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Technical Analysis Fallacy

  • #421
  • Edited 11:38am Dec 9, 2007 11:03am | Edited 11:38am
Hi ALL,

@ Green_David,
I do remember that you did posted a chart for my analysis,
I have not replied your post because you posted a daily chart,
And based on the chart , that market has moved into a range congestion.
Within that congestion time window
is where you will be hinted on the new possibilities that can develop.
What I want to tell you is that instead of trying to impose analysis on the chart,
one viewing of it already can tell you what to expect of the possibilities.
It is what it continues to form as time progresses that is more important.

Resistance and support levels are never absolute.It changes as time progresses.
Your trade positions must change as the chart progresses and a continued analytics be done.
DO NOT try to read it once and have a set mind of the possibilities of what to expect.
The analysis is an on going process and every new bar added will cause new developments.
Never read the patterns that form on the chart, rather recognise it when it forms,
and follow it with a trade position.
Chart patterns can mutate as time advances
and a fixed perspective to the pattern that has formed is dangerous
as it palalyses your ability to change when the dance changes.
Althought it is foundational that you should be able to read the pattern formations,
you should not draw those lines on to your chart.
They can form optical illusions to your mind and
impair your ability of new developments that is coming onstream in the charts.

Follow the development as I explain Zorans chart errs to him.

@ Zoran,
Regarding your posted chart.
Read what I have explained to David. further,
refer to your chart as I highlight the dangers of,
your drawing lines and patterns on your chart.
Note your up-sloping channel. It looks like a tunnel thru the air scenerio.
But pay attention to what I sketch on your chart,
to prove to you that the pattern can change ,
and leave you holding your old analysis in your head,
while new signals have developed to hint you for other possibilities.

1. You have because you have drawn two parallel lines of upward tunnelling.
So you have a perception of a continuing bull market.

2. Watch as I add new development, which hints you of impending change ,
but will not be visible to you, because of your lines.

Notice how the market has changed within your channel, range 1r(in red),
that change can happen as in this case inside your percieved channel,
Selling possibilities had already existed within the zone marked 1,
which is inside your channel.
While you may still be awaiting your percieved neckline to break for confirmation.
By the time you get the confirmation you may be already too late in the move,
(david's complain of catch fish head and tails)
and you would have lost the major part of the move.
If you remove your paralell lines
you may see that you can redraw
a new head and shoulder neck breakage inside the channel.
This is only one example, And although it is hypothetical, there will be many possibilities
and I a sure you that in life analysis your lines will impair your ability
to read the patterns that may be forming.
Remove the lines and you will definately see much more possibilities unfolding.

I urge you , do not draw patterns on your charts,
learn to recognise them visually without markings,
you will find that once you master recognising them without having them
being drawn on the charts, you will have less possibilities of pre-concieved pattern errors.


regards
Attached Image
  • #422
  • Edited 12:44pm Dec 9, 2007 11:08am | Edited 12:44pm
Hi Zoran,

I did another example on your charts to prove the point again.
Note the upwedge near the top of the channel,
inducing the short positionand the continuation pattern of an inverted flag.
Where the long leg already overexceeded possible targeted profitaking.
Then the formation of an intermediate W bottom, where I would have been long,
way before you saw the wedge breakout on the top.
By the time you got in long at the break of the wedge,
I would alredy be testing to see if the resistence top could be broken,
watching for signs for resistance,
on breakup, It hits my intermediate W bottom targets.
And subsequently formed intermediate M tops,
for my test of short position downward. while you drew your down wedge,
my targets for M top is acceived and
within that scope is long now looking at a possible profittaking
and watching the down sloping flag formation
and awaiting other possibilities or for a continuation of a big W bottom formation
and awaiting a neck possibility.

