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Setups are bunk?

  • #41
  • Jan 2, 2022 9:24am Jan 2, 2022 9:24am
I like a random trader’s POV that technical analysis with chart elements including both the price (candlestick) and indicators are simply to signal a timing for trade opportunities. And they itself has no meanings until a trading strategy takes them into account.

“Overbought””oversold” are just terms defined when RSI and some other indicators reach certain conditions, but themselves have no meaning, we can call it “Buyer’s heaven” if we like, but it is not a heaven. The price can go up or down in any RSI conditions. They are “wrong” because they have no actual meaning or effects on the price movement, but they are “correct” descriptions in a trade strategy that factors in extended up or down swings.

I believe among the top reasons of traders failing is hoping to use “leading” indicators to predict price movement as the basis of trade entry. Remember the conditions are just defined conditions based on observed price movement, the timing for trade opportunities is not analysed yet. No matter it is a candlestick pattern, MA cross or what, we can see the actual entries are setups that is completed as price finished moving, hence it is always lagging (or “reacting” to price movement).

If spend some time to study other strategies, the observations would be most if not all would start with a condition (HHHL, or oversold, retest S/R, etc) followed by a completed setup (indicator cross, engulfing candle, etc) that is lagging. A simple strategy can be RSI in oversold (condition) and open a BUY position when RSI return to >30 (lagging signal = price already moved back up in last candle)

what I see is some strategies lack a lagging element, so they are entirely predicting the price and HOPE to catch a good entry point. The risk of failure is higher IMO, at least from what I trade and learn. I really like lagging indicators because Price Action is mostly leading ones. No need to be first to catch the swing, be second is also very good and get those first batch to test the poison first
  • #42
  • Jan 2, 2022 11:10pm Jan 2, 2022 11:10pm
Quoting MatDerKater
{quote} I think the problem with indicators comes when traders start to rely on them for actual setups, other than to merely assist in giving a visual representation of the market.....which of course is precisely what millions of traders around the world, have been taught to do, including myself. We are taught that we must have a trading plan, and have a big checklist of 'reasons' for taking a trade and rules governing trade entries etc etc, all written down and printed out on our desks and rigidly adhered to. We are taught to scold ourselves if...
I think the problem with indicators comes when traders start to rely on them for actual setups, other than to merely assist in giving a visual representation of the market....

I think the issue that many failing indicator traders facing is ONLY rely on indicators for setups.

which of course is precisely what millions of traders around the world, have been taught to do, including myself. We are taught that we must have a trading plan, and have a big checklist of 'reasons' for taking a trade and rules governing trade entries etc etc, all written down and printed out on our desks and rigidly adhered to. We are taught to scold ourselves if we deviate from 'the plan' and pat ourselves on the back if we followed our rules (even if the trade was a loser). With the idea that this gives the trader confidence in his actions and makes him 'consistent'. Like a set of bicycle stabilisers for traders to reassure them and make them feel safe, like they really have something to grab onto.

What I interpret here is those recommendations are to guide traders to be 'consistent' with their strategies, no matter it is consistently profitable or consistent losing. The steps you described are more on towards discipline execution regardless of trading strategies.

that all these indicator based strategies tend to only work, if the trader has already chosen a good trade location. However, many times when a trader chooses a good trade location, the setup integrating the use of indicators will not give an entry signal. Also, the times when price will enter into these key areas is quite rare and often fleeting, leaving 'all the other times', where price can pretty much go anywhere it wants. Now very often, during these 'other times', when the trader is basically using their indicators to define the trade location, the system will flash trade entry signals which just get the trader rinsed time and time again.

I think you have nailed it the problem of ONLY relying on indicators for trade setups, and you described IMO a reasonable approach to using indicator trading strategies: 1) Leading analysis such as trade locations/levels, then wait for price to enter the locations and 2) enter as indicator gives signal aligning to analyzed bias at those levels.

