Psychology and MM free zone... | Page 4 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Discipline, Mental Skills and the Psychology of Trading 26 replies

Psychology, Trading and You 32 replies

mass psychology and self-fulfilling TA 1 reply

money management and psychology on trading.. 10 replies

Trading Basics: Concepts and Psychology 0 replies

Attachments: Psychology and MM free zone...
Exit Attachments

Psychology and MM free zone...

  • #61
  • Mar 5, 2009 5:36pm Mar 5, 2009 5:36pm
Quoting PiedPipper
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.
Do you have any proof atall that this is the case? Ok, not even proof- What have you seen that makes you think this?
Living the adventure in my head.
  • #62
  • Mar 5, 2009 5:37pm Mar 5, 2009 5:37pm
Quoting Leonlorenzo
Yes, but there has to be more Liquidity on the Buy side than the sell side for price to move up.
What about spread?
If you buy at 1.2550 Ask someone has to sell at 1.2550 Bid thus Ask price automatically goes up for the amount of the spread = 1.2552.
  • #63
  • Mar 5, 2009 5:40pm Mar 5, 2009 5:40pm
Quoting hanover
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.
Well, 'the ability to read PA' is nearly the same as saying 'The ability to trade profitably', thats why I decided to take it off the List.
We all already know that we want to be able to trade well, seemed silly having it on there, to me atleast.
Living the adventure in my head.
  • #64
  • Mar 5, 2009 9:48pm Mar 5, 2009 9:48pm
Quoting hanover
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)?
Hmm. I do not use a chart to determine where these participants are going to intervene, and therefore my immediate response would be to say that it cannot be done. I could make assumptions about those levels, but my guess is that it would ultimately be a losing battle. So again, look at the participants in the market, and maybe prioritize who the most influential players are. This might take some reading and research to find that, but it will be worth it. From there, a lot of what I have said will become obvious because some of the biggest moves have very little to do with daily techinical patterns or fundamental news. It will be eye opening.


Quote
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.
This is precicely what I am talking about. I have not read that quote but wish I could. That sums it up better then my pervious posts combined!

Quote
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.
Yes, that is what the majority of the retail traders are doing, and as we all know the majority of the retail traders fail. There are direct correlations to what everyone is doing and why everyone is failing. So again, trying hard to be on the same page with as many people as possible will not bring consistant profits. Trading systems and methods designed around TA and historical data produces periods of great draw down and inconstant profits as live performance is tested in and out of the conditions used during the historical collection. Eventually the live conditions will no longer match the historical data entirely, if even for a period, and the system will fail. The result of this kind of trading is that there is a large focus on the very things that Leon wishes not to discuss here. For example, you must have supereme discipline to outlast the large drawdowns expected throughout your trading career. You must have perfected a money management system that pushes that barely break even system into a marginally profitable one. You must adjust your entries and exists just to make sure that you either get every last pip available or close in on the ones you already have. If any of these conditions are not met or adjusted appropriately, you fail.

On the other hand, finding areas where price moves for a reason allows you to easily place orders alongside the market movers. You will take responsibility for the failure of a trade instead of pushing it off on a probability causing the loss (again, cause and effect). As a result, your accuracy will be great, your discipline will be expected, and your money management will be flexible. You will have the confidence to take on greater risk as you snipe the shit out of the market. The sooner you realize that the market is predictable, the closer you will be to trading at this level.

Good questions guys, hope this is helping.

-Gaston
Headline: USD drops due to news of USD dropping!
  • #65
  • Mar 5, 2009 11:33pm Mar 5, 2009 11:33pm
Quoting Leonlorenzo
Do you have any proof atall that this is the case? Ok, not even proof- What have you seen that makes you think this?
I could give examples and explanation but I think I'll pass. But I will say this, straight price movement (ticks) and acceleration in volatility are expressions of the squeeze. The key though is the setup leading into a squeeze which involves intraday tests and a failure or breakout of some sort. It's most visible on a chart during news times, but the public gets squeezed on a regular basis--fast or slow market. If none of this makes sense to you, I don't care.
  • #66
  • Mar 5, 2009 11:49pm Mar 5, 2009 11:49pm
Quoting Leonlorenzo
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.
I think you misunderstood what I was trying to say here. Never mind.
  • #67
  • Mar 5, 2009 11:51pm Mar 5, 2009 11:51pm
screen time , period.
To Live is the rarest thing in the world , Most people exist , that is all
  • #68
  • Edited 12:41am Mar 6, 2009 12:17am | Edited 12:41am
Quoting maheswara
screen time , period.
Double thumbs up

Screen time improved my trading 10 fold.

