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Technical Analysis Fallacy

  • #1,321
  • Feb 5, 2008 4:34pm Feb 5, 2008 4:34pm
Quoting Zoran
Wow, quiet day today. Time to delve into the 3 kingdoms a bit more fti?
Perhaps we can discuss this a bit ourselves?

I haven't read it yet but Paper Money sounds like it would give a good insight into how who and what effects the 'dollar' and how it relates to different currencies. For Fti it would be almost second nature from his years of experience, watching the markets and dealing with different instruments.

I've tried to observe and rationalise what's going on between the big four but I need a bit more insight into what influences what, this is an edge I would like to pick up on!

What are your thoughts on this?
  • #1,322
  • Feb 5, 2008 4:36pm Feb 5, 2008 4:36pm
OK fti, here is some thinking music

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  • #1,323
  • Edited 5:11pm Feb 5, 2008 4:43pm | Edited 5:11pm
Hi all,

Zoran..you are right, it has been a snoozer all day...

Anyway here is just a few of the candlestick patterns that I have been looking at throughout the day..I posted them on the 15min as they are easier to see, but I use the 5 min for entry. I am sure fti sees a million other formations on here, these are just some of the obvious ones to me. Also the wedge on the previous post turned into a flag pattern indicated here.

As I write this the flag bottom is being tested on the 5min.

NP

Edit: Flag has just been broken downward at 23:05gmt
Attached Image (click to enlarge)
Click to Enlarge Name: EJ 15 min.png Size: 39 KB
  • #1,324
  • Edited 6:14pm Feb 5, 2008 5:03pm | Edited 6:14pm
Quoting MickD
Perhaps we can discuss this a bit ourselves?

I haven't read it yet but Paper Money sounds like it would give a good insight into how who and what effects the 'dollar' and how it relates to different currencies. For Fti it would be almost second nature from his years of experience, watching the markets and dealing with different instruments.

I've tried to observe and rationalise what's going on between the big four but I need a bit more insight into what influences what, this is an edge I would like to pick up on!

What are your thoughts on this?
To put it simply, paper money describes the flow of this processed wood from the new forests and how it is used. As individuals we tend to put our money into property and consume lots of energy. On a global scale it tends to flow towards the deserts of Saudi Arabia and those countries that have ancient forests beneath the ground that has turned into a black liquid. That money then comes back into the big banks, who multiply $1 into $100 as it gets loaned out to us to buy our houses and consume energy. Sure there's a lot more to it than that but you'll have to read the book to find out.

OK, lets analyse fti's trading. This is what I found interesting. He entered at level 1 but then the next level of attack and rescue was level 2. His position size seems to relate to the fibonacci progression, but not exactly.

Entries seemed to be 1, 1, 3, 5 (couldn't see a 2 anywhere). I was wondering whether this is a normal sequence. So, enter 1 (scout as leigh calls it), then another (making 2) then 3 (making 5). Entry sequence was 1, 1, 3, 3, 3 for Euro.

Is that normal fti? Is it based on the skew? Comments anyone? We haven't really gone into attack sequence too much - except that it tends to be linear.
  • #1,325
  • Edited 5:18pm Feb 5, 2008 5:06pm | Edited 5:18pm
Okay, I've FINALLY finished my example attack sequence, so here it is ...

I've used whole lots just for ease of use, but those with shallow pockets, Scout should be .5 lot (or less) and the rest ratio'd out in increments accordingly.

Of course, you allocate whatever you can afford depending on your account capital, so the BUY quantities that I show in my example can be whatever you want. This is NOT like a recipe where you have to follow it exactly. It's just how I tend to trade. fti will have a different way than me to which he dances and allocates troops.

When to enter scout?

To be honest, basically, due to the nature of re-averaging and successful rescue missions, I have come to realize that one doesn't have to be totally anal about where to enter scout, lol. As said many times before, Scout is there to feel out the market pulse and if it turns out he was put going in the wrong direction, then rescue can be conducted with no problem.

A recommendation I will make, however, is that one enters him when the PA is shallow for the 5m trend direction to which you will be dancing to. Don't enter scout if the PA is moving fast and is already too deep, otherwise most likely you will lose most of the market move.

In the example ... Scout is LONG.

Just some other bits of info ...

Because I'm limited with shallower pockets, I've been a little more conservative on how many attack troops I enter at any given time. The maximum I will have on the battlefield is 5 total troops.

However, as my account is increasing pretty steadily and nicely, that may change tomorrow, lol, as I'm finding that I'm able to allocate troops more aggressively with each trade. Again, for good MM, one needs to scale troops accordingly (to what we can afford).

