lanrge daylight limits and risk parameters to work within. They are also the eyes for the CB dealers as most large customers go through them to deal. So they can see who's bying or selling dollars. If there are irregularities where by some large customers comes into the marekts to buy or sell dollars. CB dealers are put in the know and will be on standby to see if markets may be distured.

under the tier 1 there are the tier 2 banks and tier 3 banks, they functions as the lines of distribution. If as in the example above a large corp comes selling dollars and the CB dealers do not intervene, then the tier 1 banks will start selling the dollars down to tier 2 banks in smaller packages, and the tier 2 will likewise start selling to tier 3 in smaller packages, in 20 to 30 mins tat process fizz out and most dealers would be short of dollars to a certain extent.

MORE on market structure, the FX market is a global decentralized otc market it facilitates the exchange from a curerncy to another currency, it can be use for speculation, carry trade, and facilitate comerse in the international market. Any transaction made from one currency to another is concidered a forex transaction.

It can be traded in spot transactions, outright forwards, forex swaps, options and many other products. It is divided into different levels of access, at the top is the interbank market which is made of the largest commercial banks and security dealers. Then the top tier bank market, then the small banks followed by multi national corporations, large hedge funds, and even some of retail forex market makers. Pension funds, insurances, mutual funds, and other institutional investors have played an increasingly important role in financial markets in general,

BANKS- the interbank market caters to both the majority of commercial turnover and large amounts of speculative trading every day. A large bank may trade billions of dollars daily. Some of this trading is undertaken on behalf of customers, but much is coducted by proprietary desks, trading for the banks own account. Until recently forex brokers did large amounts of business, facilitating interbank trading and matching anonymous counterparts for large fees. Today however much of this business has moved on to more efficient electronic systems. The brokers squawk box lets traders listen to ongoing interbgank trading and is heard in most trading rooms, but turnover is noticeably smaller than just a few years ago.

Commercial companies= an important part of this market comes from the financial activities of companies seeking foreing exchange to pay for goods or services. Commercial companies often trade fairly small amounts compared to those of the banks or speculatoers and their trades often have little shrot term impact on the market rates. Nevertheless trade flows are an important factor in the longterm direction of a currency's exchange rat. Some multinational companes can have an unpredictable impact when very large postions are covered due to exposures that are not widely know by other market participants.

Central banks- national central banks play an importan role in the foreign exchange markets. They try to control the money supply, inflationg and or interest rats and often have official or unnofficial target rates for their currencies. They cfan use their often substantial forex reserves to stabilize the market. Nevertheless the effectiveness of central banks stabilizing speculation is doubtful because central banks do not go bankrupt if they make large lossess, like other traders would and there is no convincing evidence that they do make profit.

Forex fixing- forex fixing is the daily monetary exchange rate fixed by the national bank of each conuntry. The idea is that central banks use the fixing time and exchange rate to evaluate behaviour of their currency. Fixing exchange rates reflects the real value of equilibrium in the forex market. Banks dealers, and online fx traders use fixing rates as a trend indicator.
The mre expectation or rumor of central bank intervention might be enough to stabilize a currency, but aggressive intervention might be used several times each year in countries with a dirty float currency regime. Central banks do not always achieve their objectives. The combined resources of the market can easily overwhelm any central bank. Several scenarions of this nature were seen in the 1992-93 ERM collapse and in more recent times south east asia.

hedge funds and speculators about 70-90% of the fx exchange transactions are speculative. In other words the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end. Rather they were solely speculating on the movement of the particular currency. Hedge funds have gained a reputation for agrresive currency speculationg. They control billions of dollars of equity and may borrow billions more, and this may overwhelm intervention by central banks to support almost any currency, if the economic fundamentals are in the hedge funds favor.

investment firms- investment firm use the fx market to facilitate transactions in foreign securities. For example an investment manager bearing an internationsl equity portfolio needs to purchase and sell several pairs of foreign currenies to pay for foreign securities.
Some investment management firms also have more specualtive secialist currency overlay operations, which manage clients currency exposures with the aim of generating profits as well as limiting risk. Whilst the number of this type of specialist firms is quite small many have large value of assets under management and hence can generate large trades.

