Technical Analysis Fallacy

Yes, wrong direction is correct and it's not something I want to make a habit of!

I got out this morning with a very healthy profit (11% of book value), I hung on as direction moved in my favour and with the help of the magic numbers I rode it up and got out closing my last couple of open units with a small loss. Yes, I will have a break after all that...wow, what a ride!

There are a couple of things at play here (apart from the fact it was the wrong time of year), I threw myself into this trade with the view of capturing some experience, I needed to see how PA affected my margin and my blotter and test out some MM as well. I went in way over my usual exposure as well, again to see how it went and you're correct, I probably was a bit mild on buy-ins on the short cycles, particularly once I worked out how to use them

I definitely would not expose my book to the market like that with real money, I want to be able to take a loss that doesn't even 'look' like a loss if I'm in the wrong direction as you say, once in the right direction I know I could make that small loss back in no time.

This also gave me an insight on how the 'big guys' who lose huge amounts of money at the banks get burned, they could hide the real situation from the boss but not forever, once you run out of money to fight it's all over.


Yes, I was looking at the overall trend and was perhaps looking at PA thinking it was a bottom (the U/J is very similar to the A/J generally). As I said it was not the right time of year to trade either but I had some time spare to rack up some experience...it was worth it

A few points you have made such as using skew and MM need work now, I think I have my MO down pretty well but I'm looking forward to your views on the attack/rescue sequences with this.

I still believe you need to get the concept of snowballing in/out of a trade and your MO right as a priority but the phi and skew are the icing on the cake

Thanks again Fti,
best regards,
Mick.

Laying the Plans
Learning this "Art" of war is vital to our state of mind, mental state and emotional state.
It is a matter of our very existance depending on it, whether we live life or not.
The art is governed by 5 factors when laying plans and surveying the field.
Moraly we have to be at peace and in harmony with ourselves, well rounded and complete not unsettled with issues at hand. Plan your work and work your plan.
Hevens, night, day, time and seasons show the different conditions that exist in the market. Your plan is worked accordingly.
Earth, distance, great, small and security could be the decisions made on how much ground to be captured,the amount of our force and how much is at risk and plans for rescue.
The commanders virtue of wisdom, humanity, uprightness of mind, self respect and self control when in balance allows the commander to act with wisdom thus having the courageto move forward.
Method and discipline is the plan to be executed, tempered with the dicipline to manage cost while making adjustments in the exercise.
The generals understanding that the conditions of the market depends on his success or failure.
HE must understand and be commited to the plan of attack.
The general with the most ability is the one who knows his enemy the best and who made the best detailed plans.
The advantages of heaven and earth is to know the ideal conditions.
The side discipline that is most rigoursly forced is the side that adheres to the plan the best and is commited to controling risk.
The army that is stronger is the one who knows both armys strengths and its weaknesses. And the one who has the best plans to be unified and endure,again much thought and calculating surfaces as a key.
Whoever executes their plan in the most effecient matter will succeed.
Whoever knows, understands, and reacts making the needed adjustments to their enemy will win the battle.
Warfare being based on deception begin calculated movements with small advancement then when unsuspecting bring the troops.
We hold out bait as part of our offense, we will evade him if his strength is superior. We will attack when he is weak, lay your plans defeat him with a victory.
The general who wins has thoght out his plans of offense and defense with plans in detail to attack, stand aside and rescue.
The general undetailed in calculation and plans loses.

Hi fti

Can you please clarify something. When you say "pi" do you mean "pi" = 3.14159... or "phi" = 1.618...

It's just that you keep saying "pi" and others keep saying "phi" so I'm just wondering whether there is some confusion.

Also, can you explain "skew"? What do you mean by that? I have put forward my thinking but I have not received any confirmation.

I understand snowballing and I assume you would apply it when the market action indicates a potentially favourable position. You would then add a ratio but it is that ratio that I am not sure about. Martingale would indicate doubling the position size so the average would be halved and therefore a 50% retracement is only needed to recover a bad position.

If it is "pi" then that would indicate a circular motion and phi would indicate a spiral. So what I can gather is that you would allow it to spin (or skew?) 3 times before the snowball started to get heavy in a recovery situation and could potentially do some damage but with the right timing and position would allow a quick recovery.

I understand you will cover this after AOW but since your have recently mentioned it again, it would be nice to have some clarification.

Hi fti and all,

Today I entered a position in USDJPY after the open of London session. I am afraid I didn't do well with what fti teaches us. My bad. This is however a good lesson for me to remember and may also be helpful to some of the newbie trader like me.

Now I try to trade naked without any indicators, though I still draw some trendlines to help my analysis which fti does not recommend. I trade with price actions (candlesticks), finding out S/R levels and looking at the chart formations.

1. The overall trend at that moment is a bit like going up towards 110.15. So I should be waiting for the bus going north. But somehow after the open of London session the price looks like going down to the south and I was just out of my mind and jumped on the bus all of a sudden for fear that I could miss the chance for a big run! Things I learn: Be patient and focused, don't be affected by the market sentiment

2. Right after I entered, I remembered that I should wait and go north. Suckers like me tend to follow the crowd to jump in at the dead end area and get killed. Things I learn: What I should do is to dance with dance, and whack them like no tomorrow (from the opposite direction where the price stops; p.s. I don't know if I get it right). Never jump in too late or right at the breakout area.