What I think when using indicator-based strategies (also probably all strategies), there are two major concept to understand. 1) The secret and most hard work is to find and tune the tools of a strategies so as to work together and historically give a statistical advantage. 2) Each tool is sort of a filter, so there must be missed 'good trades' when not all tools agree with that entry. If a strategy cannot be profitable in backtest or forward test, or a trader feels the strategy misses a lot of opportunities and cannot stand it, chances are the combination of tools is not good enough nor suitable for the trader. Just an example, a breakout PA trending analysis will never have matching signal from the reversal signal off an oscillator.

which brings me back to a successful trade basically being based on choosing the right spot, where the indicators just cannot be relied upon to give the trader his entry signal

Probably a 2-step workflow rather than a mutually exclusive things
  • #43
  • Edited 3:35am Jan 3, 2022 3:20am | Edited 3:35am
The "problem" not in indicators. Problem is the market. And the trader who can't understand it for years.

Forex has sessions and it works only 5/2. It has bank holidays and other bullshit. I wonder why there is no lunch break.

Now let's stop reading forex fairy tales and repeat them with no brain work involved, turn the brains ON and think how the world indicators work.
How? They are calculating. What? What we have? Do we have a lot of data to calculate? Nope. We have only open, close, high and low. And time. That is all we have. We don't have any other data!!! No magic sup/res levels, no liquidity pools. They exist only in your imagination.

So. How the world it is ever possible to trade using any indicator on 1-4h TF? It is not possible, because 80% of the day data is pure bullshit. Asian session and late NY just ruins all the calculations. E.g. EMA 8 is 8 hours back where 7,5 hours are total mess. Unusable. Wrong. What signal are you all expecting from the indicator? Is it really hard to understand?

How to "fix" it and let indicators show correct data? There are two ways to do it. First is to go as deep as we can - 1m TF. Then we can trade on selected session (e.g. LO) with "good" data set. or go as higher as we can - 1D or even week.

Hooray! The secret of forex is revealed! The secret of indicators are now known!

Ask yourself have average trader even wonder about the things I just wrote? Nope. All the years they were searching for magic "non-lagging" indicator, free profitable EA or good signal provider. But yes, the problem of losses are because of indicators. Yeaah.
Observer effect
  • #44
  • Jan 3, 2022 4:23am Jan 3, 2022 4:23am
Quoting tommydoginti
What I think when using indicator-based strategies (also probably all strategies), there are two major concept to understand. 1) The secret and most hard work is to find and tune the tools of a strategies so as to work together and historically give a statistical advantage. 2) Each tool is sort of a filter, so there must be missed 'good trades' when not all tools agree with that entry. If a strategy cannot be profitable in backtest or forward test, or a trader feels the strategy misses a lot of opportunities and cannot stand it, chances are the...
It is not just indicators that give lots of false signals, or fail to give a signal at all, price structure also does. Indeed, it is well known that all the price candle formations that traders are trained to look out for, Head and Shoulders, Ascending Triangles, Rising Wedges, Harmonics, actually fail to do what the textbook says they should do, the majority of the time.....so really, the key is trade location. i.e. choose the right spot on the chart, and your trade will work....

....so great, choose a good trade location, get your indictor(s) signals aligned, with a good bit of price structure....and you have a trade idea.

.....except, very often, neither the indicator signals nor the nice textbook price structure will register. Nice when it does. But it just as often won't....so where does that leave the trader? Sitting on his hands when he knows it's time to take the trade? Or entering a trade based on all his setup parameters coming into alignment, but the trade falling flat on it's ass simply because the market makers have their eyes on a level above or below the traders SL?

Which brings me back to my initial suggestion. Setups are bunk. All that really matters is choosing the right spot. Sometimes your setup will give you a signal somewhere around the right spot, but it very often won't, and woe betide the trader who starts to believe that the 'magic' somehow lies within the special price formation (ooh the power of this Cypher Harmonic) or his secret sauce indicator signals, with his MACD settings set to real sequential Fibonacci numbers....
  • #45
  • Jan 3, 2022 4:29am Jan 3, 2022 4:29am
Quoting ryuryu
No magic sup/res levels, no liquidity pools. They exist only in your imagination.
I could go into market replay mode, in any given market, and draw a bunch of Supply and Demand Zones, that absolutely will be respected and reject price in both directions, sometimes multiple times before the market kind of 'moves on', from that level. These S&D zones often prove to be good trade location areas.

