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To what extent do self-fulfilling prophecies move markets? 5 replies

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TA self fullfilled prophecies... what a joke.

  • #1
  • First Post: Edited 8:00am Jan 1, 2009 7:05am | Edited 8:00am
Do fibs work?

Do MAs work?

Do Andrew's pitchforks work?

So, the point of the thread is simple: what would it take to DISPROVE randomness..... thus giving the trader a real advantage using fibs, MAs, round numbers, pitchforks, fancy MACD interpretations, stochastics, etc. Quite simply it would require a market NOT OF RANDOMNESS, but of repeating patterns.

But what is reality? It is that NO TWO YEARS ARE EVER ALIKE. The charts are never repeating. History does not repeat itself, therefore price is random.... and therefore TA is moot.

An example comes to mind.... kharvell's GBPJPY BB strategy. It backtested for several thousand pips in multiple years.... the thread was buzzing.... people were trading it with real money, and POOF! Crash and burn. Same with Heiken Ashi Smoothed. Etc.

Now please don't litter the thread with screen captures of where TA works, because I'll just have to post images where it doesn't.

And don't tell us how your are a successful discretionary trader (and that TA is a tool) because that means you are simply guessing..... and anybody can get lucky doing that.
  • #2
  • Jan 1, 2009 8:12am Jan 1, 2009 8:12am
Why do you think chart patterns never repeat when if fact they do?
Markets DO trend and good traders know how to take money out of the market when they do.
Trading is not rocket science,its about discipline and money management and finding a comfort zone method of trading that fits YOU.
  • #3
  • Jan 1, 2009 8:21am Jan 1, 2009 8:21am
I agree with tdion on that...

All the patterns (such as double tops or H&S) look very vivid as u are seeing the chart that already happen...

What we are trading is NOW..not past...

Here is my view...read post 832 to 834...

Sonic
  • #4
  • Jan 1, 2009 8:51am Jan 1, 2009 8:51am
TA must work. There's thousands of books on every techie tool ever made and each author has made a fortune from using these miraculous, mathmatical machines of monetary misfortune.

You ask, "what is reality?" That's the $700 Billion question so I'll take a stab at this one first. We live in a three dimensional hologram built from objects consisting of points which make up lines which make planes which make up three dimensional objects. The problem is that points, lines and planes don't exist by themselves in the third dimesion, so our reality is based upon objects made from things that don't exist? WTF!

Soon after I realized the falacy of three dimensional TA tools, I started to work on indicators that transcend the third dimension. Unfortunately, soon after I left this dimension, I no longer had the need or desire for monetary gain and my indicators were not visible even after I placed them in the MQL>Experts>Indicators folder. Even though I can now see the reality of this three dimensional retail FX market, my attitude has become so complacent that I frequently make mistakes such as opening positions with 0.01 lots instead of 1.0 or I will sometimes forget all together that I have open positions.

Now, about radomness. While in the third dimension I view everything as random. Order appears in various ways for varied amounts of time. Fractals, Fibos and social hierarchy are a few examples. Only when I leave this false reality do I catch a glimps of the order to all things. There are energies and powers that are much greater than I (obviously, hence my user name) and it is futile to attempt any kind of game based on a show of power in hopes of gaining an 'upper hand'. Where I have succeeded though is through complete surrender and acceptance of what ever happens and what has happened and instead focussing all attension on what is happening.

There it is in a 'nut shell'. I could write a book on this subject and promise great success to all who master the paradox of life by practicing systems based on multidimensional indicators, but someone else who has great ambition and can justify any means to an end will most likely be selling e-books on the subject soon.

"The Truth is Out There"
  • #5
  • Jan 1, 2009 8:53am Jan 1, 2009 8:53am
I began to look at the markets on January 2006. In the eyes of some, I am still a newbie. So I might get this advice of "Son, you need more screen time " or "You need 10 years so you can understand the markets" or any of that crap. Well actually, I already had people giving me those tips.

Probably my story is nothing new on this forum. One day, after trying every mathematical man-made indicator under the sun, I decided to learn (by myself) the concept of accumulation-distribution. Then I had this "AHA" moment.

I was trading off 4 hr charts. I noticed that I was very much at the mercy of the market. Then I went radical down to seconds charts. It all made sense. Now I have complete control over my trade as opposed to trade off higher time frames "hoping" for a trade to come my way.

Tidion, my trading is simple - I just wait for a period of accumulation and I *anticipate a move* either down or up. I use the word "anticipate" because you need to understand, at the end we're just speculators. If the market fill my order (I try to use limit order as much as possible) then I have my finger on the panic button. The market must go my way within a reasonable time. If the market stalls or reverses with anger (remember I am trading off 5 seconds) I just bail out and wait for the next one. I keep doing that until I reach a limit (money management) or I get on the wave.

