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Technical Analysis Fallacy

  • #1,201
  • Feb 1, 2008 5:01am Feb 1, 2008 5:01am
Quoting fti
@ DutchAngel,



One attribute that traders must develop, is the ability to let go.
To unwind. To laugh at the worst and laugh at the best.

regards
Thanks fti

Reminds me of your story of the two monks. The younger one couldn't let go. I always tell myself to "put down the sack of bricks" (quote from movie Devils Advocate) and move on to the next battle. Thank you again for sharing so much wisdom and experience with us. It is greatly appreciated.
Hope isn't a viable investment vehicle.
  • #1,202
  • Feb 1, 2008 7:25am Feb 1, 2008 7:25am
Quoting fti
better scale off a bit now
bot 8 @ 57
repeating bot 8 eur @1.4857
sold 8 @ eur 1.48581
dang too fast
bot 10 @ 14863

the dow's drop impeeding the usd recovery now
fti

Just to clarify, when you are buying you are effectively closing your short entries.

On my MT4 platform, I can buy and sell in the opposite directions but it does not cancel out the other trades. I need to close them manually.

However, on my CMC platform, I can only trade in one direction so to close a trade I just enter in the opposite direction.

I assume that your platform is similar to the CMC one.
  • #1,203
  • Feb 1, 2008 8:46am Feb 1, 2008 8:46am
Quoting Zoran
fti

Just to clarify, when you are buying you are effectively closing your short entries.

On my MT4 platform, I can buy and sell in the opposite directions but it does not cancel out the other trades. I need to close them manually.

However, on my CMC platform, I can only trade in one direction so to close a trade I just enter in the opposite direction.

I assume that your platform is similar to the CMC one.
Hi Zoran

yes zoran that is right.
this was the reason why I came on to try efx out.
The other one was supposed to be Oanda, which I felt so uncomfortable and disorientated with.
So CMC is same I guess.

MT4 and FXCM which I had tried is lock on to order to order liquadition, very cumbersome blotting. but the chartings good.

Actually the process is known as internal book matching of trades. Which is how all spot fx deals are blotted.

So how's your exposure, is the position ok?

regards
  • #1,204
  • Feb 1, 2008 9:12am Feb 1, 2008 9:12am
MT4 is quite flexible but it just needs to be programmed.

The EUR position was rescued so both EUR and cable were profitable. I'm still debating whether this can work over the longer term. Leigh had some very good points. We are not pros and I have always had better success trading on the longer timeframes. It allows me to sleep.

I found the trick is to size the position correctly, so entries are smaller but profits are generally larger (so it balances out). I know this has been discussed before but I can't seem to remember why you discouraged it.
  • #1,205
  • Edited 10:30am Feb 1, 2008 9:51am | Edited 10:30am
Quoting Zoran
MT4 is quite flexible but it just needs to be programmed.

The EUR position was rescued so both EUR and cable were profitable. I'm still debating whether this can work over the longer term. Leigh had some very good points. We are not pros and I have always had better success trading on the longer timeframes. It allows me to sleep.

I found the trick is to size the position correctly, so entries are smaller but profits are generally larger (so it balances out). I know this has been discussed before but I can't seem to remember why you discouraged it.
Hi Zoran,
Glad to hear that your positions are good.
Yes , your point is noted.
That was the reasons why I didn't wanted to show the complete methodology in the first instance. As I discussed with Lieghsww in the very begining. This can be very dangerous in the wrong hands.
My initial intensions was to present the basics of the mindset required as well to point to true basic and applicable Technical analysis, the old school , if you like.
So when I was asked to show MM. It is difficult not to bring Sun Zi text to the fore.
My Chapter 3 is actually not for non professional use. So after this session. I guess many may understand my hesitance in presenting it. In reality, training on this methodology needs much practice and experience to internalise. So like I said before, erroneously applied, it could take your heads off.

