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Technical Analysis Fallacy

  • #13,561
  • Edited 7:10am Feb 13, 2010 6:42am | Edited 7:10am
Quoting Fana
Hello friends. I have discovered something. Please, help me to navigate if i am on the right way.
It is about controlling risk and snowballs.
It was very difficult for me to get to this point of understanding, so i ask you for help again. Please, who knows how this works, tell me that i am now rightly directed.

I have discovered this :
Imagine trades...
Example: 10000units is scout...
Fana,

There's is much power in the skew. but practice it on demo, before you jump out with your money. You need first to learn to ride in the direction of the trend.

Don't ride with high skew for very long, your goal is to add as it starts it's break run in your favor, and then skew back out, with the goal of carving out the center of the move with the most positions. Your profit from that, is either banked or held in reserve for the remainder. The toughest part of this is the timing of adding in profit, but you can't over stay with high skew, and you can't add high skew after the big break run. It's all about feeling the pulse as the push starts and feeling it as it starts to lose momentum.

edit: personal thoughts here, once you've committed by adding and you start to take profits, you have to let that move finish and come back to you before you start the process over again. There are times you will add and the market takes off, you take some profits and the market just keeps going. Just like mistiming your entry, you missed the markets signal and exited before it was done. At this point you should still have your scout or some adds left, but fight the urge to jump back in, as this is a greed scorpion about to sting you. Any new adds will likely be added at the end of the move and trapped in skewed losses as the market retraces. So take what you can from what the market offers, but don't reach across the table and try to grab another handful of food from the serving dish, once you've passed it on.

Start small, enter your scout, and then when you feel the move starting in your favor add another one or two, and let that move push in your direction, when you feel it starting to slow, take off one of the adds leaving you with either you scout or one additional.

If it continues, ride with the other for additional pips, if it starts to retrace, take off the other add in profit, you still have the scout. If after you enter it reverses, kill the adds and your in defensive mode with your scout, if you are still in the trend direction, you have mistimed the market. Wait for the chance to rescue you scout or establish your base at a better level.
You want to watch the price in relation to your average position, once you start adding don't let it go in the red.

But do not fix your sights on 10 pips, that may be your average in certain market conditions, you will have some positions for 7 pips and some for 27. You might have a scout ride for 70 as you move in and out on the waves. But the market decides not you.

Wait for the market to turn and get in and dance.

regards,
  • #13,562
  • Feb 13, 2010 7:11am Feb 13, 2010 7:11am
Quoting auxesis
Fana,

There's is much power in the skew. but practice it on demo, before you jump out with your money. You need first to learn to ride in the direction of the trend.

Don't ride with high skew for very long, your goal is to add as it starts it's break run in your favor, and then skew back out, with the goal of carving out the center of the move with the most positions....

Thank you very much Auxesis. Now my head is really overloaded with thinking about it. I just read the thread and yesterday some new view i have found... But despite its my reading round 3, this is very new for me. I am also trying to solve jacksons graphs, but dont know his sequences and kind of progression. Searching is great, but i appreciate every hint. I cant bear that i dont understand something... Particularly such mathematical models...
Regards Fana
  • #13,563
  • Feb 13, 2010 7:24am Feb 13, 2010 7:24am
Quoting Fana

Thank you very much Auxesis. Now my head is really overloaded with thinking about it. I just read the thread and yesterday some new view i have found... But despite its my reading round 3, this is very new for me. I am also trying to solve jacksons graphs, but dont know his sequences and kind of progression. Searching is great, but i appreciate every hint. I cant bear that i dont understand something... Particularly such mathematical models...
Regards Fana
Dont try to pattern yourself after someone else. Everyones brains are wired differently, and are the byproduct of time in the market, the level Jackson is at may not be suitable for you, but if the concept is valid, you can incorporate it at a level that works for you. FTI's teaching are to be internalized and implemented in your risk tolerances, not anyone else.

There's been much discussion on this, if you try to trade outside your comfort zone it will cause severe mental blocks. You can stretch your zone over time, but you can't go outside it. Hope that makes sense.
  • #13,564
  • Feb 13, 2010 1:04pm Feb 13, 2010 1:04pm
Quoting Fana

Thank you very much Auxesis. Now my head is really overloaded with thinking about it. I just read the thread and yesterday some new view i have found... But despite its my reading round 3, this is very new for me. I am also trying to solve jacksons graphs, but dont know his sequences and kind of progression. Searching is great, but i appreciate every hint. I cant bear that i dont understand something... Particularly such mathematical models...
Regards Fana
@Fana,
Auxesis is 100% correct. I really do not have any secret formula on progressions that has not been discussed in this thread(900 pages).And, please disregard the math model(var) it is not any type of secret weapon.
The chart I posted were a "visual" reference of some positive results amongst the chatter of failure and the like, which I decided to share.
Maybe vanity on my part, maybe not, who knows.

