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Technical Analysis Fallacy

  • #4,701
  • Edited 11:26am Aug 2, 2008 11:15am | Edited 11:26am
Quoting ianf0ster
Thanks Musgrove,

1. But what is a 'fortified castle' if not an area of potential S/R ?

2. Is this what FTI meant by his posts about Elliot Wave. I understood that as in his posts about support/resistance, that we should not use it .

3. In my reply to FTI, I have explained why I find trends difficult. With all the things that we should not use (from my comprehension of FTI's posts), there is very little left to base one's dancing on apart from 'feel'.

Perhaps now that I am unemployed I will have time to demo sufficiently to develop some 'feel'. Certainly it is too dangerous for me to try in my live account (due to the no stop loss rule - I really feel insecure without a catastrophic stop loss of a hundred or more pips, and I have never understood why FTI thinks these are susceptable to stop loss sweeps).

Thanks again,
Ian
problem with attacking a fortified castle, is you may lose and exhuast your army, the resources required to siege is huge. This is what Sun Tzu strongly suggested againsts.

Dangers abt tradring on SR zone is, the approaches one take whne you trade at these levels. At times , if you get it right you get a winner when you short the top. but if it breaks out you lose ur 'BET'. Then theres those stuff like fake breakouts and what nots.

In effect there is no true price, markets is merely moving from one point to another, just a fact that some points provide more psychological interests to people more than other (based on hindsight), and these are levels where the dogs fight, culling each other, each dog will have its day, for us, we KNOW these levels but in a trade at these places we're merely placing a BET (gamble) that the market will 'flow' with our skillset called pattern recognition (or whatever), and this is where the original sin has occured, instead of flowing with the market we are becoming predictive in our behaviour, and building expectations, which is a fuel for ego.

Instead ofworrying too much abt TA, try to improve on the management skillset, fti has given a few good examples on those. Scaling in and out, taking loses here and there, understand how you manage your basis, raising or lowering averages. Book management is more important. When it comes to TA, we can quarell abt prices until the cow comes home, just to feed our own ego. But ur book will tell you a better story of your whole psycholgical setup. The Kybalion has been a great inspiration for me

regards
  • #4,702
  • Edited 11:36am Aug 2, 2008 11:17am | Edited 11:36am
Ian, this thread can be confusing at times and there seems to be some inconsistencies but try and bring it down to the most basic level on naked charts and it should make sense.

At the basic level, the direction of the trend is impulsive so the action can answer that question for you. As for Elliot waves, let them come to you rather than looking for them. You should be getting 3 impulsive waves and two corrective but try to feel them rather than look for them. Try not to make assumptions and I think that's where fti is coming from - but remember this is all second nature to him. He has been at the wheel for a very very long time.

David, remember that it's difficult to transfer raw digital signals and it is generally done via analogue means. For instance, you phone line/broadband connection tends to go through copper wire as an analogue signal but the highs and lows are converted into digital signals. CDs have a laser that either reflects light or not and that then gets converted into an analogue signal that comes out of the speakers. Sound is analogue even if the recorded image is digital.

I believe the arguements tend to revolve around CD vs Vinyl but I don't hear too many people comparing DVD vs VHS or Digital Camera's vs Film.
  • #4,703
  • Aug 2, 2008 11:39am Aug 2, 2008 11:39am
Quoting Zoran
Ian, this thread can be confusing at times and there seems to be some inconsistencies but try and bring it down to the most basic level on naked charts and it should make sense.

At the basic level, the direction of the trend is impulsive so the action can answer that question for you. As for Elliot waves, let them come to you rather than looking for them. You should be getting 3 impulsive waves and two corrective but try to feel them rather than look for them. Try not to make assumptions and I think that's where fti is coming from - but remember this is all second nature to him. He has been at the wheel for a very very long time.

David, remember that it's difficult to transfer raw digital signals and it is generally done via analogue means. For instance, you phone line/broadband connection tends to go through copper wire as an analogue signal but the highs and lows are converted into digital signals. CDs have a laser that either reflects light or not and that then gets converted into an analogue signal that comes out of the speakers. Sound is analogue even if the recorded image is digital.