In trading profitably, nothing is cast in stone. Matching trader mindset and personality to the style does play a great part in the successfully carrying it.
That is why I had asked that you traders could find your own match, as I cannot be privy to each and everyone of your individuality and skills levels. Not on the internet.
Nevertheless I have given much for the foundational requirements for your own quest and hope that it has help many.

regards

PS Take the volatility experienced in the last 4 hours in the NY sector thats on now. If you saw the MM involved and the managing of that, it may just sent you into shock. Well if any learning did come out of this, you would appreciate the nimbleness and craziness required in trading professionally. the reason why many dealers burn out.
Probably the most striking lesson for individual traders is about size of position, gearing (leverage ) and the destructiveness of greed. Many carelessly trade from a large base positions and quickly find themsleves in full risk disorientation when in changed volatility situations. The cause, by careless greed and or lack of experience and knowledge. Also the access to reliable mode of markety access , of which I am finding difficulty to tap onto since retirement. Now I am exploring, if this is a viable alternative access.
Oh and about if this is actually viable, well I can only say that I know no other true pros who doesn't do it this way, the major difference being risk appetite. If of any relevance , that I have been doing this for close to 26 years from ranks and files before retiring.
  • #1,206
  • Feb 1, 2008 10:45am Feb 1, 2008 10:45am
fti

I greatly appreciate the effort you have put into this thread and I have learnt so much. Please continue with the lessons as at the end of the day, we are all responsible for our own actions. I think we all understand that trading takes much practice and patience to master.

With regard to volatility, that has always been a great concern until I started trading longer timeframes. With smaller entries over longer periods, I could absorb greater volatility and things tend to move slower so I had time to make decisions (and sleep). I had a weakness though, and that was my self destructive nature, which I have now identified and am able to combat with these new MM skills you have provided.

I hope you are still intending to go through AOW lesson 3, the three kingdoms and perhaps more on MM. If it makes you happy, I'll turn pro so there are no excuses!
  • #1,207
  • Edited 11:58am Feb 1, 2008 10:53am | Edited 11:58am
Quoting fti
Hi Zoran,
So when I was asked to show MM. It is difficult not to bring Sun Zi text to the fore.
Chapter 3 is actually not for non professional use. So after this session. I guess many may understand my hesitance in presenting it. In reality, training on this methodology needs much practice and experience to internalise. So like I said before, erroneously applied, it could take your heads off.

In trading profitably, nothing is cast in stone. Matching trader mindset and personality to the style does play a great part in the successfully carrying it.
That is why I had asked that you traders could find your own match, as I cannot be privy to each and everyone of your individuality and skills levels. Not on the internet.
Nevertheless I have given much for the foundational requirements for your own quest and hope that it has help many.

regards

PS Take the volatility experienced in the last 4 hours in the NY sector thats on now. If you saw the MM involved and the managing of that, it may just sent you into shock. Well if any learning did come out of this, you would appreciate the nimbleness and craziness required in trading professionally. the reason why many dealers burn out.
Probably the most striking lesson for individual traders is about size of position, gearing (leverage ) and the destructiveness of greed.
Well said fti.

Bringing AOW into the fold was a very appropriate approach to the MM. It has helped me put all the pieces together. I have been trading the FX market for almost 3years with mixed results, using canned systems, my own systems, others systems, a combination of different TF's..whatever, all this in a quest to find the proper balance to my personal life and my love for the FX marketplace. I am sure many can relate. Although I have been marginally profitable, the results are not meeting my expectation nor the work that I have felt I put in..why? Well i have known this now for about the last year at least....that is the applicability to proper position sizing from the onset, MM, fear, greed....and all that stuff. I knew the initial couple of years would be a learning process so I accepted my first couple blown accounts as lessons 1 and 2 (they were appropriately small). A year ago or so I had a pretty well balanced method of trading, so I thought....what lacked was the proper MM methodology. Along with that MM methodology was a psychological mindset that was missing. It may be too early to tell for me just yet, but the AOW foundation has laid a lasting impression on my approach to my trading that is very pronounced. I must admit that once I was able to figure out your MM technique and applied it within the confines of my own risk tolerance (initial position sizing), the light bulb went on and it is very bright!! So thank you very much. I wanted to quit FX a hundred times, but I hate losing to a challenge, which can be an expensive personality trait, but has its' upside as well. Personally, I done very well in my chosen profession as a result, but that's neither here nor there. My point is I am glad I never gave up and am grateful not only that you came along (thanks leigh as well) into the FF, but that you chose a slow methodical and sometimes cryptic approach to a successful plan of attacking the market. You stimulated the psychological side of my trading mind that was not getting the attention it deserves. Now I almost challenge the market to go against me, for the "rush" of the rescue is better that just a straight win sometimes..well not really but you get my point. I know with almost 100% confidence that no matter what, if my mind is in the game and I planned conservatively from the starting position, I will not fail, I have won before the battle began, for I have many more troops where that came from...fear is gone, thats' worth 50 pips on its own! For those that are new to FX, you have hit a goldmine, stick with this methodology and learn, it is well worth the price of admission.
Anyway, I thank you for sharing your experience with us and look forward to continuing your journey with us. I hope you have seen the worth here in helping a few.

