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Technical Analysis Fallacy

  • #57,961
  • Jun 26, 2018 2:21pm Jun 26, 2018 2:21pm
Surprise, Surprise, HLAng has been made a commercial member now, someone must have reported the post, oh dear, this will happen to anyone who tries to post this type thing on this thread, our friend FTI was very against these sort of predators trying lure in the new and unsuspecting traders.

Regards

Phil.
-be careful about what you allow to be put in your mind-
  • #57,962
  • Jul 5, 2018 7:23am Jul 5, 2018 7:23am
Quoting CookieMonsta
{quote} Hi, You can't compare single entry mo with averaging mo like this, in that, the position cost average would have adjusted your probability higher. ( My take) finally, certain entries work better for certain mm skew, so that has to be taken into consideration as well.
Hi Cookie,

This fews days I have been intensively studying the characteristic of rescue and compare it to full position strategy, still I arrived to the same opinion that when edge is greater than 50%, full position is still the better option.

Here is the reasoning: Assume my edge is 55% and the win/loss is 1 dollar each, after 100 trade, the total gain will be 10 (100*1*0.55)-(100*1*0.45)
Now if I were to implement rescue, the rescue is 3 layer, under the sequence of 1,2,4, and the total loss from all the rescue should also be 1 ,which is the same as full position. The position size under rescue method will be 1/7= 0.1428. If the first positon or any one of the rescue work, I can make 1x position, which is 0.1428. If I rescue 3 times my win rate will increase from 55% to 1-(0.45^3)=91%

the total gain from rescue after 100 trade will be (100*0.91*0.1428)-(100*0.09*1)=3.99 which is less than when full position is implemented. This is because eventhough rescue reduce our loss by 36 (45-9) and increase our gain by 5.85 (0.41*100*0.1428) the reduced of winning from existing right position is 47.146 (55-7.854) due to smaller position size when trade is correct.

This mean if our chance for a trade to end in profit is more than 50%, rescue is a worse strategy as it reduce winning from all the correct trade even it reduce our losing rate.
Of course there is also a chance that after all rescue have been implemented (price will have to reverse after 1st entry) , price will go to our way, but since our edge is 55% under 1:1 R/R ,price will have a higher chance to be profitable as soon as first position is entered, which means when we are right, we will have smaller position. The reduced loss from rescue is not enough to justify for the loss from winning due to smaller position. We can also try to scale in if first entry is correct, but then we will have more losing rate due to positoin cost nearer to the market compare to full position.

But when edge is below 50%, rescue does have its merits as the loss we can rescue is more than the reduced winning in existing right position. However when edge is below 50%, the trader shouldn't trade as he wil lose money in the long run disregard what MM he used. This is the reason why no martingale strategy can beat casino as under 1:1 risk and reward our edge is always lower than 50%.

In the end, rescue or no rescue really doesn't matter as it depends on the edge of the trader, the win rate under the same risk and reward.
When we trade we always trade with the trend, be it fading or following trend move, as this is the only thing that can make our edge above 50%, if trend turns out to be a range, it really doesn't matter whether we rescue or not, as price is equally likely to go both side, and it is impossible to make money without edge, be it full position or rescie.

So all this lead me to the most important key, that is to find the extra % edge that make our trade ends up more in profit than loss state. which unfortunately cant be craft our from MM.

Just wondering ,when you have implemented rescue, do you hold the rescue overnight or cut the rescue? or do you force rescue even when there is no escape opportunity. The reason is because FTI always mentioned reducing the position to prevenet overnight risk. However, if we open our trade based on immediate trend and are forced to rescue, sometimes, even immediate trend is up, that particular day might be downtrend, which doesn't allow escape oppotunity, and then the trend will resume the next day, if we are forced to cut the rescue, we essentially got caught by the market.

Full position might be disadvantaged when price go against us, but it also train us to time our entry, we can still hold or cut depends on how the price evolve.

