LFX Trading Proverbs

About 7 years ago, I had a strong system that traded low time frames. It worked so well, that I only lost about 1 out of every 20 trades. However, that one losing trade often was larger than it should have been because I was so addicted to winning that I would hold onto it thinking it would turn. Before that system, I used to just flip trades, lol, so if it started to lose, I closed and went the other way. No worries. It took a little time to lose 1 of 20 trades, and I only let it happen about three times. Then I began to figure out why I was holding losers and hoping they would turn. It was an old problem from when I first started trading Forex, that I had fixed, but then removed from that strategy to streamline it. So I stopped trading to fix it. Now, a loss is either a head fake that actually fooled me, or a low range that didn't cover the spread. Either way, I see it, and know how to react, and so I don't hold onto losers hoping they will turn anymore. Well, almost, lol. Now that I think about it, if I somehow get caught in a consolidation area, I might hold on if I think I will be correct when the consolidation ends. Normally I can see those too, but sometimes it takes a little while for a trade to develop. Each trade is different, and unique, but I have developed measurements to identify most patterns. As a business, my goal is to make money, not lose money, lol, so now that I have a better idea when I am wrong, I stop the loss a lot faster. Sometimes I reverse the position, if I can tell I was more or less gambling on the wrong side, or other times I close and sit out because it looks like I entered a flat zone. Anyway, my advice is to limit how much you lose because that makes it easier to recover your money. Think of it as if someone is cheating you at poker and trying to take your money. Will you keep playing and let them, or walk away? If you want to intentionally lose, you probably should not trade for money.

Speaking of poker, if you ever play online poker, you might run into players who get all excited when they are winning hands and might even trash talk, lol. If you look under the surface, that means winning or losing is determining their personality. They are stuck in the moment and not in the longer term "numbers" game. If you trade like that, where your ego is controlling your mood, then you could have a tendency to be stubborn when you are wrong and that can be costly. You have to just follow the bouncing ball, making yourself a manually controlled EA, and not let your emotional judgement influence you. Close the losers and don't "hope". Because so many people lose trades, it seems logical they will be betting against you a lot, lol. If enough of them do it, it will cause you to lose, so just close the trade and get out of the way. Let them do their thing, and reenter when the chaos is over. Try to use logic, not emotions. It is not a casino where once you place your money on the table you lose it all if you are wrong. Once you see you are wrong on a trade, take your money out of it. In order to do that, you have to develop something that shows you when you are going to lose. That is an exit plan. Anyone can enter, lol, but the 5-25% of winning traders know when to exit. Once you think you have a good entry plan, the exit plan is your next priority. After that, testing becomes your priority to be sure you are profitable in the "numbers" game. The "numbers" game is simply whether or not you make money over an "X" number of trades. While each trade is different, you can still create an average rate. This is vital for your confidence first, and your account second.

I hope I didn't ramble too much. It all seems logical, however, it is not easy. Good Luck.

Dear Dkrock,

I hope you have been well, I absolutely love that quote. I came to understand this year that it is just as easy to do something as it is not do do something, very similar to Napoleon Hill's quote. I know it sounds strange, but has worked for me to be more productive Thanks for sharing it as it adds further meaning for me. I am taking the same approach in my science.

All the best,
K

Thank you dkrock, I updated my indicators as you mention here and eyes opened. I appreciate much. I have subscribed and will read entire thread

Hi dkrock, what do you think about renko chart and tick chart, i update my strategy but my account dont growth and shrink ? can this work on that chart?

First, you have to understand I am a range trader. I experimented with Renko a long time ago and found it very hard to determine changes in direction. In my opinion, momentum shows changes much better. By removing time from the sample size, it was difficult to define the price cycles. The vast majority of time, price cycles within its control limits. When it breaks outside of them, you obviously make more money. If you could define the control limits on a Renko chart, then perhaps they would be efficient, but it is not something I care to study now. In my overall business plan strategy, I have always been concerned with consolidation, and to a lesser degree, head fakes. I cannot see either of them with the Renko design, so I lose the ability to know if I should exit or hold. Therefore, when Renko finally might signal a change in direction, it can often be incorrect because it is actually in whipsaw. Also, depending on the box size, you could be in a trade for a long time because price is generally flat, meaning you are losing out on the money of the ranges because you converted price into a trend that doesn't actually exist. When the turns were signaled, they were often very late and I was unwilling to accept their slow signals. The final difficulty I found was knowing what sample size to use as the design of the box, or candle. How many pips are the best representation? I found that 2 pips was about as close as I could get to finding potential turns that might bring overall profit, however, that is one pip from just using a normal chart, lol, so why bother? Without being able to see momentum changes across multiple time frames, I just could not find myself able to trust a Renko box for a trading decision.

