Technical Analysis Fallacy

Hi David ...

After reviewing the 5m (and the 4hr and Daily), oh my, weren't you sorta commiting seppuku by going SHORT? That trade really should never have been taken, cuz not only were you going against the longer-term trends, but market was in a consolidation, as well (and small ranging ones at that - which is evident in the 4hr).

However, for discussion and review of fti's dancing style ... let's say that even if fti took that trade, and let's say he entered where you did (although, he absolutely wouldn't have), but let's just say even if he did, he would have exited that trade with about 25 pips per troop profit and gotten out of the trade before it turned against him that severely, as shown in his example of one of his dance steps --> Post #1462

If you compare the example I just linked, you can see that the scenario is almost the same except for where the price resumes going SHORT while yours reverses into going LONG. Going back to your illustration/example, once fti saw the PA reversing from 4:00 (according to the timezone setting on my 5m chart example), he would have exited any and all positions had he had any left in (or reversed into the position thus going LONG and entered attacks - I don't like to do that myself, haha, cuz I prefer to exit and then reassess any new positions, but I know he has done it --> on a ride-along where we were trading together, when it was reversing he said he was going to reverse his position and asked me if I was going to do the same, and I said, "NO WAY," lol, and I said "good luck" and "goodnight," and I exited and went to bed, while he reversed his position and continued to trade).

I think this is a good post by fti to reread regarding how (at the bank) he's had to take over the book if after his juniors and seniors couldn't rescue a self destructive trade. He also talks about Elliott Waves, which I remember him mentioning to me in the private tutorings (I'll see if I can find more discussion he did with me on that and post it later) --> Post #882

As we can see by his post, there's no way to bring the book out of a mess like that without a HUGE resource capital. We also don't have fti to take over our book (as BabeFX mentioned). So, we need to not take trades that could lead to self-destruction.

David ... are you still trading on the longer-term timeframes? Most of us look at the longer-term timeframes for reference of the trend (btw, I have readded the Daily to my trend assessment window after your "dead in the water" post, lol), but I'm talking about "trading on" meaning, you are not using the 5m, but instead using the 1hr for your entries and exits? At first I thought maybe you just used the 1hr timeframe for your example since the 5m would be too hard to show the entire move of the PA in one chart, but now I'm wondering.
.

David ...

Okay, I've done a hypothetical where rescue attempts could have been made with your E/U scenario had you not made the earlier exit (as I showed in my previous post).

HOWEVER, you would have to be consistent in always wanting to be only 10 pips away from B/E on rescues, as you wouldn't be able to foretell the future to know when 10 pips from B/E would have to be applicable or not.

Below is the example chart (click on it to enlarge).

NOTE: So happen the prices to enter SHORT position rescues were 40 and 20 pips away from each Basis, but that was just a coincidence. As I mentioned before, I do not enter rescues on a certain price level or pip count ... I determine entries on the PA, and in this case, I used the break of previous lower candlesticks.

This "dead in water" scenario was good for me to give thought to, because I normally would have waited for a lower high before initiating the rescue troops, but in your E/U scenario, there wouldn't have been any of that sort of confirmation which would have resulted in a successful rescue.

As luSan and looneyw mentioned ... being in a trade too long, has its disadvantages, and I remember fti telling me that I may be still thinking too rigid with my need for waiting for confirmations such as higher highs, lower lows, etc. I never did ask him why he uses the max 7 bars/candles thingy. I wonder why particularly "7" (35 minutes)? I'm not totally convinced that we (those with limited capital) can use the max. 7 bars method, but he must have a reason for it. If he returns, remind me to ask him, lol.
.

Yes, I agree with you. After your EU scenario, it is a good reminder for us that rescues should be only used to save the troops, not to make profit at their expense.

I know that I have learned something from your "dead in the water" scenario, lol

I agree with that I am so suprised to hear how many people are on the quest for the holy grail of trading that they failto really get good at any one thing and fail to trade at all!?!?

What ever happened to the beleif that you have to put alittle blood sweat and tear s in to build a mansion. They don't errect themselves. Rome wasn't build in a day why should your trading account be?

Thanks

fti

I agree whole heartedly that we must put serious blood sweat and tears to buil dour trading ability. Put in the time and due diligence to over come te obstacles. The patience to learn a system completely that we can use it like a fine tuned machine to produce the results that are realisitc but do-able.

Thanks a great read

My sample is only an illustration, it is not my real trades.

Martingale gambling is also an example to illustrate possible problems with skew averaging.

