Stating The Obvious and The Quest For Wisdom | Page 2 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Despair means - obvious 14 replies

Wisdom and virtue 4 replies

The quest for the best forex trading system 28 replies

The quest to be a Millionaire 16 replies

Wit and Wisdom of Wall Street 0 replies

Attachments: Stating The Obvious and The Quest For Wisdom
Exit Attachments

Stating The Obvious and The Quest For Wisdom

  • #21
  • Edited 5:15pm Mar 2, 2010 4:37pm | Edited 5:15pm
Quoting Deusomega
Take everything Leon says with a grain of salt. He's been at this a long time without much to show for it so far so he's in a very frustrated place.
I'm always sure to let people know what I say is just my own opinion and I'm honest in admitting that I have no long term profits to show. There is no need for you to offer warning about me to any person responding to my posts, I'm not misleading anyone.

Go back to reading people magazine.

@Lasvahgoose - Traders, their motives, and actions.

EDIT: Sorry that was short and irrelevant to your question, Deusomega annoyed me a little.

I believe knowing what others will do can only be done consistently by identifying real world cause and effect. Participants and their motives are what I concentrate the little free time I have on learning about. The idea of following (trends) or doing what other people did in the past (trading S&R) are the right way to approach a game in which the motto is dog eat dog seem silly to me. Both of these are circular arguments.
Living the adventure in my head.
  • #22
  • Edited 5:22pm Mar 2, 2010 5:04pm | Edited 5:22pm
Quoting TheGreatMilenko
I'll tell you how to trade to make maximum profit.
Good to see that your regular exchanges with Mr Turvey have proven to be so fruitful.

If I understand correctly, what you're saying is to fade carefully calculated extremes back through any arbitrary median point? I'm not trying to make it sound trivial; in fact, I'm sure it can be made to work very profitably - if, like you say, one puts in the work needed to establish where the extremes optimally lie.

Thanks for sharing.

Quoting TheGreatMilenko
If you can get 40% winners you're doing very well. You're right, it's expectancy that counts. In other words, over a large sample of trades, winners - losers =+ve.
Yes, if your avg win is > 1.5 your avg loss, you will come out ahead with a 40% win rate.

Win rate and win size depend on the trader's strategy. Some scalpers say they're profitable using something like TP=10 and SL=20, but that would necessitate a win rate of > 67% to stay ahead (or some more complex trade management by trailing SLs etc).
  • #23
  • Mar 2, 2010 5:04pm Mar 2, 2010 5:04pm
Quoting TheGreatMilenko
This site is wearing thin . Same old shit repeated over and over.
I'll tell you how to trade to make maximum profit . Believe it if you like if not , fine.
1) You need a reference point from which price moves. eg an ma, a trendline, pitchfork anything, as long as you can use it to see where price is relative to it.

2) Apply your reference point to a time frame which allows you to monitor the trade 24 hours a day. I use 4hr but 8hr is probably better. I actually think that smaller time frames will make more money BUT you have to stare at the screen...
I figure I can respond to you and Leon in the same post. Like Leon said, the pattern on a chart doesn't make anything happen. Patterns/signals fail all the time i.e. your point of reference. Like I've already said, your point of reference is just a crutch to make you feel better, like you know what you are doing or like you are in control of the market and your own equity curve.

I'm glad Leon has stopped by and dropped the word Value in our laps. Harris has a great chapter in his book dedicated to value traders. It's the kind of reading that gets you excited to figure out how to become a 'value trader.' I would argue along these lines: Value is not static, it changes all the time. If price is declining on a broad scale, perceptions of value are negative. Trends are like a freight train, you throw on the breaks and it takes a long time to stop and reverse. Why is is so hard to pick tops and bottoms? Technically a top or bottom is one price. Every pip price changes could be the top or bottom, but if price falls 3000 pips what are the chances that you'll guess the right price out of 3000 different prices? Oh you can see the 'zone' the bottom will be in huh? I thought you had a surgically precise system. I rest my case.

I beleive it was Harris who also describes the individual's trade as a vote. Like in any voting, the majority wins. Not any one individual decides market values, just the majority orderflow. Again, if price is declining, the majority agree that value is decreasing and their orders push price their way.