There's a trade off. Spreads.

Here's why I opt to trade currency futures, Actually, they have a *Mini EuroFx * contract with $6.25 per tick. Not bad. I pay $4.65 on comish per contract. If I get a quick in and out due my trade not going my way, either on 1 tick I am already in profit. I get way better charts , faster execution and no worries that the platform freezes or knowing that the broker is at the other side of my trade.

In my book, fear, overtrading, greediness etc. are not the #1 killer of any trader. Hoping is.

You get a "highly probable setup " and place a trade *Hoping* that the market will move your way. I've been there many times. Go figure, I remember I used fibos a lot on my beginnings, because I "backtested" the charts to the point my fingers bleed and I was "completely sure" fibos were a repetitive pattern in ALL markets. That cost me 7 grand on 2007 because I kept going "hoping" my setup will come alive attenuating past losses. The joke was on me.

I high probable setup for me is a period of accumulation. I chose to be in a quick time frame to be first in line when that bomb explodes. I keep my looses in a short leash and I don't care if I bail out many times during the day.

Surprisingly, it's not hard to trade like this. It was hard at the beginning 'cause I've been listening to many "talking heads" all over the internet and my mind was biased already on indicators, gazillion time frames, you need so much experience, all kinds of crappola.

So here's a testimonial on how this "self fulfilled prophecies" almost kill my account. Now I am a free man LOL.

Sorry for the long post.

Have a prosperous 2009.
  • #6
  • Jan 1, 2009 9:16am Jan 1, 2009 9:16am
Quoting tdion
Do fibs work?

Do MAs work?

Do Andrew's pitchforks work?

So, the point of the thread is simple: what would it take to DISPROVE randomness..... thus giving the trader a real advantage using fibs, MAs, round numbers, pitchforks, fancy MACD interpretations, stochastics, etc. Quite simply it would require a market NOT OF RANDOMNESS, but of repeating patterns.

But what is reality? It is that NO TWO YEARS ARE EVER ALIKE. The charts are never repeating. History does not repeat itself, therefore price is random.... and therefore TA is moot.

An...
Tdion,

What exactly are you seeking? You are one of the oldest members on this forum (registered), yet every few months you continue to initiate threads and discussions such as this. These are good questions to ask, tdion, and everybody has their doubts. In fact many of your assumptions are correct. Yet these are realizations that I expect to see in 6-12 month olds (trading age), but after that the questions usually get more direct, less rant-like, and capture some type of understanding behind them.

I could go down your rant and address the topics one-by-one, agreeing on a few points and disagreeing on others, and perhaps this might change how you view things. But it seems as if you have already made your decision about the questions you ask. You believe the market is completely random, that TA and FA are useless, that all systems crash and burn eventually… You also ask how to disprove randomness. What this is asking, in essence, is what it takes to trade successfully. Theories and concepts can be applied to the idea of market randomness, but in the end the proof lies in those that succeed, as they beat the odds that randomness can never produce.

In the end, you will never find the answers to your questions here, on this forum. In fact, it is this superficial exposure to the markets that creates such absolute claims in you to begin with. In reality, the origins of your doubt lie in the ongoing exposure to failure. No one is succeeding, everything fails, and all seems random. Right? Well when you look around you, in this place, then yes, those claims hold true. As such, your rant is completely justified in this environment. But keep in mind that your rant extends to this forum alone, the very environment you challenge. The same ideas and concepts that frustrate and hinder you are about to be aimed at you by the discussion of this thread you created. So, instead of creating yet another corner inside of the very environment you challenge to bitch in, why not get out of this crutch and actually start learning?

I know I am coming accross rather harsh, but given your history, tdion, I seems you enjoy a good debate.
Headline: USD drops due to news of USD dropping!
  • #7
  • Jan 1, 2009 9:48am Jan 1, 2009 9:48am
Quoting tdion
Do fibs work?

Do MAs work?

Do Andrew's pitchforks work?

So, the point of the thread is simple: what would it take to DISPROVE randomness..... thus giving the trader a real advantage using fibs, MAs, round numbers, pitchforks, fancy MACD interpretations, stochastics, etc. Quite simply it would require a market NOT OF RANDOMNESS, but of repeating patterns.

But what is reality? It is that NO TWO YEARS ARE EVER ALIKE. The charts are never repeating. History does not repeat itself, therefore price is random.... and therefore TA is moot.

An...
tdion,

If that's how you feel, what the hell are doing here? Why waste your time with FOREX at all?
  • #8
  • Jan 1, 2009 9:58am Jan 1, 2009 9:58am
I think it's important to accept that the market is (mostly) random, else you'll be searching for reasons behind every move or trying to predict where the market would be in advance.

