Stating The Obvious and The Quest For Wisdom

Thank you, thank you, thank you.........a great analogy and indeed what I have observed to be the case. Interestingly also, you will never convince the following young men that whatever they do.....it's not original; and no matter what they do, it will have no impact on her. Therefore, sit back and watch her, observe her ways, learn how to treat her with respect and approach casually but carefully. You can't change her; but you may learn to "flow" with her. Even if the end result is only a drink; your efforts were rewarded.

*** Wish list qualification ***

Your wish list has to include data that theoretically already exists and that could be exploited if you had it.

I just didn't want someone to say " Give me all the high and low values of every hour bar for the next week". While this sort of request is very nice, the last time I checked, God had not setup a market data service.

following your example, you have to

1) determine what you want (select the pair to trade)
2) go where you'll find it (market & timeframe)
3) filter out the women, who
. a) want to go out with someone (fundamental determination)
. b) would do it with you (technical signal/signal)
3.1) wait for the opportunity (patience) dismiss B-trades (discipline)
4) take the trade, that's the easy part
4.1) deal with your fear
4.2) deal with your greed
4.3) cut your losses or let your profits run
5) get out when its over, learn from the experience and move on to the next opportunity

One more thing before I forget...Speaking of orderflow trading from the side of the dealer, or even the shoddy retail FX broker. Go look in a mirror and what do you see? A self destructive freak of a trader right? I think most of us fall into this catagory hence the ridiculously high failiure rate in our realm of the trading world.

Think of the opportunity that exists for a medium sized broker with a decent client base who flys under the radar somewhat who is willing to deal with most of his customers trades in house(a large broker like Oanda shames this kind of thing, they're too big for it...or maybe not). Of course he'd have a liquidity relationship with a bank, but he'd only use it for the quotes and for hedging his few customers who actually make money.

He'd make the spread by matching off his orderflow, and because most of his customers are the typical self destructive freaks, their stops and margin calls are his TPs. Do you see the beauty of it?

New customers would be put into a quarantine phase and each trade they make would be hedged until you figured out who knew what they were doing and who didn't.

Once you seperated the sheep from the goats, sit back and watch your bank account grow very large at the expence of unrealistic over-leveraged self destructive freaks.

Yeah, just some food for thought.

Zeke, many thanks for your reply. If I understand you correctly, my tests with the strength indy confirm your findings: I haven't found it helpful on the hourly timeframes downward. I merely use its daily and weekly plots as an quick-and-dirty alternative to trying to weigh up the complexities of the various fundamentals that determine the strength of each nation's economy.

I understand the basics of DIBS. I see the inside bar merely as a tool for facilitating a 'low risk' entry, i.e. a tight initial stoploss opening the possibility for a high RR trade. The idea is supposedly that the high and low of the IB provide some kind of S/R; however (everything else being equal) I doubt that an X pip IB is likely to provide much advantage over any randomly selected X pip range. I suspect that there are better low risk opportunities available by using stronger forms of S/R, perhaps along the lines of those shown below, thus improving DIBS' win rate, while still allowing both a low risk entry, and the potential opportunity of a 'long tail' exit. Combine that with longer term pair trend strength and we have one of my preferred setups.

Thanks for the link to moneyhackers. I've experimented with using an ATR-derivative indy to try to filter out entries intgo low volatility, sideways periods. I recognize it as an area that I could develop further.

Scotty, sorry if I've gotten a little off topic with this post.

_______________________

@Everybody else

You're posting too fast for me to keep up with my replies, LOL. I will try to respond within the next day or so.

Exactly! IB's are illusions in the truest sense, pacifiers for the mind. If there was real intrinsic value in them then they'd all work. Wise words, Dave!
No no..Anything goes around here. I'm glad you're part of the discussion.

Ok Scotty, I stand corrected, this thread is better than your last one recapping your journey.

My two cents, you hit the nail on the head with orderflow and the actual structure of the market (think about dealer interaction, which is actually where most of the fx volume comes from)...keep researching that topic (I'm thinking you have read some Osler, no? Look at Lyons as well)...and you could leave some stuff for lurkers to look up themselves

And one thing I need to mention is many of you guys must realize a 'candle' in itself is meaningless. It is just arbitrary points in time that we choose to label as 'open' and 'close'. Whats the difference between a 'pin bar' and a bar that opens low and closes high with a following bar that opens high and closes low? Nothing, except arbitrary points in time.
Don't trade on a picture of a candle or candles, trade on the information contained in the candles.

edit: I skipped pages 2 and 3, if that matters...I'm catching up now, so I'll edit if need be...

Edit: A word on Risk/Reward: Your risk is the market circumstances in which you can concede you made a bad trade. So I can minimize 'entry risk' by selling as close as possible below resistance and buying as close as possible above support (unless of course market circumstances lead me to believe a breakout is due)....therefore I know if my S/R zone is cleanly broken I am wrong and can close the trade....rather than sitting around 'hoping' the trade comes back, because in my experience, that usually turns out bad and is very stressful...