Humans are not great judges of value though. Look at the state of our economy. Look at the housing bubble. I remember back in the early 2000's listening to a guy on the radio predict our current reality. He basically said that market values were insanely inflated and that the bubble would soon burst. He was right, but if he had sold at that point in time he still would have lost. The market didn't crash until later in the decade. So, sometimes you need to be able to go with the flow even when you know you're right. And that's the simple case I'm making. If you can infer what the majority is thinking, you can vote with them.

There were a few traders who did correctly time the market crash who made lots of money when it did. Even they, armed with their common sense insight into what would happen, didn't just trade for a day. They to became trend traders and got into the trend at the best prices. Eventually others agreed with them and followed suit. Those who agreed with them made boat loads of cash right along with them. Even when DJIA was at the 9000, 8000,7000 mark, there was still plenty of money to be made. Yes, I'm arguing common sense stuff here, but we could all use a little stronger dose of it. No wonder this game is such a blood bath.
  • #24
  • Mar 2, 2010 5:10pm Mar 2, 2010 5:10pm
Quoting Scotty B
The last year of my ‘trading life’ has consisted of a lot of research, contemplative thinking, and a back to the basics mentality. In this thread I’ll probably do a lot of stating the obvious kind of stuff, but after putting in a few years at this now, I feel that this basic stuff is worth spending some time with.

Here is a very basic truism to start. The market’s performance dictates your returns. By market performance I mean the combined action of all participants to move price from point A to point B. As a trader, you are completely dependant...
Hi Scotty B; great post. However, I feel that a lot of "newbies" will not understand the hidden depths within this post. I've been in the "war" a long time now and have the scars to prove it....tried to AWOL multiple times but never succeeded. My observation of the matter is that one who begins trading with no knowledge whatsoever sees everything in a totally "objective" light. This is why most "newbies" can actually make some very good money in their early days and think they're fantastic...very few actually maintain that path....and it only takes a few solid losses for them to begin "their journey". "The journey" in and of itself begins with an 'emotional' input into the marketplace, and from that moment on the trader has placed his/her outcome in the hands of "the market" so to speak rather than retaining control of that outcome. Throughout this time the trader is looking to "beat the market" as though it were an enemy; and every trade thereafter becomes in fact an emotional ego boost or a devastion to ones sense self worth. Some of our issues involve past 'conditioning' which is detrimental to trading, and different 'personalities' most definitely play a large part in the length and depth of these 'journeys'. I have by nature a "problem solver" mentality which is probably the worst kind of 'personality' to have in the world of FX!! I over-analyse; over-think; over-react; and consequently over-lose!! Well I use to...I've since learned that if one can outlast the ravages of the war...one really does go "full circle". I believe one eventually "runs out" of emotions and gets tired enough to "not care anymore"; but you just can't stop now because you've come too far to quit. Eventually you're too tired to fight; so you don't..and that's the "edge"; the "key"; the "holy grail"...your 'emotional input' has stopped; an exhausted yet peaceful kind of "boredom" has begun to set in; you are no long "searching"; and you just begin to trade a methodology that has now become "comfortable" for you in a 'mechanical' fashion almost without thinking. Now you're back at the beginning - trading without emotion, but more informed, better prepared, and a seasoned 'veteran'.
Your sentence brought a smile to my face "...your treatment of the trades that become winners (and all the losers) will define the reward and losses you derive from your trading endeavors".
This denotes a sense of being in absolute cognitive control of your decisions. For a very long time we in fact are not - we waiver between emotionally charged ideallistic hopeful trades; and emotionally charged analysis filled with fear and hope. Throughout our 'journey' we learn a multitude of technical and fundamental information which in fact remains fairly useless to us until we 'evolve'. Eventually when the emotions are no longer in control; our cognitive abilities to reason; decipher; and then make high quality decisions; come into play - and trading becomes calm; decisive; boring; and profitable. It's at this stage that everything we have learned about TA and Fundamentals is sifted, sorted, and filed; we know where we are going; why we are going; and how to get there. We even have a 'suvival kit' in place to make sure that we are capable of getting to our destination or calmly deciding that "flat tyres happen" and there's always another day. By the time we get to our 'holiday in the sun'...believe me we've earned it!!!
  • #25
  • Mar 2, 2010 5:37pm Mar 2, 2010 5:37pm
Quoting hanover
Good to see that your regular exchanges with Mr Turvey have proven to be so fruitful.

