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Stating The Obvious and The Quest For Wisdom

  • #261
  • Mar 13, 2010 10:51am Mar 13, 2010 10:51am
Quoting Leonlorenzo
With all respect, unbridled positivity is ignorance. Would we live in the world we do If no one had ever questioned what they were told to be gospel? This forum requires the questioning of what others say because that is how we learn and separate the useful from the non-useful. I respect that the PF requires unwaivering positivity for its smooth running, any PF does. I'm not comparing Skunny's Fib forum to J16, but had I (and others) continued to be positive then we would have been fleeced for a much longer time. Obviously complete positivity is...
come on Leon, you are telling me this comment I was referring to helps anyone?

Quoting dinhero
nothing new just blabla....

Let's be real. There is a huge difference between debating and questions and negativity. There is just too much pure negativity and ego flying around here.

Mike
  • #262
  • Mar 13, 2010 10:52am Mar 13, 2010 10:52am
Quoting Scotty B
Thanks Mike! Yeah, her name is Adeline Jane, we call her Addie. She's a red head like her mom, I think I'm in for it..Two of them under one roof.
Plus, the dog is girl too. I'm losing ground here quickly.

It's amazing how bringing a little one into the picture can change your perspective. I completely underestimated how it would affect me. I suppose it's one of those things that you just have to experiance to really understand the gravity of it. Anyways..Thanks for the congrats. I'll tell Addie that Elmer Fudd say's hello.
She is beautiful sir Now that is what it is all about.


Back to my hole!

Mike
  • #263
  • Mar 13, 2010 11:22am Mar 13, 2010 11:22am
Quoting Parazite
Forex, the Awesome Deception of the Trading World
Really not directed at Parazite. Just a general rambling observation:

This is a good post to look at, I think, while on the subject of, so called, negativity. While the article contains issues that should be known to all traders and give them a good reality check; even make real skeptics out of them. The question is will they be able to maintain an open enough view to be able to spot and exploit opportunities as they arise? Because they do arise all of the time. Are the Forex, and other, markets so loaded with traps, deceptions and shenanigans that it's impossible to be net profitable while being relatively happy as a trader? Yes? Probably? Forex is really just a scam? Then trading this market really isn't for you.
  • #264
  • Mar 13, 2010 1:04pm Mar 13, 2010 1:04pm
Quoting Scotty B
I say this only in a cheerful joking sense...

You should change your avatar message to "English Butcher."

Thanks for the post..This must have been written by a true expert. <- Insert sarcasm here. those Institutionals and scientificals are really something.
I went through his 26 posts, wow. This puppy needs help, he hates everything. I guess that is why he calls him self a parasite, comes on the forums to suck the life out of everyone.
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #265
  • Mar 13, 2010 1:21pm Mar 13, 2010 1:21pm
Quoting LasVahGoose
I went through his 26 posts, wow. This puppy needs help, he hates everything. I guess that is why he calls him self a parasite, comes on the forums to suck the life out of everyone.
His posts seem grounded to me, except the latest one, thats a little/lot over the top. I'm guessing his handle comes from Harry Larris book T&E.

EDIT: LOL, the LARRY HARRIS book.
Living the adventure in my head.
  • #266
  • Mar 13, 2010 1:35pm Mar 13, 2010 1:35pm
Quoting mbqb11
Let's be real. There is a huge difference between debating and questions and negativity. Mike
Well said.
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #267
  • Edited 2:24pm Mar 13, 2010 1:39pm | Edited 2:24pm
Quoting Leonlorenzo
His posts seem grounded to me, except the latest one, thats a little/lot over the top. I'm guessing his handle comes from Harry Larris book T&E.

EDIT: LOL, the LARRY HARRIS book.
Ah, the parasitic trader. I can see that.
And you're right, his posts are so bad except for that last.
(I need a vacation, I've become a bitter man lately)
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #268
  • Mar 13, 2010 2:50pm Mar 13, 2010 2:50pm
Quoting Scotty B
One more thing..
"Speaking of price action and flow. I think it would be a worthwhile exercise for those of you who are interested to look at a lot of the common PA setups and ask yourself what the implications of the flow are within those setups. Since price is determined by orderflow, what happens in someting like a dlhc for example? What is the nature of the order(s) that would cause a double low at the same price? Also, as Mike stated, what context is the setup occuring in?"

Scotty, Mike, anybody,

The above quote leads neatly into a question that I've always wanted to ask. There seems to be a school of thought that TA is impotent, and needs to be bolstered by an understanding of topics like orderflow and microstructure, in order to become profitable. My question is: what data does the orderflow trader have that can't be gleaned from a price chart, by a technical trader?