Retail fx traders= individuals constitute a growing segment of this market with advent of retail forex platforms both in size and importance. Currently they participate indirectly through brokers or banks. Retail brokers while largely controlled and regulated in the US by CFTC and NFA have in the past been subjected to periodic fx scams. To deal with the issuea the NFA and CFTC began imposing stricter requirements. Particuarly in relations to the amount of net capitalizaition required of its members. As a result many of the smaller and perhaps questionable brokers are now gone or have moved to countries outside the US. A number of the fx brokers operate from the UK under FSA regulations where forex trading using margin is part of the wider OTC derivatives trading industry that includes CFDs and financial spread betting.

Major currency pairs (positive correlation) Euro/ usd/, Gbp/Usd, Aud/usd, nzd/usd, (inverse correlating pair) usd/jpy, chf/usd, cad/usd, and the only pair non usd based is eur/jpy

all other pairs use the usd as a base against the relative value of Usd against another pair

usd/xxx vs usd/zzz = xxx/zzz

theories on what moves the exchange rates (none so far explains with certainty the reason of movement on a floating exchanger rate system)

economic factors: gov fiscal polic (budget/spending practices) monetary poclicy, government budget deficits or surpluses, balance of trade trends, inflation levles, interest rates, economic growth, and productivity of economy. Political conditions, and market participant psychology. Risk aversion.

All economic conditions is interrelated with forex. As you purchase stocks domestic or international, commodities, oil prices, liquidation of assets, carry trades. It all affects the forex market.

how brokers function

a Post by Genne 22 to FTI: if I may, let me throu in my 2 cents, as I do have some knowledge of the way honest brokers are structured, the rest I wont even go into, as they are a bunch of glorified bucket shops.
A retail broker, usually has 2 books, A and B. when a new customer arrives he gets automatically placed in the B book, unless there is prior confirmed knowledge that it would not be wise thing to do, meaning the broker acts as the other side of the market. On the average, statistically most B book traders have 3+ month against 9 negative, so you could see that having statistic enables the broker to simply bucket the trades internally, aslo an average life of a B book customers account is 3 months. Now, if lets say a customer shows a consistent rofit ( all customers are being analysed) he gets placed in an “A” book. The trades from an A book get offset by the other trades within that brokers operation and exess risk gets past on to a bank if it's a large broker or by agreement to a different broker.

As far as margin calls go it is simply a way to part the customer with money, no more, no less. Also I cant forsee taking on such exessive risk by an experienced trader that he/she will be faced with a margin call. There are always risks but, traders that have an edge will always try to minimise it. In my opinion at leas.

I have overleveraged a few times but only on a separate high risk account ( small 3% of the total account size). I had blown it twice but also managed to achieve 1000% returns a few times as well and put the exess back into the regular account, so overall it does help with faster rate of return given certain market conditions.

I've had a friend came from a dealing desk at a large bank (senior dealer) to the retail side. He had quiet an experience In the beginning, not a good one by the way, retail side is different, and that si something that ithink youll have to get used to.

FTI: so in effects the brokers are booking all the customer trades. So ECN and NDD is just basically their in-house electronic network. I supsect there shouldnt be any difference except maybe for speed of filling orders. So there is really no interbank play to the trades, may be corp dealing for their net book exposures only. So their price would in reality come from interbank broker quotes right?

with regares to the margin call auto liquidation, why would traders put stop loss orders for protection, when there is an auto mechanism to protect them already? In effect, wouldnt the traders using stop loss orders be actually pointing a loaded gun at their own head? If the average extreme volatility of 25% up, is used for benchmarking, I would guesstimate that almost all accounts as you suggested, probably wont las a few months unless no leverage was used.

