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Technical Analysis Fallacy

  • #1,741
  • Mar 12, 2008 7:17pm Mar 12, 2008 7:17pm
Quoting luSan
fti, since I trade early every morning, it reminds me of my days of Zen meditation. This is a tough and demanding job for the mind, almost a spiritual practice. I guess I do Forex meditation!

Hey...I bought a hard copy of "the art of war" and a read a little every evening before sleep...I cannot image anyone doing forex without knowing what this book contains...I am slowly losing my mind!
Hi Lusan,
yeah, it has a kind of invisible hold on the mind.

trade well.

regards
  • #1,742
  • Mar 12, 2008 7:19pm Mar 12, 2008 7:19pm
Quoting luSan
One of the most important lesson that I learn with fti is to watch the market or as he says to "baby sit." I baby sit every trade and I am ready to take inmediate action. I suspect that the market destroy those who are lazy.

I must be ready. If you want to see my mad 5M dance go to my journal. Enjoy.
Hi LuSan,

Thank you for your reply. I have already read your thread. In my opinion, it is a very good illustration on FTI's teachings. Congratulations.

I chose to take a little more distance to trade. I really can't baby sit. So no other way than reducing leverage accordingly. I fought 19 battles in the shortest time frames and kept record of them. An excellent training, but I prefer the reduced stress of the mid term battle.
  • #1,743
  • Mar 13, 2008 4:03am Mar 13, 2008 4:03am
Just wanna share a little something i created using excel.

Its a spreadsheet where you guys can use to calculate your skews for rescues.

I did up to 4 levels of rescue.

Do not use the fields labelled in blue as they are auto calculate.
same for the fields labelled in red, this field will only generate as long as you have your mt4 and dde on, it will calculate current prices of eurusd for you.

you will need to enter your trading equity and the % that you are willing to risk per wave.

Next it will request you the enter you largest skew (mine is 20, followed lusan's 3,9,20 modelling for rescues) it will then automatically calculate your 1 troop value for you.

Once you have this you can start using the rescue table to calculate and manage your martigles.

best regards
jest
Attached File(s)
File Type: xls martingle.xls   25 KB | 1,076 downloads
  • #1,744
  • Mar 13, 2008 7:40am Mar 13, 2008 7:40am
HI ALL,
here comes the feds again!
  • #1,745
  • Mar 13, 2008 7:48am Mar 13, 2008 7:48am
Quoting fti
HI ALL,
here comes the feds again!
Hi fti

Starting to expect their continuios intervention now, although it doesn't make me too happy. Messes up my charts with the big bars.
Hope isn't a viable investment vehicle.
  • #1,746
  • Mar 13, 2008 7:59am Mar 13, 2008 7:59am
Quoting luSan
fti, since I trade early every morning, it reminds me of my days of Zen meditation. This is a tough and demanding job for the mind, almost a spiritual practice. I guess I do Forex meditation!

Hey...I bought a hard copy of "the art of war" and a read a little every evening before sleep...I cannot image anyone doing forex without knowing what this book contains...I am slowly losing my mind!
Hi, lusan! Yes I read it almost every day too, it's like a bible of trading to me, sometimes I don't have a clue, why it helps, but it helps somehow and if I don't understand something, I just believe it helps and it works. Sounds stupid, but it does work.
Alex
  • #1,747
  • Edited 8:11am Mar 13, 2008 8:00am | Edited 8:11am
Quoting DutchAngel
Hi fti

Starting to expect their continuios intervention now, although it doesn't make me too happy. Messes up my charts with the big bars.
Hi DutchAngel,
Well, Mostly traders on daily charts probably won't feel much.
Except that it sure is a pain,,, to see a day key reversal fail, not being aware of the invisible hands that came manipulating.

And for the CB, at least we know that, they are on the job and trying to back paddle. This IS the markets.

regards
  • #1,748
  • Edited 8:26am Mar 13, 2008 8:13am | Edited 8:26am
Quoting fti
HI ALL,
here comes the feds again!
Hi, fti! Do you mean that this sharp downward move is a feds job? How do you know that? I can have a clue now after some reading of last book, but not exactly. Thank you for that, btw.
Alex
  • #1,749
  • Edited 8:55am Mar 13, 2008 8:20am | Edited 8:55am
Quoting alexfot
Hi, fti! Do you mean that this sharp downward move is a feds job? How do you know that? I can have a clue now after some reading of ky,,,,, but not exactly. Thank you for that, btw.
Alex
Hi Alex,
Think nothing of it.
Please may I ask if you would remove name of file, thanks
we refer to it as ky.. in future, ok

By the way the short chart pattern, indicates that the CB is quite serious about the support for the USD, at least for now.Trade carefully.

regards

PS: About the CB,
well lets say a little bird told me they were checking.
Tis is very tiring, when the elephants fight, all little ants can do is to sit and watch, waiting for the right time to pick up the spoils.
gotta go , trade careful
  • #1,750
  • Mar 13, 2008 9:08am Mar 13, 2008 9:08am
fti I would like to thank you for all your efforts in educating & guiding us through the crocodile infested waters of the forex market.

I find the hardest part of your technique to come to terms with is the removal of protective stops.

I think I know how the market rythem works in processing stoploss & limit orders, and the illogical idea that you can safely put an order in the market with a 50pip stoploss & a 100pip take profit without the stop being hit before the take profit. After all isn't the market just a machine that processes orders.

With that said I continue to use a fail safe protective stop which I place a minimun of 100pips away from entry.

In most other respects I think I understand the logic of your ways, and as yet I haven't had a losing trade since 24th February trading Eur/Usd 1min 5min & 15min charts, following the hourly trend.

Regards,

BabeFX.


