Plutonite's Trading Manual

Hello folks,

1) Thanks for the compliments. We are just getting started, so don't go away!

2) Religious nutjobs and athiest crackjobs are both welcome to take their little duels elsewhere. Once of the worst ways in the world to make a first post on a forum is to make it in the form of a religious argument. Like ouch, you know. I will occasionally quote biblical or Quranic literature just to decorate things a little, because they use pretty words, not to force anything on anyone. There are plenty of forums for that kind of thing, and if you insist, merlin/moderators will kindly show you the way there by means of kicking your newbie butts out

Love,
-P

my post was not directed at you anyhow but when I see a "movie star" saying thanks for their oscar or indeed fx trader thanking god for his pips then sorry but it fu%*s me off. Anyways I am white and british and atheist and your biblical or Quranic literature does not interest NOR bother me but who cares right?

You are correct sir

Part B: On Market Psychology

"If something can go wrong, it will"

Ok, here we go again. This is going to be ugly, so make sure that tea is on the kettle. Try a little mint too, we need to sooth those nerves..we're going to talk about grey matter, and we're going to have a lot of fun!

We want to now talk about the market as something that is not entirely random. We want to being making some statements that we hope can hold true for most of the time, so that we can hopefully combine this with the maths to get very high probability trades. So what, dear fellow of the trading pits, can we say? What can we suggest while keeping a straight face, and while not sounding like a presumptious group of fools? What in the world can we postulate about a market where hundreds of billions are changing hands virtually, with speculators all confident in their methods yet madly contradicting each other?

The answer does not lie in the retail sector, in fact it's pretty safe to go against most traders (who happen to lose on average) and make money if you had that data, and indeed the brokers do this.

The answer also does not lie in some abstract, fancy shmancy indicator based system that either lags behind the price action or alternatively makes nonsensical predictions out of it's bottom.

In fact, whenever there is room for disagreement, somebody (usually somebody big) will disagree. The more complex your cute little indicator tries to be, the further it is from the world. Nobody sees your pretty lines, no big bank or investment house trades the penny-markets based on your awesome looking chart. For every trader that uses a SMA 12, there are 10 others using an SMA45. For every genius plotting his SAR curves, there is another entering opposite trades based on a MACD 5-20, and for every one of those there are hundreds of pale-skinned news traders biting their nails and entering in the opposite direction. For every long-winded analysis that leads to a short, an equally convincing one wants you to long the long. So where is the truth?

Whence cometh the light?

The answer is: search for the things that the traders in general, especially the big investors, all agree upon. Find something that is very very simple and therefore very hard to disagree with. There are 3 of these things, I have learned, and 3 only:

1) Strong unexpected news: these send all speculators(including the big money) scrambling, at least in the short term. Strong news and consistent economic failure/success is what shapes the market.

2) Clear support resistance levels (tight ranges..etc). On the majors, where speculative power is usually effective, everybody sees a tight range, or the break of a very recent low/high. "Trendlines" are not really included here, because everybody draws their slanting lines differently and so there is room for disagreement. Human enjoy stupidity, and they will exercise it if given the opportunity. It doesn't matter that your trendline is right when the idiot in some canadian bucket shop can't see what you see and goes against you. With very clear S/R however, stupidity has little room to work in, and that is a true blessing.

3) Fibs fibs fibs. Everybody loves the fibs. They are absolutely meaningless, have no logical significance and are silly to associate with something like the market, but what can we do? The traders all love them the same way people love junk food. You can boycott it, but you can't stop it . They are a self-fulfilling indicator, and although they are done with lows/highs which are hard to dispute, they are a little more ambiguous as people have still found ways to disagree by drawing them upside down..etc. You can laugh, but this is your species we're talking about, mister X. You can hate em or love em, I've decided to love em.

*Take break, make more tea. Tea is simple, tea is good.*

Now news and ranges (majors only) are pretty easy to see with your chart/news feed. Fibos on the other hand, can be charted visually to help you trade, but because it sucks to draw a new fib retracement every time

A great discovery people have made is that if you take fib numbers away from a 50 bar mean on a H4 chart (180 or so for H1) you actually coincide with the fibs due to the wavy nature of the market. This is what vegas realized, although he (in my humble opinion) incorrectly attributed it to "fib magic". Vegas: you're a veteran and I'm an upstart next to you, but fibs exist in nature for very good and well known biological reasons. they do not have any significance off your moving averages except the coincidences I stated. It works, it's just that the reasons on WHY it works is not accurate in your document, and I'm very nitpicky about these things you see.

That's it for today. Hope you enjoyed the fireworks, see you in the next episode of How to follow the Sheep.

