Technical Analysis Fallacy

Not trying to get into a big debate and I'm certainly not trying to speak for fti here but I think you may be missing something.

One of the underlying theories validating TA is that fundamental shifts, supply and demand, etc., are reflected in the charts as price action. In a very real sense, TA is just another means of studying the fundies.

Probably the most successful traders are using a combination of TA and news. It's dangerous to completely ignore either, imho.

There are few things in life that are absolute, least of all in currency trading.

The fundamentals are reflected in the price action in the long term. If, for instance Canada raises interest rate and USA does not, all else being costant, we will see a decline in the USD/CAD pair over time. When talking about short term effect, I would say that the most important factor which moves the price right after the news are out is the unexpectancy. That is, if the news came out as expected, not much movement, but if a number is bigger or smaller than expected, we will see the spike. That's the psychological factor, not fundamental.

And I agree with the guys who say the best way is to mix both, fundamentals and technicals, this way you see where the price is going and you know the story behind the move.

This is what I found. I hope it's what you were referring to. Looks very promising.
Mr. Morris is still alive and well and active in cyberspace with a website, a blog, etc. He also has quite a colorful biography. Aside from his lengthy background in investing and finance, he graduated from the University of Texas at Austin in 1971, has a BS degree in Aerospace Engineering and from 1971 to 1977 he was a Navy F-4 fighter pilot aboard the USS Independence. He was selected for, and graduated from, the Navy Fighter Weapons School known as Top Gun.

Oh yeah, who says? lol :

As I see it, you are the faciliator and we are students in a classroom (or if you rather, your ballroom dance class, haha).

You are sharing/teaching us how the market dances, why she dances, who is dancing around who, and keeping us abreast of the dancers who are stepping on our toes, etc. through your experience having danced with her professionally for 26 years.

So, we may eventually start dancing with each other here, but we are still yet in the beginning class, so until we learn more about how to waltz and tango (and any other dance steps you have to offer) as gracefully as you, we are needing to watch and learn from the dance instructor, lol.

But it doesn't mean that other dance instructors or students can't chime in, cuz there's always room for everyone to share!

GADS, we have gone from buses, battlefields to ballrooms ... sheesh any more analogies and we may end up on the moon next! :

Oh hey, that's GREAT, David!!

Thank you very much, opie999.

Oh, but I do want to add, fti ... that please make sure to get your rest and do not feel that you have to post something every day if you are not up to it.

Your health comes first and foremost

Hey, masterpiece.

My pleasure!

Wow.. Lots of good information and knowledge in this thread alone. I actually read it throughly to gain a better understanding of what this thread is all about. I couldn't agree more with fti that understanding the rhythm and motion of the market is like dancing with it. Knowing when it has or do not have the mood to dance with you. When that happens, you stayed out and watch, till she is happy to dance with you again. I'm quite clear with your rhythm and motion of the market because I have been using it to my advantage in my trading and it has proven its use. TA is not the only key to success in the trading markets, but it can give us high probability trades which should flow with the fundamentals. Its the fundies that drives the TA, which gives us entry to the market. I think by combining both of them will facilitate better understanding of what is happening infront of your monitors rather then just oh its a long or short signal. Its something far beyond that and we will probably take a lifetime to really comprehend it.

I think you are a fellow singaporean which makes us fellow countryman because I'm from singapore too. I'm really looking forward to your informative posts because there are so much to learn and absorb from you and the people contributing to this thread. Knowledge is ever acquiring and could not be stop!! So please keep it coming!!

A side note: Maybe we could meet up sometime in the future when you get back to sg!!

Hi ALL,

@ natejax

You are probably in the know, as far as technical analysis concept is concerned, if you are able to visualise strategies.

regards


@ALL

You see, the strategies that will work for you would be the ones that you conceive in your mind,
cos, you know yourself best.
But sometimes greed may cause you to try to be something you're unconfortable to be. (keeping up with the Jones)
That's when the problems arises.
You should check you risk appitite. and you must be hornest to yourself about it.
Never over-trade or allow yourself to be over-exposed beyond your capacity.
If you already, have a couple of million, having more millions , ain't gonna change you life style too much.
So don't bungie just for the sake of it.

If you overdo it, there will the times of market movement, where the moves can create a confused trader, this is due to fear.
When that happens greed, fear and hope will be your worst enemy, not the market.

At the bank , dealers are trained in the deep end,
as most normal people are not used to the kind of risk (as well as the style) that the bank is exposed to daily.
That's why they are thrown into the deep end for them to orientate and adapt to the enviroment.