I am wrong until the market proves me right.
  • #1,751
  • Mar 13, 2008 12:56pm Mar 13, 2008 12:56pm
Quoting jest1081
Just wanna share a little something i created using excel.

Its a spreadsheet where you guys can use to calculate your skews for rescues.

I did up to 4 levels of rescue.

Do not use the fields labelled in blue as they are auto calculate.
same for the fields labelled in red, this field will only generate as long as you have your mt4 and dde on, it will calculate current prices of eurusd for you.

you will need to enter your trading equity and the % that you are willing to risk per wave.

Next it will request you the enter you largest skew (mine is 20, followed lusan's 3,9,20 modelling for rescues) it will then automatically calculate your 1 troop value for you.

Once you have this you can start using the rescue table to calculate and manage your martigles.

best regards
jest
jest,

Thanks for the spreadsheet.....question what is dde?
Once I launch the spreadsheet it has some sort of macro within it asking to "allow" for update............no offense but, please understand that I am a little skeptical of allowing such access to my computer via internet. Could you clarify the programs internet access a little more for me, and also, does it only work for E/U?

Thanks

ph
trading naked.......
  • #1,752
  • Edited 2:35pm Mar 13, 2008 2:14pm | Edited 2:35pm
Quoting BabeFX
fti I would like to thank you for all your efforts in educating & guiding us through the crocodile infested waters of the forex market.

I find the hardest part of your technique to come to terms with is the removal of protective stops.

I think I know how the market rythem works in processing stoploss & limit orders, and the illogical idea that you can safely put an order in the market with a 50pip stoploss & a 100pip take profit without the stop being hit before the take profit. After all isn't the market just a machine that processes orders.

With that said I continue to use a fail safe protective stop which I place a minimun of 100pips away from entry.

In most other respects I think I understand the logic of your ways, and as yet I haven't had a losing trade since 24th February trading Eur/Usd 1min 5min & 15min charts, following the hourly trend.

Regards,

BabeFX.


I am wrong until the market proves me right.
Hi BabeFX,
Glad to have helped.
Steady as she goes. Stay nimble.
What a elephant stampede?
Will be opportunities for us ants tom.I hope
Anyone danced this two step?
Funny managers, they open the flood gates ,
now they stand in front of the avalanche.LOL
Some may get the surprise , that
the 2 step may be even more profitable than just riding trends,
not that riding is bad , just difficult to keep balance.
Good traders makes $$ in all market conditions.

regards

PS: be careful of 1 min charts , very slippery.
if you follow close, 5min, 1hr, day is enough.
anyway whatever makes you the $$s
  • #1,753
  • Edited 3:09pm Mar 13, 2008 2:46pm | Edited 3:09pm
Hi mijamoto,
Since you are here,
some material for your education enclosed.
its from the Federal Reserve Bank of New York.
Study well.
http://www.newyorkfed.org/education/fx/index.html
The link and the pdf is the same.

I hope you manage to get the other 2 pdfs.
otherwise email me.

regard

PS: here goes, the cats away the mouse starts to play.LOL
Attached File(s)
File Type: pdf The Basics of Foreign Trade and Exchange - Economic Education...pdf   273 KB | 3,633 downloads
  • #1,754
  • Mar 13, 2008 3:20pm Mar 13, 2008 3:20pm
What these wellington boys doing?
Looks need like we need tokyo boys to come in.
wonder if BOJ is playing too.

regards

ok until tokyo open then,
cheers
  • #1,755
  • Edited 11:45pm Mar 13, 2008 3:28pm | Edited 11:45pm
Who learns from his own mistakes is SMART and who learns from others mistakes is WISE.
It costs money to be SMART and it is free to be WISE but free stuff in this world is considered worthless.

I incidentally came across your post on TA today on FF. Would like to say a few words but let me introduce myself first.
I am a full time trader. I am trading for the last year or so. Started in 2006 but quit after losing my account. Then again started in June 2007 and since then I am trading full time. This is my bread and butter and I see myself trading 10-20-30 years from now. I trade only Forex..

You might be thinking that this guy must be making money in the markets who is talking so confidently and who is so determined. The truth is I am still donating my money to the markets. Nothing new? Everybody does it. Some accept it and some don’t accept it. Some admit it like me who believe trying something and not being able to produce the desired results is not a failure. Some believe that if they tell somebody how they have failed it will be embarrassing. It is just the way you look at the situation. Your perception is your reality.

· you are not defeated until you accept it as reality.
·Do not fear mistakes. Make more of them so you learn quickly.
·Don’t look at failures as negative. They are just a footstep to success. If you are afraid of taking those steps then you will never reach the summit.
·Never regret the things you tried and failed but regret those you never tried.

My first account of 10K was blown away in about 2 weeks. 2nd account of 10K took a month. Third account of 5K took two months. Fourth account of 1000 dollars took about 2 months. Fifth account of 700 lasted 2 months and I am again on demo trading.
There is almost no book on forex or trading in general that I have not read. Mark Douglas, Van. K Tharp, Alexander Elder, Murphy, Tom D Mark..... I can’t even count the names and count the books I have on Trading and TA in my own library.

There is no software I have not tried. Paid 5K for Vantage Point. I attribute one account blow up to this software.(sorry bad habit of blaming others for my mistakes).One day I called Vantage Point people if I can return my software and told them I could not make use of it. They said they can arrange a session with one of their experts to tell me HOW TO TRADE. I asked them a simple question. Just one question:

DOES THAT EXPERNT HAVE A LIVE TRADING ACCOUNT AND HE OR SHE TRADES ON HER ACCOUNT?

The answer I got was

None of us trades live. My response was simple

” I DO NOT WANT A PERSON TO BE MY DRIVING INSTRUCTOR, WHO HAS NEVER BEEN BEHIND A STERRING WHEEL.”