If you're not comfy with as much as 5 troops on the field, then don't risk them, however, that's why I take profits when I can, because that makes it easier to be more aggressive and add more troops once some profits have been locked-in.

Okay, that's it for now.

* edited - Oh, I should mention ... the 2nd chart is a continuation of the 1st chart (didnt' want the candlesticks and text to be small and all squeezed up on one chart, so thought it was best to do it in sections).
.
Attached Image(s) (click to enlarge)
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Click to Enlarge Name: EJ-AttackSequence2.png Size: 128 KB
  • #1,326
  • Feb 5, 2008 5:20pm Feb 5, 2008 5:20pm
Leighs,

Thanks for doing that. That is a great illustration of your attack sequence and confirms what I thought you might be doing. Appreciate all the effort.

Cheers,
NP
  • #1,327
  • Edited 9:07pm Feb 5, 2008 5:28pm | Edited 9:07pm
I should mention something with the above trade (as some may wonder about it, lol) ...

You see the last BUY arrow on the 1st chart?

Can you guys give reasons why I entered the 2 BUY positions @ 158.24? (before I learned re-averaging, I might not have entered that yet after seeing the two lower lows of the PA)
  • #1,328
  • Feb 5, 2008 5:33pm Feb 5, 2008 5:33pm
Quoting leighsww
I should mention something with the above trade (as some may wonder about it, lol) ...

You see the last BUY arrow on the 1st chart?

Can you guys give reasons why I entered the 2 BUY positions @ 158.24? (before I learned re-averaging, I might not have entered that yet after seeing the two lower lows of the PA)
Price was still below previous high and may pull back further?

<added>Also to keep control of the price average if it does.
  • #1,329
  • Feb 5, 2008 5:38pm Feb 5, 2008 5:38pm
Quoting leighsww
I should mention something with the above trade (as some may wonder about it, lol) ...

You see the last BUY arrow on the 1st chart?

Can you guys give reasons why I entered the 2 BUY positions @ 158.24? (before I learned re-averaging, I might not have entered that yet after seeing the two lower lows of the PA)

The price where the 2 lots were bought reaveraged you to 158.08 which was the support low of the previous two PA lows just made. 3 buys would have put you above so 2 was your limit with a support floor to justify it.

NP
  • #1,330
  • Feb 5, 2008 5:40pm Feb 5, 2008 5:40pm
Quoting MickD
Price was still below previous high and may pull back further?

<added>Also to keep control of the price average if it does.
Nope.

-----

Oh, I should also mention ...

The first take profit area was within a 3 hour period, so those who wouldn't be able to trade full-time (like Zoran), can still do well.
  • #1,331
  • Feb 5, 2008 6:05pm Feb 5, 2008 6:05pm
Ok, 3 lots would have taken your basis up too close to PA if a bigger pullback did occur??
  • #1,332
  • Feb 5, 2008 6:11pm Feb 5, 2008 6:11pm
Quoting Northpro
The price where the 2 lots were bought reaveraged you to 158.08 which was the support low of the previous two PA lows just made. 3 buys would have put you above so 2 was your limit with a support floor to justify it.
Wow, Northpro ... you're GOOD, lol!

Probably only ONE lot should have been entered though to be safe due to shallow pockets, lol, but having a good feeling that the dance is going to continue heading up helps , and being able to re-average should a rescue be needed is taken into consideration, as well, so as long as rescue can be done with no problem, it's not a problem (oh, and not to mention, good profit was made on previous exit, so had room to spare, lol).

----------

Just to mention also ...

I don't use any of that pennant, flag, wedgy, etc. thingys, lol, so even without that type of stuff being used, fti's method is fantastic!

Oh, and I have been experimenting how to make rescues even better (taking larger profits) and safer, too, so I'll post a chart and we can discuss to see what you guys think, lol. (but, please don't hold your breath :, cuz I gotta go do some things and might not get back here for a while, sorry).
  • #1,333
  • Feb 5, 2008 6:26pm Feb 5, 2008 6:26pm
Quoting leighsww
Just to mention also ...

I don't use any of that pennant, flag, wedgy, etc. thingys, lol, so even without that type of stuff being used, fti's method is fantastic!
Sure you do, you just dont realize it...LOL !! Nice trade btw! Looking forward to seeing your rescue for profit chart when time allows.

NP
Attached Image (click to enlarge)
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  • #1,334
  • Feb 5, 2008 6:28pm Feb 5, 2008 6:28pm
Quoting Northpro
Sure you do, you just dont realize it...LOL !!
ACK, you mean I've been doing all that stuff and didn't know it?!!