My intentions were not to confuse with "progressions" or models.
It was more to share what trading done semi-correctly could possibly look like visually, nothing more.
Find your way, it is well worth the effort.

J
  • #13,565
  • Feb 13, 2010 2:42pm Feb 13, 2010 2:42pm
I have a question. When i am in some attack sequence. Lets say : 1,1,2,3,5.

Is it good idea to build some "dollar reserve base"... from the lower levels? With low risk due to the fact, that 1,1,2 are relatively small.
And after i have built this reserve, i can use bigger snowballs with this base, which gives me more space for risk covering???
Regards

Auxesis, Jackson... Thx..
  • #13,566
  • Feb 13, 2010 7:18pm Feb 13, 2010 7:18pm
Hello all seniors and of course professional traders,
Please I need some help.

I have some question in my mind quite long long time but dare not to ask.

right now I trade demo only on tues & fri at london open I trade about 2-4 hrs my average profit is about 20 pips says $20 per day my scout set to $1 per pip and I my attacking only 1-2 sequences(some time none) only due to short trading session. And mostly every time I checked the wave is on my way if I stayed a bit longer.
my rescue successful rate is about 90%, well I had to bite the bullet when big wave came 120 -200 pips.

I set my goal is average making $100/day. what the size of scout should be if I work for 8 hours at london session?. Of course I understand that each person have totally different style but I need some guide line(clue) to meet up my goal.

right now I'm thinking of scout $1/pip or may be 10 -30 cents/pip ????

all inputs are welcome. Thank you.

Best regards,
  • #13,567
  • Edited 10:09pm Feb 13, 2010 9:49pm | Edited 10:09pm
Quoting pete.alfa
Hello all seniors and of course professional traders,
Please I need some help.

I have some question in my mind quite long long time but dare not to ask.

right now I trade demo only on tues & fri at london open I trade about 2-4 hrs my average profit is about 20 pips says $20 per day my scout set to $1 per pip and I my attacking only 1-2 sequences(some time none) only due to short trading session. And mostly every time I checked the wave is on my way if I stayed...
Pete,
Scout size is proportional to your account size, not daily objective. Think about this, most people here doing ants work trying to for a minimum return of 1-2% a day. How big is your book?

10K account 1% = $100.00

1% daily consistently, that's non compounded 20% a month or roughly tripling your account in a year.

Keep with a conservative leverage, 100:1 or less, I trade at 50:1. Take your available max size and divide it by 100.

Example 10k account at 50:1. you can trade 500,000 on the market, /100 = 5000 leveraged per skew size, that's roughly .50 per pip. Depending on how your home account currency is listed in the pair affects this math some what but just use a set figure for all pairs as your actual $.xx per pip might vary a few cents. You could use $1 pip in this case, but at .50 a pip a 1-3-8 skew puts you $6 a pip.

That's plenty enough to get you into trouble.

regards
  • #13,568
  • Feb 13, 2010 10:23pm Feb 13, 2010 10:23pm
Pete

First, with that much time to trade you're better off in a casino. Seriously.

Second. If you're still going to trade, try demo and see how that fits your schedule and test position sizing there.

Third, don't listen to any conventional wisdom here or anywhere, it will only get you what conventional wisdom always does and that is to be average and in FX average means being part of the 95% that consistently blows their accounts.
Don't take me wrong we need these people so the 5% can win.

Fifth, personally I'd recommend 1 standard lot per $2000.00 account balance but remember #4 above.
  • #13,569
  • Feb 14, 2010 4:03am Feb 14, 2010 4:03am
Quoting auxesis
Pete,
Scout size is proportional to your account size, not daily objective. Think about this, most people here doing ants work trying to for a minimum return of 1-2% a day. How big is your book?

10K account 1% = $100.00

1% daily consistently, that's non compounded 20% a month or roughly tripling your account in a year.

Keep with a conservative leverage, 100:1 or less, I trade at 50:1. Take your available max size and divide it by 100.

Example 10k account at 50:1. you can trade 500,000 on the market, /100 = 5000 leveraged per skew size,...
I am so happy Auxesis, a MUCH RESPECTED poster in my book, recommends the same troop size and number of troops as I have concluded after 3 months of demo trading. This gives me confidence I am working in the right ball park.