Ust for info, I simulated that on a demo accout, made 1.30 USD using no leverage, the hardest $ 1.30 I ever made from the market using 50,000 usd principal. I dont forsee anyone would trade like that . In reality truly, all the traders would be actually setting themselves up to be taken out, once they decide to leverage their accounts.

Before I simulated 50,000 account trading agressively to upto 3 mio usd, exposure, and made 100% within 2 weeks trading sparingly. Was just wondering if it could attract countermeasures from the broker. Nothing happen so I subsequently expired my demo account. According to your explanation, if this was to happen to them live. I would be on their B account list then. Do they have counter measures for such account or do they just wait for the trader to get greedy and make self imposed error?

genne 22: you are absolutely right on the interbank part as far as ECN goes which is supposed to be a real link to the interbank market, I had quite a few attempts to lure me into the nightmare, it is still a bucket shop so to speak. Ok now to actually positive side, there are a few brokers that I know personally that are quite reliable. The quotes are rather precise, you can set up a no slippage account and they treat you with respcet, I dont think its ethical to discuss it here.

You are also right about the stops (they are red flags and brokers and large speculators do hunt them, if I have considerable positions on the market I can ask my broker to make the stops invisible, I think its still a gimmick as they still know where they are, so I only use “ catastrophic stops” just in case and close out the positions manually once im in front of the screen and very difficult part to consistently making decent money with a little leverage.

I peronally scale in and out, similar to the large speculative interest in the market intraday on a pefect market conditions and increased leverage. As far as countermeasures goes, if you are in a decent place you shouldnt worry about countermeasures, they will place you in the A book and will value your business as youll still creat a good income for them from the spread. If however you see that you didnt get filled when the ECN was quoted or got filled on a spike that never took place I would run like hell.

FTI: So in reality they are lying when they say that the banks are filling the orders, when in effect they are running the book. Effectively making them market maker.
In the interbank we use Reuters ASAP page as a guide, but when some of our dealing terminals call out, the market could be within 10 pip spread as quoted ASAP but some sectors do shade out of range,not considering the clowns that quote wide. My next quieston is if they are making market how do they determine the market at any give point in time, as the interbank is everywhere. Would I be correct to assume by virtue, that they are making market that they determine where marekt is at any give time. And their price is final. If my assumption is true, I would like to ask if you know how far do they tear from the interbank prices. Are there any arbitrager to correct the market.
In the interbank system, we deal with the honor of “ my word is my bond”. Its not unlike a knights code of honor and is strictly enforced by room chiefs. Therefore, when we deal, we at leas know what kind of character we are dealing with at the other end. Clown that cannot adhere to that protocol cannot last long in the interbank environment, they are weeded out.
The interbank brokers also have a code, its not the same, but that's a different subject altoghether.
What I'm getting at is, if retails brokers are making marketts, can I actually trust them with watching my interest? This is no way to suggest that they have no honor. But to hear that they would lie about bing an interbank as you clarified, I wonder how much good faith I can put in their hands?

FTI views on the market

volatility to the nimble it presents more opportunities to the rigid it may pose nusance and increase suffering. To me the most important indicator is price. The market sigma, which is speed of move. The vega, which indicates volatility factor in its trend, and the time it consumes in it to push. You can determine all this from bare bar or candle charts. The other indicator is average true range with that you can determine if the volatility is out line with your risk tenure, you can best understand thhis by studying the original Dow theory. And those that are being used by conventional chartis today differs from my cup of tea. I think you may get a good grounding of that from the book by R.Edwards/J magee
another imporant read is the market form

I believe FTI is talking about momentum, speed, and accelaration as well as range. Perhabs
(Σ )(v)/ time= acceleration = F (speed)(range)/time= acceleration to measure conviction and strength of Force (demand or supply) market form possible structure bearish, bullish or ranging.