Well, see then ... there's no need to draw all those dang lines and angles and stuff on your dang charts then, cuz you don't need it :
  • #1,335
  • Feb 5, 2008 6:30pm Feb 5, 2008 6:30pm
Nice example leigh.

Just a correction. I do tend to trade full-time but I have been busy at work lately so I have decided not to trade. Normally there's not a lot to do and I tend to work from home.

It wont be long before I get back... I can see the light at the end of the tunnel!
  • #1,336
  • Feb 5, 2008 6:49pm Feb 5, 2008 6:49pm
Quoting leighsww
ACK, you mean I've been doing all that stuff and didn't know it?!!

Well, see then ... there's no need to draw all those dang lines and angles and stuff on your dang charts then, cuz you don't need it :
Im just playing with you leighs...I need those lines...need all the help I can get...lol..

Thanks again for the attack sequence..
NP
  • #1,337
  • Feb 5, 2008 8:12pm Feb 5, 2008 8:12pm
Yes, thank you Leighsww for the attack example and thanks Northpro for your analysis too, very enlightening!

I have been observing the various patterns as they form and it's quite good to see them set up from say a pennant into a flag into a 'potentially' good sell signal.
I know nothing is certain but it does give you a better 'feel' for what's going on and is helping me be more patient with my entries and exits.

In regards to the 3 Kingdoms, I've been experimenting with other related currencies and studying how they are moving along with the pair I'm trading.
For exapmle, I'm trading the EUR/JPY so I might pop up a chart for EUR/USD to see how ithe euro is fairing against the main(?) contender and I might pop up a chart for the USD/JPY to see how the yen is fairing against the US$. I might even pop up a chart for the EUR/GBP to see what's happening between them.
So far everything seems to move in tandem, in fact quite a lot of crosses also follow along so it's hard to pick what I really should be looking at.

Would this be a viable set up to give some potential signals of future moves in my current pair? If not what do you suggest, and better still why so we might get a better understanding of the relationships between certain currencies?
thanks,
Mick.
  • #1,338
  • Feb 5, 2008 8:35pm Feb 5, 2008 8:35pm
Leighsww,

Thanks for the play by play on your trade. do you use the 5M exclusively?
trading naked.......
  • #1,339
  • Feb 5, 2008 9:17pm Feb 5, 2008 9:17pm
Hi leighsww,
Thanks for the walkthrough of rescue and attack sequence. I have one question. What is your exit criteria in that attack sequence. There were instances price action was going against your trade and you still were in the trade. The last exit when you sold all the 5 lots was similar to previous retracements. I like learn how your thought process and analysis in exiting the position.

Thanks,
WaveRider3
  • #1,340
  • Feb 6, 2008 1:47am Feb 6, 2008 1:47am
Quoting fti
Hi sitoca,
Thanks for helping out with a site for reference.
I haven't ha time to explore it out in totality, but generally it seems quite good.

Market form takes into consideration a few other sidekicks apart from the conventional chart pattern formations, in essence the volatility scales and the time scales. Basically what you described is correct.
However, there are not rules cast in stone , so a feel for the local characteristics as well as behavorial abnormalities couple with the understanding of market structure and immediate impact fundamental , would give you a good feel of the market form.
If you apply prudent MM to capital ratios, with a healthy mindset to your trade habits, it should serve you well for taming the markets.
It get better with sufficient exposure and experience.

When entrenched in a trend move, attention is paid to possibilities of reversals and holding to attack when complimentary patterns emerges.

In a nut shell, thats the dance.

Remember that, rigidity of mindset and "magic bullet" convictions is dangerous to your exposure, yield into the FLOW of the sequence of happenings in the charts, romance the 3 kingdoms for a feel of whats happening in the bigger picture for instrument selection.
When in doubt , bail out.
Do not be victim to conflict of the General and Commander in you.

regards
Hello fti,

What do u mean by volatility scales and the time scales and time window"? and how is this be incorporate into the dance... I mean, using time in terms of 1. "expecting mutations to form in x minutes" base on the current footprints (if this is the case, isn't it a fallacy, b/c u are hoping for some pattern to form. or is it? (i say is it.. b/c i see that maybe there is a subtle element which I can't pinpoint.); or 2. is time,volatility used in another way or 3. I'm just over-analysing and blinding myself. (hehe.. what an irony to the thread. ; -))

anyway, as a side interest... could you please share your story of how u got started in, ups and downs, discoveries and fascination of currency trading or trading in general. love to hear your life. that is if you do not mind telling. : -) It will be an inspiration to our journey and some to model upon, I'm sure.

Thank you. Cheers,
bl :-)
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