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Technical Analysis Fallacy

  • #2,521
  • Edited 3:52am Apr 24, 2008 3:36am | Edited 3:52am
Quoting leighsww


Hey, everybody thought Columbus was crazy to believe the world was round, and if people never tested out the art of flying, we'd be still ground traveling today, so sheesh, I'm going to at least test something out and quantify it before giving it the axe prematurely :

No it's not quite the same as what I'm referring to, cuz what I'm talking about HAS to be done trading TWO pairs, otherwise it won't work. And it has to be done with EUR/USD and USD/CHF specifically, because of the high negative correlation between those pairs.

Sorry, but most of you aren't grasping the concept ...
>>>actually I had similar idea but jest told me that hedging E/U was not a good idea. I think fti talks about hedging in some other thread. I rejected thte hedging thing...warning: correlations evolve and are not perfect...

Thanks for everyone's concern and opinions, but I've gotta at least give this a test drive, okay? I don't like to just jump to conclusions without at least testing things out
>>>Please experiment and tell us what you find...I know you are not crazy to put cash down...try being sucessfull during the news as a testing ground.

Like I said, it might not work like I originally thought, but I'm still gonna give it a try.
Today, I did just demo because I am trying to find a way around surprises as the NEWS...so I demo.

The questions? How to avoid catastrophic days...can we dance regularly the news?

Experiment: let us play a regular dance and see...result: Either learn how to dance the news or get out of the way!! I am attaching the chart for this morning dance....Yes, I won because I followed the trend...but...

Note the prior bar before the news...the trend was broken 20 min before the news...leakages in germany?

It moves so fast that the scout was taken out almost inmediately...so I reenter..

my plan: just demo the news to gather analytical data... I need to solve this problem

Regards
Attached Image
Empty as water and soft as a facing wind mountain
  • #2,522
  • Apr 24, 2008 3:49am Apr 24, 2008 3:49am
a good hedge should not only minimise or offset losses but also complement winnings. thats my humble opinion.
  • #2,523
  • Edited 7:03am Apr 24, 2008 6:45am | Edited 7:03am
Okay, before I go to bed, I wanted to post the trade I did tonight with using my hedging theory method

I'm doing the experimenting on my live account, cuz the EFX/MBT Navigator "demo" has major deficiencies sometimes, thus it's unreliable.

I used a small .2 lot size per pair for my testing purposes. Rescue was needed at 2 lots (10x) to be 10 pips from B/E due to the huge (125+) pip move on the NEWS spike (just for you, luSan ).

If I was in with .5 lots, I would have needed 5 lots to be at 10 pips to B/E.

For the "rescued" trade (EUR/USD), I ended up with a LOSS of 1 pip, cuz it slipped me upon exiting the trade, lol. If I wasn't in a hurry to post this (and get some sleep), I would have waited a bit longer to try and exit at B/E + commission amount :

Okay, after having done this first trade, I will want to keep in mind for future trades that my bias should be in favor of the EUR/USD when picking my entry positions. With this last trade, my P/L was in the RED when going into the rescue of EUR/USD. If I could have taken profit on the EUR/USD pair instead of the Swissy, my P/L would have been in the GREEN going into the rescue of USD/CHF and that would have been a good advantage.

The middle image shows my "Positions" window of my MBT Navigator, so you can see how the hedging was working.

The last image is my trade data.

I will put another trade in before I hit the sack and leave it overnight to test out how it will look in the morning without having babysat it. The hedging will let me be able to do this without losing sleep over it

I hope this post with my charts and data makes it a little easier to understand what I was talking about. I'll continue my testing to see if I run into any major flaws, lol.
.
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  • #2,524
  • Apr 24, 2008 8:56am Apr 24, 2008 8:56am
Quoting luSan
Today, I did just demo because I am trying to find a way around surprises as the NEWS...so I demo.

The questions? How to avoid catastrophic days...can we dance regularly the news?

Experiment: let us play a regular dance and see...result: Either learn how to dance the news or get out of the way!! I am attaching the chart for this morning dance....Yes, I won because I followed the trend...but...