All those people and companies selling those black and blue boxes make their living by selling those systems to newcomers. If their software or systems are so good they should trade with them and make money.

Look on the web, how failed traders (mostly) offer how you can become filthy rich if you use some XYZ system. If it was so easy then why they are selling these programs to make a living and can’t use it themselves to generate wealth.

Most people dont understand or comprehend how big part psychology plays in trading. For example most professinal traders who trade for their company and do exeptionally well and make millions for their company when come to trade for their own accounts fail badly at trading. Why? Psychology: when trading others money their emotions are not involved in making trading decisions. It is just like surgeons when they have to operate on their own family memebers they ask other surgeons to do the job.. Strange...

There is a very simple formula for success

Determine what you want:
Find out the price;
Pay the price.

We as traders, just get to the first step…. We determine that we want to be a Trader. We never come to a point where we know what it costs to be a trader….( at least I still don’t know the full price.. because I keep on paying and it still keep on asking for more)…. But I am clear about one thing…

I AM WILLING TO PAY THE PRICE… WHATEVER IT IS to be a Successful trader…. And this commitment is my greatest wealth and winning edge.

I and again “ I “ Lost my account 5 times in a row. I am again on practice account. Will try again live account. If I loose it again I will again try it… if I loose again, I will again try it.. and will keep on trying UNTILL I SUCCEED.

A winner never quits and a quitter never wins.

When a child starts to walk and falls, walks and falls, walks and falls... Can you impose a limit on that child that if you fall so many times you will quit and you can’t try it again.... NOOOOO.. he is supposed to try UNITL he walks... So is the case with me. I am supposed to keep trying UNITL I start walking. If anyone of you have not that commitment you will eventually loose. That is why 95% loose because they QUIT. Do you think the handful of winners never lost? Surely they lost big and many times over before they were successful. They only stayed there long enough to be successful. Here is what I have learnt so far.

If you have

PATIENCE--to wait for a trade or right opportunity

DISCIPLINE --to abide by the rules you have set for yourself

COURAGE... --to accept if you are wrong and accept the loss

you can be a WINNER

YOU DO NOT NEED ANY TRADING SYSTEM. TAKE ANY LOUSIEST SYSTEM and if you have all three above you can win. But why then we run after systems? Simple; because it is easy to run after systems and EXTREMELY DIFFICULT TO EXERCISE PATIENCE, DISCIPLINE and COURAGE. We run after systems so we can blame something in case of failure.

TRADING IS EXACTLY LIKE HUNTING: A HUNTER WHO CAN WAIT PATIENTLY FOR HIS PREY TO COME TO HIM MAKES THE KILL. YOU CANNOT MAKE A KILL BY CHASING YOUR PREY.

Did not somebody tell me, this before I blew my account 5 times? Yes I was told. BUt because I had no personal experience about this, the advice went over my head. I was told from day one:

NEVER TRADE WITHOUT STOPS.
NEVER ADD TO A LOOSER
NEVER LET A WINNER TURN INTO A LOOSER
...... and list is endless YET
I DID EVERYTHING I WAS TOLD NOT TO DO----- UNTIL I GOt BURNED and I paid to get that advice

In Nov last year, I doubled my live account in one week. 22 trades, all winners. What indicators I used, NONE. NO INDICATOR EXCEPT Trend lines. It took me a week to double my account and took just one night to bring it to less than half. WHO is responsible.. ME. Did my system fail? NO.. I failed for lack of DISCIPLE, and PATIENCE.

BACK TESTING

Back testing is the biggest BS that I hear time and again. We don’t trade in past but in future. The strategies that worked a year ago, don’t work anymore. 95%(The loosing percentage) of the Traders who traded a year ago have been replaced by new ones with different mindsets, psychology and goals. You can back test a system but when you do it in REAL TIME, the playing field is different. The emotions are different. Your mind works differently and the results are different. That is why when I devise a system I test in real time even on a demo is fine. I BELIEVE that we dont trade a system but a concept. If that concept is sound it should be tradable today, yesterday and tomorrow. Markets are mass psychology and human psychology has not changed in the most recent past. The simpler the system or the concept; more tradable it should be on any time frame and during any period and on any instrument. If your system can only be traded on any one instrument or was valid yesterday and is not valid today, then it was flawed from the start because I dont know if human psycholgy changes so frequently.

I tried NexGen Software, eAscTrend, 4X Made Easy and some others. Paid for seminars and trainings ranging from hundreds of dollars to thousands of dollars. I paid $5500 for a three day training seminar and travelled a thousand miles to attend it. Altogether I have invested about 50K in this business so far.

Did I waste my money on all of the above? Absolutely NOT. After all that spending and struggle I realized and found out that None of that stuff works as they say it does. To me that is a big find and is worth far more than the amount I spent to find it. Experience is ever BOUGHT and Never TAUGHT. I paid to get that experience. If somebody had told me the day I started in this business that this stuff don’t work would I have believed them? The answer is an honest NO. What then I spent all my money for? What is in my hands now after that entire struggle that I did not have before starting out on this journey? The answer to that question is:

BELIEFS

I have now A STRONG BELIEF that if I have to win, THERE IS NO ONE THAT CAN HELP ME BUT ME AND I AM ON MY OWN. That simple belief is worth a million dollars which I could not have achieved without that spending of money or time.

At the core of every success and failure there is a belief at work. Our successes and failures in life are attributed to our beliefs. Just to make my point what is a belief and how it can make or break us read the following two examples.

A student in a mathematics class room went to sleep on his desk. When he woke up he found two problems written on the black board. He assumed that as he was asleep the teacher might have given this as a home work assignment. He noted them down and struggled all weekend to solve them. He could do only one and could not solve the other. On Monday morning he came to the teacher and told him that he could not solve one of the problems given for homework. The teacher stared at him in disbelief. The teacher said he did not give any home work. The two problems he had written on the blackboard were written there to tell the students that they are IMPOSSIBLE to solve. How did you do even one of them?