Regards
  • #57,963
  • Edited 9:16am Jul 5, 2018 8:42am | Edited 9:16am
Quoting GoldenFinger
{quote} Hi Cookie, This fews days I have been intensively studying the characteristic of rescue and compare it to full position strategy, still I arrived to the same opinion that when edge is greater than 50%, full position is still the better option. Here is the reasoning: Assume my edge is 55% and the win/loss is 1 dollar each, after 100 trade, the total gain will be 10 (100*1*0.55)-(100*1*0.45) Now if I were to implement rescue, the rescue is 3 layer, under the sequence of 1,2,4, and the total loss from all the rescue should also be 1 ,which...
hi goldenfinger,

your maths is correct, but that is assuming your win rate can be tilted 50% and above, so, this implies your feel the trend ability must be really strong, otherwise sometimes you really can spend alot of time breaking even. so your right in saying your timing has to be good, no matter what, to push it pass 50%. so i will leave this to you to decide, what is the best mo for you personally. but my suggestion is, if you are not keen on rescue, you might want to look into fibo attack skew of 0.6 0.6 0.6, as this pyramiding will allow you to have a positive risk reward ratio of more than 1:1 when on wind and lose only 1 when taken out, but the key is once you put in 1 level of attack attempt to make your attacks short, once price seem to go against you, if it hits BE and momentum isn't there taking out at break even is prudent.

so you will have to examine your assumptions, as the maths simply models and evaluates what you have to be able to produce, but if you are unable to hit such target consistently, some i can tell you, the markets will keep testing you on your ability to adapt to its changes, that is where you will begin to see your edge erode.

reason is because with only the attack MO, you can decorrelate your accuracy rate from your risk reward ratio, in that you can manufacture strong risk reward ratio while maintaining your accuracy rate perhaps at the specified 55% rate.

as for rescue, if its against trend on hourly i may not rescue it but simply cut losses if within tolerable amount, if i have to carry i may implement lock to lock in losses then dance again the next day. but if hit by sudden volatility against me, i would rotate or lock exposure till market shows signs for rescue, mainly to attempt to decorrelate exposure from market's movements, till favourable to reinstate. also suppose i have up to level 3 rescue to save myself, level 3 is last level. so once level 2 is reached, i need to decide if level 3 is needed, otherwise i may implement something like, now price looks like its turning, i put level 3 in to rescue level 2, and taken it out, now i am left with scout and level 1, so it exposure and book sigma is being reduced, but entire exposure can't be rescued 1 shot.

also, 1 more thing which i realized, is that, recognising when a position should not be rescued is the key.

let me give you an example, if you can keep dancing within scout, level 1 and 2 rescue, never hitting level 3 rescue alot, while your attacks can hit level 3 most of the time successfully, that is when you can maximize the mo here, adapt to volatility, produce a good risk reward ratio, and a good accuracy rate.

thats the skill aspect in dancing the markets with the mm here, which is the main difference in purely using martingale as a system vs directing the troops with discretion. the skill aspect in dancing is really the only thing keeping you book alive, but mm and dancing are 2 complementary thing, but to use the mm here, dancing well is a must, then how you dance will help to dictate your mm. for example you prefer not rescuing, then you may get into draw down, but that also means if on wind you have to compensate with attacks, to maximize opportunity. otherwise the mm may not do anything for you.

i hope i did answer the question you asked, if i got your question right. as from what i can tell, correct me if i am wrong, it is likely you are beginning to get a feel for the dance but is at the beginning stages of figuring out the most suitable way to incoporate mm into your dance, and specifically catered to the way you dance, your entry and exit and the way you pulse the markets.

if we are forced to cut the rescue, we essentially got caught by the market.

as for this, not entirely, suppose you have deployed scout, and you are forced to cut, as volatility seems out of line with your book, effectively you reduced exposure, then what can happen is that you reduce exposure by taking out units, then when market swings back, enter troops more to take some back. less pips loss = less to recover. if caught out of step, main focus will have to be damage control and recovery attempts.
  • #57,964
  • Edited 5:13am Jul 6, 2018 4:58am | Edited 5:13am
Quoting CookieMonsta
{quote} hi goldenfinger, your maths is correct, but that is assuming your win rate can be tilted 50% and above, so, this implies your feel the trend ability must be really strong, otherwise sometimes you really can spend alot of time breaking even. so your right in saying your timing has to be good, no matter what, to push it pass 50%. so i will leave this to you to decide, what is the best mo for you personally. but my suggestion is, if you are not keen on rescue, you might want to look into fibo attack skew of 0.6 0.6 0.6, as this pyramiding will...
Hi golden finger,

I may have misread abit of what you mentioned, but the points still holds, is that in order to be able to properly utilize the taf mo, you have to be able to go into attack mode, the primary issue I have with your simulation and model is that, it does not factor in when your attacks come in.