If I understand correctly, what you're saying is to fade carefully calculated extremes back through any arbitrary median point? I'm not trying to make it sound trivial; in fact, I'm sure it can be made to work very profitably - if, like you say, one puts in the work needed to establish where the extremes optimally lie.

Thanks for sharing.



Yes, if your avg win is > 1.5 your avg loss, you will come out ahead with a 40% win rate.

Win rate and win...
I was fruitful long before I tried to tell turveyd he was talking shit. If you know what you're doing your reward can be much more than 1.5 time risk.4- 10 times risk is quite normal for me. And that's on 4hr charts.
Forgot to say, yes, but you don't just fade back to the median point, you fade to the maximum from it, then get in, in the opposite direction again, and repeat. Basically you sell tops and buy bottoms "" ooooh you can't do that...man who picks his bottom will get a smelly finger" One of the great myths designed to stop you making max profits. Think about it . On a particular time frame, how could you possibly make more other than selling at the top and staying in till the bottom, and vice versa?
  • #26
  • Mar 2, 2010 6:20pm Mar 2, 2010 6:20pm
I just want to address one point that I know will come up soon. Somebody is going to accuse me of contradicting myself about being down on technicals while telling Hanover that what he presented will work.

It's the building of your trading career directly on technicals that I don't like. Because the market defines your returns, not your technical studies, look to the market to do the hard work. I think that TA can sometimes be useful for gaining a decent entry to the market. Once you have a good entry though, let the trade winds carry you. If you get hooked on tinkering with the bells and whistles of your fancy system, your super duper system will kill you. Over-trading is a killer. You only need one trade, modest leverage and a little patience.

Because TA is not perfect, it might take you a few tries to gain that nice entry, but when you do, don't let your fancy system get in the way of what the market will give you.