The point of the whole story is that if the student had known beforehand that this problem is impossible to solve he wouldn’t be able to solve even one of them. Because he had a belief that this cannot be solved and he might not have even tried to tackle any of them.

Second example I would like to quote is:

In circus you see large and big elephants tied to tiny little pegs with very weak strings or chains. Why don’t they break loose? Here is why: when they are little and weak they are tied to those pegs with the same chains. They try hard to break loose. They fail because those chains are stronger than their strength. They believe that they can’t break them and learn to live with them. As the years pass their strength increases tremendously but their beliefs remain the same. Once they have believed that they can’t break them, they never try to break them again in life. They will never try it again unless they change their belief that they can do so. It keeps them tied to their pegs. Now it is not the strength of chains that is holding them it is the strength of their beliefs that is responsible for their freedom.

There is a very powerful lesson for someone who wants to learn in these two stories.

Same is true about markets. We don’t trade them we trade our beliefs about them. We bet our money not on what is the reality but what we believe to be the reality.

I am just writing to let you know my view about TA and indicators. I have spent thousands of hours in front of my computer. Have wrote a lot of my own indicators in easy language and MQL 4 for MT4. After all that hassle and struggle I am now where I can see everything clearly.

I am now where I started from. Naked bare charts without any indicator or even a trend line. My eyes can see the trendline even without drawing it on the chart. And if a trendline is not visible with naked eyes I don’t believe in that trendline. I have Absolutely nothing on my charts. I now BELIEVE that the price action is the most pure form of indictor and is most recent than any indicator. Why wee need an indicator to tell us sometime in future what we can see with our own eyes happening in front of us right now: why we have to wait for a moving average or MACD or ADX to tell us the same thing after some time. And the time when indicator gives you a signal it is already too late.

o IT IS HARD NOT TO BELIEVE WHAT WE WANT TO BELIEVE.

When we have made up our minds about an instrument that it will go in a certain direction; we try to find indicators that support our view. We don’t interpret the indicators as they are but as we want to see them. For example; I am bullish GBPUSD. My MACD is telling me on 4H to sell. I don’t like that MACD at that time because it is trying to contradict my view. I will change the time frame to see if it is giving me a buy signal on 1H, 30 Min or anywhere. If it does and surely you can find a time frame where an indicator can support your view; you will get even stronger on your bullish aspect about GBPUSD. You will only pick that goes with your brain. YOU will only see what you want to see. Then you see other indicators and surely some indicator at some point will support your view. You add up together, MACD on 30M bullish, Moving Average cross of 5 and 21 on one hour, Trendline on 5 min is holding, candle on 1 hour is bullish. Price breakouts from channel on 30 min. BUY. And you pull the trigger. This is mostly how trading decisions are made mostly by 95% of crowd who come with a dream of getting rich quickly trading the forex markets and end up donating their equity to their brokers account. I did this for 5 times in a row. I always changed brokers so everybody out in the markets can benefit from my donations.
If you try a little harder, you can find more indicators that do not support your view but that’s not what we want to see. So what is important? Indicators or the way we see them? Do they tell us something is going to happen? NO ABSOLUTELY NOT. They tell us only what has happened. And that too with a considerable lag.

I trade now only 4H charts. I don’t even look at smaller time frames. Look at daily charts and trade 4 hour. I have made some simple rules of when to enter and when to exit. HOW MUCH to buy and where to sell. I wrote almost a book of my trading plan. It describes everything About my trading. I keep on editing it as the time goes by.

I could never have developed this state of mind and mindset if I had not gone through all this mess for over two years.

I am FREE now. Free from all indicators. thank god.

I dont mind the price I paid for this FREEDOM. There is no price tag for FREEDOM.

A new trader thinks that IF HE KNEW or IF HE GOT HOLD of a system he can strike rich. They have no idea or not willing to BELIEVE that system only counts about 10% of the whole trading. First of all probably they even don’t understand what even a system is. Some think that if they know how to enter and where to enter that is all they want to know. They have no idea that entry is the LEAST IMORTANT ingredient of a trading system. Trading starts after you are in a trade. I BELIEVE that you can even win by entering on a flip of a coin if you have all else that is needed to be a winner. Most of us including me jump into a trade without knowing even our objectives of the trade. This is how I have been trading:

Look at the charts cluttered with indicators. In my subconscious I will have a predetermined direction of the market. Somehow or the other I had a BELIEF one day that GBPUSD is going to go up today. If someone asked me why I have that belief, I would not have any clear answer. How can I answer a question when I don’t know the answer? I may have some stupid beliefs in the back of my head like for example; it is going to go up because it dropped more than 200 pips yesterday and it will go up today. I could have reasoned because if it fell yesterday and fell so much there is something behind pushing it down and it might continue down today and that would have been a valid reasoning. This is just the start. Now because I BELIEVE (consciously or subconsciously) that GBPUSD is going to go up today I will look at charts. Here is the interesting part. I will look for indications or indicators that support my BELIEF. I will discount all other information that goes against my belief no matter how overwhelming it is. If even one indicator is supporting my belief that is enough for me. If some indicator is pointing in the opposite direction I will see it as turning around or about to turn and feel comfortable. I will pull the trigger and enter into a trade. Now till this point I don’t think any damage has been done. Nothing wrong has happened till this point. It matters little which way I entered that is going to make me win or lose a trade. What I have done wrong is:

· I have no idea what my risk on this trade is
· I have no idea where I am going to get off or take profits
· I have no idea where I have to exit if it goes against me.
· I don’t know my risk to reward ratio on the trade.
· I have not predetermined my risk and accepted it in my mind.