Main issue is, as earlier in the thread, it has been mentioned, that attack is important in taf mo, being only be able to rescue helps in keeping book healthy, but to bring the bacon home, attack needs to be done.

Also other posters here like Alex have given advise that focusing on attack is key. Which is inline with the lessons here.

Perhaps you may also want to factor in ability to commit attacks and factor that into the simulation you have above.

Primary reason is because you, well you already explained above very well, the risk reward is lopsided and on top of that, your exposure is very high compared to what you are making, which implies that having prolonged exposure but without ability to commit attacks to bring profits in is rather counter productive as the exposure to book is much higher and the returns may not justify the risk as you have simulated above.
  • #57,965
  • Jul 7, 2018 3:08am Jul 7, 2018 3:08am
Btw, if anyone is reading these posts, above, what's the catch?

Go read fti's post on the loss recovery table, that's where the real catch is.

And this is part of the missing pieces not inside the simulation of golden finger.

Let's say, you put 10% risk on 1 trade ( it is so large to show the acceleration in the risk of ruin).

Effectively when you lose the 10%, you are down to 90% capital. If you still put 10% of original risk pegged to the original capital amount, now with respect to your current capital, you are actually 11% risk level. So this is part of the missing piece. How tolerable to runs of losses is your mo.

So your risk has increased but your actual dollar value risk is not increased.

That is the reason why going on attacks increase your book's risk of ruin's tolerance. Essentially, trading up foreign cap to be able to withstand damage.

That's also why fti's comment on a skew by 1 of the poster using 1 3 2, allows for abandoning scout if not in favour, as 1 3 is a front weighted attack, suitable for fast hit and run, and no rescue on scout. While a fibo skew allows for balanced attack and rescue scenarios.

1 more missing piece is volatility. The understanding of how markets swing and change it's volatility from leg to leg.
  • #57,966
  • Jul 7, 2018 10:18pm Jul 7, 2018 10:18pm
It has been a long time since I have checked these boards. Is FTI still posting?

thanks,
a
  • #57,967
  • Jul 9, 2018 3:16am Jul 9, 2018 3:16am
Quoting auxesis
It has been a long time since I have checked these boards. Is FTI still posting? thanks, a
Hi - no he is no longer posting not for a while- please PM me.

Alex
check out the terrain - follow never lead
  • #57,968
  • Jul 10, 2018 4:14am Jul 10, 2018 4:14am
Quoting CookieMonsta
{quote} if we are forced to cut the rescue, we essentially got caught by the market. as for this, not entirely, suppose you have deployed scout, and you are forced to cut, as volatility seems out of line with your book, effectively you reduced exposure, then what can happen is that you reduce exposure by taking out units, then when market swings back, enter troops more to take some back. less pips loss = less to recover. if caught out of step, main focus will have to be damage control and recovery attempts.

Yes, I agree that attack is important as with an edge, that is what make the trader profitable. I do not scale in my trade for a single setup, this is because the full position has essentially embeded my attack.

As I use daily as the time window benchmark for my trade, that means I do not scale in my intraday trade, but if next day new opportunity emerge and previous day trade are still open, I will open a new trade in full position.

The reason is because if rescue reduce our losing rate, scale in will also reduce the win rate, it is unavoidable. Using an exaggerated example to illustrate, if win rate is 80% under full position, when I scale in (using smaller position size) 3 times, when those position did not hit tp target for the setup, I will have smaller profit or even losses due to high ave cost compared to full position entry, if those position hit tp target, it wil return smaller profit compared to full position.