Does this prove to you, that your drawing your patterns on your chart
impairs your ability to be nimble for proper and clear analysis?
Please do not mistaken that I am trying to prove myself better than you
or anything else other than to use this example tp try to prove to you,
that your placing these art on the chart does have a real impact in affecting
your analysis.

regards
Attached Image
  • #423
  • Edited 2:35pm Dec 9, 2007 11:14am | Edited 2:35pm
Hi ALL,

I like to tell you another story,
this is cos I can feel my "dealer arrogance" is begining to surface to bother me.
It's a natural tendency for most dealers.
BUT do not belittle, the things that my dad taught me.
It's as sure as the sun rising in the morning.

While I try to arrest the monster......
I've given you the most important law in trading.
The WWilder taught me, thingy.
The whole MM is wrapped in those numbers.
Some might see it, most will not.
To work it, there are some prerequsites.
It has value only when you can incorp, it strategically with the artof war MO.

Ponder this

All technivcal indicators aare lag reading of market footprint.
There is a required intelligence to decript them for an opinion of the dance.
Why does people allow themselves to use these as the holy grail?
The question is why?
The answer lies in those numbers and in "you".

If you cannot see the answer, then here's a tip.
What caused Princess diana's death? God rest her soul.
tip: sitting in car driven by someone else
Who killed her? the driver
Why did it happened?
cos' her life depended on some one elses skills other than her own.
I dare not question her position, and the luxury of her rights, you must understand.
But the fact was , her life was in someone elses hands.
If anyone wants to bring this to other perspectives of debate. Go debate it yourself..
I am talking about the lessons from the facts, not the hypothesis of the event.
Don't look at the incident, look at the lesson in it.
Now princess diana has nothing to do with trading,
But her death left a lesson for traders, who are indicators dependent.
I hope some of you can understand.
There are lots of things in life that are beyond our ability to control,
some may like to add trading to be one of them.

And here's the story, some may recognise someone they know in it.
I try to relate Dr Banks as best I can remember.

A man came to a shrink,
Sat down on the couch,
the shrink enquired,
How may I help you ?
The man started with I think I have a inferiority complex.
And the good Doctor enquired why he thought so.

The man started to relate how he felt because of his experienc....
this and that and how people looked at him, and their opinions, and .........

When the session ended.
The man turned to the good Dr. and asked .
What do you think?
The Dr. replied , well,
You do not have the complex.
you are truly inferior.

regards

PS: I am sorry for some of you that cannot follow the directions I am going towards now.
And I empatise with you, cos' I am going many directions at once.
Every piece of info here is part of a puzzle.
I am rushing time.
The hand holding is off, This is the deep end.

I promised Leighsww, the insights to the training, and I will deliver.
If people want to learn , and not ask questions or discuss,
well, thats your problems and I have little time left before my vacation.
by the end of the week I would have given you
a nearly 2 year course of training, in less than a month.
If it suits use it .
otherwise I don't know what else I can do for you.
Wait till I show you art of war. Then you'll really have a headache.
But actually its quite straight forward if you have been following
and asked or discussed where you didn't understand.

For those that cannot make any logic of the MM I showed.
Here is an alternative methdology, and its time tested and proven.
http://www.tradingblox.com/originalturtles/
I cannot say that it is better than what I have tried to show you.
But at least their track records were impressive.
Its a MM automated system trading methodology.
Will it continue to work, surely I don't know.
But if you people is gonna risk money on mechanical systems, At least this one professional.
time tested, hard to follow, and free.

regards

Oops, they re asking for money now.
let me give you my file.
  • #424
  • Dec 9, 2007 12:50pm Dec 9, 2007 12:50pm
Fti,

Thanks for your thought provoking insight to the markets and into ourselves as traders. I have found this thread very enlightening and refreshing.

In reference to the use of indicators and their lagging nature and the fact that so much emphasis and trust is put on them as a "holy grail". I look at indicators as tools, such as training wheels on my bike when I was 4yrs old. We as humans BELIEVE we need the extra reassurance of "training wheels" to back up our own thoughts and abilities whether it be riding a bike or analyzing a chart. I use them because my price action analysis is not as good as I think it should be, so I look at the lagging indicators to give me a backup..why: cause I don't trust myself as much as the indicators! I guess that makes me inferior.