I believe the arguements tend to revolve around CD vs Vinyl but I don't hear too many people comparing DVD vs VHS or Digital Camera's vs Film.
hey zoran since u r here , i wanna tell u that ur analogy that trading is like swimming in the sea is nice one
To Live is the rarest thing in the world , Most people exist , that is all
  • #4,704
  • Aug 2, 2008 12:35pm Aug 2, 2008 12:35pm
Quoting ianf0ster
Dear FTI,
I am sorry but I do not understand, perhaps (after more than 6 months of reading this thread) I should conclude that I will never understand what you are trying to say.

My latest replies in Red
Response from Fti in Blue
Originally Posted by ianf0ster http://www.forexfactory.com/images/buttons/viewpost.gif

Hi All,
I have had yet another confusing day reading this thread.

As I recall, FTI says;

1. ignore S/R - so why the post about not attacking until below 50 ?
If I told you the reason, you would have to find a rock to hide under for you reading and comprehension.

- I believe that Support and Resistance either holds or it does not. Therefore it is a good place to look at what price is doing, if it reacts to the supposed S/R. Not a place to be ignored!


2. Dont use Elliot - so why are people counting the numbers of waves and deciding if they are Impulse waves or not?
You didn;t read about my comments about E waves , did you, be honest.
- I did read your posts about Elliot ( I have read every post of yours in this thread - I didn't understand most of them, but I believe this was your intention so we would have to work harder). You said that you do not use Elliot Wave Theory. Then you said you used waves - but did not make it clear what sort of waves or which part you used. Of course Waves (as per Elliot) are subjective and I admit that I have problems separating out the differing degrees or timeframes - I am not good at pattern recognition).

3. Don't go against the trend - but there are so many trends. When I determine the trend for a timeframe in the most basic way - is it up or down from left hand side of chart. Then for me the E/U daily is Up , the 1Hr is down and on the 5 min it has been completely flat for most of the day - it has just turned down about 1 hour ago. So we take our pick - long , short or stay out.You have little understanding about trends. Tell me what is the basic defination of a trend?

- There are 3 basic definitions of a trend:

1. The Dow definition - Up is higher highs and higher lows (but these are subjective and you need 2 consecutive of each for a confirmed trend - by which time it is usually about to turn. So many people guess that it is a trend after only 1 HH, HL or LL,LH pair rather than wait for a confirmed trend).

2. The 5 year old child's vision - is it above or below left hand side of chart (as currently used by Jacko). This is also subjective - how far out do you zoom?
You obviously disagree with this one, but it isn't any less subjective than the Dow definition.

3. If you can draw an unbroken non-subjective trend line (up or down), then there is a trend and otherwise no trend.
Unfortunately, out of more than 6 ways I know of for drawing trend lines, there are 3 non-subjective ways and
only 2 of them give even a similar trend line. The similar ones are:
1. Tom De Mark level 2 trend lines
2. Draw bacwards from most recently cloed bar and connect High (or Low) with oldest High (or Low) possible without crossing a bar.

The third non-subjective way is (for uptrend) draw from Lowest low (or intermediate Low if using a shorter timeframe) to Highest relative Low immediately before Highest High then pull it out parallel until no bar (between the low and high) intersect it. This is a modified version of the definition used by Victor Sperandeo (Trader Vic) because his definition allows for trawing already broken trend lines.

Ian



With respect,
Ian
Ian,
I know you posted this for fti, but I thought I'd give my two cents worth. Trending was very tricky for me, and you must develop a of doing it that you will trust each day. I believe on this post the trend is found on the day chart. However, as you probably know, there are trends within trends within trends, and most traders can find a trend somewhere to justify just about anything. My suggestion: first find a higher compression chart (day, or 4H which is what I use) as the basic trend setter for you each day. Then look back one compression higher to at least know what the bigger picture looks like. Next, find a smaller compression (for example, the 1H) and fit the 1H into the basic trend setter that you have selected. This will help you know if the big picture and smaller picture are in agreement or not, then follow the trading strategy.