Surely any trader with any kind of experience must have noticed this?
  • #46
  • Jan 3, 2022 4:52am Jan 3, 2022 4:52am
Supply it is every single limit order; demand is every single market order.
That is what AMT say.
This is what move price. As long as we do not see market orders price do not move... Supply zones will do nothing if there is no market orders... fair price is what market is looking for. Market role is to facilitate the exchange this is why 80% of the time market is in range...
  • #47
  • Jan 3, 2022 5:06am Jan 3, 2022 5:06am
Quoting MatDerKater
{quote} I could go into market replay mode, in any given market, and draw a bunch of Supply and Demand Zones, that absolutely will be respected and reject price in both directions, sometimes multiple times before the market kind of 'moves on', from that level. These S&D zones often prove to be good trade location areas. Surely any trader with any kind of experience must have noticed this?
This is another big mistake. Visible setup from the past are not equal to the same one with your 0.01 lot size trade. They are not equal. You can easy reverse the market with your 0.01 lot trade. And the setup will be broken and in the future you will see different one. This all is again because of forex fairy tales about infinity liquidity on the market. All that fake billions per second yeah. You think your small trades not affect it. But it is not true. This all because we believe in that lie. And that's why they hide real volume from us. Because if they will not we will be very upset about what is real.

Indicators are the instruments. Just choose some, examine how they work, what they do and how. Then implement them and they will help you. But if you will try to chop the wood using a spoon and eat your soup with an axe you likely to get hurt.

Look around, people are talking about everything: what market is, who the whales are, any bullshit. But not about how RSI works. Every day, day by day, for years same bullshit again and again. Same fairy tales spoken billion times. Clean your head from that garbage! Forget all these statements. Market is not easy, but it is possible to be profitable.

Quoting BlackNapkins
Supply it is every single limit order; demand is every single market order. That is what AMT say. This is what move price. As long as we do not see market orders price do not move... Supply zones will do nothing if there is no market orders... fair price is what market is looking for. Market role is to facilitate the exchange this is why 80% of the time market is in range...
What is the purpose to use limit orders on forex? The fees are equal. Stops are market orders too by their nature. Who the world are using them and why?
Observer effect
  • #48
  • Edited 5:41am Jan 3, 2022 5:30am | Edited 5:41am
Quoting ryuryu
{quote} This is another big mistake. Visible setup from the past are not equal to the same one with your 0.01 lot size trade. They are not equal. You can easy reverse the market with your 0.01 lot trade. And the setup will be broken and in the future you will see different one. This all is again because of forex fairy tales about infinity liquidity on the market. All that fake billions per second yeah. You think your small trades not affect it. But it is not true. This all because we believe in that lie. And that's why they hide real volume from...
You seem quite obsessed with Forex traders and their 0.01 lot sizes.

But it isn't retail traders running $1000 accounts with cfd brokerages that make the forex market.

It is Barclays, HSBC, Goldman Sachs, Deutsche Bank, RBS, ABN AMRO, etc etc....all the big global banks, involved in all the currency swaps, involved in all international trade and exchange. There is no centralised exchange, but supply, demand, and arbitrage between these major players (I think it just something like 10 banks make up 90% of Forex volume) makes the market. Volume data is not published. But some cfd brokerages do a reasonable job of replicating the volume data, based on volume from the various futures exchanges etc.

It is what it is.

