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Technical Analysis Fallacy

  • #1,361
  • Feb 6, 2008 4:53pm Feb 6, 2008 4:53pm
Quoting Northpro
MickD,

I am leaving my initial scout in as my next reentries can now be entered in a compounded amount with reference to where the key res/sup levels are at within the trend I am trading. I therefore have a large buffer and/or I can put more troops on than normal, but with a smaller buffer. The amount of troops I decide to put on is relative to the recent resistance level formed and my average cost base without incurring risk.

NP
Thanks NP, I thought so just having a quick look at the math, just wanted to make sure

cheers,
Mick.

PS, did you take advantage <edit> on the return of the sweep up?? I was watching PA and closed my short pos and am now long (and in rescue ) but it's looking ok and I hope to BE in a pip or so.
My reason for long is the support of the previous 'flag' formed on the 1H and we bounced off it with a bit of force, we'll see.
I made a good amount of pips on the run down though
  • #1,362
  • Feb 6, 2008 8:39pm Feb 6, 2008 8:39pm
Quoting MickD
Thanks NP, I thought so just having a quick look at the math, just wanted to make sure

cheers,
Mick.

PS, did you take advantage <edit> on the return of the sweep up?? I was watching PA and closed my short pos and am now long (and in rescue ) but it's looking ok and I hope to BE in a pip or so.
My reason for long is the support of the previous 'flag' formed on the 1H and we bounced off it with a bit of force, we'll see.
I made a good amount of pips on the run down though
Hi All,

MickD. No I stayed out until things calmed down...My bias is still short so no longs for me (stay with the big trend) and the short return was too quick. I am in again on another set of troops...still short.

Here's the updated Chart:

Cheers,
NP
Attached Image (click to enlarge)
Click to Enlarge Name: EJ 5min 3 2-6.png Size: 59 KB
  • #1,363
  • Feb 6, 2008 8:46pm Feb 6, 2008 8:46pm
Nice one!

I got out even by the skin of my teeth!
I had some work to do but I'm short again now with a scout.

My problem has been pulling the trigger to early when adding troops, I have finally understood why it's good to let the scout get way in front and not panic I'm missing out on pips. And why it's good to leave him in when taking profits - it's the same reason.
I've been seeing the pips generated by the scout and I book them only to leave a new scout too close to the action and I'm always on the verge of a rescue.

Finally working it out!
Thanks.
  • #1,364
  • Feb 6, 2008 10:40pm Feb 6, 2008 10:40pm
Hi Zoran,
GMT for daily, i don't know about 5 min candles, personaly i look at 15 min minimum timeframe for formations (preferably 30 min, 1 hour), that doesn't mean i don't look at lower timeframes for trading, but, sorry, this thread is not about the way i trade, i just couldn't help myself, replying....i'll stop about now....
cheers, and good luck with your trading...
Biggest joker
  • #1,365
  • Feb 6, 2008 10:51pm Feb 6, 2008 10:51pm
Quoting Northpro
Hi All,

MickD. No I stayed out until things calmed down...My bias is still short so no longs for me (stay with the big trend) and the short return was too quick. I am in again on another set of troops...still short.

Here's the updated Chart:

Cheers,
NP
Northpro,

Just curious, what did you see here that made you enter?
Attached Image (click to enlarge)
Click to Enlarge Name: EJ 5min 3 2-6.png Size: 74 KB
  • #1,366
  • Feb 7, 2008 12:30am Feb 7, 2008 12:30am
Quoting auxesis
Northpro,

Just curious, what did you see here that made you enter?
Auxesis,

My thoughts are explained on chart..

NP
Attached Image
  • #1,367
  • Feb 7, 2008 6:20am Feb 7, 2008 6:20am
Quoting Northpro
Auxesis,

My thoughts are explained on chart..

NP
Northpro,

Thanks for the explanation.

a
  • #1,368
  • Feb 7, 2008 2:17pm Feb 7, 2008 2:17pm
Hi Fti,
Thanks for your reply it was probably all of them,
Cn you tell me where I can find your lessons so far???
Rgds
Steve

Quoting fti
Hi stewrigh,
well martingale and rescue is different in spelling.
On a serious note, martingale is an acceptable MO for rescue. Only that, as you have learned , that the growth spiral grows at a very accelerated pace.

You were wiped out because you were probably trading against the trend and didn't realise it. Maybe if you think about the ordeal carefully , you may be able to find the real reason why you lost the $$.

I suggest a few to help you along.