Being able to rescue just come with this trade off, it is impossible to try to mitigate it. If someone is able to use full position on 80% winning trade and rescue (smaller first position) on 20% losing trade, then it would be ideal, however, we really can't tell whether a setup fall in which group, so adopting a full position approach indicate I assume my trade is in the 80% group with the edge, and the 20% losing trade have been eliminated through selective setup screening, if you use rescue, then you are expecting that if the price reverse after your entry, you can add in more position to have smaller losses, but come at a price of smaller profit when it is right.

Besides if lose rate is 20% (0.20) with 3 layer rescue, lose rate will drop to 0.008. with 3 scale in position, the chance that 3 of the positions are profitable is 0.8^3=0.512, this mean the reduction in losing rate by rescue is smaller than the decrease in winning rate from scale in.
At the end, the most important is to know our edge, the chance that price hit tp before it hit our sl so trade selection is really important.
So knowing when not to trade is also as equally as important, do you trade everyday or whenever your time allowed? this question is open to anyone, would like to hear you guys opinion.

Regarding my previous reply about cutting rescue is essentially gettting caught by market, I did not mean cutting because of pain threshold is getting caught my market. What I really mean is if we are purely intraday trader that cut position at day end even rescue is still far from our bite loss point we might get caught. This is because when we trade intraday, we also have immediate trend in mind, but even in a up/down immediate trend, that particular day might only have one way movement, so if it reverse and we keep rescuing, we might not have escape opportinity before we cut at day end. If immediate trend is correct, we might be able to escape our rescue if we wait till the next day, instead of cutting it at day end.

And for the loss recovery, yes I am aware of that, so when profitable I will trade 5%, and if having loss I do not trade 5% of the smaller equity, I still trade the same monetary amount, this is assuming the edge work, and 20 hand is enough for me to go through temporary losses before profit kick in.

As a side discussion, because I also monitor stock market when I trade. IMO i think stock index is way easier to trade than currency market. what do you guys think?


Regards
  • #57,969
  • Edited 7:00am Jul 10, 2018 6:18am | Edited 7:00am
Quoting GoldenFinger
{quote} Yes, I agree that attack is important as with an edge, that is what make the trader profitable. I do not scale in my trade for a single setup, this is because the full position has essentially embeded my attack. As I use daily as the time window benchmark for my trade, that means I do not scale in my intraday trade, but if next day new opportunity emerge and previous day trade are still open, I will open a new trade in full position. The reason is because if rescue reduce our losing rate, scale in will also reduce the win rate, it is unavoidable....
Hi goldenfinger,

actually you pretty much answered your question, some positions can't be rescued by averaging if it has developed into a major term reversal.

*edit for above, trading against major term trend reversal implies additional shifts in volatility benchmark hence book's risk will have to shift larger, and if position size is fairly large right from the start, it is fairly easy to exceed the risk tolerance*

but as you mentioned, sometimes its difficult to tell. hence selection is important. that is why experience is important in pulsing the market is important.

and also fti mentioned in 1 of the post, to really be able to get the most out of the mm for rescue and attack, the pre-requisite is being able to dance the market, which is pretty much knowing when not to rescue, when can rescue and when can attack and when just deploying scout and then taking scout back and going flat, or when to cut and flip or when to stay out. but all these are sometimes difficult to tell also, as market can keep giving false signals, hence experience. but the key assumption that you have which is not in this thread, is the tp level, as dancing the markets imply following the development and adapting to what is happening now, hence, if price seems like its turning but all your positions are in profits, would you take profit? also if you are at your tp level, but market is still very impulsive and in trending in your favour and you are at max attack level, would you take it all out? or perhaps let it all ride? or perhaps take some out and let the rest ride?

as for stock index, i have no idea since i do not trade nor do i monitor that, so i have no comments on that.
but what i have observed is, the forex market has changed alot compared to 2-3 years ago, as it seems these days, the markets are alot more prone to spikes than usual, and volatility is alot more, bivariated implying the chance for a relentless strong push is stronger, if caught out of position, rescue may be harder and may need to be carried more than a day at least, and scout size has to account for the bivariated volatility otherwise its alot easier to hit the loss pain threshold faster. but usually if you catch on fast and only have scout out, cutting and flipping is usually better.

well, for me i trade intra-day and sometimes i have other positions for swing trading which is different from whats taught here.

