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Much of What You Know About 4X is Wrong!

  • #21
  • Oct 20, 2007 9:07am Oct 20, 2007 9:07am
Quoting Micro-MiniMe

Here's one point that I didn't stressed enough before. Look at a daily chart of GBP/USD. If we count any five bars at a time, how often do these bars clearly go with the major trend? How many bars are needed to determine that there is indead a trend, up or down? I say 3 minimum. How often does any one of the trends we can quickly identify last after it has been clearly identified? My original point stands. By the time most trends can be identified ON ANY TIMEFRAME, they are almost over. You can make it into rocket science if you wish, but I see what I see.
if I may add something here
all of us knew the following:
Uptrend: HH, HL
downtrend:LH, LL

anything else is sideway, congestion whatever we name it
now the point is how to identify the congestion, also how to trade it

there are many ways to identify a congestion area
for example

when I see a 4 bars that have close and open price in the range of the previous bar, I call this a congestion
in other words
if we have a five bars, now from the right side if the first four right bars opened and closed in the range of the fivth left bar then I see this as a congestion

another way
if the prices makes HH, then LH, then HH, LH, then I see this as congestion

another way when prices prints two consecutive swings that against each other like /\, coz if we are in a trend the first swing is up then the next swing will be a correction to it so it must end at a fib level that dont exceed or reach 100%, if it reached the previous low then consider it a begin of a sideways market

after I spot a congestion/sideway I draw a horizontal line on it's high and it's low then there are two ways to treat it
1.the simple:stay out unitl you see a clear breakout from this area,
2.the non-simple:go to lower TFs and daytrade it in any way ex:buy at the lower line and sell at the higher or any other technique

now here is the Daily GU chart that tell us all of this

Attached Image (click to enlarge)
Click to Enlarge Name: gudaily.gif Size: 19 KB


now some points
-if the congestion area occured in a trend then USUALLY this trend will continue
-the breakout of the congestion occued in many ways
ex1: clear breakout in the way of the prior trend (our case)
ex2:a false breakout that done against the direction of the prior trend then the price return to the congestion area and resume the previous trend (chart attached)

Attached Image (click to enlarge)
Click to Enlarge Name: gudaily2.gif Size: 23 KB


I hope anything in this post help ...
  • #22
  • Oct 20, 2007 9:18am Oct 20, 2007 9:18am
Most traders use technical indicators and they see trends simply everywhere

I think the problem is not in having one friend but in having too many of them , the 5min. friend , the 1min. friend , the30Min friend

Too many friends , don't you think?
  • #23
  • Oct 20, 2007 9:23am Oct 20, 2007 9:23am
Quoting fx_amateur
Most traders use technical indicators and they see trends simply everywhere

I think the problem is not in having one friend but in having too many of them , the 5min. friend , the 1min. friend , the30Min friend

Too many friends , don't you think?
Well I don't suffer from too many friends. Most people can't stand me due to my critical, analytical nature.

The only indicators I use are fib retracement and projections along with areas of sup/res. I have to keep it simple cause I'm stupid!

BTW Thanks to all for the different views on trading methods i.e. price action, chart setup ect.
  • #24
  • Oct 20, 2007 9:25am Oct 20, 2007 9:25am
Quoting hanover
For whatever it's worth, I go into all this in detail here: http://www.forexfactory.com/showpost.php?p=1452677

This is exactly what I've found to be true, but you explain the situation much better, most likely because you have put much more time and effort into your testing where as my opinions are based mostly on trading experiences.
The bottom line is that randomness plus costs makes trading a negative expectancy game. IMHO that is a primary reason why so many traders (90%?, so I've read) end up on the losing side.

Don't forget that the average trader is playing against more experienced, better financed players i.e. banks and brokers.

David
You've anticipated my next move well. Are you a former chess champion perhaps?

"Close the losers first and let the winners run" is up next. This one won't be easy to prove or disprove, but for the sake of honest debate I'll take the stance of a 'running loser' advocate. (OK, go ahead and hammer me on that one folks!)

I choose to believe it best to let my losers run and close my winners first. Here's where I must disclose some details of my system to better explain my reasons for thinking this way. First, I'm in the market 24Hrs a day; although my time in front of the PC is limited due to various responsibilities. Second, I use a simple one currency hedge most of the time. When the winning position appears to be ready to reverse I take the profit. Then, depending upon other factors I might add to the loser if it appears to have valid reason for a significant pull back. If the market only pauses before continuing I have limit orders placed that get me back in the larger long term trend. Yes, I believe that winners should be allowed to run, but only to the point where they show signs of weekness. Lack of momentum is my favorite way to determine this. I'm in this for profit, so when I see the market show signs of a possible correction or pull back I'm out of the winner and looking for an opportunity to make the loser a winner or at least less of a loser.

