Technical Analysis Fallacy

Zoran, position sizing is definitely one part but my take on that chart is to not let your losses get to big (cut them short - quick!). For instance, the chart below, the capture was taken just a minute or so ago shows where I hopped on the bear bus, if it goes past the pink line from that pennant formation I'm out, I'm on the wrong bus at that time so I'm not wasting any more on fares, I can always get back on. We'll see how it pans out, but it's only an example.
The problem that exists with PS'ing is that people tend to set their stop to it and then wait for it to be hit thinking they have to let it play out as they thought it would, yes, you need room to move but you need to preserve capital more.
cheers,
Mick.

Hey that's a fantastic quote , relating it to market conditions was very impressive , will keep an eye on your posts

This isn't looking good!

And...

How come you don't re analyst after moves?

To be honest I probably would have been out on the 3rd candle after the black one you pointed out (it gave me more 'confirmation' if you like and I still wanted a little room), I missed it as I was posting the previous chart. I would have even considered going long if I had have been 'dancing' for a while and was in step
I guess I was more trying to make a point about reading the action and responding to it <*edit> and to save money, not being stuck to the trade and thinking of the next strategy as it unfolds in front of me.

P.S. After thinking a little more, where you indicated would have been better and more in line with what I was trying to convey, I would have saved more than +/-half the pips that I would have if I bailed out at my preferred exit, the trade would have cost a lot less to just try out the seats on the bus only to find out it was pointing the wrong way, thanks again.

Hi Zoran,
Pls read the quoted again.

regards

Hi Zoran,
I dance in one direction, when there is determined trend.

Dance in both directions, where ranges when no predominant trends exist. To stretch the range.
This is a little tricky and the strategy requires adequate capitalisation.
The foundations for the MM is in the table provided, of course, for the bank, the pockets were very deep. For traders, I suggest milder or adjustments to accomodate risk appetites.
The MO is provided in the Art of War.

Hi fti, i enjoy reading your thread tremendously. When u were working for a bank, were you able to see order flows from other institutions?

The only way to manage a win and a loss position is by size snowballing.
There is no other way. One increases the profitabilty bottom line and the other a recovery protocol. The MO you will find in Art of War.
This is a capital game, therefore no alternative are possible.
Its the, I have a bigger one competition.
The the relativity of the size snowball is important that over-extension in % counts can kill the biggest fish in the water.

Although we can use MM strategies, we still need to be able to peg that to the mode of the prices we are attempting it in.
During High volitility sequences the MO would defer from low volitility sequenses.
This is where the trickiness exist, because your ability to use it effectively will determine the the extent of the effeciency, and this reflects the bottom line.
So in this context, there is no compromise for experience in safely executing it and trader mindset robustness.

regards

When there, I could see all of my book as well, the major books in the market due to tier 1 networkings.
Why do you ask? The extent where anyone can see the market place is always dependent on who your friends are, isn't this so in all fields of endevour?

regards

Hi ALL,
The far east USD markets seemed to have dozzed off today, wonder if the London boys will be waking up at all, let alone NY. So Back to snooze now.
cu

Hi ALL,
I had typed out the exploration sessions up to friday , then going for my vacation.
But since the markets are so letargic. Heres something to chew on.

A lesson in habit training & stupidity.
The Wild and Free Pigs of the Okefenokee Swamp
by Steve Washam based on a telling by George Gordon
---------------------------------------------------------------------

Some years ago, about 1900, an old trapper from North Dakota hitched up some horses to his Studebaker wagon, packed a few possessions, especially his traps--and drove south.

Several weeks later he stopped in a small town just north of the Okefenokee Swamp in Georgia.
It was a Saturday morning--a lazy day--when he walked into the general store.
Sitting around the pot-bellied stove were seven or eight of the town's local citizens.

The traveler spoke, "Gentlemen, could you direct me to the Okefenokee Swamp?"
Some of the old-timers looked at him like he was crazy.
"You must be a stranger in these parts," they said.
"I am. I'm from North Dakota," said the stranger.

"In the Okefenokee Swamp are thousands of wild hogs," one old man explained.
"A man who goes into the swamp by himself asks to die!"
He lifted up his leg. "I lost half my leg here, to the pigs of the swamp."
Another old fellow said, "Look at the cuts on me; look at my arm bit off!"

"Those pigs have been free since the Revolution, eating snakes and rooting out roots
and fending for themselves for over a hundred years.
They're wild and they're dangerous.
You can't trap them. No man dare go into the swamp by himself."
Every man nodded his head in agreement.

The old trapper said,
"Thank you so much for the warning. Now could you direct me to the swamp?"
They said, "Well, yeah, it's due south--straight down the road."
But they begged the stranger not to go, because they knew he'd meet a terrible fate.
He said, "Sell me ten sacks of corn, and help me load them into the wagon."
And they did.

Then the old trapper bid them farewell and drove on down the road.
The townsfolk thought they'd never see him again.
Two weeks later the man came back.
He pulled up to the general store, got down off the wagon, walked in and bought ten more sacks of corn.
After loading it up he went back down the road toward the swamp.

