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The Ultimate Fallacy in Technical Analysis 99 replies

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Technical Analysis Fallacy

Quoting luSan
Thanks I am out: no short nor long. I just play 1-2 hr session trades. There will be many surprises tomorrow morning. I guess that the dollar will be even weaker.

Tomorrow morning, when I awake up for my trade, I would be fun to see what the london market will do. My guest that the day will be EUR/USD long. Of course, I will play whatever make sense to my poor trading sense. Short and cautions with the 5M and long and happy if the 5M say so: a 5M bar at the time, that is my motto.

Still, I never expected them to take action on Sunday Evening.
Lusan,
Its better not to guess. Reaccess the situation when you approach the market and try to get into the flow. Don't guess!

regards
I want to tell my opinion to everybody, that trading is the best protection of your funds, nothing can protect you better, not metals and not the oil. I understood it today after reading 7 laws of Universe. Think about it guys.
Alex
Quoting fti

the European alternative is the swiss gold bars, not the chocolate flavoured ones,ok LOL
The Credit Suisse Gold Bullion Bar, come in various sizes.
dam it, I just bought a few bars of those for easter.. :-(
argh, I guess I have to store them in my stomach. they will be safe there. ;-)

btw, fti, do u have a partner or a team that also helps u to manage the current open trades(exposures), when u have lunch or breaks.. or do u have to command the battle fully until u can get most of your troops back home(reduce exposure) before the loo break etc.?

thanks.
regards,
bl
Quoting gfsr
dam it, I just brought a few bars of those for easter.. :-(
argh, I guess I have to store them in my stomach. they will be safe there. ;-)

btw, fti, do u have a partner or a team that also helps u to manage the current open trades(exposures), when u have lunch or breaks.. or do u have to command the battle fully until u can get most of your troops back home(reduce exposure) before the loo break etc.?

thanks.
regards,
bl
Hi gfsr,
LOL, yeah thats good, my dad also taught me that thingy.
Seems, the stomach is the only place, to safely store.
Unfortunately, thats not long term store of value.

Yes, I have a team. For now I work mostly alone, but I have a "towkay" that I used to train at the institutions, helping. By the way "towkay" is his "pet name". He's trained. So if you like , its a two man team. We wouldn't be into each others blotter. Its works more like "check and balances". We are responsible for our own money and trades.

The truth is if position were build-up there's no such thing as meal breaks, and the likes. When exposed, the managing is paramount.
For the mom, the positions are "restricted" partly due to inability to source trust worthy broking, but this may change rapidly as this retail industry matures and the broking becomes more robust and genuine.

regards
Quoting mijamoto
hehe! I should ask than fortune teller LOL As you said 100 times. Do what market do not what you expect he will do

regards
Hi mijamoto,
sorry missed this post.
yeah that, generally sums it up.

regards
Quoting fti
Lusan,
Its better not to guess. Reaccess the situation when you approach the market and try to get into the flow. Don't guess!

regards
Thanks for the reminder to avoid any guess or predictions.

Today when I traded, I noticed the response of 5M to the news and it reversal...what to do? Simple, the news is saying go long because this is not good for the dollar, the chart was telling me to go short because is the post-news effect..The chart was telling me to get ready for a reversal...so I waited a couple bar drinking some nice water and I went...LONG...got some quick punches and ended the day...

You are absolutely correct. When I trade I MUST keep any news influence from my decision...I must be totally neutral and listen to the 5M music othewise my feet will not able to dance.

Regards
Empty as water and soft as a facing wind mountain
Hi ALL,
In effects, I don't know what the plans are.
But it is getting very cheap to borrow, but the qualification to borrow becomes very tight due to eligibality to do so(sub prime failure). So I wonder where all the cheap funds are flowng toward. Very dangerous indeed.The question is who the benefactors will be , ultimately? And who's paying the bills for this feast?

regards

If this is their plans to pry open china's exchange mechanism by galloping her hyper inflated state, I got this sinking feeling of a back lash. She sure has her plates full though, with the tibet issues and her hyper inflation to deal with. So looks like olympics starts earlier than expected. LOL
Quoting luSan
Thanks for the reminder to avoid any guess or predictions.

Today when I traded, I noticed the response of 5M to the news and it reversal...what to do? Simple, the news is saying go long because this is not good for the dollar, the chart was telling me to go short because is the post-news effect..The chart was telling me to get ready for a reversal...so I waited a couple bar drinking some nice water and I went...LONG...got some quick punches and ended the day...

