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Technical Analysis Fallacy

  • #801
  • Edited Jan 11, 2008 10:42am Jan 10, 2008 9:24pm | Edited Jan 11, 2008 10:42am
[quote=asyi;1796418]
Quoting lilpip
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
Asyi,
Thankyou for the reminders of trading with the trend and staying with the majors, which I can easily stay on top of. The work comes in on my making of
plans and staying disciplined.
I guess I started with what is easiest first and that being the larger time frame for me was easier to Identify as it unfolds. With that I'm trying to execute what were learning, take advantage of a weekness, start with small troops as we gain knowledge of the ground and what the enemys doing we add more troops.
Example being 213.80 area is easily Identified as a important level (which I consider a weakness exposed) so we new to get into our 5 min.time frame chart on this afternoon when price was there about 2:00 edt.
That 5 min. took us all the way to 215.00 and there we placed another 5 min. chart. which takes us to 214.30 area where we are now. And we have another 5 min. chart up waiting for the direction of the markets next step.
The 5 min. chart took us to 212.17.
I don't know if this was dumb luck mixed with the perfect conditions using the 5 min. chart but I will find out soon enough.
The aususd, gbpusd and usdjpy I am is also with a similar situation with the 4 hour.
Thanks for the help and bear with me I have a lot to learn.
  • #802
  • Jan 11, 2008 1:01am Jan 11, 2008 1:01am
Quoting fti
I like your initiative and your attention to instructions.
Very sharp.

regards
fti

Thank you for sharing your wisdom and for your kind words.
Hope isn't a viable investment vehicle.
  • #803
  • Edited 3:18am Jan 11, 2008 1:40am | Edited 3:18am
Hi ALL,

Thanks to all who have given their reading of Sun Zi Bing Fa. Mostly your readings are illuminating.

Due to my inability to spend too much time typing out all my notes of my manual. I shall therefore have decided not to do the PM thingy that most are
waiting for. But I shall instead post here my main points of my reading. If you all will discuss the points that I raise here you shall find the way, if you put all the cpu power that exist here to ponder the issues.

Mostly I look forward that my points guides a structured thought process.

-------------------------------------------------

Lesson 1
The General (YOU)
----------------------
Be aware that although the General & the Commander may be the same, it is not necessary so. The general is he that analysis and plans strategies, while the Commander is that who would have to carry out that which the General expects, but if the General and the commander is in discord the synergy is lost.
In a bank environment, the two are segregated. in individuals trading, although the two resides in the same individual, they may not be of the same personality.
Ponder this.
Most of us thinks that we may be able to run the 4 min mile. But when you go try do it, you may experience the commander , sometimes he may question the General's aspirations. Thst when CONTROL (of objective) maybe lost and mutiny within self destroys the cohesion of commander and General towards goals.
General skills - Planning requires analytical skills, experience and mastery of strategies.
Commanding skills - requires simulation, practise and resolute of mind over matter without pain consideration.
Note that these are different skills, which is difficult to incubate in one individual, nevertheless it is not impossible if the structure of task description can be identified and the role understood.

1.01
"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."

compliments: Market Structure & Players profiling.

1.02
"All generals possess different qualities.
Leadership qualities such as wisdom, trustworthiness, benevolence, bravery and stewardship are important winning attributes."

compliments:This is character development. It is a life long pursuit.

1.03
"A general who has not fully mastered the art of extemporaneous responses may know the terrain like the back of his hand,
but will not be able to exploit this to his full advantage."

1.04
"He wins his battles by making no mistakes.
Making no mistakes is what establishes the certainty of victory,
for it means conquering an enemy that is already defeated."

compliments: Mis-calculations are normal in the course of trading, ability to trim the inaccuracies as more info unfolds is paramount to the final result of battles. Ability to enforce contingencies and alternatives to modify response to position without total reset is critical in managing.

1.05
"Hence the skillful fighter puts himself into a position which makes defeat impossible, and does not miss the moment for defeating the enemy."

1.06
"These five points are the shortcomings of some commanders and will result in calamities in military campaigns.
1.06.1 If the commander possesses suicidal bravery but lacks sound strategic thinking he will be mortally wounded.
1.06.2 If the commander is irresolute and cowardly, he will be easily captured.
1.06.3 If the commander is temperamental and impulsive, he could be provoked into taking reckless action and be defeated.
1.06.4 If the commander is scrupulously incorruptible and thin-skinned, he could be hurt by slander and made to lose his cool. As a consequence he could be lured from his impregnable fortress to fight a pointless battle in the open.
1.06.5 If the commander overindulges and excessively dotes on his troops, he could be made to respond to every move so as to prevent needless casualties, but at the expense of losing the war."