Two weeks later he returned and, again, bought ten sacks of corn.
This went on for a month. And then two months, and three.
Every week or two the old trapper would come into town on a Saturday morning,
load up ten sacks of corn and drive off south into the swamp.

The stranger soon became a legend in the little village and the subject of much speculation.
People wondered what kind of devil had possessed this man,
that he could go into the Okefenokee by himself and not be consumed by the wild and free hogs.

One morning the man came into town as usual.
Everyone thought he wanted more corn.
He got off the wagon and went into the store where the usual group of men were gathered around the stove.
He took off his gloves.
"Gentlemen," he said, "I need to hire about ten or fifteen wagons.
I need twenty or thirty men.
I have six thousand hogs out in the swamp, penned up, and they're all hungry.
I've got to get them to market right away."

"You've got WHAT in the swamp?" asked the storekeeper, incredulously.
"I have six thousand hogs penned up. They haven't eaten for two or three days,
and they'll starve if I don't get back there to feed and take care of them."
One of the old-timers said,
"You mean you've captured the wild hogs of the Okefenokee?"
"That's right."

"How did you do that? What did you do?" the men urged, breathlessly.
One of them exclaimed, "But I lost my arm!"
"I lost my brother!" cried another.
"I lost my leg to those wild boars!" chimed a third.

The trapper said, "Well, the first week I went in there they were wild allright.
They hid in the undergrowth and wouldn't come out.
I dared not get off the wagon. So I spread corn along behind the wagon.
Every day I'd spread a sack of corn.

"The old pigs would have nothing to do with it.
But the younger pigs decided that it was easier to eat free corn
than it was to root out roots and catch snakes.
So the very young began to eat the corn first.

"I did this every day.
Pretty soon, even the old pigs decided that it was easier to eat free corn,
after all, they were all free; they were not penned up.
They could run off in any direction they wanted at any time.

"The next thing was to get them used to eating in the same place all the time.
So, I selected a clearing, and I started putting the corn in the clearing.
"At first they wouldn't come to the clearing. It was too far.
It was too open. It was a nuisance to them.
"But the very young decided that it was easier to take the corn in the clearing
than it was to root out roots and catch their own snakes.
And not long thereafter, the older pigs also decided that it was easier to come to the clearing every day.

"And so the pigs learned to come to the clearing every day to get their free corn.
They could still subsidize their diet with roots and snakes and whatever else they wanted.
After all, they were all free. They could run in any direction at any time. There were no bounds upon them.

"The next step was to get them used to fence posts. So I put fence posts all the way around the clearing.
I put them in the underbrush so that they wouldn't get suspicious or upset, after all,
they were just sticks sticking up out of the ground, like the trees and the brush.
The corn was there every day. It was easy to walk in between the posts, get the corn, and walk back out.

"This went on for a week or two.
Shortly they became very used to walking into the clearing, getting the free corn,
and walking back out through the fence posts.

"The next step was to put one rail down at the bottom.
I also left a few openings, so that the older,
fatter pigs could walk through the openings and the younger pigs could easily jump over just one rail,
after all, it was no real threat to their freedom or independence--
they could always jump over the rail and flee in any direction at any time.

"Now I decided that I wouldn't feed them every day. I began to feed them every other day.
On the days I didn't feed them, the pigs still gathered in the clearing.
They squealed, and they grunted, and they begged and pleaded with me to feed them--
but I only fed them every other day.
Then I put a second rail around the posts.

"Now the pigs became more and more desperate for food.
Because now they were no longer used to going out and digging their own roots and finding their own food,
they now needed me. They needed my corn every other day."

"So I trained them that I would feed them every day if they came in through a gate and
I put up a third rail around the fence.

"But it was still no great threat to their freedom, because there were several gates
and they could run in and out at will.

"Finally I put up the fourth rail.
Then I closed all the gates but one, and I fed them very, very well."
"Yesterday I closed the last gate and today I need you to help me take these pigs to market."

The price of free corn.
The parable of the pigs has a serious moral lesson.
Markets have the skills as that trapper.
Remember your MO, and purpose.
If you are scalping, beware the gates.
If you are trading, then do not run too far off your norm.
If you cannot hold on to your intended prtocol and MO, then you will be caged by the market , sometime.
If you ever get into that position as a trader , you will have to fight tooth and nail, just to get out of it.
REMEMBER, you have been warned.

Sun Zi's :
"If you know the enemy and know yourself, you need not fear the result of a hundred battles.
If you know yourself but not the enemy, for every victory gained you will also suffer a defeat.
If you know neither the enemy nor yourself, you will succumb in every battle."

regards

Fti, a question to the above post if I may.
I beleive I understand the snowballing effect and the profitability as it relates to the bottom line. Now as far as a recovery protocol goes, based on what you wrote that would be a reverse snowballing effect, am I correct in that assumption? If so than it makes total sense, if on the other hand you meant the same snowballing effect in recovery protocol than I would asky you if you could eleborate just a bit so I could be clear, thank you in advance.