I think what you are trying to convey is to let go of the training wheels, gain knowledge of simple price action analysis and gain trust in yourself. You can only be as good as you believe you can be, by yourself. If I had not got rid of my training wheels when I was younger, would still be riding a bike with training wheels as a grown man? Probably! I wouldn't know any different, but I would be limited in where I go with my bike, how fast I go, plus I would look ridiculous. So before I get rid of my "training wheels" I better put on my helmet, cause I am guaranteed to fall down, but I will learn and eventually be more proficient without the indicators that give me lagging confidence.

Cheers,
NP
  • #425
  • Edited 1:27pm Dec 9, 2007 1:13pm | Edited 1:27pm
Hi Northpro,

The truth is you don't have to give up your indicators, as in never using them.
Sure, if they can add to you insigts to the market, do use them.
But dont flash them on the screen, and be watching them instead of your naked prices dance.
Keep them hidden. Make them references when you have trouble feeling the markets.
Peep at them for that adjustment for market form.
But don't risk your money on them, Risk it on YOU.

But my experience have been , when I dance well intune to the markets, I really don't want to have these indicators ,create for me any confusion, and disrupt my dance. When you're in the wind , you just glide with the flow.

Northpro, you're a rider. When you're on a run do you watch your speedo? probably peep at it a while, but do you have to watch it when you can feel it.


regards
  • #426
  • Dec 9, 2007 1:34pm Dec 9, 2007 1:34pm
Quoting fti
Hi Northpro,

The truth is you don't have to give up your indicators, as in never using them.
Sure, if they can add to you insigts to the market, do use them.
But dont flash them on the screen, and be watching them instead of your naked prices dance.
Keep them hidden. Make them references when you have trouble feeling the markets.
Peep at them for that adjustment for market form.
But don't risk your money on them, Risk it on YOU.

But my experience have been , when I dance well intune to the markets, I really don't want to have these indicators ,create for me any confusion, and disrupt my dance. When you're in the wind , you just glide with the flow.

Northpro, you're a rider. When you're on a run do you watch your speedo? probably peep at it a while, but do you have to watch it when you can feel it.


regards
Ahh, I see.

Yes when I do ride I do use and occasionally look at the speedo for reference only, but when I race, I use nothing, no distractions or expectations, just self and the degree of my gasping for oxygen. I get it, Thanks.

NP
  • #427
  • Edited 3:02pm Dec 9, 2007 2:48pm | Edited 3:02pm
Quoting fti
Hi ALL,
For those that cannot make any logic of the MM I showed.
Here is an alternative methdology, and its time tested and proven.
http://www.tradingblox.com/originalturtles/
I cannot say that it is better than what I have tried to show you.
But at least their track records were impressive.
Its a MM automated system trading methodology.
Will it continue to work, surely I don't know.
But if you people is gonna risk money on mechanical systems, At least this one professional.
time tested, hard to follow, and free.

regards

Oops, they re asking for money now.
let me give you my file.
Make no mistake, the styles very different from mine.
But this guys tech is big boys style.
but it kills waiting for the buses.
So for die hard, Mechanical system traders,
here it is.
Be reminded that this is for trading Futures contract, not Spot Forex.
There are some differences.
In a nutshell
trading break outs with a strict MM plan.
Attached File(s)
File Type: pdf turtlerules.pdf   251 KB | 4,178 downloads
  • #428
  • Dec 9, 2007 4:09pm Dec 9, 2007 4:09pm
Great story about Princess Di,

But the real answer to "what caused her death" is different although again it was two dangers for traders. Stupidity and Arrogance.

Stupidity .... she didn't wear a seat belt (no money management guys)
Arrogance .... she and Dodie were too important to need to wear seat belts (believing your own analysis and locking to the view rather than adapting as the market tells you new things).

The only person who lived in that limo was sitting in the Suicide seat (next to the driver and first against the pillar) BUT that person wore his seat belt.


Moral:

Wear your seat belt in a high speed car chase (use money management )
  • #429
  • Dec 9, 2007 4:26pm Dec 9, 2007 4:26pm
You know what's good about these lessons?