1.07
"To secure ourselves against defeat lies in our own hands,
but the opportunity of defeating the enemy is provided by the enemy himself.
Therefore the clever combatant imposes his will on the enemy,
but does not allow the enemy's will to be imposed on him.
Hence that general is skillful in attack whose opponent does not know what to defend; and he is skillful in defense whose opponent does not know what to attack.Rouse him, and learn the principle of his activity or inactivity.
Force him to reveal himself, so as to find out his vulnerable spots."

1.08
"All men can see the tactics whereby I conquer,
but what none can see is the strategy out of which victory is evolved.
there is nothing more difficult than tactical maneuvering,
The difficulty of tactical maneuvering consists
in turning the devious into the direct, and misfortune into gain."

1.09
When the general become irritable and edgy, it is because he is physically exhausted.

-------------End of Lesson 1----------------------

Lesson 2
The Battlefield
Running Battle mindset.
----------------------


Now begin the discussion and Q & A session on Lesson 1
Most have mastered this lesson well by now , I HOPE.
Otherwise there are many here who I beleive have got A+.
So debate away.

regards
  • #804
  • Jan 11, 2008 2:45am Jan 11, 2008 2:45am
Quoting fti


1.07
"To secure ourselves against defeat lies in our own hands,
but the opportunity of defeating the enemy is provided by the enemy himself.
Therefore the clever combatant imposes his will on the enemy,
but does not allow the enemy's will to be imposed on him.
Hence that general is skillful in attack whose opponent does not know what to defend; and he is skillful in defense whose opponent does not know what to attack.Rouse him, and learn the principle of his activity or inactivity.
Force him to reveal himself, so as to find out his vulnerable spots."
fti

I think that this is a huge advantage that traders have over brokers. We get to decide when to launch on attack. We get to choose the terrain, the season, the timing, the number of troops. The broker is almost like a sitting duck waiting for the hunter to shoot him. A broker cannot takeover your account and start a trade, you the trader are always the initiator or the aggressor. You should therefore use this to your full advantage.
Hope isn't a viable investment vehicle.
  • #805
  • Jan 11, 2008 7:44am Jan 11, 2008 7:44am
Quoting DutchAngel
fti

I think that this is a huge advantage that traders have over brokers. We get to decide when to launch on attack. We get to choose the terrain, the season, the timing, the number of troops. The broker is almost like a sitting duck waiting for the hunter to shoot him. A broker cannot takeover your account and start a trade, you the trader are always the initiator or the aggressor. You should therefore use this to your full advantage.
Of course this is an advantage, but the question is how to use this advantage. I think not to use s/l is one of them, putting a s/l is like divulging your plans to the enemy and becoming a sitting duck. Scaling in and out could be another thing. We have to discuss how to use it properly.
And I like to ask fti, which chapters should be discussed for lesson 2 ?
Alex
  • #806
  • Jan 11, 2008 7:52am Jan 11, 2008 7:52am
Quoting crazy_bdog

I tend to get out of good trades early, not willing to take a tough retracement or consolidation due to worry and trouble, I am hoping to find some answers courtesy of Sun Tzu and FTI and experience........

I also read Paper Money (got it for $6 on eBay) and it is amazing how the ideas of the book (oil prices, housing, etc) seem to be coming out of today's headlines. Thanks for the suggested reading, looking forward to more thinking..............
crazy_bdog, you are not the only one who experience inability to ride. It is a condition that plagues all traders. This is cos everyone have to deal with the unknowns at every level. You will find that the more you are in the positive books. This becomes of less of importance compared to making profitable trades. Levels and trade misses become sideshows. What would become of importance is to turn bad trades to wins, however small, it is an achievement.

