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Psychology and MM free zone...

  • #41
  • Edited 7:38am Mar 5, 2009 7:27am | Edited 7:38am
Quoting hanover
Banned from the thread! LOL.
Damn you Hanover!!

lol
Living the adventure in my head.
  • #42
  • Mar 5, 2009 7:51am Mar 5, 2009 7:51am
Quoting hanover
Surely all analysis - whether technical, fundamental, statistical, etc - is based around the idea that outcomes of past patterns, behavior, inefficiencies etc are more likely to repeat themselves, in a certain way, on balance of probability, than not.

Otherwise, analysis is futile, and trading performance is purely the result of fortuitous guesswork.
Right. A good system can be measured historically, and you would continue to trade that system if you believed the results would repeat themselves in the future. But again it comes down to cause and effect. A common mistake traders make is that they base an entire system on historical data. They will see a pattern form, and come to the conclusion that price behaved as it did BECAUSE of that pattern alone. That somehow the patterns themselves caused the patterns themselves. Self -fulfillment right? But next time that pattern forms, things will be different, and the system that profits from the pattern last time may or may not profit from it this time. Even a 1 pip difference in the entry or exit could determine the success or failure of the trade. The only thing holding that system together is hope that masses are on their side fulfilling the prophecy the same way it did before.

So for the pattern to become fulfilled, you need a bunch of people all looking at the same thing and reacting to it in the same way. The greatest numbers in the FX market are the retail traders, yet they only account for ~2% of the daily traded volume. What does that mean? It means numbers are not important. So trying to base a system on what everyone else is seeing will not offer much potential. Instead you would benefit from figuring out who the few are that actually do make a difference, and simply trade around their intervention. In this case, you know why price is behaving like it does. You will notice that patterns are broken for a reason, or that s/r are respected for a reason. You are not just hoping to be on the same page as everyone else, you are watching who is writing the page you are on.

As you trade, your system will produce certain statistical measures based on how it has performed. You can use this info to tweak and optimize your profits, but you will never be trading based on these probabilities themselves.

Damn, I am in mid thought but have to go now. I will be back later.
Headline: USD drops due to news of USD dropping!
  • #43
  • Mar 5, 2009 7:57am Mar 5, 2009 7:57am
Hi Guys,

I'm only 6 months old, but I think timing is critical. Exact point of entry is crucial. I have noticed 'tidal (wave) ebb and flow' and how the market appears to move in cycles and how one wave or cycle can be part of a bigger wave or cycle. Its no good JUST using market order limits and stops as one could be caught out by an ongoing wave or cycle. I am not referring to Elliot/Wolf waves or Hurst cycles and I realise this is all a part of price action.

My point is that timing of entry (so you don't miss an opportunity or worse get in late) and timing of exit (so you don't watch a winning position turn into a losing one or close out a losing position too early before its had a reasonable chance to recover).

Thoughts?

Lim
  • #44
  • Mar 5, 2009 8:16am Mar 5, 2009 8:16am
Gaston's post is excellent. I look forward to hearing the rest of it.
  • #45
  • Edited 9:11am Mar 5, 2009 8:30am | Edited 9:11am
Quoting Limstylz
Hi Guys,

I'm only 6 months old, but I think timing is critical. Exact point of entry is crucial. I have noticed 'tidal (wave) ebb and flow' and how the market appears to move in cycles and how one wave or cycle can be part of a bigger wave or cycle. Its no good JUST using market order limits and stops as one could be caught out by an ongoing wave or cycle. I am not referring to Elliot/Wolf waves or Hurst cycles and I realise this is all a part of price action.

My point is that timing of entry (so you don't miss an...
See, this is the problem we have in the forum. There is alot of talk, but very little actual substance. Im not picking on you atall mate, but this is the kind of thing that Dobleace was saying before.

Talk of the price moving in Cycles or waves just meens it goes up or down, and we all all know that the price goes up and down.
You say timing is critical, ofcourse it is, what else is there but getting in at a good time? But knowing any of this above doesnt help you.