If you don't like it, perhaps you need to stick to your full Sized E-Mini contracts trading the 1 minute charts, or the DOM, or the volume heatmap, or whatever else it is that you trade, that makes you feel more enlightened and superior.
  • #49
  • Jan 3, 2022 5:31am Jan 3, 2022 5:31am
What is the purpose to use limit orders on forex? The fees are equal. Stops are market orders too by their nature. Who the world are using them and why?
It depend from

Retail traders use them as SL or TP because were learned act that way… for example RR=3 to 1
  • #50
  • Jan 3, 2022 6:41am Jan 3, 2022 6:41am
To any traders looking to actually trade full time that feel their brains slipping out their ears reading some of the 'wot i reckons' on FF, this is an excellent primer

https://www.wiley.com/en-us/The+Art+of+Currency+Trading:+A+Professional's+Guide+to+the+Foreign+Exchange+Market-p-9781119583554
  • #51
  • Jan 3, 2022 8:49am Jan 3, 2022 8:49am
Quoting triphop
To any traders looking to actually trade full time that feel their brains slipping out their ears reading some of the 'wot i reckons' on FF, this is an excellent primer https://www.wiley.com/en-us/The+Art+of+Currency+Trading:+A+Professional's+Guide+to+the+Foreign+Exchange+Market-p-9781119583554
Ya know what....I think I might buy me that....

......(hope it isn't one of those that starts of with a punchy introduction (that you get to preview read) and then turns into drab affair laden full of trader cliches and indictor heavy and MA crossover trade setups that will get you FUCKING RINSED in real time markets.
  • #52
  • Jan 3, 2022 8:50am Jan 3, 2022 8:50am
Quoting BlackNapkins
What is the purpose to use limit orders on forex? The fees are equal. Stops are market orders too by their nature. Who the world are using them and why? It depend from Retail traders use them as SL or TP because were learned act that way… for example RR=3 to 1
Limit orders for entry (always in my case)

Market Orders for Stops (tend to get moved about quite a lot, but always remain market orders).

Limit Orders for targets (again, tend to get moved around quite a lot, and more often than not, turns into a market order at some point)
  • #53
  • Jan 3, 2022 9:05am Jan 3, 2022 9:05am
Quoting BlackNapkins
What is the purpose to use limit orders on forex? The fees are equal. Stops are market orders too by their nature. Who the world are using them and why? It depend from Retail traders use them as SL or TP because were learned act that way… for example RR=3 to 1
SL are market orders, they are NOT limit orders.

Quoting MatDerKater
{But it isn't retail traders running $1000 accounts with cfd brokerages that make the forex market. It is Barclays, HSBC, Goldman Sachs, Deutsche Bank, RBS, ABN AMRO, etc etc....all the big global banks, involved in all the currency swaps, involved in all international trade and exchange. There is no centralised exchange, but supply, demand, and arbitrage between these major players (I think it just something like 10 banks make up 90% of Forex volume) makes the market. Volume data is not published.
I'm reading this every day. All these banks trading every day with their billions and trillions. And standard retail trades is very proud and feels a part of something big.
Personally I think that this is total bs. Lie. Fake. We don't have access to that market. But you think it is true. It is ok too and in fact it doesn't matter.

But how the world it is connected to your claim that setups are bunk?
Observer effect
  • #54
  • Jan 3, 2022 9:54am Jan 3, 2022 9:54am
Quoting MatDerKater
{quote} Ya know what....I think I might buy me that.... ......(hope it isn't one of those that starts of with a punchy introduction (that you get to preview read) and then turns into drab affair laden full of trader cliches and indictor heavy and MA crossover trade setups that will get you FUCKING RINSED in real time markets.
Yeah, I know the type, I've read those shockers. No - this is worth more than almost all the trading books I've got put together - I only came across it because Clemmo reviewed it here, and it's rock solid. He's been a T1 spot desk and hedge fund trader too so at least you won't get any nonsense about the market being made up of 3 blokes in swivelly chairs conspiring to wipe out retail accounts either.
  • #55
  • Jan 3, 2022 10:13am Jan 3, 2022 10:13am
Quoting triphop
{quote} Yeah, I know the type, I've read those shockers. No - this is worth more than almost all the trading books I've got put together - I only came across it because Clemmo reviewed it here, and it's rock solid. He's been a T1 spot desk and hedge fund trader too so at least you won't get any nonsense about the market being made up of 3 blokes in swivelly chairs conspiring to wipe out retail accounts either.
I will trust you on this one.