You are absolutely correct. When I trade I MUST keep any news influence from my decision...I must be totally neutral and listen to the 5M music othewise my feet will not able to dance.

Regards
Hi Lusan ,
Absolutely on the money.
Abilitity to understand whats happening i markets is essential.
Its like if you are dancing 2 steps, you are aware that the band may change the music , sometime, You don't know when or how fast that will come. Although you are aware, your focus must be on now. This is because if you mind is on what might happen, you loose focus on what is happening and there is a high lightly hood that you will stumble. So be aware, but do not let it impact your dancing. If the analysis is that the music may change soon , then go to the edge of the floor ( deflate your possitions slowly) and bail out when there's signs to spook you. But stay on the "NOW DANCE" until that change comes.

Also don't be too smart and jump the gun.
You wouldn't want to be dancing boogie, when the music is 2 step.

One very wise man taught me this.
"The worst things in life is to wait for something that comes not.
and go to bed and sleep not."

Timing is the key.

regards
Quoting fti
The ISSUE stop loss order.
--------------------------

What is a stop loss order?

A stop loss order is basically a limit order.
This limit order automatically becomes a market order to fill, once limit specification is triggered.

Stop Limit orders: specify limits of slippage, exceeding which the order resinds.

The use of this sort of orders are normally placed at critical "BREAK" zones , either to prevent over losses in fast market situations or to limit exposures.
"Smart" traders use it as entries for break of ranges. To captalise on getting on runs after breaks. So it is the "stupid" traders that will sit at these levels to give away positions on breaks. Thats what many is lead to believe. The truth is that these zones are vacuum zones in reality. As even the most "stupid" traders in the world know how not to trade against breaks.

Stop orders normally fill with slippage to the disadvantage of the order always. There is no OB possibilities, if any trader gets an OB fill , please come and tell me.
fti, do you ever make use of limit orders? You mentioned that "smart" traders use it as entries for break of ranges. But that is introducing rigidity into the system right? As you mentioned, sweeps are fairly common so limit orders on the break could be triggered by a sweep and would be no better than a stop loss. So it seems that going back to observing action would be the best bet - something like a throwback would be a good sign to enter, would it not?

Also, what is an OB fill?
Quoting Zoran
fti, do you ever make use of limit orders? You mentioned that "smart" traders use it as entries for break of ranges. But that is introducing rigidity into the system right? As you mentioned, sweeps are fairly common so limit orders on the break could be triggered by a sweep and would be no better than a stop loss. So it seems that going back to observing action would be the best bet - something like a throwback would be a good sign to enter, would it not?

Also, what is an OB fill?
Hi Zoran,
when I said "smart", I meant the traders that thinks too highly of themselves, for their own good. That was why the smart was in quotes. The kind of traders that knows all, except how to be consistently profitable. And there are many such traders, they consistently lose money, but they seems to be very knowledgable about markets and technical analysis.
The context , that it was used was to describe those traders who uses stops orders for entries on breakouts, have rigid stoploss orders and consistently gets stopped out, but insist that, it is the correct way to trade. Some even goes so far as to claim that they can be stopped out 10:1 ratio and still be profitable. And if they didn't caught the one, that would putl their books to profit, it was always someones elses or some unforeseen event's fault.

OB in golf stands for "ball out of bounds".
OB in trading orders stands for "Or better"
When you put an order to the broker to buy limit X.XXXX OB ,
The order is to buy at price X.XXXX or better. So the fill can only be either X.XXXX or lower than X.XXXX. In the interbank brokers the term used is "bid".
Similarly when you put an order to sell limit X.XXXX OB,
The order is to sell at price X.XXXX or better, therefore the fill can only be at price X.XXXX or higher than X.XXXX. In the interbank brokers the term used is "comes"
So for OB fill, it stands for or better fill. Which mean at limit price or better.
The context that it was used was to mean better price fill than the limit specified.

Regarding your question on whether I use limit orders,the answer is no.
I alway use market orders for trading.
When I was market making for teir 1, I was the two way price, so effectively I was the market.