Here's some cool trivia: You can only lose 100% of your account and most do (see above), but your potential % gains are almost limitless. To those who can accept this, good trading.
  • #27
  • Mar 2, 2010 6:35pm Mar 2, 2010 6:35pm
Quoting Scotty B
It's the building of your trading career directly on technicals that I don't like. Because the market defines your returns, not your technical studies, look to the market to do the hard work. I think that TA can sometimes be useful for gaining a decent entry to the market. Once you have a good entry though, let the trade winds carry you.
So the trade winds are the core fundamentals driving the currency pair? Ultimately that's what it sounds like it comes down to, where is this pair headed in the multi-month / multi-year basis.
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #28
  • Mar 2, 2010 7:03pm Mar 2, 2010 7:03pm
Frustration; anger; manipulation; indignation...etc,etc,etc. So much of it everywhere in so many 'evolving' traders....all caught up in their frustrations of trying so hard to make this work. Many, building up ficticious accounts of 'glory'; others being as sarcastic and derogative as they can be in their comments. These are all signs of the total frustration that besets those who haven't 'evelved' out of the 'emotional' state of trading. They are still 'fighting' and seeing the market (and other trader's) as an 'enemy' to be beaten down and concquered.
Fact 1 - the market doesn't even know you exist - and what's more - it doesn't care!
Fact 2 - whatever you do in the market is equivalent to dropping a hair on the surface of the atlantic ocean.
Fact 3 - the market does not exist for you to make money.
The truth of the matter is that the marketplace exists for the monetary exchange between Banks & other large financial institutions globally who individually shift millions if not billions to and fro every day in their business endeavours. Until recent years there were no 'small fish' allowed. THESE HUGE INSTITUTIONS ARE THE ONES WHO CONTROL THE MARKETPLACE. In spite of our "numbers" we are not even 'collectively' large enough to have any impact of worth on market movement....so at the end of the day, all attempts to boost our "egotistical self" is based on a false belief that we matter in the market place and have an impact on it - WE DON'T.
No amount of tearing at each other's throats and trying to keep our little trade 'secrets' to ourselves is going to matter a damn because WE DON'T MATTER AND NOTHING WE DO WILL MAKE ANY SIGNIFICANT IMPACT OVER THE DRIVING POWER OF THE HUGE FINANCIAL CONGLOMERATES THAT CONTROL THE MARKETPLACE. This is the psychological 'war' that traders fight for a long time until they finally "get it".
Fact 4 - You have no control over the marketplace and your trade will have no impact on anything.
If trader's can get their 'emotional heads' around this fact; they will realise the ONLY way to trade is to "follow the leaders"; because they are the ones who are quite literally in control. It's at this point of the "journey" that one begins to stop 'fighting for control' and learns who's "Boss'. The rest then becomes easy. Every system/methodology has the same basic foundations - no-one has anything 'new' under the sun and to think otherwise is again 'egotistical' fantasy. Once the journey ends and reality sets in; trading is disgustingly simple in nature; boring in practice; and slowly but comfortably rewarding. There are no 'hidden secrets'; no 'special methods'; and certainly no 'get rich quick' tricks to learn. The basics of TA are 'out there' for everyone and so too Fundamentals. Only after years of thinking you need to find the 'secret' or find an 'edge over everyone else' and spewing emotional rubbish to yourself (and maybe others) you finally become exhausted and the "journey of rubbish" comes to an end....only then, does one realise it was right there in front of you all the time..YOU ARE NOT IN CONTROL OF THE MARKETPLACE...AND NEVER WILL BE. Only then, does all the spewing and frustration end; only then do you realise there is no 'edge'; no 'secret' no 'holy grail' ... and no-one to beat!!! There's just a marketplace where price goes up; down; or sideways according to what the huge institutions are doing; and that can be occasionally predictable by economic fundamental forcasts. With simple basic and well known TA; you can then choose to simply 'go with the flow' or try your hand at 'swimming against the tide' - the outcomes are not complicated either...you will either win or you will lose...simple! On that basis, you will either continue to trade or you will not. After that you will either come back another day or you will quit forever. That's the long and short of it all....and personal 'emotional' input is the MAJOR contributor for lack of succes in trading. If you think this is just another pile of 'rubbish' then consider this.
All emotions are the result of 'past experiences' which have created certain belief systems and include past 'conditioned' responses. As an example, many traders continually let their losses run and cut their winners short...why? Past 'conditioned' responses. We are all taught from an early age "when life gets tough don't give up, just hang on no matter what and it will turn around" (so we let our losses 'run' knowing they'll turn around). Fine in real life because mostly it's true; but in trading it's disasterous and we continue to do so over and over as we struggle to fight a lifetime of subconscious 'conditioned' beliefs. You may ask "why then do we cut our winner short?". Again simple...we are also taught from a very young age to "take your blessing while they're here..don't wait or you might lose them". Hence we 'naturally' cut our winners short. As I said in the beginning...so much anger and frustration being vented; is a sure sign of a "journey" still very much in progress.
This is an enjoyable thread which I have gleaned my own 'jewel' from and one which I fear will be much wasted on the 'still lost and struggling egos"; but I hope this thread continues for the good of all and I wish everyone success in their endeavours.
  • #29
  • Edited 7:47pm Mar 2, 2010 7:40pm | Edited 7:47pm
@TrueBlue: very thought-provoking posts - many thanks for sharing.

Whether rightly or wrongly, I see trading as an exercise in (albeit vague) probabilities. As a technical trader, I have only price (OHLC) upon which to base my decisions, hence the market is effectively nothing more than a sequence of numbers to me. If, by some systematic means, I can (1) choose highly trending pairs for my setups, (2) somehow take low risk and/or higher-than-normal probability entries, and (3) confine losses, and ride wins as long as possible, then I can potentially skew the probabilities in my favor. Come what may, I can do no more than that; like you say, I have no control over a market whose heavyweight players care nothing for what I do.