That each of us gets out of it what we need to and where it can apply in our life/trading/relationships/what-have-you, lol

For me, I read each story and my first interpretation is what I probably see clearest as how it relates to my life/trading/etc.

When I read other people's interpretations, I can also see their viewpoints and its validity as to how it can relate to life/trading/etc., as well.

This is why, nobody is wrong in what lessons they learn/obtain from these stories. Each can take away with them and apply whatever value needed as to how it impacts them the most
  • #430
  • Dec 9, 2007 5:09pm Dec 9, 2007 5:09pm
Quoting fti
Does this prove to you, that your drawing your patterns on your chart
impairs your ability to be nimble for proper and clear analysis?
Please do not mistaken that I am trying to prove myself better than you
or anything else other than to use this example tp try to prove to you,
that your placing these art on the chart does have a real impact in affecting
your analysis.

regards
Thank you fti, I feel privileged to have had my charts reviewed. I am beginning to understand your view about patterns and lines distorting vision, though I also understand many of the points you mention and to an extent, I believe I already follow much of what you suggest. Especially that patterns can mutate and change the dance. I shall wait and see what else I can pick up from you. It is also reassuring to see that the analysis you have provided so far, in terms of patterns (reversal, continuation, etc) is not to dissimilar to mine.

As an example to assist with clearing things up, you mention

Quoting fti
Resistance and support levels are never absolute.It changes as time progresses.
Your trade positions must change as the chart progresses and a continued analytics be done.
DO NOT try to read it once and have a set mind of the possibilities of what to expect.
The analysis is an on going process and every new bar added will cause new developments.
Never read the patterns that form on the chart, rather recognise it when it forms,
and follow it with a trade position.
Chart patterns can mutate as time advances
and a fixed perspective to the pattern that has formed is dangerous
as it palalyses your ability to change when the dance changes.
Althought it is foundational that you should be able to read the pattern formations,
you should not draw those lines on to your chart.
They can form optical illusions to your mind and
impair your ability of new developments that is coming onstream in the charts.
So if you look at the example below, a bullish wedge played out nicely and I could see another one potentially forming and waiting for confirmation before playing it.

http://www.forexfactory.com/showthre...ge#post1603733

As it turned out the dance changed. In the post below, I recognised that and removed the wedge from my chart (now being invalidated).

http://www.forexfactory.com/showthre...74#post1604074

So, if I understand you correctly. The completed wedge on the left provided a long signal on completion (and should have been traded only at that time without having any fixed perspectives beforehand) but as I was waiting for the wedge on the right to provide another signal, that distored my vision (as I had a fixed perspective) and stopped me from seeing a potential short? Would that be an accurate assessment of your points?
  • #431
  • Dec 9, 2007 5:23pm Dec 9, 2007 5:23pm
Yes Leigh, I agree, we all take something different away from these proverbs/stories but I think in the end, my interpretation of what fti is trying to teach us is not to concern ourselves with too much, just the job at hand and to not rely on other methods other than your own to analyze what is happening here and now, to make sensible decisions and not be swayed too much by what we 'may' be seeing with chart patterns and indicators et al.

I was just thinking about something which Northpro eluded to also, is how when I (and I'm sure many of us) first looked at a chart with out any prior knowledge of indicators could 'see' the price action, make a few paper trades successfully and go 'wow, I may actually be able to do this!'.
The next logical step so it seems is saying to yourself 'if I want to be professional at this I need to use something that gives me a better edge, just like the pro's' - enter indicators, the rest of this story is well known by most I'm sure.
Without knowing, I already had what I needed but was not happy with only that (putting MM aside for the moment), I needed something more.
Dr Banks' statement holds true here, "why does somewhere else always seem better than where we are right now" - that's human nature I guess.

Again this is only my interpretation, but I think fti is not saying to throw away all of your previous knowledge and study of indicators/patterns and stop reading threads on systems and such, you can always glean something from many methods and indicators that can help you understand the markets better, just accept them for what they are though and don't use them for a crutch to help you trade. The speedo analogy is also quite good here, nice one fti!