I owe Tdion one. Because of him I opened this thread. I saw a post from him that seemed ridiculous (something about that the market was random) so I thought that I could prove this theory wrong. I was absolutely sure that I was right and the theory "the market is random" just seemed complety wrong. The content of that thread made me realize what (now) seem so perfectly logical, that the market indeed is random.

Nothing is more educational when you're 100% sure about something and then realize you where dead wrong !

TA work and have worked for 100's of years and I'm sure it will work a 100 years more. It takes an strong mind along with many years of experience to to see any (positive?) results, IMO
Measure twice, cut once
  • #9
  • Jan 1, 2009 10:46am Jan 1, 2009 10:46am
Singers sing and make CD to sell, but no one guarantee it will sell money. Artists paint and sell their painting, and again there is no guarantee anyone will buy the drawings.

Everything we are doing is just a buy-chance game. But a good painter knows his / her drawing has a high-chance of being sold, that's the case as with a good trader.
  • #10
  • Edited 11:14am Jan 1, 2009 10:49am | Edited 11:14am
I would recommend a book to all of you here that I just finished...... "Fooled By Randomness" by Nassim Taleb.
After you read it let me know what you think of the market and winning at this game.

As to trading ... I still only use a couple of MAs and money management, it works because even though you can't predict the future movement of price you can take advantage of the momentum, if price has started to rise the chances are highly probable that tomorrow they will continue, true it could just as easily be a down day then the following day it could resume it's course for several days or even weeks or months. the point being you have to be positioned to take advantage of this momentum.
JMHO
Same Whore .... Different Dress
  • #11
  • Jan 1, 2009 11:01am Jan 1, 2009 11:01am
Valid arguments made by all,which can be debated till the cows come home.IMHO trading success comes when the combination of money mangement,simple trading plan,experience and understanding that trading is partly mechanical and partly art.Recognition of good spots to enter a trade usually come after getting your a** kicked a few times,nothing like losing to teach what not to do.Pure mechanical systems will make money over the long haul on large time frames,but you need deep pockets to play that game.Most traders who lose do not have the emotional makeup to trade because trading REAL money will make them do the wrong thing in the heat of battle.Trading is simply not for everyone.
  • #12
  • Jan 1, 2009 11:01am Jan 1, 2009 11:01am
Quoting wp3vv
I began to look at the markets on January 2006. In the eyes of some, I am still a newbie. So I might get this advice of "Son, you need more screen time " or "You need 10 years so you can understand the markets" or any of that crap. Well actually, I already had people giving me those tips.

Probably my story is nothing new on this forum. One day, after trying every mathematical man-made indicator under the sun, I decided to learn (by myself) the concept of accumulation-distribution. Then I had this "AHA" moment.

I was trading off 4 hr...
I agree with your comments on dropping down to a quicker time frame as the risk is smaller and you can still ride a large trend if your MM is correct, but how do you trade on a 5 sec basis, do you time yourself or does your platform have a 'seconds' setting
  • #13
  • Jan 1, 2009 11:28am Jan 1, 2009 11:28am
Quoting jonmem
I agree with your comments on dropping down to a quicker time frame as the risk is smaller and you can still ride a large trend if your MM is correct, but how do you trade on a 5 sec basis, do you time yourself or does your platform have a 'seconds' setting
My platform does have seconds and tick charts.
  • #14
  • Jan 1, 2009 11:40am Jan 1, 2009 11:40am
Good ole' tdion, always throwing the cat amongst the pigeons
I'm going to write this one more time, hopefully somebody will benefit, because it's obvious nobody actually reads anything I write. The question is not can you disprove randomness, the answer is that it is quite easy to measure randomness and most forex majors are mathematically indistinguishable from random walks. The conclusion is therefore that the type of 'pretty screen' TA which is used here is utterly pointless, people are simply retro fitting patterns to random data, this is not an opinion, this is mathematical FACT. Conclusion number 2, if a system does work most of the time it is simply a random run of good luck, no better than getting a run of heads in a coin toss experiment. If by some chance a system does exploit some characteristic in a market, the people using the system have no idea what they are exploiting or how, they have just stumbled onto some happy car crash of indicators through random searches, just like the monkey with a typewriter churning out a Shakespeare play.