For traders, and dealers that begin to trade for themselves, debreifing is necessary.
If I try to trade with the risk attitude that I had when I was at the bank, I will definately get into a financial hole.
Although the profitable modus operandi is in place readjustment of money management is critical for success.

Simple is good, I am a subscriber to the KISS. ( Keep it strong & simple.)
I cannot see any trader or dealer, can profitabily make trade decision when there are too many uneccessary studies to content with.
Traders have to focus on basic market moving fundamentals and a technical analytics,
to time the execution of a preplanned viable money managed strategy.
Too much of either just gets in the way and become distractions.
Staying light weighted and nimble is key.

A soldier may be well trained and strong, but can he carry a gerenade launcher as well as his M16,
a stand machine gun, a tank buster, a flame thrower, a long sword,a scout knife, a tent, sufficient F&B,
and sufficient ammo into a running battle.
However, good he may be, he would be too bogged down to function effectively, eventually leading to his demise.
Similarly a trader should not bog down his mind with too much unneccessaries to paralyse himself.
So just use whats working for you and throw away all the rest of the junk.

Now, do not be mistaken that I say that you should stop learning.
It is for knowledge and insight.
Learning is a life-time process, but a successful trader would instinctive know
if a new technique can fit in to his exixting profitable MO.
For me any MO that disturbs my foundational basics in technical analysis
or deprives my ability to think and rationise my position, red flags it.

Leigh is such a thoughtful and unassuming lady, hugs.

@ dopey,
Sorry I have not read J. Hill's "The Ultimate Trading Guide".
therefore cannot comment about it, When you do read it , give us a review, won't you.

@ Zoran

Thanks for your kind words.
I find that its in reading trader's responses that I can gauge, if I had articulated my message clearly.
Also its from there that I would be able to measure traders misinterpretations, if any
This is a forum, and I came onboard to present my views and opnions, as well as to research some info.
Seems I have turned Trading guru, instead. lol
Nevertheless I hope that my insights, can contribute to your development & profitability, as traders.
Do speak to each other, I insist.

@ Green_David,

Ah, I see that you may have overcome.
Great to hear of your success.
Edwin's "Reminiscences of the Stock Operator" is a traders classics.
I am glad that its giving you insights.
go..dancer go!!

@ mrjtdude
I think you have misunderstood, reread carefully, maybe you will find new insights.

@ opie999
Thanks, helping mrjtdude understand is a noble gesture.

@ masterpiecefx
Just to add on your opinion.
Not all Fundamentals are reflected in the prices, some fundamentals affect the markets in the short tenure some in the longer.
Ultimately all important fundamentals will work their way into the charts.
there are fundamentals that are maekrt moving and
there are those that could have already worked itself into the price, and are therefore discounted.

The important fundamentals for the forex are basically, world events and CB economics (fiscal & monetary policies)
It is quite impossible to sieve thru all that can or will happen on that front,
and the subjectivity of the issues are contentions for extended debate.
Staying on foundational market structure, is a good way to keep abreast its developments and effects.

Charting may be a definative method to sieve thru the actual market moving fundamentals.
Nevertheless it has its short comings that, it is still a lagger.
Understand that the charts are historical footprints of the market,
therefore they can hardly be predictive, without imposing on it assumptions.
AND i am one who is strongly against, imposing assumptions on my charts,
for me thats THE FALLACY, i mentioned in the title of this thread.

I much prefer to flow with it than to read things into it.
For all that I have posted, I hope this point comes across crystally clear.
Nevertheless, there are Technical Analyst who subscribe to predictive analyst,
I call them System Analyst instead.
And I have seen of the things that happens to rigid methodology and mindset, to know better.
For me I , I hold close to my heart, the Basics of Technical Analysis and Charting.

@ opie999
Yes, thats the Morris.
I am not much into his power candles, cos he incorporeate volume into his candles,
the Structure of the Forex markets, do not allow me that liberty.

I have not read his newer book, “Candlestick Charting Explained”
maybe I should update myself.
Yeah !, Learn from "Top Gun Academy", then fly the "Blue Angels."
That 'll be the day. Dream on, not in my state.
Oops, my ppl non-currency for 30 years already. gotta go DCA and check status.
Would you know which version of that he's on? I don't prefer Alfas, Betas are ok, but Public release is better.
Just jesting, LOL.