If anyone has read Van Tharp's works on MM, he also alludes to a similar theory, the market hold's no guarantees regardless of system or other, he even uses the coin toss theory as an example of market nature and this is why he places heavy emphasis on MM, not just to make money but also to survive. I wouldn't take his MM strategies just as they are though, what he advocates may not work so well in the forex market but I think the message he is trying to get across is very important and something I will have to work on to manage my positions better to minimise losses and maximise profits as the market dictates.
When I discovered MM in this light I believed it (and still do) to be true that this was probably 'the' most important thing but I still get distracted by the 'wanting' of something better, the magical indicator/system say but again that's human nature and something that I have to deal with, this thread is definitely helping with that though.
thanks again fti.
  • #432
  • Dec 9, 2007 5:44pm Dec 9, 2007 5:44pm
LOL, I probably should have quoted kiwi_trader's ...

Quoting kiwi_trader
But the real answer to "what caused her death"
... because that was actually what I was referring to by my post, as there is no 'real answer', lol

But, your point is noted, Mick_D. Thank you
  • #433
  • Dec 9, 2007 5:51pm Dec 9, 2007 5:51pm
Quoting leighsww
LOL, I probably should have quoted kiwi_trader's ...



... because that was actually what I was referring to by my post, as there is no 'real answer', lol
Yes, of course, that too
  • #434
  • Dec 9, 2007 6:28pm Dec 9, 2007 6:28pm
Hi Zoran,
Your chart 1
Self explainatory.
Expecting weakness and accelerated speed selling on test of support.
But your wedge colouration blinded the selling tops,cos you would have a upbreak of a downward wedge.
Now you see how the preconceived pattern blind sighted your perspective.

regards
Attached Image
  • #435
  • Dec 9, 2007 6:37pm Dec 9, 2007 6:37pm
Speaking of this last story and the two interpretations from fti and kiwi_trader ...

fti puts his emphasis on ... being in control (the driver's seat) and not putting your life into someone else's hands.

kiwi_trader puts his emphasis on ... it's okay to let someone else drive you around, but your responsibility to your own welfare is to wear a seatbelt.

Well, both are not wrong, each is just putting importance on different things.

However, in both scenarios, the outcome could have still resulted in tragedy, because nothing is absolute.

We all know that people have gotten killed being in control of their own driving, as well as people have gotten killed even when wearing a seatbelt.

The point is ... there is no predicting any outcome of any situation. The market will go where it wants to go, and even previous patterns cannot dictate or make certain an absolute result.

As deaths in accidents are pretty much random, so is that of the forex market.

We do the best we can, to try to lessen the odds of getting killed, that's all.
  • #436
  • Dec 9, 2007 6:40pm Dec 9, 2007 6:40pm
Hi Zoran.

Now fron this continuation chart, you can see that truly the support gave for a speed seller .and we are nearing syupport. There is no evidence that a bottom is found yet .So the exposure must be reduced
as we enter the Support time window where more clues will surface.

The important point was how important the waiting into the right top was.
Where a compounded stepping top form to reverse the market into a full bear.

It would now behove the trader to start looking for clues in his short chart for likely strength points, whereas still in shorts , such activity should be kept to minimal until further sigs of weakness should appear, as we consolidate into the support zone. If longs were attempted , it must be on short tenure and never to be held over night, although mkt seems deep already the bear is not dead yet.
Attached Image
  • #437
  • Edited 7:07pm Dec 9, 2007 6:51pm | Edited 7:07pm
Quoting leighsww

The point is ... there is no predicting any outcome of any situation. The market will go where it wants to go, and even previous patterns cannot dictate or make certain an absolute result.

As deaths in accidents are pretty much random, so is that of the forex market.

We do the best we can, to try to lessen the odds of getting killed, that's all.
Yes , Leighsww,
The market will go where it wants to go.