This list can be long and believe me it can be very long…..

Now let’s go on a journey to destruction after we enter the trade with this set of mind and beliefs. As soon as I enter the trade now I am caught in the ticks of the market. My heart will pound with every uptick or downtick of the market. I will totally forget why I entered and where I have to get off. Entering a trade in this way is like jumping onto a running train and having no idea where you want to go. Fortunately trade goes in my direction. I am in profit. As I have not determined my exit before entry I am hallucinated with the green numbers showing me in profit. I feel invincible. I am in profit +$800. I don’t want to take that profit. I want more. I add another lot to my trade. Not a bad idea. Now every uptick brings double the profit. I am now in $1400 profit. Nothing feels better than that feeling of elation. Suddenly the market turns around. It went up fast it comes down faster. Fear is stronger than greed. My profits shrink to 400, then 0. As I have a belief in my head that market is going to go up today, and its initial move even confirmed it and made me even stronger on that belief; I don’t see the prices plummeting in front of my eyes in the opposite direction as a negative sign. I keep on thinking it will turn around. I don’t believe what is happening in front of me but BELIEVE what is in my head. Profits shrink to 0 then -400. I have two lots now as I added one on my way up. When loss reaches -1400 I add another lot so when it turns back I will recover quickly my losses. My losses are increasing three times with every tick now. When they reach -3500 I close the trade because I can’t take it anymore. To some of you this might be unbelievable. But this is a true trade that I took one day and these results are 100% true apart from the fact that I rounded the figures to whole hundreds. After I closed the trade the market again turned around and went my direction but never to the point where I was in 1400 profit.

Another example:

I see a pair in tight range. I plan to trade the breakout. I see it breaking out in one direction and I enter the trade. It goes in that direction a while may be just to hunt some stops and heads the other way. It backs into the range then it breaks out into the other direction. By this time I am so absorbed in the trade and counting the ticks that I forgot why I entered the trade and that I should reverse my direction. It is so hard for me to accept that I was wrong. I keep on holding to that trade untill it moves far far away from that range. Once it is out of the range then I will start looking for other reasons why it should come back. I will TRY TO FIND a trendline or some other Fib levels or pivots or anything like catching on a straw while drowning. WHen the price crosses everything and the range I traded is not even visible on the chart I will exit with a huge loss.

Similarly, I enter on the break or bounce of a trendline. The price penetrates the trendline and keep going. I forget that the reason for which I entered is no more valid and I should either exit or best reverse my direction. I keep on holding and try to draw more trendlines that are still not breached. Then will find some support levels and keep on HOPING and EXPECTING that it will trun from there UNTIL it is too late.

Now what went wrong both times--There is nothing wrong in trade going against your direction. What went wrong is that I did not predetermine my risk and I did not know where I am supposed to stop. Consequently, I keep on moving my exit further and further. I cannot make a rational decision at the time I am in a trade becasue of my emotional state of mind. That is why it is so very important to make those decisions when you are not in the trade so you can think reasonably.

And it is not the one time happening. I have done it many times over before I realized what was wrong and where. Anyone reading this who thinks that he can enter a trade and then enter a stop loss or take profit order is doing like jumping on a train or getting in your car and when once on the road to decide where to go. You have to do all that planning before you get on the road. A trader who has not predetermined his risk and accepted it in his mind before entry is bound to lose, sooner or later. By acceptance does not mean that you enter a stop and it is acceptance. Acceptance is that if trade goes against you and you lose your money you don’t feel bad or depressed on that loss. If you feel ecstatic on winning and feel depressed on losses, you are still FAR AWAY from the winner’s camp.

The only thing that differentiates a winner from a loser is the way of thinking.

Now let’s look at my trade and see whether did it make any difference which way I entered? I was bound to lose no matter which way I entered. It is not the direction of your entry that makes the difference, it is the psychology behind the game that makes or breaks you. I lost even when I entered in the right direction. Now I dont use my mind or brain for market direction but use only my eyes and let my brain rest during that time.

Next time when I am in a same situation I will close my trade prematurely and grab the profits and lament for the rest of my life for doing that because the trade went long way in the same direction. This game requires discipline and a set game plan to come out ahead of the crowd.

It took me almost two years to realize that problem is not anywhere else but inside me. My fight is not with the markets buy my own self. I AM THE PROBLEM and I started working on me.

It is not the system but the trader who wins or loses.
The HOLY GRAIL IS INSIDE YOU: Try to find it within yourself.
Trading is deceptively easy and it really is if we treat it like the way it is supposed to be treated.
When I realized that I am on my own in my endeavor and no one can help me but ME: things got very easy. I flet like a MOUNT EVEREST being lifted off my chest and I have come out alive from under a train wreck. The whole world changed for me INSTANTLY. IT was just a moment when everything changed.

I don’t mind blowing my account a number of times. To get to top 5% or 1% you have to go through the crowd of losers and be among them for a while to push yourself through. Who can't stand losses can't taste success either.

I totally agree with you on TA. It is a fallacy and to break loose of this fallacy requires tremendously strong beliefs. You can do it only if you believe in yourself more than you believe in those indicators.

I BELIEVE:

· The only system that can help you is the one you devise for yourself by yourself.
· Trading is extremely easy if you develop some inner control.
· You don’t need any indicator to trade successfully other than the price.

You can only trade without any indicator on the chart if you believe it is doable.
If it is hard for you to believe that it can be done; you can't do it and you won't do it.

I am using a strategy now for the last month when I wiped out all indicators from my screen and was able to see the candles for the first time in life without any cobwebs hanging from them; how beautiful they are; (they speak volumes if you are willing to listen to them). My strategy probably will be useless for others becasue I believe in my strategy that anyone else might find hard to do. My strategy now reflects me. I even think if I tell others how I trade they may laugh at it. But it is ok. I laugh at people now who are caught up in indicator mania to an extent they are not even aware that there is a price name of thing on their charts.