3. The price level I entered should be where I whack up but not to look for breakdown to the south. The price soon went against me and I thought of making a rescue and saying no to loss. I was a bit panic and entered another position (double my trade size) to sell before a minor resistence level. (P.S. I haven't done that ever in my trading life) But I entered a bit too early and the price still went further up getting close to 109.90. I would have been stopped out before here if I haven't learnt from fti. I try to stay calmed and reanalysed the situations, I found that 109.90 could be a stronger resistance level, I shouldn't bite the bullet right at that level, though my negative balance in my book is pretty scary. After a few minutes, the price went down bit by bit from 109.91 and then I can close my position with a small profit. And the price didn't go down to the level where I entered my first position witinin the next two hours. Things I learn: Before enter, I should have known the key levels and have a plan how to close the position. (I look forward to learn MM from fti) After entry, don't just sit there and do nothing. Don't just get panic when the price goes against you. Saying no to losses is feasible if the conditions favour such a decision.

Thanks fti again. I consider myself doing a bit better than before, though I have made lots of mistakes. And I started trading naked. I know it won't be easy but I hope this is a good start for me.

Pipal, hi -

I am glad to hear your trading is improving.

All the best,

regards
daytrading

Hello fti,

Thank you for giving me the opportunity to join this exciting project.

Here are my thoughts on AOW as I see it aplying to trading:

1. Sun Tzu said: The art of war is of vital importance
to the State.
My trading and its result are of vital importance to my and my family's wellbeing.

2. It is a matter of life and death, a road either
to safety or to ruin. Hence it is a subject of inquiry
which can on no account be neglected.
If not done properly it can be a road to financial ruin.

3. The art of war, then, is governed by five constant
factors, to be taken into account in one's deliberations,
when seeking to determine the conditions obtaining in the field.
The trading should be rule based to be consistent.

4. These are: (1) The Moral Law; (2) Heaven; (3) Earth;
(4) The Commander; (5) Method and discipline.

5,6. The Moral Law causes the people to be in complete
accord with their ruler, so that they will follow him
regardless of their lives, undismayed by any danger.

7. Heaven signifies night and day, cold and heat,
times and seasons.

8. Earth comprises distances, great and small;
danger and security; open ground and narrow passes;
the chances of life and death.

9. The Commander stands for the virtues of wisdom,
sincerely, benevolence, courage and strictness.

10. By method and discipline are to be understood
the marshaling of the army in its proper subdivisions,
the graduations of rank among the officers, the maintenance
of roads by which supplies may reach the army, and the
control of military expenditure.
The rules should be put on paper as a part of a trading plan.

11. These five heads should be familiar to every general:
he who knows them will be victorious; he who knows them
not will fail.
The failure to follow the rules will lead to losses.

12. Therefore, in your deliberations, when seeking
to determine the military conditions, let them be made
the basis of a comparison, in this wise:--
Trading should follow a step by step process.

13. (1) Which of the two sovereigns is imbued
with the Moral law?
(2) Which of the two generals has most ability?
(3) With whom lie the advantages derived from Heaven
and Earth?
(4) On which side is discipline most rigorously enforced?
(5) Which army is stronger?
(6) On which side are officers and men more highly trained?
(7) In which army is there the greater constancy
both in reward and punishment?

The steps should be spelled out in a trading plan.

14. By means of these seven considerations I can
forecast victory or defeat.
Adhering to those steps can make a difference between a profit and a loss.

15. The general that hearkens to my counsel and acts
upon it, will conquer: let such a one be retained in command!
The general that hearkens not to my counsel nor acts upon it,
will suffer defeat:--let such a one be dismissed!
The disciplined trader should prevail over the one not strictly following his rules.

16. While heading the profit of my counsel,
avail yourself also of any helpful circumstances
over and beyond the ordinary rules.
Always look for additional resources to improve your trading.

17. According as circumstances are favorable,
one should modify one's plans.
Be flexible.
18. All warfare is based on deception.
Don't show your hand to your opponent (your dealer/market maker) by setting a stop loss or a target.

19. Hence, when able to attack, we must seem unable;
when using our forces, we must seem inactive; when we
are near, we must make the enemy believe we are far away;
when far away, we must make him believe we are near.

If you insist on using a stop loss, put it so far away so the
broker can't know your true intentions.

20. Hold out baits to entice the enemy. Feign disorder,
and crush him.
Start with a very small position.

21. If he is secure at all points, be prepared for him.
If he is in superior strength, evade him.
Don't fight the trend.

22. If your opponent is of choleric temper, seek to
irritate him. Pretend to be weak, that he may grow arrogant.

23. If he is taking his ease, give him no rest.
If his forces are united, separate them.

24. Attack him where he is unprepared, appear where
you are not expected.

Always be aware who your real opponent is, the party on the other side of your trade (usually your broker).

25. These military devices, leading to victory,
must not be divulged beforehand.
Again, keep your cards close to your vest.

26. Now the general who wins a battle makes many
calculations in his temple ere the battle is fought.
The general who loses a battle makes but few
calculations beforehand. Thus do many calculations
lead to victory, and few calculations to defeat:
how much more no calculation at all! It is by attention
to this point that I can foresee who is likely to win or lose.

The more preparations you do prior to trading the more succesful you'll become. Don't trade "flying by the seat of your pants".