Note the prior bar before the news...the trend was broken 20 min before the news...leakages in germany?

It moves so fast that the scout was taken out almost inmediately...so I reenter..

my plan: just demo the news to gather analytical data... I need to solve this problem

Regards
luSan, I tend to avoid the news. It is too unpredictable and is the ideal time for market makers to manipulate price. I knew some traders who traded only the news, but they were more of the fundamental type and would spend all day reading reports. They claimed to be successful but that cannot be confirmed, however they went in and out very quickly.

Sometimes the direction is obvious based on technical analysis but more times than not, one tends to get burnt. When I was trading longer term I could ignore news as it was normally just a blip on my charts.

From my view, news tends to inject liquidity into the market but can become unstable for a while so I'll wait until it clears up before entering. That could take 5 mins to 30 mins. If I am in a position already then I may close if uncertain and I have good profits locked in.
  • #2,525
  • Apr 24, 2008 9:20am Apr 24, 2008 9:20am
Quoting leighsww
LOL, I think you're the only one (possibly you too, Zoran, but your question as to why I'm not wanting to hedge the same pair, leads me to believe you're not quite understanding it completely .
The point I was trying to make about hedging the same pair is that it is not too dissimilar to what you are attempting to achieve. I have attempted both and my brain just couldn't cope, but as mentioned, women are supposedly multitasking so you could be in luck!

So hedging the same pair, I could be +47 and -53 (with a 3 pip spread), I collect 47 and then attempt to rescue 53. The balance is guaranteed but with a -6 deficit, why would you want to? However, with your method, you could be +50 and -75 or +60 and -45, it's still similar but is a bit of a gamble depending on which one is ahead.

You mentioned you will be playing with the profit to rescue the hedge, but only if the profitable one is ahead, which is not guaranteed, especially with the disadvantage of paying 2 x spread. I'd say you will probably find yourself in a position where you have more to rescue than have made so the balance is against you.

Also, the ability to snowball profit is so much more difficult. However, that is my opinion and knowing you, you'll be determined to experiment and prove its worth so don't let my opinion distract your ideas.

I'll have to side with luSan and stick to fti's teachings. I would even take it one step further and be willing to become his mirror image. Then I could stand on the shoulders of a giant and possibly move to the next level.

Take care
  • #2,526
  • Apr 24, 2008 10:41am Apr 24, 2008 10:41am
Do banks use TA
  • #2,527
  • Apr 24, 2008 11:57am Apr 24, 2008 11:57am
Leighsww,

I saw in your journal that you were following feb pullback strategy of 1D/4H. Why did you stop? I think that on those days of news, I could change his approach to the 3H for trend and 15M for timing and trades during those days. Then I would only have to make 3 or 4 decision per day.

So why did you stop? Are you still using his approach? I think that green david is using something similar...I think...

thanks.
Empty as water and soft as a facing wind mountain
  • #2,528
  • Edited 1:21pm Apr 24, 2008 12:53pm | Edited 1:21pm
Quoting Zoran
You mentioned you will be playing with the profit to rescue the hedge, but only if the profitable one is ahead, which is not guaranteed, especially with the disadvantage of paying 2 x spread. I'd say you will probably find yourself in a position where you have more to rescue than have made so the balance is against you.
Read good my posts again, I noted that my theory of playing the profits might not work like I originally thought

But, I should want to choose my direction carefully, so as to try to keep the one to TP the one in the GREEN.

Quoting Zoran
Also, the ability to snowball profit is so much more difficult. However, that is my opinion and knowing you, you'll be determined to experiment and prove its worth so don't let my opinion distract your ideas.
I wouldn't be snowballing profit. Hmmm, I think you still don't understand what I am doing or what I was trying to say.

Like I said, I'm experimenting with it to see if this may something viable for people who want a no stress system, that's all. Sheesh :

But, I may find that it might not work, so that's why I'm testing it.

Quoting Zoran
I'll have to side with luSan and stick to fti's teachings. I would even take it one step further and be willing to become his mirror image. Then I could stand on the shoulders of a giant and possibly move to the next level.
That's fine, I didn't say that this was going to be for everyone. Those who can already dance well, just keep doing what you're doing. If fti's attack sequence method is working for you, then don't change it.