When I trend, I start from the right side of the chart for the most immediate picture of trend, but then start glancing to the left more and more to verify. I want to know if the current picture on the 1H chart is an impulse of a bigger more on the 4H or day, or is retracemnent of a move on the 4H or day, etc. Two points start the trend, and by the time you get a third, I hope you are already up a bunch of pips. Learning to use fibonacci will help you pick out the castle things this thread talks about, as far as identifying possible turning points, but always wait for the turn to confirm itself (never anticipate, wait for it to actually happen). Learn to be patient and only trade when you are sure of the trend/trends.

I probably have already said enough to get me in trouble here, and have intentionally left out a bunch of stuff out of fear that it goes against this thread, but give this a try. You probably need to study several thousand trends and trend changes to really get comfortable with this (yes, several thousand) and to get it down like breathing. You have to find a process that works for you and then stick to it. Finally, just get used to the idea that trend lines are always broken, and redrawing this is just part of the job.
  • #4,705
  • Aug 2, 2008 12:48pm Aug 2, 2008 12:48pm
LOL... Zoran i am very sorry that i misunderstand you it´s my bad(my English is a problem), but you know the 007 and "L" catch my attention, tanks for your concern and yes i know that it will take long long time to drive well , once again i apolizise you...





This is how i trade Zoran...
http://br.youtube.com/watch?v=TWvzs2...eature=related
  • #4,706
  • Aug 2, 2008 1:01pm Aug 2, 2008 1:01pm
Quote
Hi Thenew,

I think you have misundersyood Zoran .
What he is trying to describe is my MO and mindset transposed to a traffic scenerio. The internalisation on the mindset and the observation of the situation thats affecting, the "drive". If you understand the only common patterns, you must also understand howthey come about. They don't just happen to be. They are formed barby bar over time. Recognition of patterns is important , only that knowing how one forms from one to another is more important. The convetinal heckline and other strategic reads of patterns do injustice to it s understanding.

What he is saying is that some people trade looking at the far horizon instead of the situation at hand and lose perspective of the managing.

Hope I articulated clearly.

Like you said , English is not mother tongue for you, so you may not articulate clearly. Similarly , you may not have understood what he had said.
Try to understand what he said, There is truely a lesson there.

Forget about his jest about james bond,it is his way of jesting.


IT´S CLEAR NOW THANKS. PEACE...



http://br.youtube.com/watch?v=WAtanH...eature=related
  • #4,707
  • Aug 2, 2008 3:22pm Aug 2, 2008 3:22pm
Thenew, no problems and thank you for the kind words maheswara
  • #4,708
  • Edited 4:00pm Aug 2, 2008 3:49pm | Edited 4:00pm
Quoting rapaduski1
Ian,
I know you posted this for fti, but I thought I'd give my two cents worth. Trending was very tricky for me, and you must develop a of doing it that you will trust each day. I believe on this post the trend is found on the day chart. However, as you probably know, there are trends within trends within trends, and most traders can find a trend somewhere to justify just about anything. My suggestion: first find a higher compression chart (day, or 4H which is what I use) - Which 4 hr do you use (there are 2 common ones and may well be all 4 in use)? I don't use the 4hr Tf because of this, just look for multiple bars on a 1hr. - as the basic trend setter for you each day. Then look back one compression higher to at least know what the bigger picture looks like. Next, find a smaller compression (for example, the 1H) and fit the 1H into the basic trend setter that you have selected. This will help you know if the big picture and smaller picture are in agreement or not, then follow the trading strategy.

When I trend, I start from the right side of the chart for the most immediate picture of trend, but then start glancing to the left more and more to verify. I want to know if the current picture on the 1H chart is an impulse of a bigger more on the 4H or day, or is retracemnent of a move on the 4H or day, etc. Two points start the trend, and by the time you get a third, I hope you are already up a bunch of pips. Learning to use fibonacci will help you pick out the castle things this thread talks about, as far as identifying possible turning points, but always wait for the turn to confirm itself (never anticipate, wait for it to actually happen). Learn to be patient and only trade when you are sure of the trend/trends.

I probably have already said enough to get me in trouble here, and have intentionally left out a bunch of stuff out of fear that it goes against this thread, but give this a try. You probably need to study several thousand trends and trend changes to really get comfortable with this (yes, several thousand) and to get it down like breathing. You have to find a process that works for you and then stick to it. Finally, just get used to the idea that trend lines are always broken, and redrawing this is just part of the job.
Hi Rap,
I think you have totally missed my point about trends - which is that they are subjective. Even the methods which rule out subjectivity are subjective because you have to make a decision to use one of them and since there are more than one this makes it subjective.