As I said, this is an small probability event. But If it happend it really kills. This is actually what I want to say.

In your illustration, it is fine. The shorter exposed in the market, of course the less risk you have.

However, in your chart, if that big green candle didn't happen, but instead a big red candle. Isn't that possible? See my attachment, I draw an imaginative red candle.

If that did happen, you may change the words "Long term starts" into "short time retracment", and " broken fall trend" into "sitting ducks zone".
(It is a joke, do not think too much, please) I think that is why fti always says "nimble".

David


By the way, the big green candle is due a news, the German IFO
German Ifo Business Climate Index
http://www.forexfactory.com/images/m...etail_star.gif 104.1
103.0 103.4

However if this figure turned out to be bad(less than 103), we never know what will happen.

I'd like to throw in that if you believe price is random (as I do, because future news reports move markets and are not known in advance) then all MA based systems are derived from randomness.

So although you are comparing candlesticks movement to an MA for point of reference, you are really comparing two random entities and looking for reason. It just doesn't make sense.

Well, as I said my sample is not my real trades. On January 15, when E/U reached 1.49 and retraced to 1.48, I longed E/U, addig to my 1 lot E/U longed @1.44 which was held for almost one month. And now E/U is 1.58, you see 1000 pips!!

Of course, I didn't make it, the market had a 400 pips retracement from Jan. 15, and that surely forced me out all my positions. And my profits gone. The problems are: 1. MM problems. 2. Hopes and ego 3. Traped by prevous experences and methods.

And in your chart illustrating consolidation, if I draw red candles after the consolidation as I did to Lusan' chart http://www.forexfactory.com/showpost...postcount=2330 , what would you think? Surely it is possilble.

You see? Chart can develop and change the whole pattern.

The consolidation in your chart could be a topping. A retracement or is it a leg of impulse wave. We can know that only after it finished.
Surely fti could do that. He has 26 years experiences

I started to read again the post from the beginning.
As you did, I check 4H, daily to choose trade direction(short or long, which is better). I open my trades and exit positions based on 5 min chart. Just to find a good timing.

But I didn't expect to get much on trading 5 minute chart. Most my gains are from intra-day trading between 50~150 pips. I also carried my positions overnigh for a bigger target.

My trading is quited mixed. Try to benefit from merits of 5 min trading, intra-day trading and overight trading, and avoid shortcomings of them.

For Post #1462, I have another example. I think a lot of people igored that. Please see the post 947, and check time duration between fti's entry and exit, I really wish you understand what I mean.

Yes, I am aware that not all his dances were short. I posted a play-by-play in my Post #2106 of how I interpreted how he traded that particular blotter in his Post #947.

But, if you scroll down from his Post #947 to his Post #958 where you called him on trading against the trend, you can see that he even admits to the "Scorpion" in him. Evidently, he is not exempt from self-destruction, lol. It's his "egor" (as he puts it) :

Anyway, it's not important that I understand what you mean, because in the end, it's your decision, not mine. I am just giving you my opinion/feedback from my observations, that's all. We've both been through this together from the beginning (from feb's thread) and I have come to care about you very much. I just don't want to see you keep doing the same mistakes over-and-over and lose so much of what you've worked so hard to gain.

So, if you understand what you are doing and it's working for you, than that's what's important. What I think doesn't matter.

But, if you find that things are not working in your favor and you are moving at more times backwards rather than forwards, then please, will you at least step back for a moment and rethink what may be the cause of/for it?

Maybe longer term trading is more your style. Possibly feb's thread and style can bring you more success, no? fti's style trading is not for everyone. Find your niche, David, and I know you will do well.

Anyway, there is nothing left for me to say to you regarding all this, so I will drop this here. You will not hear me mention this to you again. If your Scorpion keeps coming back, then only you have the power/control to do something about it.

We are all finding our own ways of dancing and succeeding the best we can, so dance well, my friend, as I wish you all the best and much success

Hello leighsww,

I have found your recent posts most constructive. And so, like to add my comments to the above of what I think and see from my trading...
maybe 7 or so bars is enough bars to tell you if the current market action should has/or is going to happen(time period) within in before the T/A of the compound bar patterns(or combined candlestick readings) has mutated into something else(a possible reversal to your intended direction or just more sideways dance??). I mean, when u first enter or when u send your troops in to rescue, you have already a general direction market is moving(the trend) from your own interpretations/analysis, so you are expecting that market will dance quickly(remember, you are trading on short charts) with you with the dance you want. But as the market takes too long, it doesn't want to dance your dance, and so you are just hoping. that's my current take. would also love to hear what fti says as well.

leighsww(since you brought it up as well. ; -). see, what I mean by constructive and a great leader.) or anyone else, how they are using fti insights on the elliot impulse waves concepts to their MO? or what is your interpretations, readings? if any. that is. : -) share my views another time.

cheers,
bl

The "dead in water" illustration I brought up is for discussion only. The idea and logic behind is more important.