It was working for me, too, but as I mentioned earlier, I was just trying to find something for those who might want a little safer and less stressful way, because I was getting the feeling that people might be getting that fear back and it seemed that people were resorting to taking losses much more easily and frequently (was what I was interpreting after all the discussion of the tidal waves incidents).

Anyway, like I said, this theory of mine may or may not work, I don't know yet without more testing.

But regarding fti's style ...

fti originally didn't want me to post any charts (I had mentioned this in a post way back) or give away all his secrets, because he wanted people to find how to dance their dance themselves, whatever that may be.

His whole premise was mainly to teach the foundation (the mindset), and the "concepts" of his MM, and just to get people on the right track.

After learning more than what he was disclosing here, I was worried that he wasn't giving enough of all his secrets to make this thing work for most.

He was worried, however, that if he taught everything, then some would self-destruct. He was already finding a few who he was concerned about cuz of how they were starting to use what he had so far shared (that was somewhere before AOW).

He finally ended up sharing most of his secrets, even posting how he actually sequences his dancing, so that was good for us to get more details to his style, but I know he was still worried about how it would be used by those who are too aggressive and gamble (not his words, but mine, but what I sensed would be what his fears were), lol. It's funny, but it would be his mirror that he feared in others, cuz in some ways, he was way too aggressive and in some ways, gambled, too, but because he is just that good (probably one of the best), he can get away with it, but it has ruined his health.

I had many times told him that he may self-destruct himself one day, so he is not exempt from his own "mindset" teachings, lol, although he argued with me that it would not happen to him. I'm sure Gann and other gurus who self-destructed in the end, didn't think it would happen to them, as well. I guess when we get that good, we think we are invincible and although we can see others' shortcomings/demons, we can't see our own.

Anyway, although fti's method is an aggressive one, and many of us would not be able to do exactly like him, at least most of us here are tailoring it to fit our pocketbooks, so that it can still work for us and that's good.

He has often said, "don't do/be like me, do/be better than me" so he is not against people finding other ways of dancing that may enhance or make things easier or better for themselves.

He encourages open-mindedness.

But if you guys are finding what I am posting distracting and not what you want to hear, then please just disregard my posts.

Anyway, again ... I was not saying to do this method for everyone, just for those who may want something that might make it safer for them if they need it. Is it safer? Well, I'm trying to quantify it to see if it may be. It very well may not be, but I don't know that until I test it and quantify it.

But everyone who wants to, can try it out on "demo" themselves, so I will not post any more about it from here on.

I believe my contributions here are about done anyway. You guys have all that you need to find your own dance, and to succeed in the way you want.

I am getting super swamped with other business/personal things, so I probably need to take a break from here anyway. Please know, I am not leaving because of what you guys have said here, I really have been neglecting some of my other duties and deadlines that I really should take care of and haven't because of my obsession here, haha. So, I needed an excuse actually, to leave again (I was saying that I needed to earlier, but as you can see I still hadn't) :

I am just explaining why I need to leave, so that you guys don't think I am leaving cuz of what you've said, lol.

Zoran ... yes, please carry on his teachings/works, but take care that you don't become his exact mirror image, cuz we don't want you to lose your health, as he has. Watch out for your Scorpion, as well :

One of the most important of all of fti's teachings is our "mindset" so if we don't falter there, we can make our dances work beautifully.

Okay, good luck and much success to everyone! (okay, I have more than 5 emotes, so it won't let me enter the *hugs* emote, so you'll have to imagine the *hugs* emote here, lol)
  • #2,529
  • Apr 24, 2008 1:05pm Apr 24, 2008 1:05pm
Quoting luSan
I saw in your journal that you were following feb pullback strategy of 1D/4H. Why did you stop?
I stopped because fti offered to train me after the incident in feb's thread when I came to fti's defense, lol.