Will take a break from posting for a little.. Give you guys time to chew on all that geeky talk. The next step will be to visually show you how to bring all of that together with a few examples, so take your time, read at ease. If there is anything, absolutely ANYTHING said in the articles above that you feel can be disputed then please speak out. The whole point is to be as watertight as possible with the (few) statements we make about the market.

Good luck.

Uh, I wasn't bringing a religious argument to the table, as I never feel the need to defend myself in that area....sorry for the mix up....was just commenting on something in your post. Don't worry, from now on I'll leave my "nutjob" comments to myself....lol.

Peace,
Pip Meister

ok, two questions that come to mind regarding the 50 ma and the associated fib lines.

1) Given that over the last couple of years we have witnessed a contraction of volatility on every major currency to record lows, would a future deviation back towards its historical mean disrupt and expand the waviness of the market enough to undermine the vegas method?

2) Given that MA's use historical numbers and that plotting fibs from exact tops and bottoms only works because it influences the herd, wouldn't any fib drawn from a 50MA simply give a more inaccurate reading, given that it deviates from the norm of fibonacci use?

No problems, I was referring to the other dude as your post was not aggressive. Anyway let's forget that shall we, concentrate on the pips.

Best,
-P

I'll answer (2) first:
Like I said in the article, it is only a matter of coincidence. The fibs drawn off the moving average just HAPPEN to give similar resistance points to the normal fib retracements drawn from the lows/highs. This is why I said vegas works, but for reasons other than those that he apparently believes.

1)I have no idea what that means What in the heavens art thou talking about? My head asplode!

here is a crazily inaccurate example as I don't have the stats to hand.

5 years ago volatility, or average range in GJ was 400 pips per day. Gradually, over the last 2 years this has shrunk to just 4.

Since the vegas method has been produced since this contraction took place would any expantion back to previous levels disrupt the 'coincidental' nature of that particular indicator.

*scratches head then smiles*

Ah, now your words art clear, indeed they are! You are saying that since he's using fixed fib numbers in a world of varying volatility, his numbers should surely be irrelevant at some point.

This is true, but he has several "models" to save his butt (i.e bigger numbers fib numbers are available during lively times) and his system is quite conservative in that it relies on price action as well to enter trades at the discretion of the trader.

I will be talking a little on the situations where the StdDev channels are too close with respect to the fibs/vegas or vice versa. Great questions, BTW, although I'm not guilty of this vegas thing! Talk to the man himself, dammit

i apologise pip meister I had far too much wine to drink last night :s

Aww, this is too beautiful. Do you see this, merlin? My threads are the only ones in ze internets where people apologize to each other instead of starting a flamewar. I was just about to get excited dammit, now all the fun is gone. I think I'm going to cry.

Way to go guys, nice to have you onboard

Rock on, Pluto

You've already got ~ 1,950 views. People are interested.

Just don't make 'em depend on you too much, or else you'll be a hero

Cryten, no problem buddy.....now Pluto....bring it...please...lol. In the words of Enigo Montoya ("The Princess Bride" movie), "I hate waiting..."

Pip Meister

Hello......anyone Out There?

This "tea"-eth is start-eth to slur-eth my speech-eth. I don't think-eth I can tak-eth much more wait-eth-ing.

I hear ya! I'm tired of waiting too....come on Pluto don't "deviate" from your plan....please continue like you "mean" business! Don't treat this like an "average" posting...or else I'll keep "pun" ishing you...(I know, I know....don't everyone throw up at once)...lol.

Seriously, we're all waited with Constant Comment/Earl Grey bated(sp?) breath....except maybe for cryten (vino bated breath? snicker, snicker!) and we look forward to hearing MORE!!!!!!!!!!!!!!!!!!!!! LOL!

Pip Meister

Hey guys,

Take a break will ya! Do you mean to tell me you actually read all that stuff already?! Jeez, I thought I'd give you a week at least to digest this, because believe it or not I have already told you almost all there is in terms of theory, the rest will be in the form of examples on both successful and unsuccessful trades and how to come out profitable in both.

Please go back and read again slowly, it is important to realize why there is so little being claimed/said in my writings. It is also important to realize WHY the few statements we dare to actually make are true.

It is at this point that any questions/heavy thinking should be made, because this is where I can help (as opposed to the actual trading where I cannot hold your grubby little hands).

Hold yer horses, pretty charts coming up.

Best,
-P

I read it three or four times and will continue to read it great jedi master....just kidding....seriously....I will continue to read it over and over so it "sinks in." I also did research on diff sites on BBs and the theory behind it, even printed it out, which I will do with your info as well....but it I must admit....your writing style is a little "parabolic" in nature and I'm a little thick headed (never did well in complicated math in school...at this point you're wondering, "What the heck is this guy doing here?!?!?!) But I'll keep working on it. Lookin' forward to the "pretty lil' charts."

Peace,
Pip Meister