Position sizing becomes nothing more than an exercise in finding a palatable balance between maximizing gains and preserving capital, but with a large bias of emphasis toward the latter. Psychology is nothing more than consistently applying my supposed edge; much more easily said than done, of course.

There's a great (IMO) post by Topherhk88 that echoes many of your thoughts (my thanks to Dopey for reminding me about it). I thought you might enjoy reading it, if you haven't already.

Thanks again for contributing.


Quoting LasVahGoose
So the trade winds are the core fundamentals driving the currency pair? Ultimately that's what it sounds like it comes down to, where is this pair headed in the multi-month / multi-year basis.
LVG, the primary purpose of my strength indy is a proxy for these very fundamentals, explained in more detail here. To quote Tom Yeomans, it's currencies that trend, not pairs. So by trading the strong against the weak we can potentially double our opportunity for profit – both nations' economies would need to U-turn in order for the resulting pair's major trend to change direction. Well, that's the theory.
  • #30
  • Mar 2, 2010 8:12pm Mar 2, 2010 8:12pm
Quoting TrueBlue
Frustration; anger; manipulation; indignation...etc,etc,etc. So much of it everywhere in so many 'evolving' traders....all caught up in their frustrations of trying so hard to make this work. Many, building up ficticious accounts of 'glory'; others being as sarcastic and derogative as they can be in their comments. These are all signs of the total frustration that besets those who haven't 'evelved' out of the 'emotional' state of trading. They are still 'fighting' and seeing the market (and other trader's) as an 'enemy' to be beaten down and concquered....
Oh, I take everything back Ive ever said. All I need to do is follow the trend (where is it? Have you seen it? Someone PM me before it ends please) and ill make my living.

Last time I checked the overwhelming majority (circa 80%) of forex trades were speculative - this rules out your 'easy to follow the big boys' conclusion.

I'm betting you've not made a cent trading; you don't impress or even convince me.
Living the adventure in my head.
  • #31
  • Mar 2, 2010 10:31pm Mar 2, 2010 10:31pm
Quoting hanover
Taking this one step further, are there occasions where real markets behave non-randomly (e.g. at S/R, or OB/OS extremes), so that – if we carefully and selectively choose our entries - we can exploit this?
Or perhaps there is a different question that could be asked. Is there a way to identify non-random market movement? And a follow up might be, can it be objectively defined?

If we break the market down in terms most recognize or understand, we might say that the market has two distinct modes, trend and nontrend, or imbalance and balance etc. There may be a number of reasons for price to trend or go to an imbalanced state. Some argue for "commercial" intervention and believe that looking for tools to uncover "commercial" activity is the way to go, where the term "commerical" could refer to large operators or the market participants at large whose concerted actions move the markets.

Others think in terms of more general science where a phenomenon known as Spontaneous Synchronization which occurs in nature and in human behavior causes prices to move too far and too fast in a stable panic feedback loop that sustains price volatility.

And there is a belief held by some that even random market movements can be identified and exploited profitably by reversion to the mean type strategies.

The key for any of this is in understanding and defining the market structure, then learning / implementing the tools that may be useful in identifying the discovered market modes, and then building logical means for exploiting either the trend or the nontrend modes via some recurring algorithm, preferably at higher frequencies to allow for more stable returns and quicker compounding of gains.
  • #32
  • Mar 2, 2010 11:11pm Mar 2, 2010 11:11pm
@Hanover

While I have not yet played with your indicator for finding trending pairs, I really like the idea. But if you looked at the correlation between two currencies over the short term you would not be able to take advantage of volatility's tendency to regress to the mean after an extended period of contraction or expansion. A market with low volatility appears to be more likely to spawn a trend (depending of course on one's definition of 'trend', but this is the underlying assumption of DIBS) and more importantly, the stop can be placed closer to the entry which should help increase the likelihood of the winners being much larger than the losers.