I originally declined his offer, because I was committed to doing feb's method and wanted to make that work, but as I mentioned in a previous post here, my husband thought I should take fti up on his offer, since it's not everyday that a "Pro" trader offers to train you, lol.

fti knew I was committed to feb's method cuz I told him so, so he was respecting my stance, but said that he still wanted to help me however he could to enhance my trading.

But, with encouragement from my husband (as well as I was constantly waiting for that dang bus :, lol), I graciously accepted his offer and I'm glad I did, because I can see that it is much more powerful and is the way to trade.

With fti's method of reaveraging and because my profits exceed my losses and just the potential of what I can do, I can make the commissions work more feasibly with daylight trading than it had before, thus I way prefer daylight trading on the 5m rather than the long-term trading on the Daily now.

Quoting luSan
Are you still using his approach?
No, I am not using feb's method anymore, as far as the longer-term trading, but the V-formation is still very viable and usable, as far as watching for that on the Daily and 4hr for good idea of where the longer-term trend may be heading
  • #2,530
  • Apr 24, 2008 1:16pm Apr 24, 2008 1:16pm
@Lusan

I thing Feb's idea of buy on discount has some value. That is buy on retacement.

@Leighswww:

OK, I believe you can find out the way of your experienment of new method. Thanks for reminding me "slow and steady"

Today E/U dropped more than 200 pips.

I sent a wrong scout to long E/U, now it is stuck with 210 pips in dead water. Luckily I also shorted G/U which brought me some profits, and I did a lot of rescues. Now it is only a small loss. Money management is so important.

And I think I learned or strenghened a lesson today. Today E/U's big drop is due to bad IFO data which changed expectation of E/U. So, in this case, take loss and reverse may be better, I reversed some but not held until 1.5640.

Well, maybe we have seen a multi years E/U top.
  • #2,531
  • Apr 24, 2008 1:49pm Apr 24, 2008 1:49pm
Quoting Green_David
I thing Feb's idea of buy on discount has some value. That is buy on retacement.
Yes, definitely for that, too
  • #2,532
  • Apr 24, 2008 2:16pm Apr 24, 2008 2:16pm
Quoting Green_David
I sent a wrong scout to long E/U, now it is stuck with 210 pips in dead water. Luckily I also shorted G/U which brought me some profits, and I did a lot of rescues.
David ... just a note ... G/U normally goes in tandem with E/U most of the time, so be careful when you enter opposite. You were lucky this time that it went opposite, but that is gambling :

With my theory method, this hedging can only be done with E/U and U/C, in my opinion, because they are high "negative" 90s correlating pairs (meaning, they go opposite of each other most always and in close proximity).

Anyway, you probably weren't going short G/U for hedging reasons, so I guess it doesn't matter/apply, but please be careful when you enter opposite positions on normally "positive" correlating pairs.

ACK, okay I gotta stop and get outta here, lol.

These forums are too addicting :

Best wishes on your success, David!!
  • #2,533
  • Apr 24, 2008 2:28pm Apr 24, 2008 2:28pm
Quoting leighsww

I believe my contributions here are about done anyway. You guys have all that you need to find your own dance, and to succeed in the way you want.

I am getting super swamped with other business/personal things, so I probably need to take a break from here anyway. Please know, I am not leaving because of what you guys have said here, I really have been neglecting some of my other duties and deadlines that I really should take care of and haven't because of my obsession here, haha. So, I needed an excuse actually, to leave again (I was saying that I needed to earlier, but as you can see I still hadn't) :
Leighsww,

you will be really missed here...You shared so much and kept us going... but I understand...I thought too about stopping and just practice without interacting... we get so involved with forex...it becomes almost an addition...

When I said that I am orthodox...I meant that I would be trading just a pair for a while because I cannot split my attention...Of course, as you already know, I adapted fti to my own ways...

Once I thought to stop my journal too because I do not want to be imitated and have the responsibility of other getting into a financial crisis...still one person begged me to keep posting...so I still post my trades... fit gaves us his wisdom from his heart so I thought that maybe I should be kind too sharing the little I understand...

You too have been very very kind and I do hope we keep interacting...Your earnest trading and commitement is very supporting for us newbies seeking from a way out of the forex storm.