"All Winners are potential Losers and all Losers are potential Winners"
  • #25
  • Oct 20, 2007 9:28am Oct 20, 2007 9:28am
benssol, I hope you don't mind me using your chart. A few things I look for is shown in benssol's chart.

http://img98.imageshack.us/img98/8402/pppiy4.png
Check Mate GAME OVER
  • #26
  • Oct 20, 2007 9:39am Oct 20, 2007 9:39am
wou,...good teories,.....i aint gona be to smart in technical point of view, bcs i really enjoy reading ur deepest analises....,...

the main problem which i still am facing evry now and then,...i can analise, even predict something, but why in hell is so fck hard to press the trigger when the market goes ur desired and obvious way,...sometimes, more offen then not, i feel like im in casino, and the croupe guy is always distracting me, to play black, when its obvious i should play red, and vice versa...or when i already did win chips, which were siting on black,...and my croupe guy disturbing instantly,...just to prevent me to take the chips from the table...whisping, disturbing, making the stupid calls, like ...go short oil x4, from 78 to 87, with open target and sl 0.70 cents up....unbelievebale high sofisticated online financial casino thats it...and we call our self traders,...no way, we are nothing but finanical adicted on-line casino players...house should always win,..if not slipage, then requotes, if not stop hunting then changing slses to market,....but hey it is still the easiest way of making money but not getting your feet dry...:...
its just money
  • #27
  • Oct 20, 2007 9:47am Oct 20, 2007 9:47am
Quoting de123
but hey it is still the easiest way of making money but not getting your feet dry...:...
  • #28
  • Oct 20, 2007 10:00am Oct 20, 2007 10:00am
Quoting SeekingLight
Here's the bottom line - it isn't the market making it hard. It's you. Everything in trading is about the mind. Took me long enough to figure it out, but there it is. My conviction at least.

Once you stop blaming others and start looking for reasons within yourself why things aren't working as smoothly as they should, you'll progress.
Why?
Because you can't change the market, but you darn well can change yourself.
At the risk of being pedantic, this can be correct only if there are aspects of identifiable non-randomness in price behavior, and one has (whether knowingly or not) somehow already established a method capable of systematically exploiting them. Only then does the mental/emotional aspect become relevant. Authors like Mark Douglas make the tacit assumption that method is a "given", and hence create the impression that the battle is purely a mental one. That's not to say that Trading in the Zone isn't a great – and essential – read, because to be profitable in trading, one must attain mastery (an "edge") at both the methodological and personal levels (i.e. outwardly and inwardly).

If price movement is a completely random walk, then every system is impotent, methodologically; all gains or losses are completely fortuitous; and no amount of "correct mental approach" can overcome this handicap. No amount of MM or psychology can beat a negative expectancy game (e.g. Roulette) in the longer term.

The corollary is this: if it can be shown that at least one technical trader is profitable indefinitely, then price movement can not possibly be a completely random walk.

David
  • #29
  • Oct 20, 2007 10:11am Oct 20, 2007 10:11am
Quoting bunton
benssol, I hope you don't mind me using your chart. A few things I look for is shown in benssol's chart.
this is a high level of price analysis, keep it up
  • #30
  • Oct 20, 2007 10:41am Oct 20, 2007 10:41am
Of course the trend is your friend, he's just a bit bipolar. Just remember that like any other friend, your job isn't to provide direction, but understand him, give him support or resistance when he needs (and can use it), provide caution when he's over-exhuberent or excessively depressed, be patient when he's changing direction.
  • #31
  • Oct 20, 2007 10:44am Oct 20, 2007 10:44am
Quoting Micro-MiniMe
......Close the losers first and let the winners run" is up next. This one won't be easy to prove or disprove, but for the sake of honest debate I'll take the stance of a 'running loser' advocate. (OK, go ahead and hammer me on that one folks!).....
In terms of profitable exits, the theoretical answer has to be that one should exit when there is evidence that the probability of reversal exceeds the probability of the favorable move continuing. The reality is that such probability is virtually impossible to calculate, but that phenomena like support/resistance might provide some kind of clue.

Let's take the theoretical answer one step further. Essentially one wants to be long whenever the probability of price rising exceeds that of its falling; and short if vice versa. This applies regardless to what has happened up to this point in a trade. It is the future – what is more likely to happen henceforth – that is important; the past (pips won or lost thus far in the trade) can not be changed, and is now irrelevant. It doesn't matter whether I'm currently –10 pips, or +10 pips, or +50 pips in a long trade; if the objective evidence probability-wise is that price will rise from this point, I should remain in the trade.

In reality, not only are the probabilities incalculable, but there are costs involved in changing one's directional position: everything else being equal, it is cheaper to maintain one's position than to pay the cost of re-entry.