Regards,
NP
  • #1,208
  • Feb 1, 2008 10:59am Feb 1, 2008 10:59am
Quoting Zoran
fti

I had a weakness though, and that was my self destructive nature, which I have now identified and am able to combat with these new MM skills you have provided.

I hope you are still intending to go through AOW lesson 3, the three kingdoms and perhaps more on MM. If it makes you happy, I'll turn pro so there are no excuses!
It's as if we are the same...lol. Boy can I relate!

Yes please, do consider intro to lesson 3, the three kingdoms, and Forex Angels (if they apply).

NP
  • #1,209
  • Feb 1, 2008 11:00am Feb 1, 2008 11:00am
Quoting Zoran
fti

I greatly appreciate the effort you have put into this thread and I have learnt so much. Please continue with the lessons as at the end of the day, we are all responsible for our own actions. I think we all understand that trading takes much practice and patience to master.

With regard to volatility, that has always been a great concern until I started trading longer timeframes. With smaller entries over longer periods, I could absorb greater volatility and things tend to move slower so I had time to make decisions (and sleep). I had a weakness though, and that was my self destructive nature, which I have now identified and am able to combat with these new MM skills you have provided.

I hope you are still intending to go through AOW lesson 3, the three kingdoms and perhaps more on MM. If it makes you happy, I'll turn pro so there are no excuses!
Couldn't agree with you more Zoran. This thread is brilliant.

@fti I'm going to swear now, but I need to COOK for the fam now. Wish you and everyone else on the thread a great weekend.
Hope isn't a viable investment vehicle.
  • #1,210
  • Feb 1, 2008 12:03pm Feb 1, 2008 12:03pm
Quoting Northpro
Well said fti.

Bringing AOW into the fold was a very appropriate approach to the MM. It has helped me put all the pieces together. I have been trading the FX market for almost 3years with mixed results, using canned systems, my own systems, others systems, a combination of different TF's..whatever, all this in a quest to find the proper balance to my personal life and my love for the FX marketplace. I am sure many can relate. Although I have been marginally profitable, the results are not meeting my expectation nor the work that I have felt I put in..why? Well i have known this now for about the last year at least....that is the applicability to proper position sizing from the onset, MM, fear, greed....and all that stuff. I knew the initial couple of years would be a learning process so I accepted my first couple blown accounts as lessons 1 and 2 (they were appropriately small). A year ago or so I had a pretty well balanced method of trading, so I thought....what lacked was the proper MM methodology. Along with that MM methodology was a psychological mindset that was missing. It may be too early to tell for me just yet, but the AOW foundation has laid a lasting impression on my approach to my trading that is very pronounced. I must admit that once I was able to figure out your MM technique and applied it within the confines of my own risk tolerance (initial position sizing), the light bulb went on and it is very bright!! So thank you very much. I wanted to quit FX a hundred times, but I hate losing to a challenge, which can be an expensive personality trait, but has its' upside as well. Personally, I done very well in my chosen profession as a result, but that's neither here nor there. My point is I am glad I never gave up and am grateful not only that you came along (thanks leigh as well) into the FF, but you chose a slow methodical and sometimes cryptic approach to a successful plan of attacking the market. You stimulated the psychological side of my trading mind that was not getting the attention it deserves. Now I almost challenge the market to go against me, for the "rush" of the rescue is better that just a straight win sometimes..well not really but you get my point. I know with almost 100% confidence that no matter what, if my mind is in the game and I planned conservatively from the starting position, I will not fail, I have won before the battle began, for I have many more troops where that came from...fear is gone, thats' worth 50 pips on its own! For those that are new to FX, you have hit a goldmine, stick with this methodology and learn, it is well worth the price of admission.
Anyway, I thank you for sharing your experience with us and look forward to continuing your journey with us. I hope you have seen the worth here in helping a few.