Take your DBLHC example. If a technical trader sees this pattern occur at a certain level, or within a certain context (e.g. at the end of a long downmove; at a 50% fibo retrace coinciding with a trendline; etc), and has satisfied himself (by testing several hundred such setups) that this generates a subsequent directional bias, isn't this enough in itself to deliver some kind of statistical edge? Given that P/L is determined solely by the subsequent price movement, how does a knowledge of orderflow or microstructure increase this edge?

I appreciate that understanding WHY something works can give one greater confidence to apply it, and I don't want to trivialize the importance of psychology. But unless the orderflow trader has access to additional info (e.g. market depth, insider knowledge from a friend at a bank, etc) then surely he's working from the same data as the technical trader.

What am I missing?
  • #269
  • Mar 13, 2010 3:32pm Mar 13, 2010 3:32pm
Quoting hanover
The above quote leads neatly into a question that I've always wanted to ask. There seems to be a school of thought that TA is impotent, and needs to be bolstered by an understanding of topics like orderflow and microstructure, in order to become profitable. My question is: what data does the orderflow trader have that can't be gleaned from a price chart, by a technical trader?


You’re mixing two concepts here. There is the concept of trading orderflow, which requires things like option placement data and open interest at price levels and the concept of technical trading based on valid market mechanics. See below for more:

Quote
Take your DBLHC example. If a technical trader sees this pattern occur at a certain level, or within a certain context (e.g. at the end of a long downmove; at a 50% fibo retrace coinciding with a trendline; etc), and has satisfied himself (by testing several hundred such setups) that this generates a subsequent directional bias, isn't this enough in itself to deliver some kind of statistical edge? Given that P/L is determined solely by the subsequent price movement, how does a knowledge of orderflow or...


Several hundred examples are still not statistically significant. Until you have around 10,000 examples, you can't have any real confidence in the statistical probability of your trading setup (and even then you can only predict within a 3-4% range). Applying ordeflow mechanics to your trading setups can help you weed out things that may seem statistically meaningful with low samples sizes, but in fact aren't.

Say you find some 4 bar trade setup that, after backtesting 500 trades, you find that it predicts an up move 60% of the time. Seems great right? Well the question to ask at that point is "WHY is this 4 bar setup producing this result?" Unless you can find a solid reason why orders would come into the market when that setup occurs, you are probably just looking at noise.

That’s not to say that you should go on a rationalizing expedition!

Its easy to say that people will buy because of X, but that’s not what I'm saying. You need to dig deeper and think about the market participants, their motivations, and explain why they would be excited to put their money at risk throughout the course of that event.

Secondarily, having an orderflow mindset helps you to view the market at a more comprehensive level. There are many times when even though you have a solid method with quality statistical samples and a microstructure based justification for the move, you would be better served by skipping the trade. If you look at the J16 thread, you will see many opportunities that Mike and other prominent traders there skip for various reasons. Most often those reasons have to do with orderflow related concepts (even if they sometimes don’t know that’s the reason).

As an example, take a pinbar that shows up at between 6 and 7pm EST. Would you trade it? Probably not because the low liquidity environment makes price movement erratic and meaningless. You know liquidity is light, so you filter out that trade and as a result, your P&L is better then it otherwise would be.

It’s a stupid simple example but I can assure you there are higher level concepts that can be applied to everything in J16 and people like Mike are doing it. The trick is in seeing beyond the chart and using your head.
  • #270
  • Mar 13, 2010 3:45pm Mar 13, 2010 3:45pm
Quoting Darkstar
If you look at the J16 thread, you will see many opportunities that Mike and other prominent traders there skip for various reasons. Most often those reasons have to do with orderflow related concepts (even if they sometimes don’t know that’s the reason).

As an example, take a pinbar that shows up at between 6 and 7pm EST. Would you trade it? Probably not because the low liquidity environment makes price movement erratic and meaningless. You know liquidity is light, so you filter...
Can we look at a recent real world example? Would the EUR/USD trade that had a large bar that failed to close above the 1.38 level, before the market close, be something we can understand better by understanding order flow? It would appear a strong move up hit a brick wall. What would be some ways an order flow trader would look at this scenario?
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #271
  • Mar 13, 2010 3:57pm Mar 13, 2010 3:57pm
Quoting Darkstar
Well the question to ask at that point is "WHY is this 4 bar setup producing this result?" Unless you can find a solid reason why orders would come into the market when that setup occurs, you are probably just looking at noise.

That’s not to say that you should go on a rationalizing expedition!