9. The Commander stands for the virtues of wisdom,
sincerely, benevolence, courage and strictness.

Wisdom- the accumulated knowledge of trading (following price movements and acting accordingly using calculated risk) from the following sources:
Books
Mentor
Learning from others- Forex Factory et al
Experience
Open mindedness about market conditions
Trading plan and when to stand aside
Economics 101
Psychology/know yourself

Avoid:
Talking heads in media
Hot tips from friends/relatives/coworkers
$59 per month signal service (dcline calls them holy grail/black box systems)
delayed signals from indicators

Sincerely-

sin·cere –adjective, -cer·er, -cer·est. (www.dictionary.com)

1. free of deceit, hypocrisy, or falseness; earnest: a sincere apology.
2. genuine; real: a sincere effort to improve; a sincere friend.
3. pure; unmixed; unadulterated.
4. Obsolete. sound; unimpaired.
Synonyms 1. frank, candid, honest, open, guileless; unaffected

Successful traders need to make a genuine, substantial effort to improve their skills, if it were easy or natural, there would be no rewards. Bragging about your giant trading account/trading skills does not help anyone. I also see a case for naked charts (unimpaired) in this area as well.

Benevolence-

Successful traders should be willing to help others find their path (I agree with Northpro here on FTI’s character), and also to help others in need. Benevolence also means paying the tax man, which is always a good idea!

Courage-

Being strong-willed enough to not rely on “things to avoid” from wisdom section above, and to stand and fight when trades go against you. Courage comes from confidence and experience.

Strictness-

Determination, dedication, resolution, rigorousness in pursuing a profitable trading account by following your trading plan. I do not think it means to follow strict mechanical trading rules, otherwise the $249 automated trading system for sale on eBay would be worth $2499!


Technical Analysis Fallacy Thread Mantra version 0.1:

( ) grant us the serenity to accept price movement on naked charts, courage to place well-timed entries, and wisdom to fight well when things do not go our way.

Feel free to insert your guidance of choice in the blank, I personally use FTI (which would probably make him slightly angry) and I do not mean to offend anyone by the obvious AA prayer rip off……….

Dear fti,

Thank you very much for your generosity and patience and effort to educate us.
Below are my 2 cents worth.

Chapter 1 Laying Plans

1. Sun Tzu said: The art of war is of vital importance to the State.
Trading is an art itself, hence the artist (General, Trader) must master his/her skills (trading plan, MM, dancing with the market, etc) well.
2. It is a matter of life and death, a road either to safety or to ruin. Hence it is a subject of inquiry which can on no account be neglected.
Trading if not mastered properly, can be devastating to ones wealth, health and wreak havoc to one's wellbeing.
3. The art of war, then, is governed by five constant factors, to be taken into account in one's deliberations, when seeking to determine the conditions obtaining in the field.
4. These are: (1) The Moral Law; (2) Heaven; (3) Earth; (4) The Commander; (5) Method and discipline.
When trading one must be clear in mindset and not be affected by the randomness of the market.
5,6. The Moral Law causes the people to be in complete accord with their ruler, so that they will follow him regardless of their lives, undismayed by any danger.
When trading we must NOT risk money that are for everyday expenses. When trading with 'extra' money the trader can ' follow him (trading plan) regardless of their lives, undismayed by any danger'.
7. Heaven signifies night and day, cold and heat, times and seasons.
8. Earth comprises distances, great and small; danger and security; open ground and narrow passes; the chances of life and death.
The peaks and troughs, higher highs, lower lows, higher lows, lower highs, 5 mins, 1Hr, 4 Hr, daily in charts, etc.
9. The Commander stands for the virtues of wisdom, sincerely, benevolence, courage and strictness.
Trader must be wise to make gd decisions and courageous to kill wrong setups.
10. By method and discipline are to be understood the marshaling of the army in its proper subdivisions, the graduations of rank among the officers, the maintenance of roads by which supplies may reach the army, and the control of military expenditure.
Trader must be wise/discipline in executing of orders (limt orders, market orders, spreads, commissions, etc.). He/she must also be very familiar with the platform that the orders are executed.
11. These five heads should be familiar to every general: he who knows them will be victorious; he who knows them not will fail.
The trader must be master of the above to have the edge to succeed in trading.
12. Therefore, in your deliberations, when seeking to determine the military conditions, let them be made the basis of a comparison, in this wise:--
13. (1) Which of the two sovereigns is imbued with the Moral law?
(2) Which of the two generals has most ability?
(3) With whom lie the advantages derived from Heaven and Earth?
(4) On which side is discipline most rigorously enforced?
(5) Which army is stronger?
(6) On which side are officers and men more highly trained?
(7) In which army is there the greater constancy both in reward and punishment?
To use indicators or to trade naked charts. The latter prevails?
14. By means of these seven considerations I can
forecast victory or defeat.
Adhering to the above and hence mastering the trade, ensures success in the long run.
15. The general that hearkens to my counsel and acts upon it, will conquer: let such a one be retained in command! The general that hearkens not to my counsel nor acts upon it, will suffer defeat:--let such a one be dismissed!
Once mastered the skill, the trader must be discipline and have the patience to stick to it.
16. While heading the profit of my counsel, avail yourself also of any helpful circumstances over and beyond the ordinary rules.
The only constant is change, hence we must continue to keep an open mind and be ready to learn and adapt to new scenarios.
17. According as circumstances are favorable, one should modify one's plans.
Don't be stubborn!!
18. All warfare is based on deception.
You never know what you'll gonna get, the next candle, next min, next hr, next day. Any signal can be a false one no matter how nice it looks.
19. Hence, when able to attack, we must seem unable; when using our forces, we must seem inactive; when we are near, we must make the enemy believe we are far away; when far away, we must make him believe we are near.
Don't use physical stop loss.
20. Hold out baits to entice the enemy. Feign disorder, and crush him.
Start with small position first, then add on to gd ones.
21. If he is secure at all points, be prepared for him. If he is in superior strength, evade him.
Trade with the trend and look out for retracments / pullbacks.
22. If your opponent is of choleric temper, seek to
irritate him. Pretend to be weak, that he may grow arrogant.
23. If he is taking his ease, give him no rest.
If his forces are united, separate them.
24. Attack him where he is unprepared, appear where
you are not expected.
The trader must actively manage his/her trades.
25. These military devices, leading to victory, must not be divulged beforehand.
Do not reveal your trading plans.
26. Now the general who wins a battle makes many calculations in his temple where the battle is fought. The general who loses a battle makes but few
calculations beforehand. Thus do many calculations lead to victory, and few calculations to defeat: how much more no calculation at all! It is by attention to this point that I can foresee who is likely to win or lose.
The trader who puts in due diligence to master the skill will prevail.