I use 1,1,2,3,5,(8) fib progression, 2,3,5 are attacks for foreign capital and do not stay for the ride, 8 is only deployed in exceptional cases and cut immediately if wrong. In general I only let 1 to 2 troops ride the whole session, meaning I want to have 25-50 as many times in reserve as troops in battle.
During the height of attacks the reserve will go down to under 10x, my reckless scorpion has made me gone down to as little as between 2x-3x but these situations only last seconds, at most a minute or two.

When in trouble I rather zoom in to a lower timeframe to forage foreign capital /cut some exposure with partial rescue versus waiting for a longer time frame chart to give me a chance for a geometrical progression rescue.

Let me use the opportunity to clarify a doubt in my understanding. Let's say we use a 1,1,2,3 progression in attack linearly and 1,5 rescue geometrically. (I think min 5 for second level because if we are against trend we cannot count on much retrace, at most 15-20%). A "geometric" rescue of 1,5 would mean we deploy 7 troops first, if these 14 troops are still in trouble we deploy 70 troops, total now 84 troops in battle. What I am in doubt is the meaning of "geometric" rescue, is my example above correct?

Having 100 troops is too risky for this kind of rescue, since Net Asset Value is reduced as draw down accrues and 84 troops requires min $8400 NAV (using the example of 10K account at 50:1 leverage) the last rescue is possible only up to DD < $1600, or about 228 pips at $0.5 per pip for 14 troops. Although possible on paper this is not a viable option for me because after the last rescue there is no reserve left, and without reserve we are doomed (AOW). We depend on hope (a no, no) God will send us another sampan. Lol, if I interpret the lessons of AOW correctly we should have 1250 troops, or at least 500 troops, or enough to divide our army into 2 (half using direct and half using indirect/devious methods). Any correction to my (mis)understanding is welcome.

By the way if you trade E/U then 10K USD account at 50:1 leverage will only buy max 73 troops of 5000 units (using 1.36 quote), or 100 troops of 3676 units each. To simplify math I use Euro based account since I only trade E/U. I want each troop to have a easy round number because I am experimenting with spiral within spiral in my scout (not sure if I use the lingo correctly). The 1 is split into 0.1, 0.1, 0.3, 0.5, I call these spies. I find having multiple positions are very helpful for me to "pace the pulse of the market" - if my bias is correct and market makes HH and HL when I am long, then my long positions should come out of DD soon (reverse for short). the P/L of these multiple positions keep me on my dance toes.

I am just a student on demo talking out loud to myself, critique is welcome. I have found using this MM, 1-3% profit daily is possible. Tsunamis are also possible, still thinking hard for best ways to contain them

Regards,
Baifu

Happy New Year of the Tiger!
  • #13,570
  • Edited 6:13am Feb 14, 2010 5:04am | Edited 6:13am
Hi Baifu
Interesting, i just also study this...
When you rescue, u use very big troops... Isnt it too much risk?

Now my question is, if it is good to make some booked profits from lower levels before trigger bigger balls... to reduce risk from bigger positions.

Because when u win first three levels consecutively, u have good base (your profits are booked and the risk was low), for triggering bigger balls and when these "biggers" wont succed with the same risk parametres like what you have grabbed with those "low levels"... You are still in small profit....

But when u will be winner also with bigger levels... U controll risk+have great profits. So your Value of Risk is now very effective...

I dont think, that is demanded too much math in it, but how to implement the damage control and make it robust... question...
? ? ?

Edit. 1,1,2,3,5,8 fibonacci progression can be used as attack sequence, imho it can be developed to higher levels. But when the first levels not work, i can go to rescue it but by martingale progression... to be at zero... So attack should be longer and managed... When in higher levels i can fall back to lower levels and develop them, or when i have success also with higher levels, thats big gain...

Or do u use rescue attitude when for example 8 is wrong...?
  • #13,571
  • Feb 14, 2010 6:42am Feb 14, 2010 6:42am
Quoting robertw
Pete

First, with that much time to trade you're better off in a casino. Seriously.

Second. If you're still going to trade, try demo and see how that fits your schedule and test position sizing there.

Third, don't listen to any conventional wisdom here or anywhere, it will only get you what conventional wisdom always does and that is to be average and in FX average means being part of the 95% that consistently blows their accounts.
Don't take me wrong we need these people so the 5% can win.

Fifth, personally I'd recommend 1 standard lot per...


What leverage you trading? Even if you could enter 1 standard lot for the scout, what next?

Sorry that's a train wreck waiting to happen.
  • #13,572
  • Feb 14, 2010 7:49am Feb 14, 2010 7:49am
Quoting robertw
Fifth, personally I'd recommend 1 standard lot per $2000.00 account balance but remember #4 above.
The following are my personal opinions and are not meant to upset anyone.