Limit orders are instructions to fill orders within specific demarcated prices zones, with discretion , and I don't see the benefits from such action. Other than that the trader doesn't have to watch the market.
I believe you may already know my opinion of traders who do not watch markets.

regards
Quoting fti
Hi Zoran,
(...)
I believe you may already know my opinion of traders who do not watch markets.

regards
Hi fti,

I greatly appreciate your style of trading and I am very thankful to you for all your teachings in this thread, including direct answers to my foolish questions. But I think there are thousands of ways to win in the markets (of course, there are millions of ways to lose!). I would not be so ... rigid ... about traders who don't watch the markets. There are probably a few profitable people among them. And there are investors... Warren Buffett doesn't care at all about 5 minutes or daily bar charts...
Hi people! how are you today Yesterday was a very choppy day and i can't understand why FED lowered one day before meeting a discount window rate as they could do it today? Now is so dangeorus and choppy market in forex i am afraid to trade even on a demo account. Instead i watched ping pong clips beacause i've tommorow tournament in it. FTI i like about the stop losses when you once in the beggining of a thread explained how our long trades makes our brokerage short and therefore we have abnormal unexpected down or up moves in a single minute.

enjoy your time regards
Originally Posted by fti http://www.forexfactory.com/images/buttons/viewpost.gif
For dealers, its a different game, because when markets are going up in a BEAR market, customers keep making them short,
their book keeps getting bigger short, but their average cost of being short keeps going up.
all they have to do is to wait for the trend to enforce and
when the market returns to the point where the buying started ,
he would make nearly the amount of money that made him short in the first place.

For this to happen, he has to have a book big enough to accommadate the customer base.
AND as the market swings back towards the start point, he has to ascertain that his book of shorts, be kept constant.
This is because on the way down the customers will be making him long.
So by constantly covering back to back on the way down he maintains his book short.
So for the dealer, as long as he maintains his poise in the direction of the markets major trend,
he will always make "scalp money", guanranteed.

His modus operandi, is to "duck and move quickly"
so as to have a better average on the up swing towards stops to maximise his shorting near the top of the swing.
This scenerio is most effective if there are stop near levels where he las a large order to sell,
where he can help the customer sell OB and "kill the sitting duck stops" in the same blow.
Another senerio is where by the heavy selling is CB levels or specific sell zones,
where many teir 1 are ready to pounch on the buyers.
You must understand that only tier 1 and some big tier 2 will have this advantage.

This is the reason, why you have rubber band snap backs in the direction of trend directions,
and slow puffy moves counter trend.
Am I making any sense to anyone here?

So we use daily trend as the direction to build book size and short charts to make market for retraces.
Do discuss this on this trread, no questions are silly, just discuss until it becomes clear.
Don't understand !, argue until you understand.
Fight if you must, I will not complain.

YOU MUST GET THE CONCEPT OF MARKET STRUCTURE RIGHT TO UNDERSTAND THE CHARTS.

I didn't wnat to get into this first, but since it is being asked here we go.
I wanted to get across the basic foundations right first,
cos if your foundation is slopy you will get a slopy structure built on it.
not so unlike building a house.
Nevertheless this is also the advance level of foundation and is an acceptable direction togo.

I hope this will help you to understand better OB.-by Mijamoto
Quoting Jairo
Hi fti,

I greatly appreciate your style of trading and I am very thankful to you for all your teachings in this thread, including direct answers to my foolish questions. But I think there are thousands of ways to win in the markets (of course, there are millions of ways to lose!). I would not be so ... rigid ... about traders who don't follow the markets. There are probably a few profitable people among them. And there are investors... Warren Buffett doesn't care at all about 5 minutes or daily bar charts...
Hi Jairo,
Thank you, for your kind words.
I do not believe that any questions are foolish, just that some traders may be misled in mindset and find difficulty to realign to see the truth. I note your insistence to believe that the methodology I presented could be successfully modified to cater for term trading. This is very far from the truth, because the strength in the methodology is in its ability to troubleshoot quickly when not in sync with the markets flow.When such is transposed to daily time frame, the practise become dangerous, as the trader is unable to sync quickly to correct he err. This is because on such time scope, the non reactive response by the trader incurrs slippage. If you can appreciate that the volatility on a singular 5 min bar can be up to 50 to 300 pips in an extreme environment, you must appreciate that the the volatility AND slippage on a day scope would be much larger. And it is my belief that traders do not have the capitalisation , nor the stomach for that kind of risk. That is in, trading outright exposure, letting alone snowballing risk with high gearing, as this MO requires.