I look forward to your revelations. Best Wishes.

kev

http://www.forexfactory.com/images/buttons/quote.gif

Fti ,
In trying to understand our method please correct me with the direction I should be going.

We have had several pair ranging this week lets take for example the gbpjpy.

Jan. 3rd
I sent a couple of spys and taken the ground from these points.
S -216.80 to L-213.80
Jan. 4th
gaining knowledge of the grounds an increase of number of men were placed at 216.80 and 213.80 area.

Now to set up the dance floor I used 215.45 what I think is price equallibrium
215.45 to devide the floor in half to give me a guide to dance to and from.

Can I get some instruction on maybe the ideal dance or different types of dances that I could anticipate ?

thanks for the help

Hi fti and all,

Thanks for the opportunity to exchange pointers about AOW in trading context. Here is my shallow understanding of ancient wisdom. Sorry for being long-winded, I am not very good with words.

Before I begin, I would like to apologize to anyone offended by my post FOR ANY REASON.

Chapter 1: The Beginning, Planning.

“The art of war is of vital importance to the State. It is a matter of life and death, a road either to safety or to ruin. Hence it is a subject of inquiry which can on no account be neglected.”

The state here should refer to your business (if you take your trading as a business). War is a fight for survival, a fight between life and death. Either you business live or die, hence every aspect of trading must be well planned and no information or areas must be neglected.

“The art of war, then, is governed by five constant factors, to be taken into account in one's deliberations, when seeking to determine the conditions obtaining in the field. These are:

1.The Moral Law;
2.Heaven;
3.Earth;
4.The Commander;
5.Method and discipline.

The Moral Law causes the people to be in complete accord with their ruler, so that they will follow him
regardless of their lives, undismayed by any danger.”

Moral Law

It is mentioned in some other ancient history, I think it’s Gui Gu Zi “He who goes against the will of heaven might gain success but he is GUARANTEED FAILURE.”

You might have an immoral purpose, and you might still reach success if you really want it bad enough. However do note that Failure is merely round the corner. Man need to relate to a higher purpose, the higher the purpose, the further he goes. When you have a higher purpose, you will gain support. (Support here can mean a lot of things.) Moreover, you might be able to sleep more peacefully at night and will not be violating your own principles. If you do not violate your own values, rules & beliefs, you will have a higher chance of acting consistently within yourself to achieve your intended outcome.

In the market the Moral Law refers to “Trend”.

“Heaven signifies night and day, cold and heat, times and seasons.”

Heaven

Heaven signifies the various conditions that are beyond our control, market cycles, the various market sessions (US, Asian, London as it is refer to), various economic figure releases (aka news). While we can’t “predict” the future, there are some things that are predictable.

“Earth comprises distances, great and small; danger and security; open ground and narrow passes;
the chances of life and death.”

Earth

Earth refers to the market, the market has various types of terrain (round numbers, Fibonacci levels, support and resistance), nevertheless it if full of traps (sweeping zones for stop hunters).

Knowing how each army (CBs, Hedge Funds, institutions, retail traders) utilizes the terrain is an advantage that provides you with a higher chance of winning.

Dangers would include sweep zones, distance from current price to the next support or resistance and so forth. All in all, comprehensive compilation of this information should be able to provide you with a probability of your survival of that particular intended trade.

“The Commander stands for the virtues of wisdom, sincerely, benevolence, courage and strictness.”

The Commander

The trader is the key to everything, (like any other career, jobs or whatever… YOU are the key.) it determines if the war is won or lost even before it has started.

Wisdom comes from experience, and experience comes from trial and errors (on demo accounts). Sincerity is the honesty you are willing to bare upon yourself about your trading habits, your mistakes. And the amount of efforts you are willing to put into learning. (A trading journal works well…)

Benevolence is the forgiveness for your mistakes in your trading (anti self-destruction). When you give, you will often find yourself getting more in return. (Not referring to giving away your account… I mean knowledge.)

Courage is when you face your worst fears about losing, about yourself and overcoming them.

Strictness is to adhere by the 5 pillars which are the constants and be flexible to all the variables revolving around the pillars of constants. For example, while cutting loss is frown upon, there are situations where cutting loss is the only way to go.

When Earth refers to the market, Heaven refers to factors that are beyond our control (opportunities arise) and the Moral Law refers to purpose. The command must be able to master the Moral Law (Himself – understand thyself), obtain the Earth (Understand and in tune with the market), and wait for the Heavens to provide the opportunity (Patiently wait until the odds are in your favor.)

Only then are you able to utilize the 5th Element “Method and Discipline”.

“By method and discipline are to be understood the marshalling of the army in its proper subdivisions
the graduations of rank among the officers, the maintenance of roads by which supplies may reach the army, and the control of military expenditure.”

Method and Discipline

Methods would refer to the different strategies, analysis and money management available. A through understanding of each strategy, analysis and money management and how they work together with each other is required.

Also required is the strict execution of each strategy, analysis and money management.