I am glad you enjoyed "paper money" it is truly an educational and accurate bird's eye view to trading economics.

regards
  • #807
  • Edited 8:46am Jan 11, 2008 8:39am | Edited 8:46am
Quoting fti
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
fti,

OK I will ask about this and probably look very ridiculous, however, I know I am not the only one scratching my head over this as there are some missing pieces to the puzzle I am formulating in my head. Can you please elaborate specifically on the 3 dimensional growth spiral and how it correlates with the logarithmic spiral....I've been beating myself up over this for a while now. Sorry in advance for my simpletons approach to mathematics, I am having a mental block with this one. I know I am close, but not quite there. Furthermore, the more I look at the Log spiral, I see not so much the price, but I see a value of time as the more important, price will go where it wants, but the value of time seems to be a more influential piece to the puzzle when and where continuation or reversals may occurr..Am I on the right track here? Thanks fti.

NP
  • #808
  • Jan 11, 2008 8:42am Jan 11, 2008 8:42am
Quoting DutchAngel
fti

I think that this is a huge advantage that traders have over brokers. We get to decide when to launch on attack. We get to choose the terrain, the season, the timing, the number of troops. The broker is almost like a sitting duck waiting for the hunter to shoot him. A broker cannot takeover your account and start a trade, you the trader are always the initiator or the aggressor. You should therefore use this to your full advantage.
I would like some clarity on the enemy.

Are you saying the enemy is the broker? Perhaps to an extent but on the retail side, the broker is just emulating the interbank market. I can see the broker being more of an enemy when it manipulates prices or its platform to take you out. To that extent, yes.

I initially considered the market as the enemy, but reconsidered and deliberated when reading AOW. There is a constant battle going on there. If we read, enter and exit the market correctly then it pays us and is our friend, not our enemy. The market is the battlefield with a fierce and continuous battle occuring all of the time. We cannot make it our enemy as individuals because it is too big and strong. It would be like trying to move a mountain.

Therefore, who is the enemy? Well, I can only conclude that the enemy is within ourselves. It is our ignorance of the market, ignorance of MM, ignorance of MO and ignorance of ourselves. And the battle is to defeat this ignorance. We must understand the market, understand MM, MO and ourselves. In other words, we must learn to dance with it and that will take some practice. The general and commander within ourselves must be in agreement and understanding.

"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."

In my opinion, The enemy is my ignorance of the market, MO and MM.
I also must know myself. When I have conquered the enemy and removed the ignorance, then I am victorious.

Opinions anyone?
  • #809
  • Jan 11, 2008 9:00am Jan 11, 2008 9:00am
Quoting Zoran
I would like some clarity on the enemy.

Are you saying the enemy is the broker? Perhaps to an extent but on the retail side, the broker is just emulating the interbank market. I can see the broker being more of an enemy when it manipulates prices or its platform to take you out. To that extent, yes.

I initially considered the market as the enemy, but reconsidered and deliberated when reading AOW. There is a constant battle going on there. If we read, enter and exit the market correctly then it pays us and is our friend, not our enemy. The market is the battlefield with a fierce and continuous battle occuring all of the time. We cannot make it our enemy as individuals because it is too big and strong. It would be like trying to move a mountain.

Therefore, who is the enemy? Well, I can only conclude that the enemy is within ourselves. It is our ignorance of the market, ignorance of MM, ignorance of MO and ignorance of ourselves. And the battle is to defeat this ignorance. We must understand the market, understand MM, MO and ourselves. In other words, we must learn to dance with it and that will take some practice. The general and commander within ourselves must be in agreement and understanding.

"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."

In my opinion, The enemy is my ignorance of the market, MO and MM.
I also must know myself. When I have conquered the enemy and removed the ignorance, then I am victorious.

Opinions anyone?

Zoran,

I am with you on this opinion. Initially I approached the market as me against the rest of the world...Having been at this for a while now and been through a fair amount of battles, I have concluded that the number 1 enemy is within me..its like a Jekyll and Hyde situation, specifically stimulated by the influences of fear and greed. Have you ever let losers run when wrong and taken profits way to soon when right...I have..many times, even though I know better and have read all the literature and trading books on cutting losses and letting profits run, easier said than done, IMO. So in knowing the enemy is also knowing how to control the enemy within. This comes with preparation, knowledge of the market, a plan when things go bad and when things go well. I think if I develop a road map of possibilities and tactics ahead of a trade, I can eliminate a lot of the fear of the unknown which psychologically allows me to trade with confidence and without fear.
This is just my own observations on my own weaknesses however.