for restricted time trading, for say if i can only trade london open till US morning, or US morning till US lunch, i use 111 and see how london opens, as these opening is where fresh orderflow hits the market (sometimes from stocks, sometimes from commodities, sometimes from bonds, sometimes from oil, sometimes from other funds and corp orders, sometimes from derivative markets) and you see start to see where the tilts of the markets may be at, or sometimes if there is say NFP, these outsized volatility periods forces the market's hand and after these numbers are out, the price action is usually offers more edge as thats when large parties may be required to come in to adjust their position, and may generate momentum from their orderflow, and because of that, the momentum can be large and hence if able to time well, these can offer nice profits fast.

commodities, stocks and bonds are assets, and forex is inbetween them, flowing as big players are trading. sometimes when foreign investment funds with large investments need to liquidate and exchange back to their home currency, they can generate strong momentum which may be counter to the current trend, but its what they have to do. implication is that, sometimes when stock markets and futures or options market open, and a massive orderflow on that side happens or a huge move happens and flushes some big guys out, and they need to exchange to their home currencies, it can drift into the forex markets too. so the opening for futures as well as stocks are fairly important, and so is it for bonds, as interest rates, bonds and currency exchanges are strongly tied by interest rate relationships, arb traders doing forward spot arb may spot the opportunity and arb till there is non on the exchanges, and that would force exchange rates to go back inline with expectations.

for example, gdp for gbpusd just now, after the gdp numbers are out, it was a good short opportunity, because yesterday's daily was strongly downwards. and the gdp itself has a momentum move down, implying the tilt was short, and it showed that the upthrust before the gdp numbers were a stop hunt, and was a hourly pullback, these can be seen after the fact, but the trading opportunity was there, since it can be caught near the start.
  • #57,970
  • Jul 12, 2018 9:29am Jul 12, 2018 9:29am
long time no see fti..... huge respect and prayers for the one who chiseled my skills.
just a thought, just a line.... remembring fti
  • #57,971
  • Jul 26, 2018 5:26am Jul 26, 2018 5:26am
Quoting cuthbert
long time no see fti..... huge respect and prayers for the one who chiseled my skills. just a thought, just a line.... remembring fti
I feel the same way. I can't believe I made my first post in the TAF Lounge in December 2008. It's taken me nearly 10 years to start trading live without any distractions and I wouldn't have a clue what I was doing if it weren't for this thread and the generosity of a man I'll never meet.

Only now have I managed to get myself into a position where I can afford to spend the next 3-6 months trading live (full-time) without any pressure to make an income to pay the bills. I tried once before, in about 2012 I think, but the need to make an income at the time led me to trade rather recklessly at the time.

I went live again yesterday and made 1.6% on the day but it was quite a struggle. I am really looking forward to sharpening my skills again and seeing what I can do now that I have no excuses or distractions. I have always found my mindset to be the biggest obstacle to overcome when trading and that remains the same today but this is a golden opportunity for me to prove my worth and I sincerely hope that I don't blow it! I believe that the advice in this thread gets you 90% of the way there as most of your fellow traders will not be babysitting trades, employing sensible money management techniques and trading naked but that last 10% is down to each and every one of us and how well we internalise what has been presented here and use it to our advantage.

Sorry, I didn't intend to make such a long post and I doubt anyone posting here these days knows who I am...I just wanted to say thanks again to Freddie and I hope that wherever he is, he is happy and safe.
  • #57,972
  • Jul 26, 2018 5:28am Jul 26, 2018 5:28am
Quoting ukmanthailan
{quote} I feel the same way. ............. Sorry, I didn't intend to make such a long post and I doubt anyone posting here these days knows who I am...I just wanted to say thanks again to Freddie and I hope that wherever he is, he is happy and safe.

well said...

and I love Thailand.... having family there now kaa

Alex
check out the terrain - follow never lead
  • #57,973
  • Jul 26, 2018 9:40am Jul 26, 2018 9:40am
hi traders!

i have found an indicator and i think this is very profitable indicator if anyone solves this problem( indicator does not show most of the arrows until we refresh it.)
please anyone solve this problem!!
indicator :
Attached File(s)
File Type: ex4 $uperArrowIndicator~.ex4   11 KB | 551 downloads
  • #57,974
  • Jul 26, 2018 10:51am Jul 26, 2018 10:51am
Quoting bilal777
hi traders! i have found an indicator and i think this is very profitable indicator if anyone solves this problem( indicator does not show most of the arrows until we refresh it.) please anyone solve this problem!! indicator : {file}

Hi bilal777

I see you are new here, you need to post this in the 'platform tech' section to get an answer and for someone to maybe help out and fix the indicator, we do not use such indicators in this thread for our trading.