“These five heads should be familiar to every general: he who knows them will be victorious; he who knows them not will fail.”

The trader who is unable to understand and integrate these 5 constants into themselves will find themselves losing.

Therefore, in your deliberations, when seeking to determine the military conditions, let them be made the basis of a comparison, in this wise:--

(1) Which of the two sovereigns is imbued with the Moral law?
(2) Which of the two generals has most ability?
(3) With whom lie the advantages derived from Heaven and Earth?
(4) On which side is discipline most rigorously enforced?
(5) Which army is stronger?
(6) On which side are officers and men more highly trained?
(7) In which army is there the greater constancy both in reward and punishment?

By means of these seven considerations I can forecast victory or defeat.

(1) War in the market is simply between the bulls (Sovereign) and the bears (Sovereign). So are the bears or the bulls imbued with the Moral Law (Trend).
(2) Are the bullish players more powerful or the bearish players more powerful? (CB’s bias on trends, e.g. BOJ’s warning of interfering with the market)
(3) Are the economic indicators pointing favoring the bulls or the bears? Are the charts showing major resistances, supports, Fibonacci figures etc in favor of the bulls or the bears?
(5)Are the bears stronger or the bulls? (Price Action)

By these considerations, the probability of winning or losing can be calculated.

“The general that hearkens to my counsel and acts upon it, will conquer: let such a one be retained in command! The general that hearkens not to my counsel nor acts upon it, will suffer defeat:--let such a one be dismissed!”

“While heading the profit of my counsel, avail yourself also of any helpful circumstances over and beyond the ordinary rules.”

“According as circumstances are favourable, one should modify one's plans.”

Trading plans are to be followed, some discretionary measures however should be allowed to override as new information that is coming in will change the entire picture. And a trader must be flexible enough to absorb the new information and change the plan to best fit the new situation.

“All warfare is based on deception.”

Everything you see in the market might just come up as an illusion. Signal providers, indicators, chart patterns etc… should not be taken as absolute.

“Hence, when able to attack, we must seem unable; when using our forces, we must seem inactive; when we are near, we must make the enemy believe we are far away; when far away, we must make him believe we are near.”

I am unable to translate this into trading context.

“Hold out baits to entice the enemy. Feign disorder, and crush him.”

This one sounds like trying to make a “spike” in the market.

“If he is secure at all points, be prepared for him. If he is in superior strength, evade him.”

If trade opportunity presents itself, be prepared. If there is no opportunity, stay out.

“If your opponent is of choleric temper, seek to irritate him. Pretend to be weak, that he may grow arrogant.”

I am unable to translate this into trading context.

“If he is taking his ease, give him no rest. “

If the trade is moving in your favour, snowball your position.

“If his forces are united, separate them.”

I am unable to translate this into trading context.

“Attack him where he is unprepared, appear where
you are not expected.”

I am unable to translate this into trading context.

“These military devices, leading to victory, must not be divulged beforehand.”

Traders should not reveal the trades they are taking until it is over.

“Now the general who wins a battle makes many calculations in his temple where the battle is fought. The general who loses a battle makes but few calculations beforehand. Thus do many calculations lead to victory and few calculations to defeat: how much more no calculation at all! It is by attention to this point that I can foresee who is likely to win or lose.”

The lazy unprepared trader will hand his capital to the hardworking prepared trader.

P.S. Please pardon my bad English and bad communication skills.

Have you experiences instances where markets moves very very fast in certain directions?
This is because there is a difference between what is mean by price liquidity and volume liquidity.
You see, even in markets of greatest volume liquidity (where the daily traded volume of trade are greatest), there exist pockets in price levels where ther is a vacuum of bid and offers ( price liquidity). This exist in all markets but is persistant in futures contracts.

This is because of the structure of exchange traded Futures contracts, where orders are matched in the pits ( or electronic books) on orders of customers and liqudity provided by LOCALS ( non clearing members). There will alway exist these vacuum pockets, where it is hard to match non exchange member buyer and sellers ( this are known as papers). This is why sometimes you may experience big slippage in fills for market orders (also stop orders ). In reality there are such levels where actually nothing trades for papers and it keep gapping away for the paper to find possible trade matches because the the locals keep swalloing away the true liquidity.

whereas in markets. where there exist a market maker, he is obliged to make a price for you to transact. AND on the prices he made for you as a customer , you are certain to have a trade honoured.

Therefore in spot interbank forex you will tend to experience more of true liquidity vis a vis futures contracts.

Globex is a reuters child,they have for the longest time existed but have never excelled as a dominant trading platform due to it proprietary nature.
CME has always favoured open outcry until recent developments in IT that have posed a challenge to their prefered mode for trading.
In many ways their core doctrines finds little synergy and I feel that this marriage mismatched.

Although the trader may like to manage trades on longer time frames, their orders however still have to be filled in the 'now" ie short time frames.

regards

I like your initiative and your attention to instructions.
Very sharp.

regards

More question to help you.
1. notice where the location of the epicenter in relation to the spiral
2. notice the distance between the sprial gaps on top and below the center?
3. notice the general characteristics of the shape.
4. Why do you only look from the pricing aspect of the study?
what about the MM aspect?

"What does the words martingale, fibonacci progressions and log arithematic spirals suggests."

Money managing?, exposure size?

Ringing any bells? my friend.

regards

There's more to it than just a table of %.
think progression.
think position MONEY MANAGEMENT and size.
build a 3 dimensional geomatrically growth spiral.
then draw an log arithematical sprial.
What Do You see?

regards

[quote=lilpip;1795569]Fti ,
In trying to understand our method please correct me with the direction I should be going.