My background is business analytics, so when I use a graph, I need a defined x-y axis in order to create equations for the plotting and design of the data. By removing time from the ordered pair, I lose the x-axis, so that didn't fit my training and experience. Like I said, eventually I ended up converting the box size to "2", which basically just forced enough time back onto the graph to find a design. I think most traders don't have a clue how to use graphs, but for me, I am old school I guess and need a proper x-y axis in order to analyze it.

Renko reminds of point-n-figure, which was a common trading tool for people who could not access Ticker Tapes. It also helped people who did not have access to the data and so they could not use math to do price analysis. Now we have the Internet with nearly instant access to price, and computers that can do mathematical computations nearly instantly. Why trade like it is 1920 when you do not have to?

As for ticks, from my understanding that is something from the Commodities trading world. I have never traded commodities as that is more or less a specialty market since each commodity has its own price structure. In Forex, we trade pips, which can be translated as the measurement of the length of a price cycle from its high to low, or low to high. If you consider pips as a measurement, much like inches or centimeters, then your focus becomes figuring out how to measure the distance, rather than measuring how much money you will make. Money is made from the amount of your risk, but you need consistency to make risk useful, so you have to be able to efficiently measure pips. Since there is also a spread, that is measured in "pips", it makes no sense to trade ticks. You have to trade according to the standard metric of measurement. Otherwise, it is like driving your car using nautical speed, or the speed of light, rather than miles per hour. You would be using the wrong standard of measurement. To achieve consistency, I trade an average of averages, also known as mathematical odds, or mathematical probability. Those averages have to be large enough to show consistency in trading signals. A pip average is a much more consistent than a tick average simply because it is a much larger sample size. If you were to bet on the outcome of something, and knew the overall result from 1 instance or 1000 instances, which set of results would you use to place your bet? People who trade support/resistance lines typcially use "1", and we all know how that turns out. If you are trading ticks vs pips, you are limiting your average, so you are limiting your probability.

I realize my opinion does not support your trading plan, but it is just my opinion based on a couple months of research on Renko. For me, it was necessary to satisfy my curiosity on it, learn from it, and use the knowledge to further progress on my design. At this point my system is so advanced I do not even need to see the candles, normal nor Renko, so I do not have any interest in further studying them. Good Luck.

Hi DKROCK, always nice to draw from your experience. Without talking to much, please could you explain this point "To achieve consistency, I trade an AVERAGE of AVERAGES, also known as mathematical odds". I have spent 100 of hours going through all your post as well as looking it up on the internet several times to no avail. Please What do you mean by AVERAGE OF AVERAGES??.

If you use a normal trading chart, the distribution of price is defined by time. You can average the distribution through time to predict direction. When you do this across multiple time frames, then you will have multiple distribution averages. By using the multiple distribution averages you can sequence them into a plausible pattern using oscillators that project the full range of price as it moves back and forth from the average. I call the comparison of the patterns created by the oscillators the average of averages because I use the aggregate data to determine the probability of the direction of the price cycle.

This screen shot shows the exact same trades as they appear in multiple time frames. The smaller time frame gains precision. The larger time frame filters. By using them together, I can use what I call the average of averages, a visual comparison, to make fairly easy trading decisions.

I have only seen Wolf of Wall Street once, so I forgot about this scene. I saw this as a response on another thread to some member wanting other members to prove they make money and thought it was an hilarious answer to the thread. So, when the trolls challenge you, post this, LOL.



Oh, by the way, did you ever read where I told you most "traders" are salesmen? I know because when they offered me a job, they didn't want me to trade. They wanted me to sell. This movie also depicts that. Most "traders" have a J-O-B, making money from commissions. There are very few of us that are proprietary traders, or in other words, capable of making money from our own money by trading it. Good Luck.

Hi dkrock, do you make an EA based on mechanical system? do you use an EA?

Average of Average?
example: using TF M30.

using moving average (48) daily TF
So when i want to see the momentum on daily TF, I must use data source from moving average (48) to create another moving average or use data source from TF M30?

[quote=Geriliel;12732949]Hi dkrock, do you make an EA based on mechanical system? do you use an EA?