One standard lot ($10/pip) per $2,000 account balance? I think the standard "at risk" percentage that experienced traders recommend is 2%-5%, which is $40-$100 on a $2,000 account. Am I to understand that you click out when you're 4-10 pips down?

I have been reading the discussion on progression. I think experienced traders like fti and auxesis are more than capable of progression, but am wondering if it is a good thing for new traders to try. If you can make money consistently by risking 2% of your account on each trade (ie, on a $2,000 account balance, you can trade $2/pip for 20 pips, every day for 3 months), then you can start thinking about how to make progression work. You might find that the success of 3 months of trading will open your eyes to how the market really works and how you might take advantage of this new knowledge.

More importantly, you will learn how the market moves against you and how to keep your losses to a minimum (if you are risking 2%, you must exit each trade when the dollar loss = $40, every time, without fail). Better yet, over that 3 months, you may learn to exit a trade when you are only 10 or 15 pips down because you come to understand when a trade is going to run against you, rather than hang on to it and suffer big losses.

IMHO, if you can't (or won't) learn these basic things, then progression is a quick ticket to your next job. Quick review: learn to trade, learn to be a trader, learn to make lots of money. FWIW, I follow a very basic progression rule: 1,1,2 (rescues are 1,1 only) all within a 4% risk constraint. So this does not need to be complicated to work.
  • #13,573
  • Edited 8:26am Feb 14, 2010 8:13am | Edited 8:26am
Quoting GEfx
FWIW, I follow a very basic progression rule: 1,1,2 (rescues are 1,1 only) all within a 4% risk constraint. So this does not need to be complicated to work.
Woa...people...this is turning very complicated already...so I have to make a quick comments...watch out for the rigidity...remain flexible...

Currently I have also a basic prog as GEfx...1-2 (and rarely -3) and I explore NO rescue...if I want to rescue I would do something like 1-1 (maybe 1-2)...Why? I think to flip is a much better idea, it is much better than long and risky rescue...even though when to flip is also another big issue...think about this:would you risk 10 troops to save 1?...doable, yes...but when you fail the loses could destroy the book. I came to the realization that only those that have been doing this for many years have what it takes to effectively run 5-8-13 and higher rescue...The same for strong attacks as 5-8-13 or whatever...forget it...until the skill is there after years of trading...practice, practice, practice...keep it simple.

By the way, please do not turn the Rescue strategy into a Martingale trick. If you do, eventually you will have to either lick your deep wounds or seek another entertaintment because you will be bury in losses.

One more thing, I believe that those new to Forex should strive only to survive the first year. The second year, maybe to break even, and the third to make money. Of course, this is my own rigid way of taking thing slowly. There is no need to rush. PA will be there. And if the EU breaks when the German decide that they have enough dumping their cash into Greece, Spain, Italy and Portugal, maybe the Marks and the Franks will be back. Then the fun we will have even more fun.

Do not rush...
Good luck to all.
Empty as water and soft as a facing wind mountain
  • #13,574
  • Edited 9:14am Feb 14, 2010 8:45am | Edited 9:14am
Quoting Baifu
I am so happy Auxesis, a MUCH RESPECTED poster in my book, recommends the same troop size and number of troops as I have concluded after 3 months of demo trading. This gives me confidence I am working in the right ball park.

I use 1,1,2,3,5,(8) fib progression, 2,3,5 are attacks for foreign capital and do not stay for the ride, 8 is only deployed in exceptional cases and cut immediately if wrong. In general I only let 1 to 2 troops ride the whole session, meaning I want to have 25-50 as many times in reserve as...
Baifu,

Firstly, I'm just a student of the markets so take what I say and study for yourself, FTI is the only one here to take at face value, everyone else is interpretation.

Fib progression grows @ 1.618, in doing so you will keep your break even level within 25-30% of your average entry level on rescues by multiplying total troops x phi.

The simple way to do so is by adding, taking inside the fib spiral, but the risks associated may be to great for the individual, so either adjust entry level or work out a different skew growth pattern for the average entry, but imho, the 25% retrace line is my goal.

Be aware this is in relation to the move not necessarily my average position ( which will be between the turn and present level on rescues). What I'd like to suggest is to not be rigid in your entries as the move dictates the level to enter.

If you are caught and need rescue, never carry adds in the hole. Additional levels are on the attack, if price makes us retreat kill the higher skew level asap. The remainder if needed to be rescued when price gives us a retrace, we can look to the fib spiral to find the rescue level. Also Rescue attempt is made after signs of base, not while price falls away from you. But be sure your still in higher trend and not trying to fight a reversal, rescue should be quick not prolonged.