By discussion, or even argument, I think that makes something more clearer. Internalization takes time. And let the scorpion be seen by every one.

Thanks, i know you really care about me. I learned quite a lot from fti especially mental set, and fti confirmed me a lot of conclusions which I learned from the market. Of course I paid a lot tuition fees to the market.

Well, I will follow your advice, use less leverage. To control risk, decipline, position management, patience for a sure sign, these rules, that rules, etc., most effective one however, is derease the leverage.

Wish you post some live cases, so we can make improvement together. I posted more failure cases. In fact, I had some very good rescue/attack example of last two weeks.

What happen? This thread is becoming quiet. Here's a little useless info......

Testosterone an elixir for stock market success

WASHINGTON - The most successful stock traders have higher levels of the male hormone testosterone, providing a dramatic boost to their confidence and drive, according to a British study published Monday.

Researchers at Cambridge University found that testosterone also appears to increase traders' appetite for risk-taking a quality likely to enhance the performance of those who earn a living in the high-stakes world of the stock market.

"Market traders, like some other occupations (such as air traffic controllers), work under extreme pressure and the consequences of the rapid decisions they have to make can have profound consequences for them, and for the market as a whole," said Professor Joe Herbert, Cambridge Center for Brain Repair, one of the researchers on the study, which was to be published Monday in the Annals of the National Academy of Sciences.

The researchers also noted that success fueled by testosterone feeds itself, in part because it leads to the production of even more testosterone.

In male athletes, for example, testosterone levels rise prior to competition, and rise even further in a winning athlete, but decrease in a losing one.

The phenomenon called the "winner effect," can increase confidence and risk-taking and improve chances of winning yet again, in a positive feedback loop.

"Hormones may also be important for determining how well an individual trader performs in the highly stressful and competitive world of the market. We are now exploring this in much more detail," the researchers wrote.

The study followed 17 male traders in the City of London for eight consecutive business days.

To measure the traders' hormones, they took saliva samples twice per day at 11:00 am and 4:00 pm, times that fell before and after the bulk of the days trading. At each sampling time, traders recorded the traders' profits and losses for the day.

They found that daily testosterone levels were significantly higher on days when traders had a higher than customary daily average.

On the down side however elevated testosterone may explain why stock traders sometimes make irrational choices that lead to bubbles and crashes.

Researchers speculated that if testosterone levels continued to rise or became chronically elevated, it could prompt traders to engage in reckless risk-taking and undermine their profitability.

They noted that earlier studies have linked administered testosterone to impulsivity, sensation-seeking and harmful risk-taking.

Dr. John Coates, lead author of the study said: "If testosterone reaches physiological limits, as it might during a market bubble, it can turn risk-taking into a form of addiction."

Coates, himself a former trader, added: "At times like these economics has to consider the physiology of investors, not just their rationality." - AFP/ar

Is it really the professional trader that causes bubbles and crashes?... ...I'm more inclined to believe it is Joe Public and his greed and fear (i.e. Tulipmania, Tech. Boom, etc.)...

Although, at such times, I can't help but think the professional trader would certainly not hinder the "progress" of such a bubble/crash... after all, he's probably making a whole load of bucks on the backs of these aroused amateurs...


Magnus

Hi fti and the rest of the amazing rescue gang. I’m learning so much here. I’m very noob and glad I found this thread before I became an indicator addict.
I’ve been slowly reading this thread all the way thru for 2 weeks now (almost done).
I want to contribute a little. I’ve been demo-ing the fti method for 4 days now. No losses at the end of day yet. Completely naked.
Yesterday I sent out a scout. The scout was sent in the direction of the trend. After several hours he/she was 50 pips down. Two rescue parties were sent out. Several hours later, not only were the rescue parties a success, but the scout was hanging around break even. So I had 2 rescue parties in very positive pips and a scout hanging around entry. Part of me was saying close close close its a great trade. Part of me was saying just hang on this is where you thought you should enter. Then the position started moving against me again and it reminded me of a story I heard when I was younger. I searched the internet for the story and here it is:

“It’s all very reminiscent of an old metaphor in cognitive psychology. Many centuries ago in southeast Asia, some clever soul figured out how to use the thinking patterns of monkeys to make a highly effective monkey trap. The trap is a gourd with a hole in one end just big enough for a monkey’s hand to fit in, and a stout rope connected to the other end, fastened to a stake in the ground. Into the gourd goes a piece of some local food prized by monkeys, large and solid enough that it can’t be shaken out of the gourd. You set the trap in a place monkeys frequent, and wait.