I do not use an EA. There was a period when I tried using them, but I found them to be useless because the market has too much whipsaw. If you trade too tightly, you will have a lot of false signals. If you trade too loose, you will have a lot of losses due to entering too late. An EA is obviously a strict mathematical equation, so head fakes and consolidation areas will activate orders, even though you will not profit on them.

Average of Average? example: using TF M30. using moving average (48) daily TF So when i want to see the momentum on daily TF, I must use data source from moving average (48) to create another moving average or use data source from TF M30?

I don't understand your question. Sorry. A time frame is just a time frame. They all draw the same patterns. They differ in range from high to low, low to high, and the frequency of the ranges. Whatever you draw on a 30M chart should be similar to what you draw on a Daily chart. If you want to see the Daily chart signals on the 30M chart, then either use a multiple time frame indicator, preferably one that interpolates, or convert the Daily signals to the 30M chart by using a multiple of 48. If you were using 48 moving average on the 30M chart, that would be a 1 moving average on the Daily chart. Are you trading the 1 moving average on the Daily chart? First determine what moving average you want to track on the Daily chart, then convert it to the 30M chart. I will guess the value will cause trades to be so late it will seem ridiculous to trade it.

The other thing is even though you can calculate an approximate value for the various time frames, they are not necessarily correct. That is why you should you an interpolated multiple time frame indicator. You are asking 48 candles on the 30M chart to give you a view of a single candle on the Daily chart. Because of the market volatility, you will likely have more trading signals on the 30M chart than from the Daily chart, meaning they are not congruent. I would probably stick to time frames that were more near to each other in sample size.

I have read a lot of your posts ...
A number of your thoughts sound like they were my own, although I realized it only now ... it surprised me a lot. A few years ago, I occasionally read some of your posts, but I wasn't ready to be aware of them. Just like with N.Taleb's books ...
You are an interesting person with intriguing concepts that seem completely real ... Not often in my experience with the market I get such an impression. It makes me a little nervous, a bit excited ...
I'll keep reading ... let it happen what is going to happen ...

"... Many of our troubles may be explained from the fact that we live according to a pattern, and, instead of arranging our lives according to reason, are led astray by convention.
There are things which, if done by the few, we should refuse to imitate; yet when the majority have begun to do them, we follow along – just as if anything were more honourable because it is more frequent! Furthermore, wrong views, when they have become prevalent, reach, in our eyes, the standard of righteousness." Seneca.

Stay well
BN

Myself feel to be in stage 3 of Reynaldo Soriano Jr. list of competence ... (page 10)
"3. Awakening Moment - After a few years of trading and losing consistently, he realizes there's something else wrong. At first he can't figure out what's wrong. He learned different systems and none of them worked out. He traded different asset classes from stocks, futures, Forex, and options. He is about to give up and he realizes that perhaps it's not about the trading system. He realizes that the main problem is him and that he learned how to trade the wrong way."

...which state is looking like permanent pregnancy ... WAITING FOR DELIVERY ... and waiting, and waiting ... and eventually you smell a rat ...you are STILL in stage TWO, not in THREE ... specially after reading this thread ...

is it a equlibrium line, maybe?

Attached Image (click to enlarge)

Hi wise people ...
SO , I have a puzzle …
Took CSV file of M1 data …
Calculated 50 closes and took average of 5 and median of last five, and this way 50 consecutive candles one by one…
Put new data on and compared with chart corresponding imported data…
Does make it any sense?



and corresponding chart

I am also a reader of your posts and i believe you have already given so many hints about how to look at the chart but cant connect all the dots. i am experimenting with the ideas that i gathered from your posts. here is one

When you can see profitable trades without seeing the candles, then you are trading the technique of this thread. It is about measuring current buyers against current sellers and identifying which one is more dominant.

How does your indicator react to a "stair steps" pattern ? Or to a prolonged movement of many pips ?
(The one you posted and then removed)

Hi argosgate
I think the solution is to find an indicator that shows the full range of price. The question now is , which oscillator will that be? The very heart of my problem.

I removed this pics because they were laying ... was looked nice on historical charts but in real (I use Soft4FX Symulator) it was garbage... it was a dead end...
So please forget about this pics, it was a mistake, lack of logical and analytical thinking from my side... I am sorry...

It sounds like you learned a great lesson. What looks good in history does not always translate into live trading. This is because of moving averages. As the sample size increases, the moving averages adjust, so what you see live can alter with new data. The only way to know is to test it live, and be ready to make modifications because of it. But with experience you can find improvements.

DK this pic is NSFW lol