1. Overexposed vis a vis the capital.
2. Greed
3 Ego
4 disorientation of risk snowball.
5 caught against trend.
6. unskillful in analysis and mindset..................

or was it all of the above?

regards
  • #1,369
  • Feb 7, 2008 2:44pm Feb 7, 2008 2:44pm
Fti,
You haven't really explained the difference and I think that is because there is no difference. Martingale adds to losing positions until they turn, which is what your rescue MO does. And I know why I was wiped out but that wasn't the question.
Quoting fti
Hi stewrigh,
well martingale and rescue is different in spelling.
On a serious note, martingale is an acceptable MO for rescue. Only that, as you have learned , that the growth spiral grows at a very accelerated pace.

You were wiped out because you were probably trading against the trend and didn't realise it. Maybe if you think about the ordeal carefully , you may be able to find the real reason why you lost the $$.

I suggest a few to help you along.

1. Overexposed vis a vis the capital.
2. Greed
3 Ego
4 disorientation of risk snowball.
5 caught against trend.
6. unskillful in analysis and mindset..................

or was it all of the above?

regards
  • #1,370
  • Feb 7, 2008 3:09pm Feb 7, 2008 3:09pm
Quoting stewrigh
Fti,
You haven't really explained the difference and I think that is because there is no difference. Martingale adds to losing positions until they turn, which is what your rescue MO does. And I know why I was wiped out but that wasn't the question.
Hi stewrigh,

I'm assuming that the difference is still the question?
The real difference is in a Martingale strategy you just keep adding to your positions at interval regardless of price action whereas with rescue it is calculated and based on price action.
While it is still snowballing your rescue lots are calculated based on the size of the move, PA and your capital at hand. This takes a lot more work than simply buying in at levels and hoping.

For example, with Martingale you buy a lot and the price may move 50 pips against you.
In a Martingale approach you may simply double up at every 25 pips against you, this would leave you very exposed at 50 pips, if the price continues against you, you have to keep adding more and expose your book even further. Here compounding is not your friend!

In a rescue approach you would wait until PA told you that the move was over and pulling back in your direction, all the time making calculations on the way of how many lots to put in to break even at a potential pull back of so many pips at your current price point (in case you were simply in the wrong direction). You are not exposing your book any further until you buy in. Sure, it may move aganst you again but the MO/MM is the same, either way you will not expose your book as much with a rescue as you would a Martingale strategy.

hope that helps,
Mick.
  • #1,371
  • Feb 7, 2008 8:29pm Feb 7, 2008 8:29pm
Hi All,

That was well said MickD..

Well what a slow day here..I was away, so no trades earlier..Just started a short at 155.56 EJ. What did everyone else see today...lets keep the interest alive here so the learning can be fine tuned.

Fti, when will we explore the next lesson...looking forward to it.

Cheers,
NP
  • #1,372
  • Feb 7, 2008 8:44pm Feb 7, 2008 8:44pm
Hi NP,
I jumped on at 155.60 earlier today (for me), I sat patiently to wait for confirmation I was going the right way and price went down to 155.24. Again I waited for PA to either pull back, which it did then I was still waiting for the the price to go down even further and it did and I put in 2 units and the next low/low.
So far so good then price makes quite a correction to put me quite a few pips behind so I'm now in rescue mode and have sent in some more troops and I'm about 8 pips away from BE. If I get there I watch and see if I can just reduce my exposure or just sell up and start again.

I'm still a bit trigger happy with the PA, although I am getting better at rescues

I think I've got the dance, the MO and MM down pretty well now just need more practice!

I was still playing with fib's (just for fun ) but I did find they were literally getting in the way (that's a good sign I think) so I now only throw a few trend lines around to give me an eyeball on the patterns being formed.
It's all good

PS - the PA is looking ok at the moment so I will hopefully hang in and takes some profits from the rescue and try to leave my scout in a bit longer.
  • #1,373
  • Feb 8, 2008 7:35am Feb 8, 2008 7:35am
Hi Mick,
Thanks very much for your explanation - I guess I still have a lot to learn.
My main problem with Martingale and Rescue is that I now prefer to cut my losses and sacrifice the scout if PA moves against me re-buying if price moves in my direction.
I also have a problem with the terminology used i.e. troops and scouts seem to imply a battle with the market. I believe that you can't fight the market and shouldn't try - just read what it is telling you and follow the action - if you're wrong - get out and try again later.
But having said that I am still open to other strategies and am keen to understand the 'dance' and Martingale.
Can you tell me where I can find the lessons??
Thanks
Steve

Quoting MickD
Hi stewrigh,

I'm assuming that the difference is still the question?
The real difference is in a Martingale strategy you just keep adding to your positions at interval regardless of price action whereas with rescue it is calculated and based on price action.
While it is still snowballing your rescue lots are calculated based on the size of the move, PA and your capital at hand. This takes a lot more work than simply buying in at levels and hoping.