One approach would be to look at pairs that have been trending over a longer period of time - 20 to 40 days and then looking for contracted volatility on a shorter time frame, anywhere from 1 to 8 hours. This could be done on a discretionary basis by looking for pinnacles, one of the few chart patterns that seems to hold an edge, or through an indicator like historical volatility. Larry Connors has recommended looking for setups in commodities where the 6 day HV is 50% of the 100 day HV. He may have recommended those parameters to ensure that the period of contraction was greater than one week so I wouldn't feel tied to those values if I was looking at 4 hour bars, but a ratio in that area could be a good starting point. Another possibility is to look at moneyhackers.com and look for the times where there is the greatest increase in average pip range. But I think identifying a trending pair is an important first step, I wouldn't want to look for a big movement in eur/chf no matter what the indicators or charts say.

Carol Osler has written a few papers on order flow in forex, and the prevalence of stop loss (that is, market) orders to be placed on the other side of values ending in "00". When the market moves past such a value there is a cascade of triggered stop loss orders resulting in larger than average moves. Perhaps long entries ending in "06", or short entries ending in "94" merit a slightly larger bet size.

So there's a couple more edges that may be helpful to someone. I'll certainly be giving them some attention over the next few months.
  • #33
  • Mar 2, 2010 11:21pm Mar 2, 2010 11:21pm
Quoting FXEZ
Or perhaps........
"And there is a belief held by some that even random market movements can be identified and exploited profitably by reversion to the mean type strategies."
If, by 'random', you mean a coin-toss-like random walk, then I don't understand how this can work. If every event (tick) is effectively random, i.e. from a TA perspective, then any 'mean' would be completely arbitrary and continuously changing.

"The key for any of this is in understanding and defining the market structure, then learning / implementing the tools that may be useful in identifying the discovered market modes, and then building logical means for exploiting either the trend or the nontrend modes via some recurring algorithm, preferably at higher frequencies to allow for more stable returns and quicker compounding of gains."
Fair enough, but supposing we understand market structure, for example, how does that provide additional benefit, if the only data available to us is price?

Or what other data do we need (orderbook?, insider info from a friend at a bank?, ....), and how do we obtain it? (see Darkstar's quote below)

As a possible parallel, let's suppose that price somehow reflects the underlying emotion that drives it. If we understood the emotions involved, would we be any closer to being profitable? If an emotion creates a price pattern that reflects some kind of exploitable inefficiency, then as a technical analyst, all I need to know is that price pattern X, if traded in a certain way, is a 'valid setup'. I guess it's a bit like saying that I don't need to understand the intricacies of a car engine in order to drive a car.

Quoting Darkstar
What you need? A prime broker currenex/ebs account, IFR, Oanda open interest, some friends on the inside of a large bank or brokerage, a proper understanding of risk management, and most importantly; your psychological issues completely resolved.
  • #34
  • Edited 11:53pm Mar 2, 2010 11:52pm | Edited 11:53pm
I'd like to add my two pips about market randomness:

I think that anyone who has traded for enough time will realize that prices are neither random nor predictable: The truth lies somewhere in between.
  • #35
  • Mar 3, 2010 12:27am Mar 3, 2010 12:27am
Hanover:

Quote
If, by 'random', you mean a coin-toss-like random walk, then I don't understand how this can work. If every event (tick) is effectively random, i.e. from a TA perspective, then any 'mean' would be completely arbitrary and continuously changing.

There are rules to normal distributions. Lots of very smart academics have made their bones by identifying characteristics of these distributions, writing papers on their discoveries, and generally speaking, normal distributions are the basis for comparison in the statistician's world. I'm not a statistician and so you can take everything I write with the idea that it comes from a novice in the field who has taken a couple of stats classes way back in the day, and has recently gotten back into studying math and statistics and relearning the lingo and its application again.

One of the rules of the normal standard distributions is that that even though each of the observations might be random, the mean forms directly in the center of the distribution given the law of large numbers, and the first and second standard deviations account for about 68% and 95% respectively of all observations in the known population. There is a lot more to it and you can read about normal distibutions here: http://en.wikipedia.org/wiki/Normal_distribution
  • #36
  • Mar 3, 2010 12:30am Mar 3, 2010 12:30am
Hanover:
Quote
Fair enough, but supposing we understand market structure, for example, how does that provide additional benefit, if the only data available to us is price?