Cheers,
NP
  • #810
  • Jan 11, 2008 9:55am Jan 11, 2008 9:55am
Quoting Zoran
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.
Ok ,Zoran
very good understanding, great read.
and thanks for your kind words for me.

I suggest, from experience, print out your read.
paste it where you can read it daily. read it for 21 days.

After doing that you would have made it a part of your mind. Then when ever you are tortured by the markets read it again.better reside it from your storage.

regards
  • #811
  • Jan 11, 2008 10:15am Jan 11, 2008 10:15am
Quoting alexfot
Of course this is an advantage, but the question is how to use this advantage. I think not to use s/l is one of them, putting a s/l is like divulging your plans to the enemy and becoming a sitting duck. Scaling in and out could be another thing. We have to discuss how to use it properly.
And I like to ask fti, which chapters should be discussed for lesson 2 ?
Alex
The advantage in a single word would present itself in CONTROL. This would remove the other ghost (fear, self doubt, irritation, greed )that may pilage you mind, as the battle unfold.
Steadiness and objectivity with ability to answer to every possible blow that the fight may present you.
Clearness of mind and singleness in purpose with deadly commitment to come out winner with infinate response.
Surely much more specific skills horning is required, this is but the necessary foundation.

And many traders have sucummed cos of this weakness.

regards.
  • #812
  • Jan 11, 2008 10:17am Jan 11, 2008 10:17am
Quoting catshot
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.
Masterful understanding, you must be some officer, no?

regards
  • #813
  • Edited 12:37pm Jan 11, 2008 12:08pm | Edited 12:37pm
Quoting sitoca
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.........
The maths is just the stastical read of the picture. Constant mathematical calculation only tires a mind that is coping with swiftly changing conditions. A visual eyeballing of the ranges thats unfolding would already give you a guessstimate of the required resources for the challenge, give or take a variance of up to 10 %+-.
Your understanding is complete. Initially you may have to content with the maths. but after a few initial skirmishes the scope of the required skew required will fine tune by intuition. And it probably will be view by bystanders that you were flying by the seat of your pants.

From that point onwards exposure size can be quickly determined. And the focus would be reverted to the timing of the hit which is determined by the gradient of the move (dance), which is a visual of it volitility.

Many analyst uses the this spiral ( some use fibonacci retacements) on price and although this is an accepted branch of TA. It builds blind reliance on "hope" factor. I use it as true to initial research basis and use it on size of position as in Money management.

@ Zoran
I think Zoran did ask me about my using the pi against that was suggested in the golden ratios (phi) by some posters here. I will answer him here as it is related issue.
Using a phi spiral creates a constant growth spiral from a point.
Whereas using pi skews breaks the circular leg price range and creates a spiral initiating from a "range window" .In doing so, price and volitility ( determined by visual observation of the leg of run from the bar chart.) becomes a component to the skew. This is akin to the using ATR of a run leg of a trend ( note: run leg and not bar range). And the spiral growth becomes a function of the windowed range. To do this requires much capitalisation.

This can also be constructed from a phi start point which begins not from the fibonacci progression but a user determined base. Only that the spiral growth then coils into a 1.618 constant of itself. The exact technique of determining that range window leg is classified for my own use as it may not be suitable for individuals.

For the purpose here, an understanding of the phi (golden) spiral may be sufficient as they both utimately produces the same , a progressive growth of position exposure growth. The differences is in the aggression of rescue and attack sequences.

You may like to build models to find your individual tolerance levels. Some may be able to build better models than that which I use because mine is aggressive due the size of my capitalisation, while at the bank. The reson I am doing so much demo is to retrain myself for trading as an individual.

Whats most important is the understanding of the impact of per pip "value at risk" as the position size spirals. It can get scary, so stay to most conservative parameters.

The most important thing to understand here is that there is no other alternative way to rescue badly timed positions other than using this methodology. The basis of the success is in the trading of the volitility, the direction of the trade is non negiotable it has to be right, so stay with the entranched trend, and watch your capitalisaion.

regards
  • #814
  • Edited 12:32pm Jan 11, 2008 12:18pm | Edited 12:32pm
Quoting Northpro
Zoran,

I am with you on this opinion. Initially I approached the market as me against the rest of the world...Having been at this for a while now and been through a fair amount of battles, I have concluded that the number 1 enemy is within me..its like a Jekyll and Hyde situation, specifically stimulated by the influences of fear and greed. Have you ever let losers run when wrong and taken profits way to soon when right...I have..many times, even though I know better and have read all the literature and trading books on cutting losses and letting profits run, easier said than done, IMO. So in knowing the enemy is also knowing how to control the enemy within. This comes with preparation, knowledge of the market, a plan when things go bad and when things go well. I think if I develop a road map of possibilities and tactics ahead of a trade, I can eliminate a lot of the fear of the unknown which psychologically allows me to trade with confidence and without fear.
This is just my own observations on my own weaknesses however.