I notice that you have quoted the usual multiple timeframe stuff. So tell me if you made a chart, what would be the difference between a 1hr chart and a 1day chart for determining the trend? Somehow I doubt that you would go further back than the intermediate low made on 13 June for your 1day chart - see below. (Note the trend lines were drawn using modified V Sperandeo method- however they are almost useless for S/R since almost nobody else draws non-subjective trend lines and of those that do probably less than half draw them this way.)

As I said, I find my 1hr trend lines often look just like my 1day.

Ian
Attached Image (click to enlarge)
Click to Enlarge Name: 1_eu_1hr_trend-01aug08.gif Size: 28 KB
  • #4,709
  • Aug 2, 2008 5:12pm Aug 2, 2008 5:12pm
Quoting ianf0ster
Hi Rap,
I think you have totally missed my point about trends - which is that they are subjective. Even the methods which rule out subjectivity are subjective because you have to make a decision to use one of them and since there are more than one this makes it subjective.

I notice that you have quoted the usual multiple timeframe stuff. So tell me if you made a chart, what would be the difference between a 1hr chart and a 1day chart for determining the trend? Somehow I doubt that you would go further back than the intermediate low made on 13 June for your 1day chart - see below. (Note the trend lines were drawn using modified V Sperandeo method- however they are almost useless for S/R since almost nobody else draws non-subjective trend lines and of those that do probably less than half draw them this way.)

As I said, I find my 1hr trend lines often look just like my 1day.

Ian
Hi Ian,
I am looking at my day chart Eur/$. The trend is up and has been ranging since reaching a peak around April 22. Since then it has been ranging (from 5360 to 5970, about), so you must rely on a lower compression chart for your daily trend analysis. You can see the move up that you noted that started on June 13, very nicely on the 4H chart. I am reluctant to discuss trend change observations here, but take a look at fibs on the day chart (12/19/07 to 4/21/08). You will note that the lower level of the current trading range is a .38 fib and has been hit several times. The .38 fib is also about at the same price level as the last (s-word) of the day up move. An alert observer may note in the future when PA breaches here, and when two resistances form as a possible beginning of a new down trend. Until then, trade the range up and/or down if you like, as the music moves you. If you are using a 1H chart for this, that is probably ok. I think you have drawn the lines correctly and hope you are trading them. Remember, trend lines tell you what direction to trade (until they are breached when you need to re-analyze), not when to make the trade. You must be listening and feeling the PA for entry.
  • #4,710
  • Aug 2, 2008 5:23pm Aug 2, 2008 5:23pm
Quoting ianf0ster
Hi Rap,
I think you have totally missed my point about trends - which is that they are subjective. Even the methods which rule out subjectivity are subjective because you have to make a decision to use one of them and since there are more than one this makes it subjective.

I notice that you have quoted the usual multiple timeframe stuff. So tell me if you made a chart, what would be the difference between a 1hr chart and a 1day chart for determining the trend? Somehow I doubt that you would go further back than the intermediate low made on 13 June for your 1day chart - see below. (Note the trend lines were drawn using modified V Sperandeo method- however they are almost useless for S/R since almost nobody else draws non-subjective trend lines and of those that do probably less than half draw them this way.)

As I said, I find my 1hr trend lines often look just like my 1day.

Ian
Regarding subjectivity. Yes, you must select the time compression and trend line to trade with. It is a skill you must develop. I use the following guide when it comes to trendlines: a line on any compression below 60M is very easy for the PA to breach, but can be useful information. Many traders never trend a lower compression chart because it is meaningless.
  • #4,711
  • Aug 2, 2008 6:18pm Aug 2, 2008 6:18pm
Sorry to say but your chart made my eye twitch.

It is good to see people trying to help though
  • #4,712
  • Edited 7:39pm Aug 2, 2008 7:15pm | Edited 7:39pm
Inserted Video


The Gambler
Kenny Rogers

On a warm summer's evenin',
On a train bound for nowhere
I met up with the gambler.
We were both too tired to sleep.
So we took turns a-starin'
Out the window at the darkness.
When boredom overtook us,
He began to speak.