For readers of this Post I am posting below a few gems from the book, Trading in the Zone by Mark Douglas.

· Consistent winners think differently from the rest.
· 95 percent of trading errors you are likely to make—causing the money to just evaporate before your eyes—will stem from 4 primary fears:
o Your attitude of being wrong
o Losing money
o Missing out
o And leaving money on the table.
ACCEPT

· Responsibility
· Uncertainty
· Risk
You don’t need slightest bit of a skill to put on a winning trade

A probabilistic mindset pertaining to trading consists of five fundamental truths.

· Anything can happen
· You don’t need to know what is going to happen next in order to make money
· There is a random distribution between wins and losses for any given set of variables that define an edge.
· An edge is nothing more than an indication of a higher probability of one thing happening over another.
· Every moment in market is UNIQUE.
Only the best traders:

· Consistently predefine their risk before entering a trade.
· Cut their losses without reservation and hesitation when the market tells them the trade isn’t working.
· Have an organized, systematic, money management regimen for taking profits when the market goes in the direction of their trade.

o NOT PREDEFINING YOUR RISK,
o NOT CUTTING YOUR LOSSES,
o NOT SYSTEMTICALLY TAKING PROFITS

Are 3 of the most common—and usually the most costly –trading errors you can make.
Mark Douglas-------
In his book, “Trade your way to Financial Freedom”, Dr Van. K. Tharp writes:
THE LEGENT OF THE HOLY GRAIL

There are probably hundreds of thousands of trading systems that work. But most people when given such a system will not follow it. Why not? Because the system does not fit them. One of the secrets of successful trading is finding a system that fits you.
Most successful market professionals:
· Achieve success by controlling risk. Controlling risk goes against our natural tendencies and requires tremendous internal control.
· Have success rate of 35% to 50%. They are not successful because they predict prices well. They are successful because the size of their profitable trades far exceeds the size of their losses. This requires tremendous internal control.
· Are patient and are willing to wait for the opportunity. That also requires tremendous internal control.
Ed Sekota taught a college course in trading that lasted 10 weeks. Here is how he divided his schedule.
1 week- basic information about trading
1 week- teaching 10/20 moving average crossover system.
8 Weeks - to convince people to use that system and to accept the losses that the system generated.
MODELING MARKET GENIUSES

Successful traders think differently. That is the key to their success.
After interviewing about 50 traders I found that none of them had the same methodology. As a result I concluded that their methods were not a secret to their success except that their methods all involved “Low Risk Ideas”. And later in the book he describes; what is a low risk idea in his opinion as under:
“A methodology with a long term positive expectancy and a reward to risk ration with which you can live. That methodology must be traded at a risk level ( usually based on the percentage of equity) that will protect you from the worst possible conditions in the short run while still allowing you to achieve the long term expectancy.” Consequently, in any worthwhile trading or investing methodology, you must have all kinds or backups to protect you when you are in a bad trade.
Investors and traders usually go through two stages before they find the essence of the Holy Grail.
1. First they need to find someone to tell them exactly what to buy and sell in the market.
2. Second, they search for someone to tell them how to do it.
When neither of two processes work, the few remaining survivors move on to the final stage—putting themselves into a state of mind so they can find a trading system that is right for them.
The Holy Grail is to appreciate your own ability to think and be unique.
Judgmental Biases: Why mastering the markets is so difficult for most people

Entry Bias

Most people believe that they have a trading system if they have some sort of entry point that makes them money. There are as many as 10 components to a professional trading system and the entry signal is probably the least important.
Selection Bias

We typically trade our beliefs about the markets, and once we’ve made up our mind about those beliefs, we are not likely to change them. And when we play the markets, we assume that we are considering all the information. Instead we may have already eliminated the most useful information by our selective perception.
Small Numbers Bias

Most people trade by following the patterns in few well chosen examples. When the human eye scans a chart it really does not give all data points’ equal weight. Instead it will focus on certain outstanding cases and we tend to form our opinion on the basis of these outstanding cases and we tend to form our opinion on these special cases. It is human nature to pick out the stunning success of a method and over look day in day out losses that grind you to the bone, thus even a fairly careful perusal of the charts is prone to leave the researcher with the idea that the system is lot better than it really is. Even the most careful researcher would tend to bias the result towards his or her hypothesis.
Conservatism Bias

Most people totally ignore the contradictory evidence, despite the fact that it is overwhelming. The implication of this bias is that people search out what they want and expect to see in the market. They cannot go with the flow. Instead they are constantly searching for what they expect to see.
System Optimization

About system Optimization; first understand the concept you are using so well that you will not even feel the need that you need to optimize. The more you understand the concept you are trading, the less you need you have to do historical testing. No matter how much traders and investors learn about the dangers of over optimization, they still want to optimize.
Biases how you trade your system

People want maximum performance. So there is always a temptation to override your trading system. The few times you override and it works in your favor stands out in your mind. However, you tend to forget times it does not work and day in day out transactions costs that affect your bottom line.
Gambler’s Fallacy