For example, with Martingale you buy a lot and the price may move 50 pips against you.
In a Martingale approach you may simply double up at every 25 pips against you, this would leave you very exposed at 50 pips, if the price continues against you, you have to keep adding more and expose your book even further. Here compounding is not your friend!

In a rescue approach you would wait until PA told you that the move was over and pulling back in your direction, all the time making calculations on the way of how many lots to put in to break even at a potential pull back of so many pips at your current price point (in case you were simply in the wrong direction). You are not exposing your book any further until you buy in. Sure, it may move aganst you again but the MO/MM is the same, either way you will not expose your book as much with a rescue as you would a Martingale strategy.

hope that helps,
Mick.
  • #1,374
  • Feb 8, 2008 7:59am Feb 8, 2008 7:59am
Quoting leighsww
Okay, I've FINALLY finished my example attack sequence, so here it is ...
Hi leighsww,

These last few days, thanks to work and moving, I have hardly been able to access the internet nor make any trades.
That was a great post, it really illustrates well how to dance.

Hi Northpro,

Iīve been looking at your posts with interest, so if you can, itīll be good if you continue.
I do not know about all these flags and wedges and have been reading about and watching the candlesticks only, which as fti says, are better looked at in bundles.

I noticed on your scout entry it was just after a long upward shadow on the previous candlestick, which was an indication to me that the bears were possibly gaining stronger influence. Until I read your explanation later about using the hour chart for the s/r I thought maybe you had taken that candlestick into consideration as well for your decision.

Regards,
HapaSasa
  • #1,375
  • Feb 8, 2008 9:57am Feb 8, 2008 9:57am
Quoting stewrigh
Hi Mick,
Thanks very much for your explanation - I guess I still have a lot to learn.
My main problem with Martingale and Rescue is that I now prefer to cut my losses and sacrifice the scout if PA moves against me re-buying if price moves in my direction.
I also have a problem with the terminology used i.e. troops and scouts seem to imply a battle with the market. I believe that you can't fight the market and shouldn't try - just read what it is telling you and follow the action - if you're wrong - get out and try again later.
But having said that I am still open to other strategies and am keen to understand the 'dance' and Martingale.
Can you tell me where I can find the lessons??
Thanks
Steve
Hi Steve,
Troops and scouts mean the same. This how much capital you can put at risk. The idea fti is teaching is to feel the market pulse intially and increase your position at appropriate conditions. And you are not fighting the Market. You always align with the major trend and use price action to decide on your entry and exits. Best place to read fti's lessons are this thread. Start reading it from the beginning and you will feel happy about that. Hope this helps.
- WaveRider3
  • #1,376
  • Edited 10:22am Feb 8, 2008 10:12am | Edited 10:22am
Quoting HapaSasa
Hi leighsww,
Hi Northpro,

Iīve been looking at your posts with interest, so if you can, itīll be good if you continue.
I do not know about all these flags and wedges and have been reading about and watching the candlesticks only, which as fti says, are better looked at in bundles.

I noticed on your scout entry it was just after a long upward shadow on the previous candlestick, which was an indication to me that the bears were possibly gaining stronger influence. Until I read your explanation later about using the hour chart for the s/r I thought maybe you had taken that candlestick into consideration as well for your decision.

Regards,
HapaSasa
Hi Hapa,

When Fti talks about looking at candlestick formation in bundles, I believe these formations of flags/wedges/H&S/pennants/three's inside outside///etc..along with bundles of support and resistance on the larger TF's is what he notices. At least thats' what I notice on the daily/4hr/hourly specifically...these areas and break out of patterns can tell me where I can expect the price to stall against res/sup and/or breakout from a formation...like anything in life, nothing is a guarantee, but all we are trying to do is raise the probability and the more knowledge you have in recognizing patterns, the higher the probability.
From there I then go to the 5 min chart and transpose those same patterns as well as look for smaller ones in the shorter TF. I then look at individual candles that give reversal confirmation signals. The one you are referencing that I entered my scout on was pushing the upper limits of the previous support which now acted as resistance, so I knew this was a high probable area of a turn around. When I was near this area I was looking for a reversal candle which was a bearish harami..so all things were in alignment; daily chart was still in a downtrend overall, hourly showed a probable resistance area, and 5min gave us the specific candle to enter on. These candles such as harami's and engulfing are no guarantee either, but again, we are trying to stack the odds in our favor. That specific one turned downward for me at exactly that specific candle, which is why I said I was lucky..it could have jogged around a bit more..it didn't so it was a ideal.