Cheers,
NP
Thanks for sharing NP.

Sometimes it is clear to me and other times not. I am still deliberating it seems.

It is clear to me that the market is the battlefield and when we enter we begin our battle. To win we must collect positive pips but the enemy will attempt to take our pips. Who is the enemy if not our ignorance? Could it be the opposing side to our trade? In that case it is likely to be the broker and I'm sure they have a few tricks up their sleeves but their price is just emulating the big boys so they do not control it (in general).

So my other thought is to keep it simple. Our aim is to take pips from the market. If we can achieve that we win and if not we lose. Although we cannot change the market, we must understand it to win consistantly. The enemy in that case can be the market.
  • #815
  • Jan 11, 2008 12:33pm Jan 11, 2008 12:33pm
Quoting Zoran
Thanks for sharing NP.

Sometime it is clear to me and other times not. I am still deliberating it seems.

It is clear to me that the market is the battlefield and when we enter we begin our battle. To win we must collect positive pips but the enemy will attempt to take our pips. Who is the enemy if not our ignorance? Could it be the opposing side to our trade? In that case it is likely to be the broker and I'm sure they have a few tricks up their sleeves but their price is just emulating the big boys so they do not control it (in general).

So my other thought is to keep it simple. Our aim is to take pips from the market. If we can achieve that we win and if not we lose. Although we cannot change the market, we must understand it to win consistantly. The enemy in that case can be the market.
Zoran,
Before you get disorientated, may be this may help.

When I started this thread I quote winston C in err of Lincoln.

Now I quote again hopefully correctly.

The the course of life and esp in markets,

"There are no perpetual friends,
neither perpetual enemies,
only perpetual interest."

regards
  • #816
  • Jan 11, 2008 1:30pm Jan 11, 2008 1:30pm
Quoting WaveRider3
Hi Fti and others,
This is my first post in FF. This the only thread I have read from start to finish. Great job guys. Thanks Fti and others for the valuable information you provide here.
- WaveRider3
Good evening/day Fti and all the others here,

I wish to say more or less what Waverider3 says.
There has been a delay with getting my email but just in time here are my initial thoughts against most of the points listed under Laying Plans:

1. Sun Tzu said: The art of war is of vital importance to the State. – How the trader trades is of vital importance.
2. It is a matter of life and death, a road either to safety or to ruin. Hence it is a subject of inquirywhich can on no account be neglected. - It is a matter of consistently making gains or losing. Hence it is a matter of deep study which cannot be avoided.
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 art of trading is governed by the five constant factors.
4. These are: (1) The Moral Law; - the trader΄s mindset and self control (2) Heaven; - All factors above the market and influencing it. (3) Earth; - The market. (4) The Commander; - the trader. (5) Method and discipline. – method and discipline.
5,6. The Moral Law causes the people to be in complete accord with their ruler, so that they will follow himregardless of their lives, undismayed by any danger. – the trader must be at peace with himself and stick to his trading rules.
7. Heaven signifies night and day, cold and heat, times and seasons. – conditions prevailing in the market.
8. Earth comprises distances, great and small; danger and security; open ground and narrow passes;the chances of life and death. – market conditions and price movement in all time frames.
9. The Commander stands for the virtues of wisdom,sincerely, benevolence, courage and strictness. – the trader must never stop learning and always retain self control.
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 thecontrol of military expenditure. – entry and exit of trades and scaling up and down in harmony with the price movement.
11. These five heads should be familiar to every general: he who knows them will be victorious; he who knows themnot will fail. – every trader has to be familiar with them in order to stay in the game.
12. Therefore, in your deliberations, when seeking to determine the military conditions, let them be made the basis of a comparison, in this wise:-- when examining the market prior to trading:
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 all the above, the trader has to know which are the best currencies to trade in at the time and how they could be affected by fundamental announcements.
14. By means of these seven considerations I canforecast victory or defeat. – Success or failure for the trader is governed by the above.
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 trader has to stick to the rules by which he trades.
16. While heading the profit of my counsel, avail yourself also of any helpful circumstances over and beyond the ordinary rules. – take advantage of price movement in your favour by pressing the trade.
17. According as circumstances are favorable, one should modify one's plans. – remain flexible and go with the flow.
18. All warfare is based on deception. – the market may not behave the way you first perceive it.
21. If he is secure at all points, be prepared for him. – anything can happen, be prepared to react accordingly. If he is in superior strength, evade him. – when in doubt, stay out.
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 attentionto this point that I can foresee who is likely to win or lose. – the trader has to carefully consider how he is going to make each trade.