And still continues to do so.
  • #69
  • Mar 6, 2009 1:35am Mar 6, 2009 1:35am
Quoting hanover
There's a great post by Merlin somewhere
.............
about a pattern forming not simply because of the pattern itself
Maybe not the post you mean but, a real good one IMO:

darkstars stop hunting technique is a perfect example of a good premise in forex. another good forex broker premise... there is no central exchange, and therefore the bid/ask should fluctuate among brokers. developing and understanding the premise isnt the hardest part, it just takes a lot of experience which cant be bought, taught, or shortcut. its the testing an executing the premise that presents the biggest challenge in terms of intelligence, but anyone who can code EAs and understands statistics will be able to pull it off.

its almost impossible for a novice to come up with a good premise because they dont understand whats going on behind those little candles. instead they look at the candle itself, just seeing the surface, and making little patterns in their head or with a computers. but behind the candle is where the magic is, thats where the people are. i call it "the human element". the best premises i have ever traded are rooted directly in human nature. humans are predictable to some extent, and herds of humans are even more so. if you can come up with a premise based on human observations (in regard to trading and the markets, not talking vodo crap here), and then the data tells you its legit, chances are you got winner on your hands.

Quoting merlin
darkstars stop hunting technique
  • #70
  • Mar 6, 2009 4:36am Mar 6, 2009 4:36am
leonlorenzo you said that in order for price to go up in a paticurlar currency pair volume must favour the upside it doesnot really matter what other pairs are doing?But can you say that when the banks r trading do they buy a particular pair or a currency?just asking
  • #71
  • Mar 6, 2009 5:40am Mar 6, 2009 5:40am
Gaston, thanks again for your comprehensive reply.

Quoting Gaston
So again, look at the participants in the market, and maybe prioritize who the most influential players are.
Given that I must time my entries and exits profitably, I assume that what you mean is that one must not only know who these heavyweights are, but when and how they trade?

Quote
Yes, that is what the majority of the retail traders are doing, and as we all know the majority of the retail traders fail.
If it's not possible to profit technically, then that's tantamount to saying that all patterns generated are ostensibly random - correct?

But apparently there are a small number of retail (technical?) traders who are consistently profitable. To have had (for example) several years without a single losing month is clearly not luck. Hence I assume that they've found an exploitable inefficiency.

Even if I don't know who the heavyweights are, or when/how they trade, their influence must generate a significant move, which I assume generates a technically discernable pattern. Or are you saying that the move occurs too slowly to be discernable, i.e. as it 'soaks up' all of the opposing orders, retracing and/or zigzagging in the process (creating a pattern similar to 'everyday' price movement), before finally making the intended push?

Quote
For example, you must have supereme discipline to outlast the large drawdowns expected throughout your trading career. You must have perfected a money management system that pushes that barely break even system into a marginally profitable one.
I too must be careful here to avoid the forbidden words and topics, LOL. But surely no amount of discipline, or sophisticated position sizing, can rescue an unprofitable method - if the method fails to capture a recurring inefficiency, then (forex being a negative sum game) it is doomed to fail eventually, anyway. In other words, expectancy is ultimately the product of entries and exits. Correct?
  • #72
  • Mar 6, 2009 5:47am Mar 6, 2009 5:47am
Quoting FXSurfer
Maybe not the post you mean but, a real good one IMO: ........
Thanks, FXSurfer. As best as I can recall, I don't think this is the post, but I agree that it's a good one, and with a very similar message.
  • #73
  • Mar 6, 2009 7:35am Mar 6, 2009 7:35am
Quoting FXSurfer
[i]its almost impossible for a novice to come up with a good premise because they dont understand whats going on behind those little candles. instead they look at the candle itself, just seeing the surface, and making little patterns in their head or with a computers. but behind the candle is where the magic is, thats where the people are. i call it "the human element". the best premises i have ever traded are rooted directly in human nature. humans are predictable to some extent, and herds of humans are even more so. if you can come up with a...
This is along the lines of what I was trying to say in my original post.
  • #74
  • Mar 6, 2009 8:34am Mar 6, 2009 8:34am
Quoting hanover
Gaston, thanks again for your comprehensive reply.