No, no,no, Do not try to lessen the odds of getting killed. Instead you must have the mindset to do whatever it takes to WIN. Not having it kill you. The negativeity must be removed from the mindset in totality lest it allows you yto create it. But of course with strong MM in play likelyhood of being killed should be negligible. Althought there is still that possibility, The mindset must not yield to such thinking.

Any buses along lately?

regards
  • #438
  • Dec 9, 2007 7:01pm Dec 9, 2007 7:01pm
Quoting fti
No, no,no, Do not try to lessen the odds of getting killed. Instead you must have the mindset to do whatever it takes to WIN. Not having it kill you. The negativeity must be removed from the mindset in totality lest it allows you yto create it. But of course with strong MM in play likelyhood of being killed should be negligible. Althought there is still that possibility, The mindset must not yield to such thinking.
LOL, okay, okay!

Quoting fti
Any buses along lately?
Actually, yes, I'm in a trade right now
  • #439
  • Dec 9, 2007 7:06pm Dec 9, 2007 7:06pm
Quoting fti
Hi ALL,
And here's the story, some may recognise someone they know in it.
I try to relate Dr Banks as best I can remember.

A man came to a shrink,
Sat down on the couch,
the shrink enquired,
How may I help you ?
The man started with I think I have a inferiority complex.
And the good Doctor enquired why he thought so.

The man started to relate how he felt because of his experienc....
this and that and how people looked at him, and their opinions, and .........

When the session ended.
The man turned to the good Dr. and asked .
What do you think?
The Dr. replied , well,
You do not have the complex.
you are truly inferior.

regards
It's bed time here, but before I go, I will say that since he kept looking for reasons to justify his inferiority belief, that made him so. By focusing on this, he allows others to control his life rather than taking control himself and believing in his strength. In trading terms, it would have to do with belief in your system and not allowing others to influence your decisions.

Quoting fti
Wait till I show you art of war. Then you'll really have a headache.
But actually its quite straight forward if you have been following
and asked or discussed where you didn't understand.

For those that cannot make any logic of the MM I showed.
Here is an alternative methdology, and its time tested and proven.

I cannot say that it is better than what I have tried to show you.
But at least their track records were impressive.
Its a MM automated system trading methodology.
Will it continue to work, surely I don't know.
But if you people is gonna risk money on mechanical systems, At least this one professional.
time tested, hard to follow, and free.

regards
Thank you fti. Your reference to showing us MM is past tense, so it seems it is complete. Those percentages is it I assume. I will have to think about it a bit more but my brain is a little tired now. Maybe I'll get an insight whilst sleeping!

Good day/night to you and all.
  • #440
  • Dec 9, 2007 7:22pm Dec 9, 2007 7:22pm
Quoting fti
Hi ALL,

before we go on, I think I should mention this.

A long time ago.
Mr. Welles Wilder taught me this.

This is not new.It was old when the Phoenicians were trading with the Romans and the Greek Philosopers cornered the olive oil market. This is the concept.

The percentage gain it takes to recover a loss increases geomatrically with losses.

The concept is as the following table

% Loss intial capital % profit required to Recover
5----------------------5.3
10----------------------11.1
15----------------------17.6
20-----------------------25
25----------------------33.3
30----------------------42.9
35----------------------53.8
40----------------------66.7
45----------------------81.8
50----------------------100
55----------------------122
60----------------------150
65----------------------186
70-----------------------233
75------------------300
80------------------400
85------------------567
90------------------900

The % gain required to to come back to balance (break even) will increase gemetrically with your losses.
if you loss 20% of your capital. you will have to make 25% to come back to breakeven.
However if you lose 50% of your capital, you have to make 100% to come back to break even.
So please be careful with your trading.

regards.

PS: I need to take a nap, so this is the last post for today.
Think about it.
Perhaps I can start some discussion before I get second wind.

Ok, so I initially saw the above as something to do with position sizing. That could be part of an MM tactic. Position size for consecutive losses is gradually decreased so as to limit it within a certain percentage whereas winners are gradually increased, to improve profitability.

fti, just a question.... do you trade in one direction only or do you have positions open in both at the same time?
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