Regards,
NP
@NP
Wonderful post. I am going over fti's dance and learning something new stuff on every run.
@Zoran , @NP and all - I think it will be useful to review fti's dance, So that we will learn how everyone interpreted the dance (fti and leigh can correct us if we misunderstood something). What do you guys think?
@fti @leigh - We cannot thank you enough for what you are doing for us. Hats off to you.
- WaveRider3
  • #1,211
  • Feb 1, 2008 12:21pm Feb 1, 2008 12:21pm
Quoting WaveRider3
@NP

@Zoran , @NP and all - I think it will be useful to review fti's dance, So that we will learn how everyone interpreted the dance (fti and leigh can correct us if we misunderstood something). What do you guys think?
WaveRider3
I was just thinking about the same. I've been studying all this dance stuff since yesterday and still did not get to full understanding, maybe Zoran and NP could cast some light on this. How fti picked trades and why closed them.
Regards
Alex
  • #1,212
  • Feb 1, 2008 1:09pm Feb 1, 2008 1:09pm
To dance, we must feel the pulse. fti has not gone into too much detail but has dropped hints in his cryptic manner. Personally, I think I have an understanding of his points but I can't be sure. It's a matter of identifying the action.

So, look at the action and understand what it's telling you. Things like, the direction of the trend is impulsive (referring back to Elliot). Also, remember those ladies, their legs, shadows, etc? Check the link below (I have attempted to get more out of him but he seems reluctant to expand).

http://www.forexfactory.com/showthre...56#post1806556

Those ladies with heavy tops or bottoms move bouncy & slowly
Long legged ladys are very flirtitious and wild.
Those that have long shadows are normally tall and very volitile.
Those introverts that coil up normally spring surprises.
Those that spread themselves out normally have no substance
  • #1,213
  • Feb 1, 2008 1:33pm Feb 1, 2008 1:33pm
One other thing, those ladies are probably best explained with chart action. If I get some time, I can attempt to find the action that I believe matches the descriptions. Also, please post your thoughts/understanding (with charts if need be).
  • #1,214
  • Edited 2:22pm Feb 1, 2008 2:04pm | Edited 2:22pm
Guys,

I can't comment on how exactly fti chooses his specific spots...he is way more experienced than all of us here and can think quicker on his feet . But the general idea is trade the trend and strategically lay out the whole process, whilst being ready to change on a dime.

Zoran pretty much said it all..look at the price action on the charts...look at the overall trend on the larger TF's and try and determine where we are in a trend...scale down to the TF's that you will be trading..ie. 5min. and then patiently wait for the opportunities to enter in your probable direction.

Here is a chart that I have been trading with this morning...although the day is pretty much winding down...you can pretty much guess my direction and notice the inflection areas....from the ranges I can do a rough calc on where I could expect rescue areas..(this is just me, I dont know exactly how others do it, but this is my "prepare for the worst" areas) which are the red X's....from there I apply the skews and plan my MM around those areas not to exceed my max risk% of capital. Regardless of how much Cap you have, leave yourself a ton of rescue capital...you can never have too much capital to draw from. Like fti mentions about me not to get predictive, I have to plan for the worst....it gives me the confidence I need to go into the trade even though I may take a rescue wherever PA dictates...it's the ruling force and keeps things nimble. fti and leigh have mentioned it numerous times that overexposure from the start and in the rescue (if failed) will kill you quickly, so I leave many troops in camp for multiple rescu attempts, due to my PA handicap. So plan accordingly and then do not be afraid to pull the trigger, if you left lots of ammo, then you should have confidence in a winning trade, even if it doesn't go as planned. My MM calc is very similar to leighs, but I allow for multiple rescue attempts if one fails...and it has before. I like a safety net under the safety net under the safety net....get it!