I do not have figures to tell what the success rate of traders are, when they trade such time trame, but I can atest that all the traders of whom I had the opportunity to meet (doing that) have failed in such endevours. I have drawn my conclusion based on that , concluding that , it is not the prudent way. Not withstanding , the having experienced my methodology, for the numbers of years I was at the banks.

If you believe there is validity in your modifications and that it may be successful, please by all means, go ahead and prove it to your complete satisfaction.

You sighted Warren B's modus operandi, and I would like to high light to you, that as you so mention, he is an investor. Therefore he operates with a different MO. You seem confused with the differences between trading and investing. If I may be allowed to highlight to you, Mr B does not even trade the stocks market, his MO is in buying and selling companies. In the financial circles, it is known as raiding. Have you ever heard of company raiders?

Although, I can excuse your misinformation due to your indoctrination and education. Please be so kind as to compare apples with apples and not bring forward an orange, siteing that because they are all fruits, that they are the same.

Please do not take my response as disrespectful, It is just that we stand very far apart in doctrine, and from my many years of experience, I can see that you are unaware of your follies.

regards.

PS: Please do not feel other than that I have the utmost respect for Mr Warrant Buffet, a prudent and honest man. One does not become 2nd richest in the world by being careless, but I must point out that he is not within the same platform that forex traders/dealers stands.
Quoting mijamoto
Hi people! how are you today Yesterday was a very choppy day and i can't understand why FED lowered one day before meeting a discount window rate as they could do it today? Now is so dangeorus and choppy market in forex i am afraid to trade even on a demo account. Instead i watched ping pong clips beacause i've tommorow tournament in it. FTI i like about the stop losses when you once in the beggining of a thread explained how our long trades makes our brokerage short and therefore we have abnormal unexpected down or up moves in a single minute.

enjoy your time regards
Afraid of trading because of the FED? I have the same feeling this morning...I thought..."Hey... fear of the FED means to stop trading....F*** the FED, I will trade today otherwise I develop a terrible habit." So I trade and I ended my session with 47 happy pips..Even again the 1H trend...
Empty as water and soft as a facing wind mountain
fti...you are one cool dude to have around here.
Amazing!
Any way, fti we are here. My sucess rate after incorporating whatever I understand of your method is +90 %. Before your teaching, I did not undertand a thing about the 5M and my target was 10 pips/da, today because of the little understanding I learned, I am confidet that 30 to 100 pips per day within the hour is possible. But who cares!

What I mean? ...I mean that I am grateful of your teaching.
Empty as water and soft as a facing wind mountain
Quoting luSan
Afraid of trading because of the FED? I have the same feeling this morning...I thought..."Hey... fear of the FED means to stop trading....F*** the FED, I will trade today otherwise I develop a terrible habit." So I trade and I ended my session with 47 happy pips..Even again the 1H trend...
Hi lusan,
Good for you.
BUT, please have some respect for the feds.
1.You are trading his markets.
2. They are just doing their job the best they can.

BUT, is this a case of overconfidence, I am seeing.
Careful there, as the ego thingy have been the downfall of many a good traders.
The vulgarity was not necessary and unbecoming.

Count the money quick and laugh all the way to the Bank, while you're at it.

regards
Quoting Zappa
fti...you are one cool dude to have around here.
Hi Zappa,

Thanks for your kind words.
regards
Quoting fti
Hi lusan,
Good for you.
BUT, please have some respect for the feds.
1.You are trading his markets.
2. They are just doing their job the best they can.

BUT, is this a case of overconfidence, I am seeing.
Careful there, as the ego thingy have been the downfall of many a good traders.
The vulgarity was not necessary and unbecoming.

Count the money quick and laugh all the way to the Bank, while you're at it.

regards
You gotit . I laughed today after work. Look, I turned the computer and I saw that the market was turning against me..I was out...and happy and in bed...having my after trading nap...this is happiness..I laughed to the market...I played against the trend and I was safe...madness? Yes..Overconidence? No...The market is a MONSTER. I feel that those who do not accept this fact will be destroyed.

Yes, unbecoming...I apologize...No excuse...I did it (almost)...but we should not be afraid of facing their the market even when we are coward!...Oh well...tomorrow will be another crazy day...Another day for my training.

I keep wondering why some people think that forex is easy? I think that this is extremly hard on our emotions. What am I missing?

Regards...
Empty as water and soft as a facing wind mountain
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