The main (and most lasting) points in market structure study or the auction market theory, seem to be imbalance and balance. And so understanding that balance is mostly a random distribution - where price rotates around a given mean, and that imbalance is mostly a non-random occurrence, it then comes down to identification. Can you identify when the market is exhibiting random distributions? Can you identify when the market is exhibiting non-random behavior? So it comes down to identifying the characteristics of each. This can be done statistically or heuristically. If you've studied market structure via the works sprouting from Peter Steidlmayer and his concept of Market Profile, then you're familiar with what most refer to as "market structure."

Much of the study in this direction leads to heuristic rules or definitions. For instance, value area - defined as 70% of the TPOs for a given period. This is an obvious heuristic for the standard deviation which yields approximately 68% of the area for a normal standard distribution. But the standard deviation is measured from the mean, not from the POC (as is done in MP). The heuristics are not statistically based and as a result it's impossible to ascertain the underlying real probabilities. I'm not criticizing the work of Steidlmayer but merely pointing out that the same work can be approached from a statistical frame and thereby statistical tools can be employed in helping discover the type of distribution we are looking at. There is a very interesting thread on another board that should be read by all who would like to be more exact in their interpretation of market structure and take this analysis to the next level. I don't agree with everything the author states, particularly with regards to application but do believe that it gives a very good base for someone who isn't a statistician but would like to up their game in this area. The thread series can be found here: http://www.traderslaboratory.com/for...inks-4803.html

And as to the final point regarding price patterns, some/many/most/all of them (depending on who you talk to) occur while price is within a normal standard distribution - meaning the pattern is very likely non-predictive because it is made up of random inputs. If we can agree that a (non-statistically based) price pattern would only be useful (predictive) if it occurs when the market is in a trending mode, then we would eliminate all the price patterns that occur within randomness (which may be some/many/most/all of them).
  • #37
  • Mar 3, 2010 12:35am Mar 3, 2010 12:35am
Quoting Leonlorenzo
Oh, I take everything back Ive ever said. All I need to do is follow the trend (where is it? Have you seen it? Someone PM me before it ends please) and ill make my living.

Last time I checked the overwhelming majority (circa 80%) of forex trades were speculative - this rules out your 'easy to follow the big boys' conclusion.

I'm betting you've not made a cent trading; you don't impress or even convince me.
Hi Leon, this is an interesting retaliatory response to an article that was written as a general observation and "intended" for no-one in particular. I have taken my own "journey" and like most here make my posts in good will in the hope that it might help even just one struggling trader to have perhaps a small breakthrough in their endeavours. I don't mind being insignificant, but we are always taught and expected throughout life to "be in control" - this is something we therefore naturally strive to do. I was simply stating that much of our upbringing is detrimental to our trading endeavours in that it is totally opposite to our trading requirements. Every seasoned professional trader will tell you "the market is in control" and the best way to succeed is to "go with the flow". If you think you can belittle and humiliate me here; I'm sorry to disappoint you but I'm long past the age of caring about such things. I am a professionally trained counsellor and was simply trying to help any who might read my posts to understand the complexities of the working of the human mind and emotions while learning the art of trading.
I have no purpose whatsoever in convincing or impressing you; but your response was interesting and I wish you well.
  • #38
  • Mar 3, 2010 12:40am Mar 3, 2010 12:40am
Quoting hanover
@TrueBlue: very thought-provoking posts - many thanks for sharing.