Given that I must time my entries and exits profitably, I assume that what you mean is that one must not only know who these heavyweights are, but when and how they trade?
Exaclty. Then as they shift their priorities, you shift yours. You will not be hoping that the historical data will happen the same way two times, three times, ten times, etc.


Quote
If it's not possible to profit technically, then that's tantamount to saying that all patterns generated are ostensibly random - correct?

But apparently there are a small number of retail (technical?) traders who are consistently profitable. To have had (for example) several years without a single losing month is clearly not luck. Hence I assume that they've found an exploitable inefficiency.
There is no way I can claim that you cannot be consistently profitable using TA alone. There is just no way to disprove it. It may seem like that's what I've been saying all along, and I guess a part of me wants to say it if only to make a point. But the fact is that if a pattern formed because a trading participant just intervened in the market, then the intervention already happened. Support and resistance offer good examples.

If a true support level just formed, it did so for a good reason. I assure you it did not form because a million retail traders saw it and bought into it. Therefore, the next time price reaches that level, the market will be different from the time before. If you trade the level according to data gained from the time before, then you are trading on the hopes that everything is the same then as it is now. Accordingly, the large force of retail traders are probably looking at things the same way, and are eagerly looking to buy into the support. But numbers do not matter. We are not waiting for a mass shift from these retail traders to make a difference. The market will move if even one trader has both a reason and the capacity to make a difference. As such, price may turn around X pips above, X pips below, right on the level, or not at all – according to the reasons behind this intervention. With that understanding, it can be concluded that without some idea of who is moving the market, you are trading on probabilities alone. Probabilities do not cause results, results cause probabilities.


Quote
Even if I don't know who the heavyweights are, or when/how they trade, their influence must generate a significant move, which I assume generates a technically discernable pattern. Or are you saying that the move occurs too slowly to be discernable, i.e. as it 'soaks up' all of the opposing orders, retracing and/or zigzagging in the process (creating a pattern similar to 'everyday' price movement), before finally making the intended push?
Great question. I think this would directly relate to the quote by Merlin you were referencing to. In this thread I am focusing on the influence of large participants to move the market, and that intervention can be historically measured to find patterns (so that would be a “no” to the question about moves being too slow). With those patterns you could create a methodology to profit from, the biggest difference being that you would be utilizing that method around a real cause and effect of the market.




Quote
I too must be careful here to avoid the forbidden words and topics, LOL. But surely no amount of discipline, or sophisticated position sizing, can rescue an unprofitable method - if the method fails to capture a recurring inefficiency, then (forex being a negative sum game) it is doomed to fail eventually, anyway. In other words, expectancy is ultimately the product of entries and exits. Correct?
You got it.
Headline: USD drops due to news of USD dropping!
  • #75
  • Mar 6, 2009 12:47pm Mar 6, 2009 12:47pm
Gaston, thanks once again for answering my questions.

Quoting Gaston
.......Support and resistance offer good examples.

If a true support level just formed, it did so for a good reason. I assure you it did not form because a million retail traders saw it and bought into it.......
I'd previously been misinformed by other sources, who'd suggested that it was sheer weight of number (of participants) that caused major reversals. Thanks for correcting my view about the effect of retail traders.