@ Leighsww,
Ahh..THE lady.
No , Leigh, don't take it that way and "put me on the table."
Like I said You can't learn trading by reading a book.
and You won't learn how to dance unless you get on the floor and boogie.
So start dancing and lead each other, find your own niche and have a ball.

I give you the sketch and you fill in the colours, make it your own painting.
Then sketch for others to learn how to paint.

You see for me, this is an adjustment too.
I have to adjust from being a trading machine to be a normal person again.

Nah, don't think we"ll be going to the moon.
If God had wanted ne to go there , I would have been born with the live support to do that. LOL
Howling to it? maybe. LOL

Thanks for the concern and yes "mommy" , health is wealth.

@ shauny,
Thanks for your kind words.

regards

Here is a Lesson my Dad thought me while I was young.
He's the big one in the avatar, I am the little one with the cowboy hat.
He was my mentor and he taught me alot about life while growing up.
He's no longer with us, gone home for some time already.
Do guard that this should happen to you, in your trading and your life.

A Lesson about Human Nature.
The Turtle and the Scorpion.
------------------------------------------------------------

Once upon a time, LONG LONG ago in China
There was this scorpion, who wanted to cross a river.
Since he could not swim, he waited along the river banks for someone who could.
Along came a turtle, and the scorpion promptly asked if the turtle would give him a ride across.

The turtle quickly replied, NO, NO, NO.
Why? The scorpion asked.
The trutle replied, because you will sting me while I am carrying you across.
The scorpion replied, If I did that, then we would both drown
and What would I benefit from that? he asked.

Accepting the scorpions reasoning, the turtle agreed to give the scorpion a ride across.
While half way across the river, as the waters became choppy.
and the ride became rough, the scorpion stung the turtle.
And as the turtle was drowning, he asked the scorpion why he did it.
Now they will both drown.

The scorpion replied,
I am so very sorry, I couldn't help myself from doing it.
You see, ITS MY NATURE,

---END---

regards

PS:Lets see if we can get the juices flowing,
No, up there.
For all you Analyst.
In one word, can you summarise the story in the context of trading?

regards

fti ...

Just when I thought you couldn't be any more eloquent with your posts, you prove me wrong.

Even through your broken English and fat-fingered typos, lol, you bring tears to my eyes with your humbled, honest, sound and wise words.

I totally understand what you have said, and I will dance with you rather than have you dance for me.

I am just so glad that you have come back to FF after your ban, because I honestly feel that your contributions here have been so valuable!! I think the overwhelming responses in this thread have given you indication of that.

You have taught me (as I'm sure many others) much through your generous sharings, and I thank you with all my heart for it (my husband thanks you, too - I've been keeping him abreast of my progress, lol)!!

BUT, please know, that if you ever call me "mommy" again, I will slap you silly, my dear!! lol :

Hi. ALL,

@ Green_David,
In regards, to your dance.

I disected the info you provided.
came up with afew questions.

1. I understand from your pervious postings
that you have multi accounts now for different time frames.
So I presume that this is the overhight accout your are presenting. right?

2. Being overnight I remembered that you metioned that
you shall not be putting stop losses, right?
So are you carrying profits attained from you daylight activities to
average out your cost or are u leaving the accounts as treated as separate?
and the profits you have attained , are you withdrawing it from your accourt to form a separate nesting?

3. Since you are not baby-sitting your overnight account.
do you have any bells and whistles to alert you in the eventuality of counter moves?
I notice that you presented the short chart to discribe your overnight position,
do you look for evidence of probabilities in the daily chart?

Don't answer this question as they are rather personal,
just explore it within yourself and see if you have the bases covered.

@ ALL
Couldn't help it but just wanted to put on display this for you all to appreciate. You will find many such cases in your own charts.

DUCKS.JPG

@ Leighsww,

Thanks you for your kind words.
I guess a good spanking should be the order of the day, sis lol
Would be googd for the blood flow, lol
warm regards to your hubby.

forgot to give me a summary word, to my question, huh.

regards

LOL, you edited your post after I read the story :

Okay, for me, there could be two meanings depending on whether we're viewing the side of the turtle or the scorpion, so ...

Turtle = sitting-duck (had to hyphenate, cuz you wanted ONE word, lol)
Scorpion = rigidity

fti ... regarding your sample of David's chart, you have two rubber-band killings shown going in opposite directions.

According to your definition, the rubber-band snaps/swings/killings are supposedly going back with the trend.

So, for that 5m chart, I can see the 1st rubber-band snapping with the 5m downtrend, but the 2nd one, are you calling that one out for the overall Daily trend (which would be an uptrend)?