He said, "Son, I've made a life
Out of readin' people's faces.
Knowin' what the cards were
By the way they held their eyes.
So if you don't mind my sayin',
I can see you're out of aces,
For a taste of your whiskey,
I'll give you some advice."

So I handed him my bottle,
nd he drank down my last swallow.
Then he bummed a cigarette
And asked me for a light.
And the night got deathly quiet,
And his faced lost all expression.
He said, "If
You're gonna play the game, boy,
You gotta learn to play it right."

You've got to know
When to hold 'em,
Know when to fold 'em
Know when to walk away,
Know when to run.
You never count your money
When you're sittin' at the table.
There'll be time enough for countin'
When the dealin's done.

Now every gambler knows
The secret to survivin'
Is knowin' what to throw away
And knowin' what to keep.
'Cause every hand's a winner
And every hand's a loser
And the best that you can hope for
Is to die in your sleep."

And when he finished speakin',
He turned back toward the window,
Crushed out his cigarette
And faded off to sleep.
And somewhere in the darkness,
The gambler he broke even.
And in his final words I found
An ace that I could keep.

You've got to know
When to hold 'em,
Know when to fold 'em
Know when to walk away,
Know when to run.
You never count your money
When you're sittin' at the table.
There'll be time enough for countin'
When the dealin's done.

Enjoy.

Rgs,
Textor

P.S.: Something interesting to read:
http://www.dailyspeculations.com/wordpress/?p=3065
  • #4,713
  • Aug 2, 2008 8:17pm Aug 2, 2008 8:17pm
Quoting ianf0ster
Hi Rap,
I think you have totally missed my point about trends - which is that they are subjective. Even the methods which rule out subjectivity are subjective because you have to make a decision to use one of them and since there are more than one this makes it subjective.
Look at this chart...It looks like a downtrend...LL and LH, Right?...Note yesterday, a white bar with a huge upper shadows...Bearish, right? So I would think that this a safer trading direction than Euro long next Monday.

Regards,
Attached Image
Empty as water and soft as a facing wind mountain
  • #4,714
  • Aug 2, 2008 9:25pm Aug 2, 2008 9:25pm
Quoting luSan
Look at this chart...It looks like a downtrend...LL and LH, Right?...Note yesterday, a white bar with a huge upper shadows...Bearish, right? So I would think that this a safer trading direction than Euro long next Monday.

Regards,
Hi luSan,
I agree with the trend. Until the trend changes, I will only dance South. If I traded up, both of my mentors would take turns kicking me in the seat of my pants!
  • #4,715
  • Aug 2, 2008 9:32pm Aug 2, 2008 9:32pm
Hi all !! This is from fti!!
""Remember, that in the trading context, there are no rules,
we make up the rules ourselves, so try not to enchain ourselves.""
So as the guy says!" There are known knowns,known unknowns, unknown knowns, and unknown unknowns !! All of these can be important!!
  • #4,716
  • Aug 2, 2008 10:02pm Aug 2, 2008 10:02pm
Quoting fratti
Hi all !! This is from fti!!
""Remember, that in the trading context, there are no rules,
we make up the rules ourselves, so try not to enchain ourselves.""
So as the guy says!" There are known knowns,known unknowns, unknown knowns, and unknown unknowns !! All of these can be important!!
yes, but read post #59.

Quoting fti
...I use Daily Chart studies to indicate trend,
I use short charts to indicate form.
and there are rules as "do not be a pig b/c bus will run you over", "do not fight the daily trend b/c you will burn your book", "do not use stop losses because of sweeping brooms", "do not chase PA on breakout because of sweep and failures", etc. Right?

