DislikedHere you go. For more information about it, go to Shakes' thread and find a post by the user "seba." He gave a link to a website about Jesse Livermore and his "pivotal points."
EDIT: Here's the link: http://www.jesse-livermore.com/price-patterns.htmlIgnored
Eur/Usd scalping inspired by Shakesfx
Oh yes, you do want good odds. I think pivotal points do provide a situation with good odds.
What I'm starting to understand is that you don't need good odds of correctly guessing everything perfectly. You don't need to be able to guess the correct entry price, time, and direction. Instead, it seems like the most important thing is being able to predict price zones where a big move is likely to occur. If you know there will be a big move, it doesn't matter if you guess the direction correctly. If you're wrong, you can...
That is exactly it mathematician... I believe that statement you just made is one of the most important things that every trader must have ingrained in their mind at all times.
It is a fact that every trader, no matter how good they are have losing trades (and NO trader knows 100% what will happen at these points).
These 'pivotal points' are a perfect example of how to either trade them like a winner or a loser.
The "key to trading" is to let your winners run, and cut your losses short.
a) The "Winners" will stop and reverse when they are wrong ........ as soon as they realise this (without emotion) and then jump on the coat tails and trade with what "the market has decided to do".
b) The "novices/newbies/Losers" will not .... they will freeze, hope it turns round, extend their stop to give it even more time to breathe and then either get out with a big loss or wait to it gets back to their entry and get out at b/e, before watching it go 50 pips in the original direction they were hoping for.
PS .... I know this is true, because I've been doing it for ages!!
Once we know what to do, all we have to do is practice, practice, practice until it becomes a) become 'second nature' ... well actually until it replaces b) as our second nature.
WG
- #574
- Mar 2, 2009 12:41am Mar 2, 2009 12:41am
Just to let you know yes I will continue to post my trades on here when I can (I can usually only do a couple of hours a day), it is unfortunate hwat has happen with Shakes and his thread
Not to taint anyones perception of "Trading in the Zone" but Chapter 8 and especially the five points of "How the fundamental truths relate to the skills" is a big one for me.
I'd be interested to see what your perceptions are when you've finished reading it.
Now I'm more confused than ever. I'm not sure of any system anymore. I've fallen into that trap where there seem to be too many options. The confusion started when he started talking about "the uncertainty principle" and thinking in probabilities, etc. Basically I'm torn between a mechanical system with very strict rules, or a more discretionary system.
Here are the 5 rules.
- Anything can happen.
- You don't need to know what is going to happen next in order to make money.
- There is a random distribution between wins and losses for any given set of variables that define an edge.
- An edge is nothing more than an indication of a higher probability of one thing happening over another.
- Every moment in the market is unique.
Now I agree with all of these ideas, and I can see how they could help you stay in the right mindset if you have a system with a statistical edge. The problem is finding such a system. By the way, he seems to be using the word "edge" to mean a trade setup, whereas I would use the word "edge" to mean that for a given setup, the average profit exceed the average loss. Let's look at the five truths in another way. I would actually start with #5.
5. Every moment in the market is unique.
[Agreed. I've never seen identical situations.]
1. Anything can happen.
[Well this just follows from #5.]
4. An edge is nothing more than an indication of a higher probability of one thing happening over another.
[Ok, fine. This is just a definition.]
3. There is a random distribution between wins and losses for any given set of variables that define an edge.
[This also follows from #5.]
2. You don't need to know what is going to happen next in order to make money.
[Yes, as long as you have an edge.]
I understand from his explanations of all of this, that believing in these ideas will eliminate your fear. Without fear you will be able to act in your own best interest Knowing that you will do what's right will confirm that you have nothing to fear because there's nothing the market could do to you such that you are unprepared. This will create a positive cycle, etc. I understand all of this and, in fact, it has helped me in my trading.
However, sometimes when I read this, it seems like he wants you to trade a mechanical system. All you have to do is find a mechanical system that has a statistical edge and follow it like a robot. In fact, just let a computer do it for you and there will be no emotions. But I don't actually think he means this because he talks so much about the psychology of trading, and computers have no psychology. (Plus when's the last time you found a 100% mechanical system that actually works?) So here are my questions:
If we are not going to be using a 100% mechanical system, then how can we find a system with an edge? If we have an idea for a system, we won't know it has an edge unless we test it. We can't backtest it because that would involve either having a computer test it for you, or you do it manually. Either way, it doesn't not simulate the psychology of live trading. So if we are going to live test it and things aren't working properly, how do we know if it's not working because we haven't yet mastered the psychology of trading, or if we are just wasting our time because the system simply doesn't have an edge?
Also, he talks about having a predefined risk and the risk or cost of finding out if a trade is going to be a winner. I'm sure he means you always have a stop in place. No problem. But he also says get out of a trade as soon as the market tells you to, and he says to never let a winner turn into a loser. This part has me confused. If you find yourself in a trade that has a substantial profit, then I can understand that you should exit if there is some indication that price is reversing on you. But if a trade is only slightly profitable, say, +1 pips, you don't want to move your stop to break-even right away. You'll almost always miss a more substantial move. What if price is +1 or +2 or +3, then drops back below 0. Should we exit or give it the benefit of the doubt and see if it will hit the original stop? Basically, I don't know how to determine when to move the stop up. I guess Shakes' 2-lot method is a good way...
Sorry for the long post. I'm just so confused right now. 
Mathematician;
This is an opinion only of an edge for the EUR/JPY. I am not an expert just have seen this work with high percentages. (See the attached chart)
This is the one minute chart from E/J today. At 16:47 bottom hit on a long run. Three wave retrace to a oblique head and shoulders formation. The right shoulder (where the arrow is) stopped at a resistance line.
I love this formation. Very high probablity (for me) that this will go short with force. I feel very confident in the play. I hit 2 lots with a limit of 10 on one and let the other...
I echo your thoughts and experiences with training yourself to take the reversal, there is often a strong fight at the point of entry on this pattern and the failure of the pattern can be as good as the successful ones. Like you, I have to force new pathways in the brain to be able to look at taking the trade against my initial position. By studying live price action I hope to be able fine tune the way I enter and manage my trades and whether to reverse or not.
.....
Thank you petelearning and shakes for your discussion and involvement in these threads. Through your efforts I am becoming a better trader.
Good work
Cam