Regards

Phil.
-be careful about what you allow to be put in your mind-
  • #57,975
  • Jul 26, 2018 11:42am Jul 26, 2018 11:42am
I have put a lot of effort into explaining it all.

Watch my videos:

Inserted Video
Attached Image(s) (click to enlarge)
Click to Enlarge Name: ggugfghjhj.png Size: 22 KB
Click to Enlarge Name: eyuetteuet.png Size: 15 KB
www.sme-fx.com
  • #57,976
  • Jul 26, 2018 11:53am Jul 26, 2018 11:53am
Quoting FractalFreak
I have put a lot of effort into explaining it all. Watch my videos: https://www.youtube.com/watch?v=86lvaUx3bss {image} {image}
?!? Wrong thread?
  • #57,977
  • Jul 27, 2018 12:39am Jul 27, 2018 12:39am
Quoting FractalFreak
I have put a lot of effort into explaining it all. Watch my videos: https://www.youtube.com/watch?v=86lvaUx3bss {image} {image}
Clearly the post has not been removed showing it was intentional to post it here in some sort of effort to try to attract some people to their direction for whatever personal agenda the poster may have, reading the recent posts of this person shows that many people think this poster is a scammer (amongst other things), this poster then calls THEM trolls etc then bans them from his thread and still he has the cheek to post this completely self-promotional and unrelated post in this thread …. LOL ‘you reap what you sow’.
-be careful about what you allow to be put in your mind-
  • #57,978
  • Jul 27, 2018 10:37am Jul 27, 2018 10:37am
Quoting phil13
{quote} Clearly the post has not been removed showing it was intentional to post it here in some sort of effort to try to attract some people to their direction for whatever personal agenda the poster may have, reading the recent posts of this person shows that many people think this poster is a scammer (amongst other things), this poster then calls THEM trolls etc then bans them from his thread and still he has the cheek to post this completely self-promotional and unrelated post in this thread …. LOL ‘you reap what you sow’.
Hello Phil,

Indeed, it's clear.
Regarding the pictures, there's, e.g., The Black Square and The Ninth Wave. Both are famous and of value, I personally like the latter more. It doesn't matter what those FF craftsmen are able to paint here, we may just turn to page 2900. Or are they able to explain to anyone why The Black Square is more expensive than The Ninth Wave?

Best regards,
Exnav
Not to Advance is to Fall Back
  • #57,979
  • Jul 27, 2018 10:47pm Jul 27, 2018 10:47pm
Quoting ukmanthailan
{quote} I feel the same way. I can't believe I made my first post in the TAF Lounge in December 2008. It's taken me nearly 10 years to start trading live without any distractions and I wouldn't have a clue what I was doing if it weren't for this thread and the generosity of a man I'll never meet. Only now have I managed to get myself into a position where I can afford to spend the next 3-6 months trading live (full-time) without any pressure to make an income to pay the bills. I tried once before, in about 2012 I think, but the need to make an income...
All the best old friend.
Find your niche and zone. You dont need to move every day, only move when the markets is in your zone. 1.6% is quite a lot for a day actually. But that is good. Well played.

Rgds

Anyone heard about Freddie too? Any updates?
Fall in love with the process, and the outcome takes care of itself.
  • #57,980
  • Jul 27, 2018 10:49pm Jul 27, 2018 10:49pm
to that freak
The only person he is manipulating is himself with that corrupted mind of his. What a retard. If you can not stand the heat, get out of the kitchen. Otherwise, just use the heat and cook some food.
Fall in love with the process, and the outcome takes care of itself.
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