This is a belief that when a trend is established in a random sequence, the trend will change at any time. Thus after 4 up days in a market expect a down day. Well respected researchers also are affected from this bias.
When you understand what’s involved in winning, as do professional gamblers, you’ll tend to bet more during a winning streak and less during a losing streak. However the average person tends to do exactly the opposite: to bet more after a series of losses and less after a series of wins.
Ralph Vince once did an experiment with 40 Ph.D.s. They were asked to play a 100 trials of a simple computer game in which they would win 60 percent of the time. They were each given $1000 in play money and told to bet as much or as little as they wished on each of the plays. None of them knew about Money management. Only 2 out of 40 had more than their original at the end of the game. Or 5 %. If they had bet constant a $10, they would have ended with $1200. And if they had bet optimally for achieving the maximum gain ( which was to risk 20% of their new equity each time—not recommended here) they would have ended with $7490 ( on average ).
Perhaps the number one rule of trading is to cut your losses short and let your profits run. Those who can follow this simple rule tend to make large fortunes in the market.
Most people continue to take the gamble, thinking that the loss will stop and the market will turn around from here. Most often it doesn’t and the loss gets bigger and bigger and gets to a point where the trader is forced to take it and more often than not small investors go broke.
On the other end when people have profits in hand are so afraid of letting it go away that they tend to take the sure profit at any sign of a turnaround even if their system gives no exit signal. It is so tempting to avoid let the profits get away that many investors and traders continue to lament over the large profits they miss as they take sure small profits.
Look at the following two scenarios and see for yourself what it means:
· Which would you prefer:
o A sure loss of $9000 or
o A 5% chance of no loss at all and a 95% chance of a loss of $10000.
· Which one your prefer:
o Sure gain of 9000 or
o A 95% chance of a $10000 gain plus a 5% chance of no gain at all.
In the first case More than 80% of the public does not pick the sure loss and picks the risky gamble which works out be a bigger loss (9500).
In the second case more than 80% of the population picks up the sure gain which works out to be less profitable (9000) whereas the second option is a gain of 9500.
PRICE INFORMATION IS MUCH PURER THAN ANY SUMMARY INFORMATION YOU MIGHT GET FROM SOME INDICATOR—page 208

Van K. Tharp—Trading your way to Financial Freedom

  • #1,756
  • Mar 13, 2008 5:00pm Mar 13, 2008 5:00pm
Hey Lucky57 that was a wonderful post..
  • #1,757
  • Edited 5:59pm Mar 13, 2008 5:17pm | Edited 5:59pm
Quoting PM by fti
[color=black]
Hi ..... (Lucky57),

Thank You for your PM.

Although long, it is filled with truth and experience.
In my 26 years as a pro market maker and manager in the forex markets, I have had the opportunity to see countless traders, not so unlike yourself who had given much in the pursuit of the search for that illusive niche in the markets.
This, as well as the desire to assist Leighsww whom I bumped into at Forex Factory lead me to starting this thread to see if I could impart my experience to the trading community at large. So here we are.

Be assured that there is a whole generation of traders and newbies out there in the same quest, as those that went before them. Mostly all, guided by their itch to riches and fostered by business hungry facilitators.

From material that I read in regards to the developments, I find that most if not all that is available in the print media, hasten their ruin, by introduction of bias foundations in their education. Being retire partly due to bad "health", I hoped that by spending some time to present my experience of taming the markets, it may do its little part in helping some along in their quest.
With your experiences and education of the "animal" that we call the markets, I am confident that you will most surely be able to grasp what I have presented.

Read the thread slowly, pausing to ponder that I had presented and see if much of it will help you ...................

More if it suits , I may like to ask if you would post this message on the thread, as a beacon, for some there, lest they are determined to reinvent the wheel, which goes in a full circle.

I am glad to have you onboard the thread.

Good Fortune
regards
Hi Lucky57,

Thank you for obliging to post.
I am sure many here, will learn alot from what you have presented.
Probably many questions too, which we will deal with as we move along.

Now, if you will slowly digest, this thread, you will find a perspective, that I hope will improve your quest to successful trading. Especially that you have gone into trading professionally.(taking the bull by the horns)

Welcome on board.

regards.
  • #1,758
  • Mar 13, 2008 6:07pm Mar 13, 2008 6:07pm
Quoting Lucky57
Who learns from his own mistakes is SMART and who learns from others mistakes is WISE.
It costs money to be SMART and it is free to be WISE but free stuff in this world is considered worthless.
..........
I have now A STRONG BELIEF that if I have to win, THERE IS NO ONE THAT CAN HELP ME BUT ME AND I AM ON MY OWN.

Very wise indeed
............

I am now where I started from. Naked bare charts without any indicator or even a trend line. My eyes can see the trendline even without drawing it on the chart. And if a trendline is not visible with naked eyes I don’t believe in that trendline. I have Absolutely nothing on my charts. I now BELIEVE that the price action is the most pure form of indictor and is most recent than any indicator. What we can see with our own eyes happening in front of us: why we have to wait for a moving average or MACD or ADX to tell us the same thing after some time has passed. And the time when indicator gives you a signal it is already too late.

...You got the point and it seems that you got it before it was too late. Everybody here drop the indicator fad.

...why people like indicators? It is so confortable to surrender to a calculator. But what people do not seem to be aware that the calculation depends on PA and PA IS CHAOTIC. I mean this is a dynamic non-linear problem and no indicator will be reliable because the chaotic PA is changing on an unpredictable way. People have surrended the most powerfull computer of all: Their analog BRAIN.

...I tried everything indicators -do you know that most of them are highly correlated and are telling the same history? They were late late late...Even a trend line is really junk. I found that in a 5M time frame when you got the trend defined you are near a reversal...so trend line trash trash trash.

o IT IS HARD NOT TO BELIEVE WHAT WE WANT TO BELIEVE.

YOU will only see what you want to see. Then you see other indicators and surely some indicator at some point will support your view. You add up together, MACD on 30M bullish, Moving Average cross of 5 and 21 on one hour, Trendline on 5 min is holding, candle on 1 hour is bullish. Price breakouts from channel on 30 min. BUY. And you pull the trigger. This is mostly how trading decisions are made mostly by 95% of crowd who come with a dream of getting rich quickly trading the forex markets and end up donating their equity to their brokers account.

...you got it my friend.