But what if the move was deep and my remainder average was far away?
  • #13,575
  • Feb 14, 2010 9:07am Feb 14, 2010 9:07am
Quoting Fana
Hi Baifu
Interesting, i just also study this...
When you rescue, u use very big troops... Isnt it too much risk?

Now my question is, if it is good to make some booked profits from lower levels before trigger bigger balls... to reduce risk from bigger positions.

Because when u win first three levels consecutively, u have good base (your profits are booked and the risk was low), for triggering bigger balls and when these "biggers" wont succed with the same risk parametres like what you have grabbed with those "low levels"... You are still in...
Fana,

We are suppose to gather resources as we go along, profits booked can be used as cushion for troops in the battle, but if you double up and double down continuously you will end back at zero, minus the spread.

So some profit needs to be that, profit, and not at risk.

So start small, as earning grow it gives you the daily resources to increase and remain profitable.

regards,
  • #13,576
  • Feb 14, 2010 9:07am Feb 14, 2010 9:07am
Quoting luSan
[...]
And if the EU breaks when the German decide that they have enough dumping their cash into Greece, Spain, Italy and Portugal, maybe the Marks and the Franks will be back. Then the fun we will have even more fun.

Do not rush...
Good luck to all.
Hey LuSan,
nice to see you.
That scenario would be cool - have still some good old D-Marks in my safe ;-)

CU,
MaMood
  • #13,577
  • Feb 14, 2010 9:21am Feb 14, 2010 9:21am
Quoting luSan
I think to flip is a much better idea, it is much better than long and risky rescue
Totally agree. Minimize the loss and get it back by following PA. It takes some time to learn this, as luSan mentioned, but well worth the effort.

And let me mention one more thing about my rescue: I only rescue under certain circumstances, not every time (maybe 1/2 the time). I'd rather take a 10-20 pip hit than mess around with the other 1/2, because it takes time away from finding the better trades, etc. You can spend your time making money, or spend your time regretting or worrying about the trade you are in.
  • #13,578
  • Feb 14, 2010 9:33am Feb 14, 2010 9:33am
Quoting luSan
I think to flip is a much better idea, it is much better than long and risky rescue...even though when to flip is also another big issue...think about this:would you risk 10 troops to save 1?
IMHO the answer to the question of rescue or flip lays in market conditions. When price is trending and you go along with the trend and then get caught in a pullback then rescue should be a better option as chances are for the trend to prevail. If the market had in consolidation for a while then flipping sounds more reasonable as PA is simply different during such periods. Nevertheless leveraged flip is a lot harder feat to learn as it requires much stronger feeling for the PA. Just my 0.02.
  • #13,579
  • Feb 14, 2010 10:17am Feb 14, 2010 10:17am
Quoting Setebos
IMHO the answer to the question of rescue or flip lays in market conditions. When price is trending and you go along with the trend and then get caught in a pullback then rescue should be a better option as chances are for the trend to prevail. If the market had in consolidation for a while then flipping sounds more reasonable as PA is simply different during such periods. Nevertheless leveraged flip is a lot harder feat to learn as it requires much stronger feeling for the PA. Just my 0.02.
Yes, If price makes a impulsive move (TRENDING) and I enter my scout on the following correction:

many variables but,

If I'm early and price retraces more, as long as I view that I'm still in correction and haven't retraced back past the start of the impulse, I can ride with new position level once it starts to continue the move, or rescue the scout or average out as price starts to continue, leaving a new scout from the higher retrace level, and attack on following PA once I'm more confident on follow through.

Depth of final correction and small time frame PA, ( breaking from wedge or such) all would go into decision making on how to handle the current situation, there's no pat answer.

If I enter and price goes out the back past the start of the wave then I'm looking at full reversal.

Breaking from a range is a whole other subject, and would be judged on relation of range vs. higher time frame market structure and my positioning inside the range.
  • #13,580
  • Feb 14, 2010 11:09am Feb 14, 2010 11:09am
Quoting GEfx
The following are my personal opinions and are not meant to upset anyone.

One standard lot ($10/pip) per $2,000 account balance? I think the standard "at risk" percentage that experienced traders recommend is 2%-5%, which is $40-$100 on a $2,000 account. Am I to understand that you click out when you're 4-10 pips down?
Maybe Im misunderstanding you but how can anybody be free of imotionally distress ?
That 2,000 would be better suited for battle in a mini account.
As we read fti demonstrations in past hes rescued beyond 40 pips.
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