By learning we change...so keep experimenting. I am sure that you will find away to improve MM and risk management... would you please return sometimes and tell us about your hedging experiments?

Good luck, best wishes, and happy pipping
Empty as water and soft as a facing wind mountain
  • #2,534
  • Apr 24, 2008 2:30pm Apr 24, 2008 2:30pm
Quoting Zoran
So hedging the same pair, I could be +47 and -53 (with a 3 pip spread), I collect 47 and then attempt to rescue 53. The balance is guaranteed but with a -6 deficit, why would you want to? However, with your method, you could be +50 and -75 or +60 and -45, it's still similar but is a bit of a gamble depending on which one is ahead.
Ah, I reread this part and I see now what you are saying. Because my platform does not allow me to hedge the same pair, I did not know/realize this.

I hadn't given it enough thought about all the mathematics of it, but in theory I figured it would work.

I guess what you are saying makes sense then, lol.

But, there are some advantages that I can think of ... can leave the baby unattended, and not having to stress about the power going down or Internet disconnect, or things like that :. I'm mainly taking out the stress level, but you're right, we would have to make good rescues on the remaining pair left in the battle after we take profit from the other.

So, again, this is something that people who want to can demo for themselves to see if it works and if not, then scrap it, lol.
  • #2,535
  • Apr 24, 2008 2:37pm Apr 24, 2008 2:37pm
Quoting luSan
By learning we change...so keep experimenting. I am sure that you will find away to improve MM and risk management... would you please return sometimes and tell us about your hedging experiments?

Good luck, best wishes, and happy pipping
Thanks, luSan, and I will.

P.S. This will have to be my absolute last post, lol, cuz otherwise I'll never get out of here, so THANKS everyone for all your shares, and such.

Please, NO need to say goodbye, sheesh, I'll be back if and when I can. I just had to explain once again why I was having to leave. I didn't want you guys to think I was leaving cuz of the negative comments, cuz sheesh, I'm stronger than that :, but if I left for a long period without a word, then you guys might start thinking that something happened to me (like we're wondering about fti ).

Okay, so anyway ... see ya!
  • #2,536
  • Edited 2:57pm Apr 24, 2008 2:46pm | Edited 2:57pm
ACK, Zoran, I just thought of one more advantage, so I have to at least say this before FINALLY leaving, lol ...

Okay, I guess whether it's one pair or two separate opposing pairs, I guess my whole originally thinking in regards to the hedging is that we want to make a profit, so I guess why not rescue your other hedged position so that you can capture the full 45 pips rather than be -6 in the RED? lol

Anyway, I may still be wrong about this whole theory, but it sounded good at the time when I was thinking about it :
  • #2,537
  • Apr 24, 2008 2:53pm Apr 24, 2008 2:53pm
Quoting leighsww
I wouldn't be snowballing profit. Hmmm, I think you still don't understand what I am doing or what I was trying to say.

Like I said, I'm experimenting with it to see if this may something viable for people who want a no stress system, that's all. Sheesh :

But, I may find that it might not work, so that's why I'm testing it.
Hi Leigh

Yes, I understood you wouldn't be snowballing, but I see it as an important tool not to leave out. As I have gone through my trading life, I have tried to come up with many different methods myself and after some thought I have come to certain realisations.

I also experimented with something similar to what you have mentioned. I couldn't get it to work as mathematically one negates the other which comes back to even but minus the spread and you are at a slight disadvantage.

As I mentioned, it doesn't mean you shouldn't try. It may help you psycologically so there's no reason you couldn't build a system around it. That's why I tried to encourge you to test it and find out for yourself but I also wanted to make you aware of the shortcomings.

Your contribution to this thread is enormous Leigh. You have an active and healthy mind so keep it up. Remember you were the one who encouraged fti to share his experiences and I am forever grateful to you. Peace

Quoting leighsww
I had many times told him that he may self-destruct himself one day, so he is not exempt from his own "mindset" teachings, lol, although he argued with me that it would not happen to him. I'm sure Gann and other gurus who self-destructed in the end, didn't think it would happen to them, as well. I guess when we get that good, we think we are invincible and although we can see others' shortcomings/demons, we can't see our own.
Yes, I agree. I think his self-destruction may come from neglecting his health but hopefully his wisdom will allow him to see that and prevent it.