Technical trading maxims ("trade with the trend", "cut losses short and let profits run", etc) apparently make the assumption that prices will "trend" more often than not, at least possibly until S/R is encountered. At the end of the day, one either follows and rides what one perceives as being trends, on the assumption that they will continue; or attempts to anticipate likely reversals ("top and bottom picking") that appear to offer good RR. That may be an over-simplification, but price can only either continue or reverse, and I can't think of a third approach.

Quoting Micro-MiniMe
"All Winners are potential Losers and all Losers are potential Winners"
Sorry Micro, I didn't want to steal your thunder, but I've already covered what I see as logically correct:
1. "Cut losses short and let profits run" will work profitably to the extent that prices "trend";
2. Take profits early and allow losers to turn around, will work profitably to the extent that "mean reversion" occurs.

David

PS: I'm not a very good chess player
  • #32
  • Oct 20, 2007 11:01am Oct 20, 2007 11:01am
Quoting HalifaxCB
Of course the trend is your friend, he's just a bit bipolar. Just remember that like any other friend, your job isn't to provide direction, but understand him, give him support or resistance when he needs (and can use it), provide caution when he's over-exhuberent or excessively depressed, be patient when he's changing direction.
Yes, now I understand this trend thingy in the context of bipolar 'disorder'.

OK. I stand corrected, in part that is. I'm willing to accept that "The Trend is my Friendly Aquaintance". The level of trust I will allow him depends on his behavior.

Still though, I refuse to depend on him for much more than occasional conversation or a walk in the park. His sudden unpredictable outbursts are too much for me at times, especially if my stops aren't honored. Oh oh, there I go again. Blaming the market/broker/banker/analysts for my loses. My boo boo again!
  • #33
  • Oct 20, 2007 11:14am Oct 20, 2007 11:14am
In a nutshell, it is all about how you manage RISK.
Forex is my business
  • #34
  • Oct 20, 2007 11:18am Oct 20, 2007 11:18am
Quoting hanover

Sorry Micro, I didn't want to steal your thunder, but I've already covered what I see as logically correct:
1. "Cut losses short and let profits run" will work profitably to the extent that prices "trend";
2. Take profits early and allow losers to turn around, will work profitably to the extent that "mean reversion" occurs.

David

PS: I'm not a very good chess player
Steal away, David. I couldn't have said it better.

One main point I'm trying to convey here is that uncertainty exists most of the time in greater quantity than reasonable certainty. By this I mean that the highly probable trade set ups come and go at wide intervals, while uncertainty remains most of the time. By adopting an uncertain attitude your mental game becomes more of a move counter move strategy which I feel should be a main focus especially for new traders. One learns about trading by making live trades and experiencing all the joy from winning as well as the dissapointment of losing. Traders learn little more than patience by watching charts and waiting for good set ups. Nothing is more frustrating for a new trader than to spend hours or days waiting for a trend to pull back only to miss the re-entry because you were doing something else.
  • #35
  • Edited 12:19pm Oct 20, 2007 11:18am | Edited 12:19pm
Quoting kiwi_trader
Trends occur on all time frames. I can find trends on 5 minute charts, 60 minute charts, or daily or weekly charts. I don't care. I can find them.

Maybe you can't. But that doesn't mean that others can't.
I think i must clarify one thing here.

I don't think that trading against the Real trend can't be profitable or that i can't find nothing in lower TF.

I traded before against the trend and i even have an old thread where i made a little review of a correction on GU, and how we should have traded that correction.

However, as the times goes by and a learn more. What did i found out? I found out that... it's unnecessary.

Again, not impossible... just worthless.

Why? Because there are more pairs to trade with no direct correlation and trending. I can put myself throught a bed of spikes and survive.. but why should i do that??? LoL if i don't have to..

There is a difference between saying that they are not quality trends(like i do) and saying that they cant be traded.

However, i must ask a question... imagine 1 or 2 big banks selling one pair, and they create a big red 1 hour candle. If we look for the tick charts... OH YES there is a trend there lol...

I mean, the banks just closed their positions... but considering your trend criteria, the mindless few down ticks in a row, are trends...


In conclusion what i clearly disagree is the claims that all trends have the same quality. I find that wierd...



SeekingLight, i'm not sure i did understand completly your view.

You defend that the trend is only one, however you are giving credit to some posts where ppl are saying that, not only counter-trends are quality trends, they also clearly afirm that every trend have the same trading risk/quality in any TF.


Benssol i don't think the TL you drawn in your H4 charts is completly correct...

Here is my view...

http://img267.imageshack.us/img267/8536/gbpdu2.jpg


In a brief explanation, the first resistance became support many times in a choppy overall uptrend, then and obviously not a coincidence, it became resistance again after a bull run after the problems.

The second TL below, seem to be a easy and simple connection of the lows, but in fact it isn't. If we take the first trend and copy it to match the low (in the middle of the chart) we see that this line leaded to a later support.