I have to assume, then, that the 'heavyweights' that you speak of somehow use S/R as a primary vehicle for entering their orders into the market. Price respects S/R way too often for it to be mere coincidence. Or, given that for every willing buyer, there must be a willing seller, then if a heavyweight wants to move price in a certain direction, and there are insufficient retail trader volumes to provide fodder, then the majority of the counter-positions must be somehow be provided by other large players (whether speculative or commercial). So maybe S/R levels are the outcome of their order placement.

Quote
Therefore, the next time price reaches that level, the market will be different from the time before.
I'd always suspected that part of the apparent randomness in price movement was caused by the fact that different participants are present at different times (and that one of the difficulties facing the 'uninformed' technical trader was not knowing who or why).

Quote
With that understanding, it can be concluded that without some idea of who is moving the market, you are trading on probabilities alone. Probabilities do not cause results, results cause probabilities.
Nice quote!
It's widely understood that technical trading is a game of imprecise probabilities. But of course it's not necessary to have anything near a 100% win rate to come out ahead. Mathematically, one would break even by making random entries and exits, if it wasn't for costs (and possible manipulation). Hence, given a small methodological advantage, leverage, compounding, and conservative position sizing, it should theoretically be possible to make a fortune using TA alone. At least, that's why I believe that some traders' claims that they achieve that.

Or, put another way, if there is a underlying rationale behind order placement, then I don't believe that the resulting patterns can be a completely random walk. And any sequence that's not randomly generated - even if only at certain key points in time - will potentially provide exploitable inefficiencies.

Our discussion has vindicated my continued pursuit of using price behavior as my primary analysis tool - given that I currently have no better alternative - even if not knowing the real who/why/how of the heavyweight players places me (and probably 99.9% of the other wannabe traders out there) at a severe disadvantage.
  • #76
  • Mar 6, 2009 6:49pm Mar 6, 2009 6:49pm
Quoting Gaston
the influence of large participants to move the market
A couple of thread links that may be relevent (and of interest?)
to valid premise establishment based on market stucture/orders:
(At least they are psychology and mm free. LOL.)

Darkstar's Stucture of Forex Brokers:
http://www.forexfactory.com/showthread.php?t=7484

Bank Flow Trading Resources?:
http://www.forexfactory.com/showthread.php?t=73047

Thanks for the info/insight guys! I'm working hard to try and follow you.
Bit by bit I'm getting it I think. I have a lot to unlearn.
  • #77
  • Mar 6, 2009 6:54pm Mar 6, 2009 6:54pm
Another interesting links in the same thought flow:

http://www.investopedia.com/articles.../interbank.asp

http://www.investopedia.com/forex/fi...ort_index.aspx

And Billy Ray Valentine's post (and whole thread as well):
http://www.forexfactory.com/showpost...postcount=1615
  • #78
  • Mar 7, 2009 2:05pm Mar 7, 2009 2:05pm
Back in post #56, I mentioned a post by Merlin, here it is. Many thanks to Billflet who found it for me.
  • #79
  • Mar 7, 2009 2:28pm Mar 7, 2009 2:28pm
Yes hanover believe me when i say that there technical patterns(charts)that has been successful for years and years without failure those set ups just dont come quite that often probaly a few times each year?
  • #80
  • Mar 7, 2009 2:57pm Mar 7, 2009 2:57pm
Quoting hanover
Back in post #56, I mentioned a post by Merlin, here it is. Many thanks to Billflet who found it for me.
It's a really interesting post! Thanks!

From a couple of replies lower in the thread:
(Rabid's reply to Merlin)

Quoting Rabid
His approach is similar to yours it seems, he starts w/ a pattern and then seeks to prove or disprove it w/ data, rather than starting w/ data and searching for patterns.
Even though this may be, or most likely is, an improvement in the pattern game...your still playing this game with trying to distinguish so called "hi-prob" patterns of price movement from the rest which supposedly will have a different probability of a predictable outcome - in the future.

The Pattern Game and the Indicator Trap...close cousins IMO.

I think that's why looking into Market Structure, Players and their objectives, Order Flow
and just straight, objective observation of what Buyers and Sellers are currently doing
is the way to direct our energies.
0 traders viewing now