Quoting leighsww
He has often said, "don't do/be like me, do/be better than me" so he is not against people finding other ways of dancing that may enhance or make things easier or better for themselves.

He encourages open-mindedness.
I don't know who fti is and even if I did I still probably wouldn't know him, but I see him as a giant in the trading world and when I say I'd like to become his mirror image, what I meant was I would like to eventually stand on his shoulders like in the meaning "Standing on the shoulders of giants". So first mirror his knowledge and then, if I am capable, I can improve it.

Quoting leighsww
I believe my contributions here are about done anyway. You guys have all that you need to find your own dance, and to succeed in the way you want.

I am getting super swamped with other business/personal things, so I probably need to take a break from here anyway. Please know, I am not leaving because of what you guys have said here, I really have been neglecting some of my other duties and deadlines that I really should take care of and haven't because of my obsession here, haha. So, I needed an excuse actually, to leave again (I was saying that I needed to earlier, but as you can see I still hadn't) :
Come on Leigh. You are not going to leave and I'll swamp your email address until you've had enough. I understand you have things to do but that does not mean you have to leave. I've got a demanding wife and three young demanding children but I still somehow manage find a bit of time to devote to this thread - even if that means staying up late at times. Do what you have to do but even if you allocate an hour or two a week, you are still with us.

Quoting leighsww
Zoran ... yes, please carry on his teachings/works, but take care that you don't become his exact mirror image, cuz we don't want you to lose your health, as he has. Watch out for your Scorpion, as well :
Yes, I can see that scorpion and I know it's there but I am becoming more and more confident. Each time it shows its head I learn something new so I am working out my weak points and adapting. The scorpion will be history.

Good health and well being to all of us. Take care of your business but speak soon Leigh.
  • #2,538
  • Apr 24, 2008 3:00pm Apr 24, 2008 3:00pm
Hi All,

Re Leighs hedge/rescue/profit idea; I think this is an interesting concept, that will be worth experimenting with. By diversifying risk, foraging on the enemies resources to rescue the unfortunate, rather than your own has some merit. The difficult part will be the attention required to the multiple dance partners as mentioned by Zoran and Lusan. I think this concept could be considered as the snake with two heads, if you do ever lose the correlation or even if the correlation gets out of sync, you could be rescuing two scouts at the same time, something to watch out for, although rare, could happen. Fti did mention that his concept can be adopted and that there were many ways to slice the pie as per say, meaning we do not have to dance exactly as he does, but to apply the fundamentals of the philosophy to what works for each individual trader. Lusan uses different skews than Leighs, as well as different time frames. I use different skews, MM, and time frames as well, although similar, they are all different, but the philosophy is the same. Some traders are attacking with 3 levels or more, some less, some even just one. Personally, I have found that my rescue is spread out over a longer time frame which prevents me from going to battle too much too quick. My exits are also quicker than Leighs or what Fti does, I am in the 7-15 range, sometimes less. Also my MM is pretty conservative (more so than Leighs) as I am trying to adopt Fti's rules of conservation of capital. Things may take a little longer, but the results will yield in the end. The point of all this is I believe there is no hard and fast rules of engagement and the attacks and battles can be fought many different ways, the difficult part is finding what works for you.

Leighs, I know you are busy and I thank you for the time and effort that you have made to Fti's thread, please continue posting as your time allows and please keep us all posted on when you hear of from Fti.

Regards,
NP
  • #2,539
  • Apr 24, 2008 3:01pm Apr 24, 2008 3:01pm
Quoting leighsww
ACK, Zoran, I just thought of one more advantage, so I have to at least say this before FINALLY leaving, lol ...
Leigh, you are not leaving and that's final! :

Now where's my whip?
  • #2,540
  • Apr 24, 2008 4:47pm Apr 24, 2008 4:47pm
Leigh
You've spent alot of time and energy with the thread and it is much appreciated.
As you take a break and get caught up with your matters at hand you'll be missed.
take care
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