Sooner or later, a monkey comes along, scents the food, and puts a hand into the gourd to grab it. The hole is too small to allow the monkey to extract hand and food together, though, and the rope and stake keeps the monkey from hauling it away, so the monkey keeps trying to get the food out in its hand. Meanwhile you come out of hiding and head toward the monkey with a net, if there’s a market for live monkeys, or with something more deadly if there isn’t. Far more often than not, instead of dropping the food and scampering toward the safety of the nearest tree, the monkey will frantically keep trying to wrestle the food out of the gourd until the net snares it or the club comes whistling down.

The trap works because monkeys, like the rest of us, tend to become so focused on pursuing immediate goals by familiar means that they lose track of the wider context of priorities that make those goals and means meaningful in the first place. Once the monkey scents the food in the gourd, it defines the problem as how to get the food out, and tries to solve the problem in a familiar way, by maipulating food and gourd. When the hunter appears, that simply adds a note of urgency, and makes the problem appear to be how to get the food out before the hunter arrives. Phrased in either of these terms, the problem is impossible to solve. Only if the monkey remembers that food is of no value to a dead monkey, and redefines the problem as primarily a matter of getting away from the hunter, will it let go of the food, get its hand out of the trap, and run for the nearest tree.”

The scout moved back near break even and I closed the position.
I am such a monkey.

Nice story, Mike! We all can be like a monkey, from time to time, but we have to use claws and teeth to get out of trap.
Alex

Mike...nice story ya.....but

i guess your rescue take too long....if you happened to bump into a big trend within that period of hours....(if u r agasint the big trend) then ur rescues will turn into giant killing machine.....

yes i owe all of you my deepest thank you for the wisdom.... especially fti.. finished reading all from the start of the thread two weeks ago... very rare stuff but very enlightening... i got my losses back for this month after careful reading this thread and try to incorporate it to my trading style.... thanks again...
i missed fti stories....

Yes Looney.
More than one thing was wrong with the trade. I left the details out because I know most of the things that went wrong. Definitely rescued too long. I just wanted to share my feelings when it turned in the "right" direction for me.

Folks,

today I rode the wrong bus...and I learned several lessons that I want to share with you about my learning on risk managment.

1-Define clearly how much you want to lose for peace of mind. This will help at the time that we need to bail out and not have much regret. Losing more than 1000 pips is not worthy. 1000 pips? Yes, 1000 pips. When yo reach your limits....PULL THE TRIGER!

2-Keep your sizing small and do not have too many troops outs. More than 3 waves out is probably too much.

3- Fti seems to be correct. It would take quite a few months of practice before we could understand -somewhat- this MO.

fti' strategy works but oh lord...it is really really dangerous...if you do not have the gut and a large bank account, you could easily go for broke.

Me? I am reducing again my sizing not because I was emotional but because I am still developing the best way of take profit as well as managing the news.
My loss today was too high for my style....I either go full size to deal with win/loss ratio -which is fine with me- or keep evaluting different approach to manager risk. I prefer the later.

Note: I stopped placing my trades in my forex factory journal for my own peace of mind. People should practice they own way and find their path.

In my short learning, I came to the realization that naked trading is tough and for the tough one. Why? There are not regulalities and we must be totally aware of the market unless she will destroy us. What I mean?...you are on your own...It is she and you. Peace.

I am very glad that i found this thread beacuse he learned me everything. Today i was on a seminar in ljubljana and one shiter was talking about forex and how to be profitable i was really shocked and i hope people won't do what he said. I also met AJ Monte and he is a perfect guy. Maybe i didn't like when he said never buy a stockin which you are already in loss but later when i talked to him he admited you can do that but you need a lot of money. I am really glad and i got some fti's concepts what is seen on my trading DEMO account. I attached trades from last month. I know i have to learn a lot more and i don't like that whatever i buy if failed i rescue it and make money. Last trades was kind a gamlbing for fun and i always made money. I will now start microaccount 50 USD just to get a feeling for a real money. Instead of big attacks i will use this money. People really we must take FTI's concepts but the most important part is YOU. I have the biggest problem with me because i am hiperactive and too too young. But i hope time will change me. Regards