We have had several pair ranging this week lets take for example the gbpjpy.

Jan. 3rd
I sent a couple of spys and taken the ground from these points.
S -216.80 to L-213.80
Jan. 4th
gaining knowledge of the grounds an increase of number of men were placed at 216.80 and 213.80 area.

Now to set up the dance floor I used 215.45 what I think is price equallibrium
215.45 to devide the floor in half to give me a guide to dance to and from.

Can I get some instruction on maybe the ideal dance or different types of dances that I could anticipate ?

Looking at the G/J is see major resistance at the 215.00 area. But this pair is very vollitile. You need to look at the different TF. Each TF is a dance unto itself. The only signal I could see (with no indicators) came at 17:25 on a 5 min TF. That was good for 50 pips, but at 215.00 it has hit major resistance. But 50 pips may not have been your plan. To execute your plan to make, say 100 pips you would have to find a different dance floor. Maybe a 1hr. TF, which may be the next one to follow. If your plan is 300 pips then that dance is taking place on the 4 hr floor. But look at the trend. You wouldn't want to dance against your partner, would you? You need a thought out plan of offence and defense. Failure to follow your own rules makes hearing the orchestra a little harder next time. Take a good look at the daily TF on this pair and then trade something else. Just my opinion. ASYI

fti-Thanks for sharing your career experience. I thoroughly enjoy learning your ways.

My thoughts-AOW
The art of war is of vital importance to the state.
One must know & understand AOW to survive & prosper

Moral law
A sense of oneness & confidence that any task can be acheived

Heaven
The ever changing environment we reside in.

Earth
The physical challenges we face,in pursuit of a goal

The Commander
One who has mastered his emotion & intellect

Method & dicipline
A careful planned calculation of the task at hand

AOWs message for success:
Now the general who wins a battle makes many calculations in his temple ere the battle is fought.The general who loses a battle makes but few calculations beforehand.Thus do many calculations lead to victory,and few calculations to defeat.It is by attention to this point that I can see who is likely to win or lose.

Jeff44

The Market, it's structure and my tools

Understand the market. Have a good reason to trade, determine the condition of the market, identify the patterns, know my role and know the tools and resources available to me (when and how to use them and the reliability/strength). Look after myself and my resources. When the opportunity arises, use the resources to snowball success. Know the signals and read them.

Relate to:
I. LAYING PLANS 4. These are: (1) The Moral Law; (2) Heaven; (3) Earth;
(4) The Commander; (5) Method and discipline.
II. WAGING WAR 2. When you engage in actual fighting, if victory
is long in coming, then men's weapons will grow dull and
their ardor will be damped. If you lay siege to a town,
you will exhaust your strength.
II. WAGING WAR 9. Bring war material with you from home, but forage
on the enemy. Thus the army will have food enough
for its needs.
III. ATTACK BY STRATAGEM 12. There are three ways in which a ruler can bring
misfortune upon his army:--
(1) By commanding the army to advance or to retreat,
being ignorant of the fact that it cannot obey.
This is called hobbling the army.
(2) By attempting to govern an army in the
same way as he administers a kingdom, being ignorant
of the conditions which obtain in an army. This causes
restlessness in the soldier's minds.
(3) By employing the officers of his army
without discrimination, through ignorance of the
military principle of adaptation to circumstances.
This shakes the confidence of the soldiers.
IX. THE ARMY ON THE MARCH (Points 18 to 41 is about reading the signals, Point 22 is an example)
22. The rising of birds in their flight is the sign
of an ambuscade. Startled beasts indicate that a sudden
attack is coming.

MO, MM and Capitalisation

Be familiar with the traps. Manage funds by risking the appropriate amount. Analysis costs nothing so do as much as required. It is entry when the battle begins and my skills (MO and MM) should enable an endless series of maneuvers. Timing is crucial so I must not be late. Dance with the changing circumstances. Also know when not to enter and know when to exit. Be prepared to save undesirable trades when the opportunity arises. Trade with the trend and not against. Know when to enter - engagement and have clarity in my position. As with the 9 situations, I must identify and adapt to the changing market conditions.

Relate to:
I. LAYING PLANS 18. All warfare is based on deception.
V. ENERGY 1. Sun Tzu said: The control of a large force
is the same principle as the control of a few men:
it is merely a question of dividing up their numbers.
V. ENERGY 10. In battle, there are not more than two methods
of attack--the direct and the indirect; yet these two
in combination give rise to an endless series of maneuvers.
V. ENERGY 10. 11. The direct and the indirect lead on to each other in turn.
It is like moving in a circle--you never come to an end.
Who can exhaust the possibilities of their combination?
VI. WEAK POINTS AND STRONG 1. Sun Tzu said: Whoever is first in the field and
awaits the coming of the enemy, will be fresh for the fight;
whoever is second in the field and has to hasten to battle
will arrive exhausted.
VI. WEAK POINTS AND STRONG 28. Do not repeat the tactics which have gained
you one victory, but let your methods be regulated
by the infinite variety of circumstances.
VII. MANEUVERING 29. A clever general, therefore, avoids an army when
its spirit is keen, but attacks it when it is sluggish
and inclined to return. This is the art of studying moods.
VIII. VARIATION IN TACTICS 4. The general who thoroughly understands the advantages
that accompany variation of tactics knows how to handle
his troops.
VIII. VARIATION IN TACTICS 5. The general who does not understand these, may be well
acquainted with the configuration of the country, yet he
will not be able to turn his knowledge to practical account.
VIII. VARIATION IN TACTICS 9. If, on the other hand, in the midst of difficulties
we are always ready to seize an advantage, we may extricate
ourselves from misfortune.
IX. THE ARMY ON THE MARCH 2. Camp in high places, facing the sun. Do not climb
heights in order to fight. So much for mountain warfare.
X. TERRAIN (Points 15 to 19 about having clarity on position. Point 18 is an example)
18. When the general is weak and without authority;
when his orders are not clear and distinct; when there
are no fixes duties assigned to officers and men,
and the ranks are formed in a slovenly haphazard manner,
the result is utter disorganization.
XI. THE NINE SITUATIONS 1. Sun Tzu said: The art of war recognizes nine varieties of ground:
(1) Dispersive ground; (2) facile ground; (3) contentious ground;
(4) open ground; (5) ground of intersecting highways;
(6) serious ground; (7) difficult ground; (8) hemmed-in ground;
(9) desperate ground.
XI. THE NINE SITUATIONS 33. How to make the best of both strong and weak--that
is a question involving the proper use of ground.
XII. THE ATTACK BY FIRE 9. (4) If it is possible to make an assault with fire
from without, do not wait for it to break out within,
but deliver your attack at a favorable moment.
XII. THE ATTACK BY FIRE 17. Move not unless you see an advantage; use not
your troops unless there is something to be gained;
fight not unless the position is critical.
XII. THE ATTACK BY FIRE 19. If it is to your advantage, make a forward move;
if not, stay where you are.