I hope this makes sense and sums up what I am looking at in a sequential manner.

I will post more charts as they happen....it's a busy end of week, so trades have been minimal yesterday and today.....I had to rescue a short last night at level 1 rescue.

NP
  • #1,377
  • Feb 8, 2008 11:11am Feb 8, 2008 11:11am
Hi all,

Here are my quick view of charts today..
NP
Attached Image(s) (click to enlarge)
Click to Enlarge Name: EJ daily8.png Size: 36 KB
Click to Enlarge Name: EJ 4hr.png Size: 32 KB
Click to Enlarge Name: ej 1 hr 8.png Size: 28 KB
Click to Enlarge Name: ej 5 min 8.png Size: 40 KB
  • #1,378
  • Feb 8, 2008 12:18pm Feb 8, 2008 12:18pm
thanks for your example NP.

how do you handle if you failed yours 2 attack troops and price is heading toward or exceed your scout entry?
  • #1,379
  • Feb 8, 2008 12:25pm Feb 8, 2008 12:25pm
Quoting amenlo9
thanks for your example NP.

how do you handle if you failed yours 2 attack troops and price is heading toward or exceed your scout entry?
If my attack fails and price reverses, I do 1 of two things based on price action...I either exit at B/ E before things get out of hand or I patiently wait to see where the dust settles...If I have to rescue I pick the spot according to PA and prior res/sup and enter a rescue sequence there...My MM is already prepared for this so if I miss the B/E exit, then I can withstand the draw down to rescue. Ideally you want to get out before the B/E is lost and reassess the overall trend.

NP
  • #1,380
  • Edited 1:07pm Feb 8, 2008 12:34pm | Edited 1:07pm
Fti,


I have been pondering the attack sequence and the MM associated. In Leighs example, she enters with a scout which is a single lot to test the rhythm of the market, she then added 1 more once trend was established in her direction, then 2 more respectively. Whenever I looked at this adding to positions (foraging on the enemy), I have tried to apply it without applying additional risk and exposing my real profits from previous entries.
If Leighs 2 troops (2lots) had reversed back to a previous support she would be at B/E or less.

If one entered a scout (1lot) then worked your MM to enter the first troops on a larger scale say 3 lots. You could now scale down future entries as per the reverse Fibonacci progression (3,2,1,)..

Here is an example of my thoughts:

Leighs technique: (I know she said 5 was her limit but for this example we’ll say she uses 6)

1 scout-moves 15pips in her favor= 15
She adds 2 troops and it moves 25pips = 45(scout)+50(troop1)=95
Then she adds 3 troops 30 pips later (total of 6 positions) and it eventually reverses 30 pips before she exits all positions to reassess = 75(scout)+110(troop1st)=185…..185-30(scout)-60(troops1st)-90(troops2nd)=5 total profit pips.
Recap: she entered 1,2,3 respectively.


My technique using same entry areas:
1 scout which moves 15 pips in favor = 15
I am confirmed in direction so send in 3 troops that moves 25 pips = 45(scout)+75(troops1st)=120
I add 2 more lots (reducing exposure) 30 pips later (total 6 positions) and it eventually reverses 30 pips before I exit all positions to reassess. = 75(scout)+165(troops1st)=240….240-30(scout)-90(troops1st)-60(troops2nd)=60 total profit pips. (considerably more)

Recap: I entered 1,3,2 respectively.

Conclusion is that I entered at the same times in the sequence and went the same distance as the 1st example however I used the reverse martingale when entering troops. Obviously this is a small scale example and ones MM would determine the allotted troops for the 1st entry.

My long winded point here is doesn’t it make numerical sense to add more troops from the onset once the dance is confirmed with the scout and then add more troops at a smaller allotment as the attack progresses as the likelihood of an eventual end and reversal is increased the longer the fight goes. You are capitalizing on the momentum of the fight by adding more troops but am reducing risk of profits realized.

I know this is a small scale example, but used it for simplicity. Please lend us your thoughts on this.

Regards,
NP
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