As soon as I enter the trade now I am caught in the ticks of the market. My heart will pound with every uptick or downtick of the market. I will totally forget why I entered and where I have to get off. Entering a trade in this way is like jumping onto a running train and having no idea where you want to go. Fortunately trade goes in my direction. I am in profit. As I have not determined my exit before entry I am hallucinated with the green numbers showing me in profit. I feel invincible. I am in profit +$800. I don’t want to take that profit. I want more. I add another lot to my trade. Not a bad idea. Now every uptick brings double the profit. I am now in $1400 profit. Nothing feels better than that feeling of elation. Suddenly the market turns around. It went up fast it comes down faster. Fear is stronger than greed. My profits shrink to 400, then 0. As I have a belief in my head that market is going to go up today, and its initial move even confirmed it and made me even stronger on that belief; I don’t see the prices plummeting in front of my eyes in the opposite direction as a negative sign. I keep on thinking it will turn around. I don’t believe what is happening in front of me but BELIEVE what is in my head. Profits shrink to 0 then -400. I have two lots now as I added one on my way up. When loss reaches -1400 I add another lot so when it turns back I will recover quickly my losses. My losses are increasing three times with every tick now. When they reach -3500 I close the trade because I can’t take it anymore. To some of you this might be unbelievable. But this is a true trade that I took one day and these results are 100% true apart from the fact that I rounded the figures to whole hundreds. After I closed the trade the market again turned around and went my direction but never to the point where I was in 1400 profit.

...This is were put. You really described the maddening trading experience.

It took me almost two years to realize that problem is not anywhere else but inside me. My fight is not with the markets buy my own self. I AM THE PROBLEM and I started working on me.

...Indeed. That why are are student of the "Art of War." In our practice we train ourselves to percieve PA and make trading decision that lead to win a war.

I don’t mind blowing my account a number of times. To get to top 5% or 1% you have to go through the crowd of losers and be among them for a while to push yourself through. Who can't stand losses cant taste success either.

...my friend, sorry, but I do. In a war, the general loser get hang or shot!

I BELIEVE:

· The only system that can help you is the one you devise for yourself by yourself.
· Trading is extremely easy if you develop some inner control.
· You don’t need any indicator to trade successfully other than the price.

...I agree 100 %. Trading seems to be mostly emotional training: attack and defence, killing and capture...a war of survival.

· Anything can happen
· You don’t need to know what is going to happen next in order to make money
· There is a random distribution between wins and losses for any given set of variables that define an edge.
· An edge is nothing more than an indication of a higher probability of one thing happening over another.
· Every moment in market is UNIQUE.

....I buy this

· Have success rate of 35% to 50%. They are not successful because they predict prices well. They are successful because the size of their profitable trades far exceeds the size of their losses. This requires tremendous internal control.

...standard stuff. I strive for 100 % sucess in the 5M time frame. Am I insane?
100 % means that by the end of trading my book MUST be larger than at the beginning of the day.



Perhaps the number one rule of trading is to cut your losses short and let your profits run. Those who can follow this simple rule tend to make large fortunes in the market.


....I guess we will never make it. I NEVER NEVER cut my losses short. I fight my battles to have not loses. Our ways of trading is so different to his approch that it might sound very ilogical. Imagine we do not use stop loses. I have none and I trade everyday. At the beginning I was full of fear.Now I would finding unthinkable.

Most people continue to take the gamble, thinking that the loss will stop and the market will turn around from here. Most often it doesn’t and the loss gets bigger and bigger and gets to a point where the trader is forced to take it and more often than not small investors go broke.
On the other end when people have profits in hand are so afraid of letting it go away that they tend to take the sure profit at any sign of a turnaround even if their system gives no exit signal.

...No me. I take my profit as soon as I can and I do not care if the bar keep going up. I pick pips 5 and 12 at the times depending on my bet size. I have seen so many the crazy reversal you describe above that I am not confortable until I rush my gain to the bank.

Van K. Tharp—Trading your way to Financial Freedom

Welcome to the Naked club. You might want to read the whole thing because it does not agree with Mr. Tharp and other writers. fti has its own way of doing thing.
Empty as water and soft as a facing wind mountain
  • #1,759
  • Edited 6:43pm Mar 13, 2008 6:19pm | Edited 6:43pm
Quoting luSan
Welcome to the Naked club. You might want to read the whole thing because it does not agree with Mr. Tharp and other writers. fti has its own way of doing thing.
Hi Lusan,
I am not very sure what Mr Tharp's style is, but if you read what Lucky57 wrote, and he is well read, it reinforces what I do. But we will get to that soon. Of course, no two traders are alike. The principles that carry us should be similar. There are some issues but I am quite sure indepth analysis is likely to show where it syncs.This is a good direction to go, as you will see where the similarities for success are. And it is likely that we are singing the same song.

regards

PS: There is lots of development in the mkt front today, oil's gone thru the roof again,similarly gold and the wohole world is now readjusting, Be watchful.
  • #1,760
  • Mar 13, 2008 6:48pm Mar 13, 2008 6:48pm

lusan,


Perhaps the number one rule of trading is to cut your losses short and let your profits run. Those who can follow this simple rule tend to make large fortunes in the market.


....I guess we will never make it. I NEVER NEVER cut my losses short. I fight my battles to have not loses. Our ways of trading is so different to his approch that it might sound very ilogical. Imagine we do not use stop loses. I have none and I trade everyday. At the beginning I was full of fear.Now I would finding unthinkable.


You might disagree with the logic of placing an emergency stop (disaster) loss, I do hope you have the pockets big enough to protect you in the event of a major disaster or massive C.B. intervention.

Take care,

It is too late to close the stable door once the horse has bolted.

BabeFX.


I am wrong until the market proves me right (POP. Phantom of the Pits).
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