The dow theory: 1 the market has three movements, the main movement, primary movement or major trend may ls from less than a year to several years. It can be bullish or bearish. The medium swing, or secondary reaction or itermediate reaction may last from ten days to three months and generally retraces 33% to 66% of the primary price change since the previous medium swinng or start of the movement. 3 short swing or minor movement varies with opinion from hours to a month or more. The three movements may be simultaneous, for instance , a daily minor movement in a bearish secondary reaction in a bullish primary movement.

Market trends have three phases: dow theory asserts that major trends are composed of three phases: accumulation phase, a public participation phase and a distribution phase. The accumulation pahse is a period when investors “in the know” are actively buying (selling) stock against the general opinion of the market. During this pahse the stock does not change much because these investors are in the minority absorbing (releasing) stock that the market at large is supplying (demanding). Eventually, the market catches on to these astute investors and a rapid price change occurs (phase 2). this occurs when trend followers and other technically oriented investors participate. This phase continues until rampant speculation occurs. At this point the astute investors begin to distribute their holding to the market (phase 3)

the stock market discount al news: stock prices quickly incorporate new information as soon as it becomes available. Once news is released, stock prices will change to reflect this new information. On this point dow theory agrees with on of the premises of the efficient market hypothesis.

Stock market averages must confirm each other: in Dows time, the US was a growing industrial power. The US had population centers but factories were scattered throughout the country. Factories had to ship their goods to market , usually by rail. Dow's first stock averages were an index of industrial (manufacturing) companies and rail companies. To dow a bull market in industrials could not occur unless the railway average rallied as well, usually first. According to this logic, if manufactures profits are rising it follows that they are producing more. If they produce more, then they have to ship more goods to consumers. Hence, if an investor is looking for signals of health in manufacturers , he should look at the performance of the companies that ship the output of the mto market, the railroads. The two averages should be voving in the same direction. When the performance of averages diverge, its a warning that change is in the air.

Trends are confirmed by volume: dow believed that volume confirmed price trends. When prices move on a low volume, there could be many different explanations why. An overly aggressive seller could be present for example. But when price movements are accompanied by high volume, dow believed this represented the true market view. If many participants are active ina paritcualr security, and the price moves significantly ino one direction, dow maintained that this was the direction in which the market anticipated continued movement. To him it was a signal that a trend is developing.

Trends exist until definitive signals prove that they have ended: dow believed that trends existed despite market noise. Markets might temporarily move in the direcion opposite to the trend, bu they will soon resume prior move. The trend should be given the benefit of the doubt during these reversals. Dtermining whether a reversal is the start of a new trend or a temporary movement in the current trend is not easy. Dow theorist often disagree in this determination. Technical analysis tools attempt to clarify this but they can be interepreted diffferently by different investors.

FTI: I try to recognise the compound formations In the bar charts. A good reference of forms study was done by the reasercher, by the name of John R Hill, im not sure if this studies are available to the masses. They read compound chart formations. And understanding of HIP and LOP patterns is foundational requirement. A complementary methodology is by complex candle chart formations. I find the books in englis on this too elementary, I used th have an understudy who had a copy of the secret reading by rice traders in hihongo. Unfortuately ive no contact with him for a long time since and my development on that has stalled.

I use daily charts to indicate trend, I use short charts to indicate form.
As above so bellow, what overll directional biased is established by dailchart as they ecompass trend and average range, force of speed and oveal market structure, the shorter timeframes are used to indicate form to see volatility and uderstand what market is doing now, as the short charts will reflect the daily chart in at the end. FTI uses an hourly SMA to see price tearing from the mean and see thrust of movement. And intraday direction.

Bulls make money, bears make money, pigs get slaughtered. You see when bulls are making money, bears are not, when bears are making money bulls cannot, but one who is tying to catch both buses will soon 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 when the north comes. Or mostly in the middle of the road when both buses come

this tells me that FTI infact when being nimble he did not mean turn coat at every turn and catch every pip, he in fact meant to always position ourself in the direcion of the daily trend. As tsun stu said that to seek higher ground and sunny places.