I don't want to lead any of you down the wrong path, but this is just how I look at it and how I set things up. I hope fti will do more "live" examples so we can follow along his path and get inside his mind.
Also...there are the 3 kingdoms to be discussed as well..I can't comment yet as I am as new to this technique as you. Although whilst trading the EJ, I am watching the E/U and UJ pretty closely.

Edit: Oh yeah, for the record, because I know what the Grand Master will say, I remove all lines and x's on my charts when I trade, these are here just for the example, and what I use to plan my MM as conservatively as I feel appropriate. I do not want to be influenced by lines and predictive levels when I trade and as I said, the PA will dictate execution.

Hope this helps.

NP
Attached Image
  • #1,215
  • Edited 4:33pm Feb 1, 2008 2:53pm | Edited 4:33pm
Thank you NP for your sharing this is interesting observation, I use the same MM as leighs discribed. I mostly trade EU. You also have MA on your chart, I wonder if this allowed, b\c fti had them on his charts he posted recently, so maybe they don't count for indicators?
Fti used dynamic correlation between EU, GU and UY yesterday on his entries and exits and and I did not get how it worked for him. Did anybody got it, and can explain it ? I hope it will be covered in 3 kingdoms by fti.
Regards
  • #1,216
  • Feb 1, 2008 3:23pm Feb 1, 2008 3:23pm
Quoting Northpro
if my mind is in the game and I planned conservatively from the starting position, I will not fail, I have won before the battle began, for I have many more troops where that came from...fear is gone,
Yes, this is spot on!

The premise is to start out small (sending only ONE scout in) to test the market pulse, then when the market moves your way, you attack at the right times (level 2 and level 3). As fti mentioned this is where the money is made. This part I totally follow fti's methodology!

The only place I will differ from him (and basically, mainly because most of us DO NOT have deep pockets, lol) is that when initial scout gets into trouble, that I wait until there is a clear sign that there is a possible retracement to get rescue team with scout out for break even or possible profit. I try to place my rescues strategically for my kingdom is much smaller than fti's, so I can't afford to send in as many troops as he can. This is just the facts and being realistic. If I had the capital that fti has, then I would be more aggressive with how many troops I could risk because I would have enough reserves to rescue multiple times if needed, as Northpro has mentioned in his quote below:

Quoting Northpro
My MM calc is very similar to leighs, but I allow for multiple rescue attempts if one fails...and it has before. I like a safety net under the safety net under the safety net....get it!
That is the best possible position to be in ... to have enough capital/reserves to be able to conduct multiple rescues and attacks, so don't get me wrong, my MM post was not about only putting in one rescue mission and that's it, it was about the calculations you need to make for the best possible range of pips needed for safe/successful rescues. But because the market is not predictable, YES it can still continue to go the wrong way even if you've put in a rescue team at let's say 30 or 50 pips away. Actually, that has happened to me, but I was still able to turn it around to make it a winning trade in the end, but I wouldn't want to make it a habit with not enough capital to put in multiple rescues, thus you don't want to be entering rescues too fast, cuz 3 pip troops can turn into 100 pip troops (if you can even afford that) if you don't strategically place your rescues. "Strategically" meaning that you can't just enter them willy-nilly, you have to know your dance and wait and see a clear sign by the price action (this comes with being a good dancer) that the market may be retracing/pulling back to where rescue would be successful. Most cases (when you become a good dancer) you will be right, but there are times where it may keep heading the wrong way, thus if you are in the right way of the longer timeframe trend, you could still hold tight and let the market turn to make rescue possible.

With fti's method, you can never lose a trade if you know your stuff, have the proper mindset and can dance to the market well. This I know more than ever in my heart (and head) after trading fti's method and the logic behind re-averaging.

I don't know about most of you, but when I grasped the concept (when he first taught it to me), I was like ... "OMG, this is FASCINATING stuff!!"

Anyway, even though for now I cannot trade as aggressively as fti due to not having enough reserves for larger scale rescues ... when my account increases (which I have doubled in two days, so being a little more conservative doesn't mean you give up being profitable ), I will then be able to allocate more and more troops as needed for the compounding factor. That's my goal and my game plan. That way, I build slowly and steadily.