Before everybody jumps in to tell me I'm full of s**t, note:
1. I'm not saying trading forex is pointless.
2. I'm not saying all markets are random.
3. By dint of 2, TA can be usefull if applied properly.
The breaking of a wave cannot explain the whole sea.
  • #15
  • Jan 1, 2009 11:40am Jan 1, 2009 11:40am
I totaly agree with Tdion on market randomnes!
The "main" indicators like mas, sr and fibo etc works "sometimes" becouse
majority of traders use them, but that all means a sh## when some of the
big company or bank make a transaction....after all, they move the market...
forexflash
  • #16
  • Jan 1, 2009 11:44am Jan 1, 2009 11:44am
Quote
But what is reality? It is that NO TWO YEARS ARE EVER ALIKE. The charts are never repeating. History does not repeat itself, therefore price is random.... and therefore TA is moot.

Yawn. Except that it isn't random all the time. And when it isn't, it isn't.

Standard TA is all in the context. Learn to read the market's context and you'll be fine. Some of this stuff is so easy it's scary. Look around at my past posts for whatever proof you want.
  • #17
  • Jan 1, 2009 11:46am Jan 1, 2009 11:46am
Quoting beantrader
Valid arguments made by all,which can be debated till the cows come home.IMHO trading success comes when the combination of money mangement,simple trading plan,experience and understanding that trading is partly mechanical and partly art.Recognition of good spots to enter a trade usually come after getting your a** kicked a few times,nothing like losing to teach what not to do.Pure mechanical systems will make money over the long haul on large time frames,but you need deep pockets to play that game.Most traders who lose do not have the emotional...

"Trading is simply not for everyone." -- exact.
  • #18
  • Jan 1, 2009 12:11pm Jan 1, 2009 12:11pm
TA works but not in the traditional sense. I used to focus on MACD, stochastics, MA xovers, etc.; but my greatest revelations about trading occured when I focused on price action.
  • #19
  • Edited 1:10pm Jan 1, 2009 12:47pm | Edited 1:10pm
Quoting tdion
Do fibs work?

Do MAs work?

Do Andrew's pitchforks work?

So, the point of the thread is simple: what would it take to DISPROVE randomness..... thus giving the trader a real advantage using fibs, MAs, round numbers, pitchforks, fancy MACD interpretations, stochastics, etc. Quite simply it would require a market NOT OF RANDOMNESS, but of repeating patterns.

But what is reality? It is that NO TWO YEARS ARE EVER ALIKE. The charts are never repeating. History does not repeat itself, therefore price is random.... and therefore TA is moot.

An...

Comment 1.) Markets move up and down, this is a repeating pattern.
Comment 2.) For the most part, the same analysts, institutions with the same risks, roles and responsibilities are looking at the same charts everyday. This is a repeating pattern.
Comment 3.) I would speculate that at least 40% of all FX transactions and trades are automated...and with this notion It creates a very strong case for repeating patterns...historically.
Comment 4.) The value on everything changes with time...various assets, various indicators, various psychological levels, various tools...

Question 1.) Are you trying to convince us or yourself? You sound like you have quite a bit to work though personally...


Quoting FOREXflash
I totaly agree with Tdion on market randomnes!
The "main" indicators like mas, sr and fibo etc works "sometimes" becouse
majority of traders use them, but that all means a sh## when some of the
big company or bank make a transaction....after all, they move the market...
Markets are logical, those types of transactions or "price actions" should be factored in your strategy.
Money Talks. Wealth Whispers. Charts Talk. Traders Whisper.
  • #20
  • Jan 1, 2009 12:55pm Jan 1, 2009 12:55pm
I'd like to throw my hat in the ring and issue this reply. Most here are talking about Technical Analysis as a mathamatical tool, which strictly speaking I would have to agree. But no one has touched on the "Big Picture" of what TA really is, so here's my 2 pips worth:

The market is made up of people. Be they institutions or individuals PEOPLE are participating in the market. People make decisions even if it is to program a computer to make the same decision over and over. People behave in predictable patterns over and over. If you are burned (physically) you pull your hand out of the fire. This reaction can be predicted with a certain degree of accuracy on a mathamatical basis.

Because all people are not the same the degree and strength of their reaction to a stimulus varies, thereby giving a "random" feel to the market but the reactions still remain.

TA "tools" only allow us the ability to recongnize and quantify the underlying "emotion" always present in the market. Choose any tool you like it doesn't really matter. What matters is your ability to "gauge" the underlying emotion currently present in the market and take appropriate action to benefit.

Our job as traders is to recongnize the market for what it is and learn to "know" when it is off balance. We then use that to our advantage. Those with the more intuitive sense of this seem to gain more readily than others...thereby contributing to the market's underlying pace.

It is not "us vs them"...is it not random vs pattern...it is more like balance vs off balance, and the ability to read a chart (pure price, or "math" doesn't seem to matter), and sense the underlying emotion of the market.

THAT is technical Analysis, and it usually takes many years to develop and cultivate. For myself, yes I am still working on that aspect too, but I finally accept that I control ME not the market, and accept the market for what it is. THAT is MY edge.
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