For dealers is a different game because when markets are going up in a bear market, customers keep making them short their books 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 whre the buying started he would make nearly the amount of money that made him short in the first place.
For this to happne he has to have a book big enough to accommodate the customer base, and as the market swings back towards the starting point, he has to ascertain that his book of shorts be kept constant. This is because on the way down the customer will be making him long. So by contatly 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 market major trend, he will always make scalp money guaranteed.

His MO is to duck and move quickly os to have a better average on the up swing towards stops, to maximize his shorting near the top of the swing. This scenario is most effective if there are stop near the levels where he has a large order sell, where he can help the customer sell OB and kill the sitting duck stops in the same blow. Another senario is where by the haeavy selling is CB levels or specific sell zones. Where many tier 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 the trend, and slow puffy moves counter trend. Am I making any sense to anyone here?
So we use daily trend as direction to build book size and short charts to make market for retraces,

if im just cluttering the thread let me know and i will stop.

i wrote all this in word perfect did not copy and paste actually wrote to memorize it and understand it better.

and the newbies if you would like a copy of my notes by when im done i could share them with you

Something to read.

http://www.thedailybell.com/852/Jim-...e-Markets.html

Rgs,

T.

so in essence when FTI teaches us to dance with the market he is not in anyway saying to be scalpers.

he actually mentions that pigs get slaughtered, so trying to catch upwaves down waves and move in and out of the markets can get us in financial trouble.
i think here is where i am wrong in my approach.

i think FTI is saying that we should always trade in the direction of the trend.
using lower time frames for timing our entrances and reduce risk exposures if need be, but keeping due course for quick battles or actually manage the trend movement.

so in essence RISK exposure is what we need to control.
when he mentions market makers keep their averages for when the market retraces, that might not be a good idea for an individual trader with a small account but we can adapt that if needed AS LONG AS WE ARE TRADING IN THE RIGHT DIRECTION.

so in im thinking counter trend rescues personally although i have succeeded at times with them, need to be taken into consideration how expose we are and if it makes sence to risk further damage against the trend.

if we have a scout in and we are trading against the current or uphill battles. By risk exposure alone it makes more sense to kill the position and flip, or await clearer signals depending on how price is moving in the NOW.

see i dont know if it is only me, that sometimes makes the mistake of seeing price moving up and down and thinking what it might do or how it might react as if price in the screen is what am actually trading. now if we read the actual structure of the market it is inmense, and the participants are in the billions with trillions of dollars, and our platforms at home although have to quote the market is acutally made by our dealers who might not be acting in our favor and might not be keeping price in accordance to the Tier 1 banks right away.

so it is a killing zone, and the first thing is preservation, The Art of War is very fitting to what we need to be doing in the markets.

understanding the correlations of fundamental economic factors, understanding the dollar movement, and seeing as the dow theory indicates if the markets are reacting in good health.


i would like to know your opinions on the sigma,vega and form, how we can use true range.

my take is the sigma which is speed of movement which shows conviction, how far the liquidity is taking the quotes from the current price measuring a viable push of Force which is demand, and as it decelerates we can see distribution or supply in place. the the time and range can be the momentum and how the average range correlates with present price movement.

as far as bars and candles formations they are not truly important in the sense to learn patters but they give us a read of price.

Hi Textor! Thanks for the article. Very good reading....

I thank you very much Redlion......Thanks for your effort. your post is priceless.....at least for me.

keep rocking.

Still alive...Ah....should I, should I?
Do I dare?
Greeting to the chief
and the dancing troup.

Oh...my...gosh! Look who's back! Hey luSan, how are you?

good to see you back Luis...

and yes you should

Estabamos esperandote.

Rgs,

Textor