regards
  • #817
  • Jan 11, 2008 1:40pm Jan 11, 2008 1:40pm
Quoting fti
Zoran,
Before you get disorientated, may be this may help.

When I started this thread I quote winston C in err of Lincoln.

Now I quote again hopefully correctly.

The the course of life and esp in markets,

"There are no perpetual friends,
neither perpetual enemies,
only perpetual interest."

regards
Thanks fti, that makes complete sense.
  • #818
  • Jan 11, 2008 2:16pm Jan 11, 2008 2:16pm
Hi fti,

Following on from my previous post - I just came across this thread by chance and the title certainly caught my eye.

I know that I΄m repeating what many others have already said but with the knowledge and assistance that you are very generously offering us I believe that we have a real opportunity to make the journey far less difficult and more enjoyable.

Many thanks,
regards,
HapaSasa
  • #819
  • Jan 11, 2008 3:55pm Jan 11, 2008 3:55pm
After some research, I can see that fti's MM seems to be based around W.Wilder's systems. Firstly his recovery table and his ATR (Average True Range). ATR is based on a 14 day MA (Moving Average). We have pi and phi in the system also. I am still having difficulties visualising it but lets discuss what we know. As fti has mentioned, there is enough processing power in this thread to solve problems.
  • #820
  • Jan 11, 2008 4:31pm Jan 11, 2008 4:31pm
Quoting fti
@ Zoran,
I would like to ask you ,since you mention ECN.
ECN means Electronically Connected Networks, right?
If I am correct, I remember reading that they claim to link to spot interbank.
Since I came from Interbank teir 1 , I like to say that,
no spot desk in the world, would quote for the sizes, retail is trading.
The min ticket interbank is 5 mio USD, 2 mio USD through interbank brokers.
These ECNs would be lucky if they can get to the corp desks,
and for most banks, for 10.000 USD they would direct you to maybe counter 10 at the banking hall.

So I cannot see how these ECNs can be linked to banks esp the spot desks.
Having said that, I would presume that they run a bucket and are customers to the bank in hedging exposures.
So on this reasoning, I wonder, what's the difference between ECNs , NDDs to bucket desks?
Have you heard any Bank Treasury coming out to confirm that they are suppoting with prices.
Sure like to see the names.

Zoran, You mentioned that you have IvB experience.
In your career have you seen any USD$10,000 tickets before in spot interbank?
Even futures contracts are aprox USD1 lag.
Do you think I am wrong?

regards
Hi fti

I was meaning to respond to your questions earlier but you had departed already so I decided to await your return. I know someone who was a previous trader and now wants to start a capital investment firm.

I have to say that it's a grey area to me but he informed me that ECN's connect to tier 2. Also, as far as his negotiations went, he needed a minimum of $10 million to get an interbank relationship. He claims to have experience of the lower end to the higher end of the pyramid so if you'd like to contact him, PM me and I'll send you his details.

With regard to my experience. I have worked for a Tier 1 bank (in Australia for the treasury section), an International Investment bank, Europe's largest clearing house and one of the world's largest oil companies in the trading division. However, it has always been in the technology section.

My point being that these companies invest a huge amount into their Information Technology (I.T.) sections. Both in equipment and staff. The systems are highly resilient and designed to recover quickly upon failure. So my point being that you cannot compare the type of reliability you had in your bank to the retail section. As a retailer, you have the internet and a whole lot of system (not under your control) inbetween yourself and your broker. There are a few things you can do to improve resilience but you just have to keep in mind that reliability is reasonable but not guaranteed.

I hope that helps.
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