About ME

Gain experience and understand what I am doing - practice. Be swift with my trades. Trading is my decision and success is entirely in my hands so I must be in the right frame of mind. I must know the market and myself - be disciplined, control emotions. Trade wisely.

Relate to:
I. LAYING PLANS 26. Now the general who wins a battle makes many
calculations in his temple ere the battle is fought.
The general who loses a battle makes but few
calculations beforehand. Thus do many calculations
lead to victory, and few calculations to defeat:
how much more no calculation at all! It is by attention
to this point that I can foresee who is likely to win or lose.
II. WAGING WAR 5. Thus, though we have heard of stupid haste in war,
cleverness has never been seen associated with long delays.
II. WAGING WAR 20. Thus it may be known that the leader of armies
is the arbiter of the people's fate, the man on whom it
depends whether the nation shall be in peace or in peril.
III. ATTACK BY STRATAGEM 18. Hence the saying: 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.
IV. TACTICAL DISPOSITIONS 16. The consummate leader cultivates the moral law,
and strictly adheres to method and discipline; thus it is
in his power to control success.
VII. MANEUVERING 21. Ponder and deliberate before you make a move.
VIII. VARIATION IN TACTICS 12. There are five dangerous faults which may affect
a general:
(1) Recklessness, which leads to destruction;
(2) cowardice, which leads to capture;
(3) a hasty temper, which can be provoked by insults;
(4) a delicacy of honor which is sensitive to shame;
(5) over-solicitude for his men, which exposes him
to worry and trouble.
IX. THE ARMY ON THE MARCH 43. Therefore soldiers must be treated in the first
instance with humanity, but kept under control by means
of iron discipline. This is a certain road to victory.
X. TERRAIN 22. He who knows these things, and in fighting puts
his knowledge into practice, will win his battles.
He who knows them not, nor practices them, will surely
be defeated.
X. TERRAIN 24. The general who advances without coveting fame
and retreats without fearing disgrace, whose only
thought is to protect his country and do good service
for his sovereign, is the jewel of the kingdom.
XII. THE ATTACK BY FIRE 22. Hence the enlightened ruler is heedful,
and the good general full of caution. This is the way
to keep a country at peace and an army intact.

About fti (not a spy but a great provider of intelligence)

Gather intelligence from those that offer it (and are in the know)!

Relate to
XIII. THE USE OF SPIES. 4. Thus, what enables the wise sovereign and the good
general to strike and conquer, and achieve things beyond
the reach of ordinary men, is foreknowledge.

All, I have purposely not read any of the other’s replies so that I can post my thoughts with out the influence of others. This then became a mind game for a couple of days as I read and hashed the chapter over and over. Here goes………
Chapter 1: The General

I am the general, commander of my forces. As general, I am responsible for understanding where the market has been (trend lines), it’s strength (bull, bear or sideways) and on what ground it is in at any point in time (Asia, London, New York).
The general starts all the engagements with the enemy, EURO/USD or GBP/USD, the time and place is based on his interpretation of the information that he has gathered before hand. The preparations for this engagement include gauging the strength of the opponent’s moves, volatility, and direction of movements: long and short term trends.
He also chooses a strategy (buy or sell, long or short term) and asset commitments.
All this he ponders in his temple. When the plans are made, he waits for the enemy to provide an opening and the starts the battle.
Once a battle has started, the general will modify his plans to account for movements of the enemy (price action, changes of ground).
The general will not display his retreat points (stop loss points) nor will he announce his points of victory (limits). These will only help the enemy to defeat him.
Management of resources will always be part of the battle (money management).
The general will practice responding to enemy movements, honing his skills both in battle and in the practice field.
This general is a guerrilla fighter. He does not have the resources to go head to head with the enemy. The fight is always on the flanks and is not able to see the full strength of the enemy, but can feel the effects of the enemy’s movements instantly and must be able adjust his adjust his attack using discipline and methods learned in battle and instruction.

I'm weak in maths but shall give it a go nevertheless. Think what Fti is trying to say here is that during loss recovery, use the spiral or the skew ratio to calculate your MM/position size in order to recover back the initial loss. But remember that this skew is growing at a exponential rate, which means your position size is getting bigger and your risk of ruin is increasing as the skew increases and may result in a catastrophic loss.