Bare bones of the matter is, Why will enough traders buy EU after you have to make the price go up? Was everyone else busy brushing their teeth when the stoch cross up and then jumped in late when they got back to the PC?lol

EDIT: DUHH! If everyone else was brushing their teeth then the stoch would not have crossed up in the 1st place. Lol, I blame lack of sleep.
Living the adventure in my head.
  • #46
  • Mar 5, 2009 9:08am Mar 5, 2009 9:08am
Yes, I see I was being a little vague, but I was not about to post specifics on my personal methodoly, primarily because I am still working on it. I see timing as being equated to volumes for a specific move up or down over time (Yes, I am aware that forex has no central exchange and is therefore not accurate but I get a feed from esignal to assist), and there are numerous excellent threads on this forum that relate to volume trading.

I see price action as the majority of the picture and volume (therefore timing) as the detail.

Apologies if I havent brought anything new to the table or you think that my comments are too noob to be included

Quoting Leonlorenzo
See, this is the problem we have in the forum. There is alot of talk, but very little actual substance. Im not picking on you atall mate, but this is the kind of thing that Dobleace was saying before.

Talk of the price moving in Cycles or waves just meens it goes up or down, and we all all know that the price goes up and down.
You say timing is critical, ofcourse it is, what else is there but getting in at a good time? But knowing any of this above doesnt help you.

Bare bones of the matter is, Why will someone else buy EU after you have? Was...
  • #47
  • Mar 5, 2009 9:21am Mar 5, 2009 9:21am
Quoting Limstylz
Yes, I see I was being a little vague, but I was not about to post specifics on my personal methodoly, primarily because I am still working on it. I see timing as being equated to volumes for a specific move up or down over time (Yes, I am aware that forex has no central exchange and is therefore not accurate but I get a feed from esignal to assist), and there are numerous excellent threads on this forum that relate to volume trading.

I see price action as the majority of the picture and volume (therefore timing) as the detail.

Apologies if...
No, thats not it. I explained that I was not picking on you earlier.

Im not actually looking for anything new to come to the table at the moment as I have things that Im working on myself. I opened this thread so that people would actually look at trading from a more objective angle.

The talk of psychology and MM and 'feel the price, breethe the price, be the price' just confuses people and has them running in circles and trading methods that have no logic to them.
Living the adventure in my head.
  • #48
  • Mar 5, 2009 9:34am Mar 5, 2009 9:34am
So far we have:

1. Confluence of Multiple TA factors.
2. A cause and effect.
3. Statistics that Indicate possitive expectancy.

No fluff or meditation, doesnt it feel good?
Living the adventure in my head.
  • #49
  • Mar 5, 2009 10:04am Mar 5, 2009 10:04am
A 'thorough' knowledge of TA. Not a passing fancy and a 'hey I know a doji' knowledge - but a real knowledge only attained via study and chart time.

btw: I really like your question "Why will enough traders buy EU after you have to make the price go up?"
In trading, there is no bullshit. You either make money or you don't.
  • #50
  • Mar 5, 2009 10:14am Mar 5, 2009 10:14am
Quoting Leonlorenzo
So far we have:

1. Confluence of Multiple TA factors.
2. A cause and effect.
3. Statistics that Indicate possitive expectancy.

No fluff or meditation, doesnt it feel good?
This all boils down to quantifiable non-random behavior, or an 'inefficiency'.
The breaking of a wave cannot explain the whole sea.
  • #51
  • Mar 5, 2009 10:38am Mar 5, 2009 10:38am
Quoting Leonlorenzo
Bare bones of the matter is, Why will enough traders buy EU after you have to make the price go up?
Can be seen the other way around: why will enough traders be selling EU so buyers can keep buying?
  • #52
  • Mar 5, 2009 10:52am Mar 5, 2009 10:52am
Quoting Leonlorenzo

No fluff or meditation, doesnt it feel good?
Man, I don't know if I can live without fluff.