My humble opinion is that somewhere a few traders are able to make money using the simple behaviour of price. They identified some inefficiencies and capitalize on them. I think I found 2 of them, they worked in the past, they worked this year and I hope that they will continue to work in the future.

You have all already understood the concepts of money management, psychology and edge. They hold no secrets anymore. It is clear that you need an edge, you must not risk more than x% on a certain trade and you must be able to press BUY/SELL and follow a plan.

I think that some of you complicate the matter too much and the reason for that is that you are searching for the holy grail or a method that will multiply your account very fast. Or a way to eliminate the boredom associated with entering a few trades every month which increase your account 2-3%.

Let's consider the last week. If was a no brainer to short the EURO a few times using a support line, given the problems of Greece. You had the perfect technical opportunity and the perfect fundamental opportunity. You didn't need orderflow, DOM, IFR, VSA or knowing when the smart money will hunt stop losses. You could have made easy money.

But I also find boring to wait for these setups. Because if you know when to trade based on experience or an EA and you win most of the time, the whole trading activity becomes extremely boring. There's no fun in an activity which has no secrets or challenges anymore. It becomes a simple game of coin tossing, when you receive 2$ after a tail and you give 1$ after a head.

This is how I realized that I'm in this game for money alone and not for wisdom, personal development or finding who I am. I would employ everything I can to maximize my profits and if a better game comes around I'll jump on it without thinking. Maybe some of you must ask the same question.

I can see your point, but I also think some people really like to understand all the little details of whatever they are interested in. The kid that takes apart his toys to see what's inside type of thing. Maybe this is more of a detour being taken and the path takes longer. Some say in trading it doesn't make money to know all the extra microstructure, but then again if it brings peace of mind or brings some closure, so be it.

It may not be what some people are into, that is fine. But what harm is it doing?

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I'm liking the strength meter, thanks for the 411. Especially on the weekly monthly time frame.

I know this but the first post wasn't about market's microstructure.
Actually this thread is about nothing in particular, I see only experienced traders who share some points about trading in general.

Because there are not that many forms of market data, the only thing I can imagine that you are refering to is volumes in a market profile sense. Yes, I've seen MP call themselves orderflow traders to. Kind of funny really. The other source would be the tape, which only exists in fx futures. I've looked into it but I'm not much of a tape reader..The only real edge I know of is price's tendancy to turn and rebounce off the point of control, which is really no secret. Is it viable? Sure, but so are IB's sometimes. I'm interested in gaining entries into the market that I can ride for weeks to months at a time. The fewer trades it takes to gain the position the better. This is the question I'm working to answer, but even random entries would eventually stick. I guess you could say I'm trying to be as cost efficient as possible.

If you think that taking only a couple trades per month will only net you 2-3% then you have some re-examining to do.

Thanks for the tip on dealer to dealer interaction, but I don't know where to start looking at that. If you're talking about 'hot potato' trading among dealers, I'm already studying how this could be useful knowledge.

Sorry to everyone reading.. I don't intend for this thread to turn into a system or orderflow trading thread. The truth is that the options for gaining entry to a trend following trade are legion, but I can't help wondering what the best entry approach actually is. Maybe it's only truly clear in hindsight.

I think it is hard to beat a MEGA pinbar on a weekly / monthly time frame that kicks off a change in trend. Even a simple 60 day MA on weekly chart would get you in and keep you in for a long term trade. Trend trading is catching 60% of the move in the middle since you miss the first 20% and last 20%. Or so I've read.

On another topic I just read an article from Dirk Du Toit (Bird watcher) and was making the point that TIME is an edge for the retail player. Link to the ARTICLE (ignore the sales pitch at the end). The points that he made regarding short term entries as random price movement and time being an edge I thought were interesting. Do the opposite of the marketing hype by forex brokers was another one I liked.

True, feel free to share some more.

I completely agree with Scotty that technicals are basically just points of reference. I've actually considered the ones I use to be "anchors" for some time now and that's all that really matters about them.

I think the idea steps on a lot of other people's toes (whether experienced or newbies who base everything they say on books or web pages they've read) because of a giant misunderstanding. From the start, the real practical use of TA is to get a visual representation of something that isn't 100% objective. By that I mean that price doesn't move based on a single cause-and-effect relationship in most cases, and certainly not "because of" an indicator.

In that vein, it's true that a trade shouldn't be entered under the assumption that a TA pattern "caused" it -- just like a weather forecast, or the tools used for it, didn't "cause" rain. The practical use for either one shouldn't really change though.

Beyond that, it becomes a matter of semantics.

If a relatively new trader were to take a trade purely because price has hit a trendline or moving average, it could still be a high probability trade under the right circumstances.

Now, the odds of price stalling or breaking this area isn't "caused" by the moving average, or the trend line, or the candles on your screen for that matter... but whether a newbie took a trade around this area thinking "it'll bounce because there's a giant pin bar at a trend line that'll make it bounce" (mistakenly thinking that TA causes price action) or "there's a good chance the interbank dealers will retrace the last move because there's been a long move down without a single retracement" (whether it's because interbank dealers need to push it back a little or because they feel like taking a crap on all the breakout traders) actually doesn't matter much because the practical use is essentially the same.