I am writing them so I keep them in front of my mind!
Empty as water and soft as a facing wind mountain
  • #4,717
  • Aug 2, 2008 10:05pm Aug 2, 2008 10:05pm
Hi Fti!!
I've a question regarding one of your post in which you'd mentioned about how the retail trader can follow the FLOW!!
" At the tier1 I see flow ,I check what's my blotter (you mean direction of trend!) direction!!
What did BIG ORDERS do,how often they're hitting me!(I guess either your bit your ask!!)..And Where are the DUCKS(you mean by that,stop lose sweep zones that DEEPLY can be seen from your trading platform,but can not be seen by us but just be guessed!!) How large they're pilling!!
Then you come to the point saying"But as a trader you CANNOT SEE FLOW!!!
So watch the PIPS MOVE IT SHOULD TELL YOU!!
Now can you open this more please!!'
Thank you again!!
  • #4,718
  • Edited Aug 3, 2008 12:46am Aug 2, 2008 10:27pm | Edited Aug 3, 2008 12:46am
Hi lusan!!
I agree with that !!and I read that part too!!Yeaah!! that comes from experience!!Then he gave us two options either get out from position or commit to position.But he 's mentioning about your LIMITS..So without proper size entry you 'd be dead already but you don't know yet!!Rescue operation should be thought with your entry size and how much ammo you have in case things go wrong!! You should have known that before you get in the initial position!!!then the question comes down to your TIMING!!
  • #4,719
  • Aug 2, 2008 10:44pm Aug 2, 2008 10:44pm
Quoting fratti
Hi lusan!!
I agree with that !!and I read that part too!!Yeaah!! that comes from experience!!Then he gave us two options either get out from position or commit to position.But he 's mentioning about your LIMITS..So without proper size entry you 'd be dead already but you don't know yet!!Rescue operation should be think with your entry size and how much ammo you have in case things go wrong!! You should have known that before you get in the initial position!!!then the question comes down to your TIMING!!
I think he tells us to check FIRST the daily trend and to trade in that particular direction...THEN you set your strategy accordingly: size and skews...THEN you trade the 5M and taking care of your timing...that is what I understand...that is the MO as I understand it...

The suggestion is to "get out" or "commit" if one find oneself ALREADY in the trade and something goes wrong...one pull the plug or fight to save the book...
Empty as water and soft as a facing wind mountain
  • #4,720
  • Edited Aug 3, 2008 3:07am Aug 2, 2008 11:25pm | Edited Aug 3, 2008 3:07am
Well Lusan!
I think you didn't understand what I'm trying to say ! Let me try it again!!
We can not know what the market will do next!! When we take a position we might have reason for that trade!!Base on from longer time frame either daily or 8 hours e.g to shorter time frame let say 5 minutes or 15 minutes!!Either you gonna go with longer time direction or seeing,guessing opposite retracement will take place and you 'd like to take advantage on that! even maybe for the short time period!! But it shouldn't be rigid or we shouldn't be opinionated at all!! We may guess the direction of trade base on the price action we've been following through but still we don't know the future ! Do we? We have our risk parameters ,namely our entry size ,our rest of available capital may or may not will be used depends on the what the future price action show us!!or we might have daily or shorter term targets!!But still anything can happen in anytime!! So your entry size is KEY then your timing comes later!! No matter how good your timing if your entry size is not appropriate with your capital exposure you could be taken down anytime!! I know that because I experienced that very hard way!!By the way your psychological make up is another maybe biggest hinderness you must deal with!! Because the way we raised up or education we passed through play against us in this environment!!I think in the trading arena we're in the very different habitat that whatever we learned through our entire life will be our biggest obstacle we shall overcome!!!
That's the hardest part of our journey!!I think !!!!!
Lusan I respect fti greatly!! What I'm trying to do is just asking the questions that haven't been asked yet!! And learn from him as much as I can!! He has been complaining that he 's not been asked question he 'd been expected!! And I only try to learn as much as I can from him!!
I believe he knows technical analysis very well and I believe after so many years following the all price action through his naked eyes he comes to conclusion that TA just another tools created through human observation has great fallacy that we should be aware of!! WHY???!!
BECAUSE It 's another way we as a human beings set the rules to be able to justify our actions that we based on our observation either following Mr.Charles Down basic trend cycle analysis to nowadays computerized back testing BS analysis!So that's why I think fti wants us follow the naked price action ,but be aware the others how they might react base on whatever they know about either technical ,fundamental ,sentimental realities that effects their behavior other than the majors who know and know how to fade others very well in away few of us understand what they're doing!!!
Regards!!
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