If you can't trust a random stranger on the internet, then who the hell can you trust!?
  • #56
  • Jan 3, 2022 10:29am Jan 3, 2022 10:29am
Quoting MatDerKater
{quote} It is not just indicators that give lots of false signals, or fail to give a signal at all, price structure also does. Indeed, it is well known that all the price candle formations that traders are trained to look out for, Head and Shoulders, Ascending Triangles, Rising Wedges, Harmonics, actually fail to do what the textbook says they should do, the majority of the time.....so really, the key is trade location. i.e. choose the right spot on the chart, and your trade will work.... ....so great, choose a good trade location, get your indictor(s)...

I completely agree with your points.

The setups that works with statistical edge would not be as simple as a H&S pattern, candlestick pattern, etc. A working strategy should determine when during the formation or completion of the H&S pattern is formed, or by statistics where is the sweet spots for SLTP after a H&S. That is the “right spot” and what is not revealed by the traders including myself. I have spent time to discover by myself the “right spot” of a pattern, hell no I am not giving it out for free. But what I can share would be some of my trades, and a hint that H&S or some setups I am looking at with my working strategy. The rest of it have to be the readers’ work should they choose to pursue the path with what I am using, and spend their time to find their “right spots”.

If one think he is sitting too much on his hands to trade because of the strategy he is using, then this strategy is not suitable for him and better find another one.
  • #57
  • Jan 3, 2022 10:39am Jan 3, 2022 10:39am
Quoting ryuryu
{quote} SL are market orders, they are NOT limit orders. {quote} I'm reading this every day. All these banks trading every day with their billions and trillions. And standard retail trades is very proud and feels a part of something big. Personally I think that this is total bs. Lie. Fake. We don't have access to that market. But you think it is true. It is ok too and in fact it doesn't matter. But how the world it is connected to your claim that setups are bunk?
No, we don't have access to that market. Most brokerages simply mirror the price action of the actual markets. Some mirror the HSBC price action, some mirror Barclays, and so on, so all have very slightly different price action, including all the intra-brokerage kinks n jinks. Some brokerages separate their traders into A listers and B listers. The B listers, which will be around 90% of the brokerages clients, the broker simply takes the otherside of their bets, knowing over the duration, these guys lose. The A listers, the brokerage will seek to hedge against them, by mirroring (or sometimes doubling) their trades, in actual Forex transactions.

Other brokerages will just tolerate their A listers as the cost of doing business, and/or attempt to get rid of them if they keep on winning.

None of the above is connected to my assertion that 'setups are bunk'.

It was you who felt the need to belittle Forex traders with their replicated volume data and their 0.01 lot sizes.....

......but at the end of the day, price action is still price action.

.....as for your argument that the supposed size of the REAL Forex markets is all lies and b.s. What figure would you put on the average total Daily global international transactions, and the huge amount of financial sector speculation that is built on top of that?
  • #58
  • Jan 3, 2022 10:55am Jan 3, 2022 10:55am
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It never gets easier, you just get better
  • #59
  • Jan 3, 2022 11:41am Jan 3, 2022 11:41am
Let me please remind ...

Each order waiting for the price to be hit is a LIMIT ORDER.
Each Buy or Sell order placed on the market now is a MARKET ORDER.
The Market Sell ORDER is the acceptance of the Bid price, each Market Buy ORDER is the acceptance of the ASK (offer) price.

Limit orders are passive orders, market orders are aggressive orders.
Only aggressive orders will be noted in the volume profile and footprint.
Limit Orders are supply, Market Orders this is demand
They move the market.
  • #60
  • Jan 3, 2022 11:41am Jan 3, 2022 11:41am
Some more FX Trading info from the Bank for International Settlements (BIS):

https://www.compareforexbrokers.com/forex-trading/statistics/

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It never gets easier, you just get better
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