Just kidding, good thread. On a serious note though technicals are where its at but it's also not wise to become so robotic in trading that you completely ignore what is underlying the markets: people. The layers are a lot deeper than at a game of poker, but the players are still there with fear and greed. Psychology is the why, fundamentals and technicals are the how. Becoming in tune with your own emotions and psychology is as important as discovering others' because often what drives you to make a trade is the same for many other traders. (Hope I'm not banned now).
  • #53
  • Edited 11:17am Mar 5, 2009 11:00am | Edited 11:17am
Basically what I think moves the market is mistakes made, chasing, entering early, impatience, an overextension in one direction or another which leads to an inefficiency. It's all about squeezing people. The more the market can squeeze in one direction or another, the larger the move will be.
  • #54
  • Mar 5, 2009 12:14pm Mar 5, 2009 12:14pm
i agree with leonlorenzo view look for a confluence of acvtivities dont just look at one setup?
  • #55
  • Mar 5, 2009 12:40pm Mar 5, 2009 12:40pm
Quoting PiedPipper
It's all about squeezing people. The more the market can squeeze in one direction or another, the larger the move will be.
I agree. I look at a chart and think, "What can the market do right now that will screw the most amount of people in the process."
  • #56
  • Edited 2:16pm Mar 5, 2009 2:01pm | Edited 2:16pm
Quoting Gaston
........Instead you would benefit from figuring out who the few are that actually do make a difference, and simply trade around their intervention........
Gaston, many thanks for the insightful response.

My question: is it possible to know when these heavyweight participants are 'making a difference' (or even even better, when they are about to drive price in a certain direction), purely by looking at price action, or does one need to have access to other info (e.g. across-the board-volume, market depth, order placement, etc)?

Quote
A common mistake traders make is that they base an entire system on historical data. They will see a pattern form, and come to the conclusion that price behaved as it did BECAUSE of that pattern alone. That somehow the patterns themselves caused the patterns themselves.

There's a great post by Merlin somewhere (wish I could find it), where he states that the best way to develop a system is to first find a pattern/phenomenon that you believe to be a recurring inefficiency, and only then use the historical data to prove your assumption. As opposed to starting with the historical data and simply fitting a system around it.

Anyway, I see your point about a pattern forming not simply because of the pattern itself, i.e. catch 22. But, as a retail trader, I have no other info (at least that I'm aware of) other than historical TA upon which to base my trading decisions. In other words, test a past pattern, and then later expect in real time (on balance of probability) a certain outcome. Hence my earlier question.
  • #57
  • Mar 5, 2009 2:04pm Mar 5, 2009 2:04pm
Quoting Leonlorenzo
I think 'the abbility to read PA' Is a little too broad, afterall, that is the aim of trading. The ability to profit from price moves. So we will take that one out.

1.Confluence of multiple techincal criteria.
2. --????--
Leon, if 'the ability to read PA' is too broad, then I guess you're looking for methodological specifics. Confluences are just one of many possible approaches.
  • #58
  • Mar 5, 2009 2:10pm Mar 5, 2009 2:10pm
You r sure right about that?
  • #59
  • Mar 5, 2009 3:30pm Mar 5, 2009 3:30pm
Quoting doblece
Can be seen the other way around: why will enough traders be selling EU so buyers can keep buying?
Yes, but there has to be more Liquidity on the Buy side than the sell side for price to move up.
Living the adventure in my head.
  • #60
  • Mar 5, 2009 3:34pm Mar 5, 2009 3:34pm
Quoting PiedPipper
Man, I don't know if I can live without fluff.

Just kidding, good thread. On a serious note though technicals are where its at but it's also not wise to become so robotic in trading that you completely ignore what is underlying the markets: people. The layers are a lot deeper than at a game of poker, but the players are still there with fear and greed. Psychology is the why, fundamentals and technicals are the how. Becoming in tune with your own emotions and psychology is as important as discovering others' because [b]often what drives you...
Ofcourse your not banned, you just owe me a toblerone.

The part in Bold: I agree that possibly many will trade technically, but I seriously beleive that 95% of the money doesnt give a flying fuck about the technicals(in forex atleast), thats just an opinion.
Living the adventure in my head.
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