So for those of you who can only put in one rescue team, that's okay, I had to do that until only a few days ago, you just build slowly and steadily like me and we'll get there together

Okay with that being said ... I'll be here mainly to help the smaller kingdom Generals who might otherwise get scared away by fti's aggressiveness, lol. That would be those who:

1) have smaller capital to work with for now
2) cannot stay up till all hours of the night into the next day (trading needs to be within a certain time frame, cuz we have a life :, lol)
3) any other reason you can think of that hinders you from trading as aggressively as fti, lol

But take heart, our goal is to grow our kingdoms fully, so you still need balls of steel, cuz this method isn't for the faint of heart (as Zoran mentioned in a previous post somewhere). You CANNOT cower in the face of danger, you have to HOLD FAST to your convictions and NEVER panic, NEVER let fear get in the way of your saving and defending your kingdom!! If you haven't gotten the feel for the dance yet, then you need to do that first!! These things are not an option!!
  • #1,217
  • Feb 1, 2008 3:59pm Feb 1, 2008 3:59pm
Quoting crazy_bdog
Leigh, I am no mathmatician, but your logic comes through very clear on your rescue example. I just closed my quick usd/jpy short as I made enough money to pay for the cold beer I just finished (just one!).
LOL, thanks, I'm glad it made sense. Also, I had to laugh at the "(just one!)" (now, is that a good thing or a bad thing? That's the question, lol)

-----

Thanks also to others who made compliments and welcome backs. Sorry if I don't acknowledge each of your posts individually, as I am trying to keep my posts short, cuz they are always so dang long : (but please know that they are very much appreciated )
  • #1,218
  • Feb 1, 2008 4:11pm Feb 1, 2008 4:11pm
I thought it was a good time to take a break from the market because of fed announcement, nfp and come back refreashed with a new month. I havn't been here in 1 1/2 days and I missed all the action around here. Its good to see the food for thought and digestion though.
fti,
thankyou for your example of what it takes and what it means being at your battle station. Also, your dance withthe market was a perfect examle of following the lead of the market and taking what it gives. Your first example the market gave you If I remember 40-45 pips and this dance 10-20 pips.
Your dance demostration with the market was a little different than the last one you showed us and in my eyes more difficult as the steps wern't as telegraghed. What are your thoughts?
As we try to digest develope an understanding of the 3 kingdoms you pointed out in your demonstration the "topping out and bottoming out" seemed to be an important factor in helping to keep in step with the market.
So is the recommendation to have these charts up and over time try to understand there impact on each other and our trades?
Also, I suppose in watching them I pick out which pair seems to be the most favorable battle to pick, correct?
thanks
  • #1,219
  • Feb 1, 2008 4:17pm Feb 1, 2008 4:17pm
Quoting leighsww
...
The premise is to start out small (sending only ONE scout in) to test the market pulse, then when the market moves your way, you attack at the right times (level 2 and level 3). As fti mentioned this is where the money is made. This part I totally follow fti's methodology!
Thanks Leighsww and fti, the last day or so's lessons couldn't have come at a better time and the pieces are coming together. I'll be going live next week and it will only be a small account so any tips will be great.

In the quote above, regarding levels 2 and 3, would they be when the PA has finshed retracing from a run and swinging back in our direction again?
Similar to when our rescue would be implemented I'm guessing, and what amount of troops would one consider to deploy at these levels?

regards,
Mick.
  • #1,220
  • Feb 1, 2008 4:35pm Feb 1, 2008 4:35pm
Hi,

Here is an Excel spreadsheet to calculate rescue. Just fill in the yellow cells (up to 8 levels - I recommend not to use them all ) and the breakeven level will show up in the green cells. It will also show each individual trade profit/loss and the total (0,00).

Hope it is useful (better not to be needed).

Good trading to all.

P.S.: this spreadsheet was written for mini accounts. For standard, all profits/losses are 10x bigger but the levels are the same.
Attached File(s)
File Type: xls Rescue.xls   17 KB | 1,650 downloads
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