In that way, it's nothing but semantics because the TA is just there to present a visual representation of what is still essentially tape reading and remembering new swing highs and lows relative to old swing highs and lows. This part hasn't changed much in the past century -- only the way we look at it and the machines we use to visualize it.

Where the real problem lies is when beginners are using TA-based ideas that don't pan out the way they expect, and then place blame on the wrong things so that their efforts to "fix" the problem is completely misguided. (This is what I believe Scotty originally meant to address but it obviously brings a lot of reactions out of people who might find the argument threatening to their entire understanding of the markets.)

The problem in this case is that, in their efforts to "fix" the losing trade, they may not realize that their stop might've been too tight for the setup they're trying to trade in the context of the current volatility of the market as seen by that time frame; that they, themselves, might be exiting too early (nervously taking small profits) for the type of setup they entered so their winning trades fail to outsize this losing one; or if they entered or exited far too late for the particular setup they traded (ie. held onto a losing trade long past the time it was already proven wrong, or entered too late in a dangerous effort to chase an already exhausted and stalled move.) Instead, they think "there must be something I'm missing, maybe I'll read another 2000 threads on FF and see if I find that one big secret pattern so this loss will never happen again."

Plus, there's a huge difference between each of these traders:

1) Long term forex trader who focuses on H1, Daily, or above and follows trends with high R:R

2) Intraday trader who fades high probability S/R areas or "pivots" of some sort

3) Scalper who looks for small 5 to 10 pip profits but needs a larger stop to withstand volatility

4) Carry trader holding onto a position to collect positive swaps (whose risk is based on a future interest rate announcement rather than typical volatility)

Even if all of these people were consistently profitable, it could still be very short sighted for any of them to throw around generalized blanket statements like "you need a 1:3 risk-reward ratio to profit" or "more than 40% win rate is required to be profitable" or "you can never pick tops/bottoms" or "you're over trading/not trading often enough", etc. because even if any of these statements might be true for your style, it isn't entirely true for the others yet they can all be profitable (and can all be losing) at once.

About IB's -- I agree that they're useless if viewed as a magical indicator of price reversals (the odds aren't that high since it could either be a retracement or a stalling pattern on a lower time frame) but there are constructive ways to look at them. All they really show is that price consolidated for one unit of the time frame you're looking at (ie. for 15 mins if you're looking at a 15-min chart.) If anything, you can drop down to a lower time frame to check out the real price action within that consolidation area after noticing it and then deciding what to do with it (if anything). It's usually either a "triangle", "wedge" or whatever name you give the consolidation patterns, or it's a "flag" (retracement before a continuation) -- just assuming that it's one or the other could lead to more losses than your style and risk profile can tolerate if you expect them to indicate one specific scenario.

An IB by itself doesn't tell you anything other than that it could be "A" consolidation, just like seeing a random person on the street only tells you that it's a person. That doesn't mean your vision and recognition abilities are "useless", just that you don't know if it's a robber or an animal rescuer at first glance unless you use other methods to find out more about it.

I hope none of this comes across condescending but a lot of good discussions get dragged down into meaningless arguments between original thinkers and the struggling frustrated know-it-all cynics, or newbies who regurgitate gurus/books about trading psychology/risk-reward at every opportunity.

I just thought this thread had potential to be more than that and it still could be. Keep up with original thoughts, just don't second guess yourself too much after you've already settled in to a trading style that works for both you and your bottom line. Until then, it's better to think outside of the box than to blindly follow the same advice that's given to everyone who's struggling and losing -- just a little food for thought.

Your a pleb.

Hi Scotty, intelligent post.

Ive always considered an order-flow trader to be parasitic; sucking a little profit from an identifiable individual or group. If I had to ask for some kind of data it would be stops and options, bids and offers, the same as you. Id prefer a friend in the know-how though. Real-time Open Interest taken from loads of brokers/liquidity providers would also be great, for obvious reasons.

Above any kind of data id ask for a better memory though, it sucks to read things but not remember them.

Leon

lol ALL Hail Caesar! So... who wants to take the first STAB

I'm not sure of the purpose of the Pm's you sent to me. You asked no questions and I'm unsure what kind of response you would like. I agree with one thing you have said... the use of vouches. I have asked for my vouches to be removed in the past and have stated more than once that members should be somehow verified for profitability before being given them. The problem is, i suppose, that there would be very few members given the badge should profitability be a criteria for them being given.

The poster I called a pleb, he speaks in clichés, and that winds me up.

Lets let Scotty's thread get back on track now please

Scotty, IFR option info is second to none. They're talking about knock out options by the way; there's nowhere near as much at stake with a knock in option.

Also, you don't necessarily want to front run interest - depends on market conditions - given you don't always know if that interest is going to reverse price or not.