Psicologicaly what do i understand from this?

After the problems(middle of the chart), the big money resolved to proceed with the dollar bearish sentiment proceeding the uptrend, but still inserting the UK problem.

Then, what we see is a beautiful TL that have the exact same inclination than the other...

´
Conclusion... Main Trend direction rules because the big fish LIKES US giving us incredible leading elements that i've seen repeated in many important pairs.
  • #36
  • Oct 20, 2007 12:11pm Oct 20, 2007 12:11pm
Quoting Warper

Benssol i don't think the TL you drawn in your H4 charts is completly correct...

Here is my view...
LOL

this line isnt a trend line
and the chart isnt a 4H chart

LOL

the line is away to show the prior trend was an uptrend , I dont mean or want to draw a trend line, and believe me I know how to draw it

and the chart is daily GU chart

BTW
do you remember my reply on your closed thread "about the weekend threads"
if you dont remember it so refer to it
if you do, then you have two examples in this weekend
  • #37
  • Oct 20, 2007 12:30pm Oct 20, 2007 12:30pm
Quoting benssol
this line isnt a trend line
and the chart isnt a 4H chart
Well regarding the TF its my bad, i didn't payed good attention, but regarding the lines, well, i've seen it before...

...wierd lines floating around in many charts... what do you want me to think?

If we draw a line and then write "trend" beside it, its not dificult to guess what ppl will think about it... I'm not inside your head to know how skillful are you drawing lines.



I would expect to someone to find errors in my analysis, but lets face it... its flawless...
  • #38
  • Oct 20, 2007 12:56pm Oct 20, 2007 12:56pm
Quoting Warper

I would expect to someone to find errors in my analysis, but lets face it... its flawless...
this is what I love in you
your selfconfident, your huge ego!!

I wish I have 1/8 of your selfconfident

but I cant
cause the markets taught me one thing that cant change forever


there is nothing that can quickly make a man as humble as the markets can

and this point never ever and wont change
traders comes and went every day
and stayed only those who accept this fact
  • #39
  • Oct 20, 2007 1:37pm Oct 20, 2007 1:37pm
Quoting Warper
I would expect to someone to find errors in my analysis, but lets face it... its flawless...
Well, thanks for the transition Warper.

The next adage I wish to examine is "It's Better to be Lucky than Good". We as traders don't hear this one much in the context of trading, but I think it has significant relevance. I rather think of myself as a lucky trader than a good, talented trader any day.

Pride in my ability to forecast market directions, tops and bottoms is the first sign of a big loss in the making. Once I begin to think I know what the market will do I'm more apt to stay with bad trades or allow good trades to dwindle because I hope they will turn soon. It only takes one big bad trade to cripple a small account but many small good trades to rebuild it. It’s best to accept that large winning trades are luck and not fool yourself into expecting repeat performances. Hence, I rather think of my large gains (+100pips) as lucky and not that I analyized the market was able see where it was going.

I liken a big gain to finding a $100 bill on the ground. That bad boy is in my pocket quicker than you can say Ben Bernake. Should I let a gentle breeze blow that bill accross the ground in hopes of it finding some of its long lost friends? Hell no! As soon as price shows signs of exhaustion I except the fact that I've been lucky to get this much.

Actually, I'm darn good at predicting major price moves and swings, but when the big boys decide to take profits off the table I don't argue just because I know where the price will be a month or two from now. That's a argument I can't win. It's best to play it safe for a while until I can get lucky again.
  • #40
  • Edited 4:59pm Oct 20, 2007 4:38pm | Edited 4:59pm
Quoting incomeideas
In a nutshell, it is all about how you manage RISK.
This overused cliche likewise makes the underlying assumption that one already has a positive expectancy system. Setting stoplosses and conservative position sizes will preserve capital and keep one in the game longer, but if the system doesn't ultimately generate more and/or bigger wins than losses, the account balance will eventually slip backwards toward ruin. Moreover, although the amount of risk on an each individual trade is manageable, one has no control over the number of losing trades. Hence total risk can never be completely managed.

Quoting Micro-MiniMe
The next adage I wish to examine is "It's Better to be Lucky than Good"......
If one doesn't possess/employ all of: (1) a significant and demonstrable methodological "edge", (2) sufficiently conservative MM and (3) a "correct" mindset, then profitable trading can never be anything more than luck.

Quoting Micro-MiniMe
One main point I'm trying to convey here is that uncertainty exists most of the time in greater quantity than reasonable certainty. By this I mean that the highly probable trade set ups come and go at wide intervals, while uncertainty remains most of the time.....
Exactly. Uncertainty will always exist, and is ultimately unmanageable. Even if one trades only what one perceives as being positive expectancy setups, there will always be risk associated with trading. IMHO randomness plus costs will defeat all but the very best system (i.e. method plus the trader's ability to implement it).

David
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