Can you explain more in detail how you are determining those? Thanks.

Hi Leighsww,

Thanks for the answer.
Sorry , my bad, for always edting and adding to my previous post.
I'll try to stop that. I thought that ppl would reread the post for clearer understanding.

We'll wait for more response before I Give out the prize, ok, lol
Just a tip for those who may feel hesitant to respond,
there are no right or wrong answers.
But I will explain about it.

OK Leighsww,

The purpose of reposting David's chart, was to highlight market sweeps.
Full focus was placed on the 5 mins as that was the medium of analysis.
I was just trying to show how an interbank dealer would capitalise on the sweeps,
as you can view on the charts.
Remember that at every level some customer would be hiting him, My highlighted focus
was on sclaping traders , trying to capitalise on breakout. They would normally use stop orders to ease their having to baby sit too closely. These scalpers, normally end up being duck kill most of the time.

hope it clears.

regards.

PS : by the way did you get to read my edit regarding the emotions asist about the music
I listen to in post 60. Because no one said or asked anything.

Actually am I going too fast for some of you?

I found the book; it's called "Candlepower: Advanced Candlestick Pattern Recognition and Filtering Techniques for trading stocks and futures" by Gregory L. Morris

Available from Amazon and others

Hi fiveshorts.

Thanks thats the one, as opie999 also pointed out earlier.

Enjoy it.

regards

Actually, I normally do go back to reread your posts in case you edited (haha, cuz you have a habit of editing like I do), but I didn't figure to do that to the story as it wasn't something that I figured would be edited, lol.

I will make sure to go back in future one other time to make sure.

But, don't go editing like a few days later, lol, cuz that we will miss for sure unless we go back to read the entire thread over again (which some of us may do, but still

If you edit, bold it in RED like I do, so that people can spot any edits right away, otherwise it may get missed.

* edited - you see what I mean?

Ah, okay. So in essense, the "rubber-band" notation could have also been labeled "sitting duck" as well. Both are basically stop sweeps.

Yes, I did read that and will be pulling out our Enya CDs, lol. Not everything we will have a question or comment about, silly :

Say, are we done with the "foundation" yet? Or is there more to that subject? And after "foundation" what will be next (Money Management? just kidding ... you see how anxious I am for you to share that? lol

Okay, okay ... will be patient and await next subject, like a good naked lady

Hmmmm, this is the reason I hope Money Management isn't too far away in the future, because I worry about David's overnight trades.

First of all, thank you fti for taking the time to illuminate some of the world behind the curtain. It's fascinating to see how you (and others with similar experience) 'stagger' your revelations about the reality of the market so that us pigs and ducks don't run screaming for the exits...

I've been trading forex for about a year — going through the usual process of indicator obsession; black box fascination; holy grail worship; robot dependency and eventual burn out as the funds deplete.

I discovered feb2865's excellent thread on going back to basic price action skills (where leighsww first introduced the idea of nakedness to our previously fully-clothed forum lives and spiced the experience up a bit...) and since then I've been sitting quietly in the background absorbing as much as I can from the "naked" debate and James16's chart thread etc.

Now I've discovered your excellent offering of wisdom and want to start contributing again -- not least as you've added alcohol to the naked dance fest...

The scorpion and the turtle = don't trust the market or rely on its "promises" (indicators make promises). Don't rely on your (or anyone else's) predictions or promises about how the market will behave.

And as far as talking to each other is concerned:

I want to ask Leigh how her bottom line is looking (no joke there btw) since making the switch to price action trading.

I want to know how 'blindfolded' we really are as retail forex traders by not having access to volume information. I've done a lot of reading about the role of volume in the interpretation of stocks and futures charts and it seems it's a piece of the puzzle we're sorely missing -- the way professional money 'hides' their activity in big moves in a way that can only be 'seen' in by comparing real volume to price.

I have so many questions.

One thing I started doing on feb's thread was posting current charts that had my 'analysis' annotations, to see if the subsequent critique would lead to some greater understanding. Not sure if I didn't just annoy people though? It's difficult to not look like your fishing for trading advice in the literal sense. But I don't want someone to tell me when to trade — I've been there, done that — I want to learn how to really do it for myself.

Pinbars, outside/inside bars, candlestick patterns (I ordered the Morris book), chart patterns... I'm developing the vocabulary slowly and don't lose much ($), but my ability to let go and get stuck in is still weak. And this whole 'no stop loss' thang is just throwing me right off...

Anyway. I've rattled on.

Thanks again.