Whether rightly or wrongly, I see trading as an exercise in (albeit vague) probabilities. As a technical trader, I have only price (OHLC) upon which to base my decisions, hence the market is effectively nothing more than a sequence of numbers to me. If, by some systematic means, I can (1) choose highly trending pairs for my setups, (2) somehow take low risk and/or higher-than-normal probability entries, and (3) confine losses, and ride wins as long as possible, then I can...
Thanks for that Hanover, I really enjoyed reading that post. Trading is very much like people around the world....we all think we're so different, yet in reality we are generally very much the same.....so too with trading. It seems there are so many variables; but when the smoke finally clears, one is amazed to find there's actually not...it's all pretty much the same with the individual application being the greatest variable. Anyway, happy pippin bro.
  • #39
  • Mar 3, 2010 12:51am Mar 3, 2010 12:51am
Quoting TrueBlue
Thanks for that Hanover, I really enjoyed reading that post. Trading is very much like people around the world....we all think we're so different, yet in reality we are generally very much the same.....so too with trading. It seems there are so many variables; but when the smoke finally clears, one is amazed to find there's actually not...it's all pretty much the same with the individual application being the greatest variable. Anyway, happy pippin bro.
This got me thinking about an example that some on here might be able to relate with. Imagine a "normal" guy out looking to meet a "nice" girl. He goes out to a place where "nice girls" hang out so he probably ends up in a bar or nightclub instead. He sees an exceptionally attractive woman across the way and thinks of an approach. He tries to be unique, original and comes up with something that he is certain, she has not heard before. He times it so she is alone and walks over to her and compliments her on her looks and then offers to buy her a drink. The woman and her friends laugh at the guy and she says "nice try" and turns her back on him because he is the 5th guy tonight who has tried that exact same line on her and it bores her to tears. So much for originality. Random guys using the exact same approach on the same woman - all eliciting responses from her that revert to the mean.
  • #40
  • Mar 3, 2010 1:08am Mar 3, 2010 1:08am
Quoting hanover
Or what other data do we need (orderbook?, insider info from a friend at a bank?, ....), and how do we obtain it? (see Darkstar's quote below)
I'm glad you brought this up Han. I've pondered over this question a lot. I think an interesting way of approaching this question would be to name off what information you'd want and why if you could have any of it you wanted. Doing this sort of exercise helps me to better guage where I need to fill in the gaps in my own knowledge.

When I first became interested in 'orderflow trading,' I thought I needed an 'orderbook,' which some refer to as the DOM while others are refering to a private banks book that details all types of pending orders. To be honest, I'm not 100% clear to this day what orderflow trading even is. The description of it around here is vague at best. 'orderflow trading' would mean differant things depending on who you are. If I'm a dealer, it would make a lot of sense to call myself an orderflow trader because in essense thats what makes me money. If I'm a guy who is privy to all sorts of pending order data then I'm more of a front-runner or what Harris would call a parasitic trader.

So at this ponint in time, according to my still very limited understanding of 'orderflow trading,' if I could have any data I wanted hand delivered to me, here is what I'd ask for:

 

  1. The internal orderbooks of all banks who deal with hedge funds. (according to all the research papers I've read, financial customers of banks make the most impact on prices and their orders are the most informative regarding future returns) I'd also like to see real stop order placments just to see what their effects truly are on prices in a live setting.
  2. Some sort of higer level FX options data. The sad thing is that I still don't fully understand all the implications of FX options on the spot market. Yes, I get the whole barrier options idea and the aggressive defense of those options in the spot market, but c'mon, how do you really test that sort of thing? I follow IFR and enjoy reading their options reporting, but am not fully sure of how to best use that data. For instance, a couple weeks back they reported of large barriers down at the 1.3 level in EU. Does this mean the market is going to 1.3? I can't help but laugh a little. To my knowledge, there are knock in/out barriers, but IFR, or my version of it does not tell me these details. If it was a knock out barrier I could see why price might make it down to break 1.3, but if it's a knock in then wouldn't the buyer of the option be well informed about prices NOT reaching 1.3? Yes, scotty needs more work in the options area.

I can't say that I'd want access to the interbank DOM because to be honest, all the DOMs I've seen change so fast that I have no idea what to even look for. The one thing I'd be interested though is the true spreads on the interbank. This is based on the notorius words of Darkstar. If the spread is really 30 pips at times and oanda is still quoting a 1 pip spread, you could just straddle the market and put your TP's at the respective prices you see quoted on the interbank. Even this though is probably silly and impractical.

Well I used bullet points thinking I'd have a long wish list of data I'd want but ole Scotty hasn't gotten very far in this stuff despite all the time spent. How about you guys? You can have whatever data you want, what would you put on your list and why? Hopefully this gets interesting!

Until later,

Scotty B

0 traders viewing now