I repeat.
The only way to manage a win AND a loss position is by size snowballing.
There is no other way. One increases the profitabilty bottom line and the other a recovery protocol.

Snowballing your positions in a win situation to to enhance and stretch the profits in the book.

Snowballing in a loss situation is very tricky,
The trick is to stay on the front line, and not allowing the market to run too far away from you for effective salvaging the bad . Therefore averaging of cost is the main component in this MO. Later in Art of War you will learn that to save 1 bad postion , you will need a squad. Therefore the timing is critical and the terrain whereby this is allowed to occcur must be manageable. This MO must be given sufficient thought , well parametered and executed swiftly on running battle sequences. If any possibilities of failure were to present itself , the whole exercise have to be abandon. So use it wisely. Under the strength of unlimited capital, this activity will dig you out of the holes , a trader might find themselves in. But traders do not have unlimited resource as with banks, if this protocol is adopted then much preparation is necessary, in terms of the limits of the parameters is concerned.

Remember that every loss you swallow, based on the WW tables, will put you off geometrically. So to a trader a 10 cts profit is a 10cts profit whereas a 10cts loss is not exactly that, its more. To keep books healthy, loss taking is a very detrimental exercise.
Try to be profitable , a small profit is better than a very small loss, by leaps.

regards

for viability, you must understand, the martingale, fibonacci and log arithmetic spirals. Their workings, the empirical formulation and their characteristics. The secret working lay in the pi & its skew.

Just want to know....and are you still able to see order flows now since you still have connections? oh.....can i be your friend too?

In Banks they have built up "China walls" to block all info flows. Unless you can walk thru walls, there is no chance of that happening.

Alternatively you can master, pip movement reading skills, read, Edwin's book "Reminises of a stock operator" , If you have enough experience, it tells you stories of the under-current.

Contacts out of the core circle is not useful, so you may not want to be my friend anymore.LOL

regards

The london boys, they're awake.
sorry guys, dinner date, BB

After writing a lengthy reply and addressing all problems and misconceptions in regard to leigh's post, I realized that one of the core messages of my reply, that discussing trading instead of trading and constantly trying to have everything and nothing being right or wrong leads to nowhere, would just be countermanded by supplying new fodder to re-argue in the form of a big post.

So I erased it again and am leaving this in place.

Things will come to people or not; I'm fed up with arguing people that already seem to know me(and my trading, insights, problems, views, etc) better than I do(which is incredibly offensive). And it's also just disruptive of fti's thread. Apologies.

There's always the hard way - learning by doing, trial and error. Nobody has to skip the mistakes others have already made if they don't want to and I feel the majority I encounter is hell bent on doing just that.

Accepting this and just not bothering anymore pointlessly is my problem, not that of others, and I am going to work on fixing it by restricting energy output to those that actually want and can use it / those times where there's actually sense to it.

It's definitely not well spent on counterarguing "having rules and a plan and following both is bad" or "everyone is right and wrong and there's no way to tell and it's just so cool not to commit and feel goody good in loving tolerance of everything and nothing at once instead of actually going somewhere". You can't go somewhere if you don't commit to a direction.
Understand things as intended or do not, the material is there.

Out.

Thanks fti. I have experimented with this in the past and have managed to get myself out of some bad positions for a small profit but the key was to pay attention and to keep analysing, find a possible escape route and take it immediately when it presents itself. I can understand the mindset here being that I should keep fighting.

Good positions should be strenghtened to maximise profit but always keeping an eye on the market. This brings me to trading longer term. Do you see any problems with this? From my view, I can see the same type of behaviour on the larger frames as the smaller ones except patterns tend to develop slower (on the larger ones). This gives me more thinking time and noise is generally swallowed up.

MO = modus operandi = method of operating, correct?

Regarding Art of War, is this something you intend to cover or do you expect us to read the book?

Thanks again.

I have been reading you posts from beginning, and I found them the best stuff that i have read here in FF. I must say that I am not good English speaking, so sometimes have a little problem understanding some of your story's, I maybe understand better when the apply to charts. Anyway i have ordered the books that you recommended because i really want to understand and learn how to trade in forex and other markets. If you have the time to teach us who am I to not have the time to read your posts (10X) if its needed to understand. THANK YOU so much for your efforts.

Towards everybody that is participating in this threat a want to tank you all , for sometimes asking the questions that i cannot formulate myself.

Towards Leighsww, thank you to for convincing FTI to teach all of us.

Kind regards
Valter

Could you please clarify this? I can see that loss taking can be detrimental so it could be carried and snowballed so long as it is in the direction of the continuing trend. Is this what you are referring to as you would expect your unrealised loss to eventually come good. However, could this also distract from taking other positions? Would you take a position in the opposing direction (or hedge)?

However, I can see the danger in this also as some wrong analysis could snowball into a disaster. There must come a point where a bad position is closed. Do you have any rules of thumb? Such as 1% or 2% of an account?

Finally, is there an ideal initial position size? I can see the turtles had a forumla to calculate this. Do you have anything similar?