Hence, you need huge capital to use this rescue MO effectively. Also, do not use this skew ratio more than 3 times after which it becomes too large and risky to be effective.

Is my understanding correct?

As I'm poor in maths, can anyone teach me how to calculate this skew ratio against my initial loss? More explanation needed pls.........

Since fti has given so much of his time, I have taken the time to read and give my interpretation on art of war as he requested. I have not read others responses yet so this is just what I've thought about as I read it.

Laying Plans
10. These five heads should be familiar to every general: he who knows them will be victorious; he who knows them not will fail.
(1)Moral Law = To be able to follow the rules/method without fear or insecurity
(2)Heaven = To be aware of the events in the market
(3)Earth = To know the structure of the market and its participants
(4)The Commander = To be aware of your place and actions in the market and how you will respond to events in the market
(5)Method and Discipline = To know the method you plan to carry out on the market and the discipline to follow it.
15. According as circumstances are favorable, one should modify one’s plans.
The trader must be able to recognize changing market conditions and adjust to them on a continual basis
16. All warfare is based on deception.
The trader must recognize when the market is trying to tease you into a position and when it tries to force you out of a position
18. Hold out baits to entice the enemy. Feign disorder, and crush him.
A trader must be aware to not always trust what the market is showing him, in particular other’s orders
19. If he is secure at all points, be prepared for him. If he is in superior strength, evade him.
Know your opponents and your edge against them
23. These military devices, leading to victory, must not be divulged beforehand.
Do not let other traders know your intentions, hide them
24. Now the general who wins a battle makes many calculations in his temple ere the battle is fought.
Have a completely thoughtout, methodical plan before you enter the market

Waging War
9. Bring war material with you from home, but forage on the enemy. Thus the army will have food enough for its needs.
Use your profitable position to supply your next position
Attack By Stratagem
4. The rule is, not to besiege walled cities if it can possibly be avoided.
The trader should avoid trying to force his way through heavy resistance/support areas
8. It is the rule in war, if our forces are ten to the enemy’s one, to surround him; if five to one, to attack him; if twice as numerous, to divide our army into two.
Play the weaknesses of other traders
12. There are three ways in which a ruler can bring misfortune upon his army:
(a) Commanding an army that does not obey = Good order execution and reliability
(b) Ignorant of conditions in the army = Not being aware of the current market conditions
(c) Employing army without discrimination = Making trades based on hope and carelessness
14. Thus we may know that there are five essentials for victory:
(a) He will win who knows when to fight = Only get in the market when you have sufficient edge
(d) Prepared himself, enemy unprepared = same as (a)

Tactical Dispositions
3. Thus the good fighter is able to secure himself against defeat, but cannot make certain of defeating the enemy.
Through proper money management the trader can protect himself from being wiped out
12. Hence his victories bring him neither reputation for wisdom nor credit for courage.
A profitable trade should not lead the trader to become greedy and overtrade
16. The consummate leader cultivates the moral law, and strictly adheres to method and discipline; thus it is in his power to control success.
The trader is the only one responsible for his success and failures

Energy
1. Sun Tzu said: The control of a large force is the same principle as the control of a few men: it is merely a question of dividing up their numbers.
A trader can chose to divide a position up to, so to allow him to take some profits or reduce losses
22. When he utilizes combined energy, his fighting men become as it were like unto rolling logs or stones. For it is the nature of a log or stone to remain motionless on level ground, and to move when on a slope; if fourcornered, to come to a standstill, but if round-shaped, to go rolling down.
When the market is ranging don’t take unnecessary positions. Follow the trend

Weak Points and Strong
7. You can be sure of succeeding in your attacks if you only attack places which are undefended. You can ensure the safety of your defense if you only hold positions that cannot be attacked.
Take positions towards the path of least resistance, trends and sweep zones. Take positions that you are able to defend with points of higher resistance

Maneuvering
13. We are not fit to lead an army on the march unless we are familiar with the face of the country–its mountains and forests, its pitfalls and precipices, its marshes and swamps.
A trader must be aware of current short-term and long-term resistance and support levels

Variation of Tactics
9. If, on the other hand, in the midst of difficulties we are always ready to seize an advantage, we may extricate ourselves from misfortune.
When a trader is in the red he can get himself in the black if he is ready to seize an advantage
12. There are five dangerous faults which may affect a general:
(a) Recklessness, which leads to destruction = Overtrading, too confident or careless
(b) cowardice, which leads to capture = Insecurity and hesitation in trades
(c) a hasty temper, which can be provoked by insults = Revenge trading, destructive nature
(d) a delicacy of honor which is sensitive to shame = A trader who isn’t true to himself will make excuses or lie to himself
(e) over-solicitude for his men, which exposes him to worry and trouble = prevents a trader from cutting his losses when he made a poorly timed trade

The Army on the March
22. The rising of birds in their flight is the sign of an ambuscade. Startled beasts indicate that a sudden attack is coming.
The trader needs to be able to listen and feel the market for what is to come
39. If the enemy’s troops march up angrily and remain facing ours for a long time without either joining battle or taking themselves off again, the situation is one that demands great vigilance and circumspection.
A trader should become more watchful when the market faces off (large order facing each other)

The Attack By Fire
12. Move not unless you see an advantage; use not your troops unless there is something to be gained; fight not unless the position is critical.
The trader should not take a position unless he has the edge and something to be gained.
13. No ruler should put troops into the field merely to gratify his own spleen; no general should fight a battle simply out of pique.
A trader should not trade out of boredom or excitement. Only trade when it’s for business