[color=black][font=Verdana]Its easy to say that people will buy because of X, but that’s not what I'm saying. You need to dig...
So is the above basically what the Kathy Lien's and the Ashraf Laidi's of the world are doing by looking at the intermarket flows and paying attention to news headlines to build a picture for short term and long term trades. Take that knowledge and anticipate market movements with TA as a confirmation?
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #272
  • Mar 13, 2010 4:12pm Mar 13, 2010 4:12pm
Quoting LasVahGoose
Can we look at a recent real world example? Would the EUR/USD trade that had a large bar that failed to close above the 1.38 level, before the market close, be something we can understand better by understanding order flow? It would appear a strong move up hit a brick wall. What would be some ways an order flow trader would look at this scenario?
Options defense pre 3800, combined with an exhaustion of the daily move (130+ pips by that point? That’s about the most eur moves on an average day) created your "brick wall". Its going to take a meaningful allocation of capital to get through those options and you would have to be an idiot to blow it ahead of the weekend. There is still substantial Greek political risk and any bad news is going to crush euro longs. Pre weekend up moves always pull back a bit anyway...

Now we have a concentration of TA stops hovering just beyond 3800. Combine that with the stops from the option defense and, pinbar or not, without a big euro negative news event were going to at least 1.3825 on Monday. So take your pinbar if you want but, without some news to save you, it’s a loser trade.
  • #273
  • Mar 13, 2010 4:15pm Mar 13, 2010 4:15pm
Quoting LasVahGoose
So is the above basically what the Kathy Lien's and the Ashraf Laidi's of the world are doing by looking at the intermarket flows and paying attention to news headlines to build a picture for short term and long term trades. Take that knowledge and anticipate market movements with TA as a confirmation?
I have no idea what those people do... never studied them.
  • #274
  • Mar 13, 2010 4:44pm Mar 13, 2010 4:44pm
The really less people understand what ordeflow,price action and liquidity is really all about.
That's why they trade like the other 95% with some standard lagging indicators (MACD,RSI,stochastic etc).

Orderflow: here you can directly observe the pricing levels and how many contracts were executed on the bid and ask. It's tape reading.

Price action: how fast does the price climb or fall in a specific period of time - 1M 5M etc.

Liquidity: the more buyers and sellers come together (volume), the more "goods" normally will be exchanged.

The way the floor and pit trader are acting: they are combining all the 3 points while looking simultaneously at different markets and instruments.

The edge is to act when the are patterns (more heavy buyers on the tape,or price action on smaller timeframes breaks through "litte" resistance (tape reading scalping method) or when a leading instrument is rising then to buy the weaker instruments).

That's the reason why news trading is very profitable because here they also build a very good risk reward strategy.
The normal trader would never trade news events or seconds after.
  • #275
  • Mar 13, 2010 4:49pm Mar 13, 2010 4:49pm
Quoting LasVahGoose
Can we look at a recent real world example? Would the EUR/USD trade that had a large bar that failed to close above the 1.38 level, before the market close, be something we can understand better by understanding order flow? It would appear a strong move up hit a brick wall. What would be some ways an order flow trader would look at this scenario?
Oh and PS here is the TA way to look at things and still understanding flow from a broader understanding.

Price moved up strong(the short term is to the upside after the recent breakout), and people took profit pre weekend and formed a tiny small pinbar that trading to the downside is all but a losing proposition(now for those that follow TA look at how much talk was to get in short which is crazy talk late on a friday). Because there is no true "flow" to the downside. So the reason people take that pinbar short is simply b/c they see a pinbar. Even if price moves down there is a lot of "flow" points under us that can prop us back higher. Again its coming back to location. Look for TA at true powerful points of supply and demand and you can get a lot more from these bars. If you just trade the bars you are going to have a lot of trouble.

Again I am trying to show you(and LVG you know this ) how you combine the two and to tie into Hanovers question you don't need to know exactly what specific flow is located anywhere. Just where important levels reside by watching the chart. So yes it is all in a chart, but a deeper understanding of the microstructure part of the market helps you understand what you are seeing as just bars/candles etc. And I am NOT saying there is only one way to do this.

Take care
Mike
  • #276
  • Mar 13, 2010 4:59pm Mar 13, 2010 4:59pm
Quoting Darkstar
You’re mixing two concepts here. There is the concept of trading orderflow, which requires things like option placement data and open interest at price levels and the concept of technical trading based on valid market mechanics........
Many thanks for the comprehensive reply. I have a somewhat better idea now of where you, Mike, Scotty, et al are coming from. It seems that much of the data is available from price charts, and I assume that by "valid market mechanics" you're talking about things like how supply and demand create areas of support and resistance.

I've had some fairly consistent success using my own TA-based approach lately. I'm trying to get a feel for how much is likely due to 'luck', or put another way, to what extent I might have a real and enduring edge. I guess only time will tell.
___________________
[EDIT] Just to point out that by "TA" I mean price and time, and everything that can be deduced, or derived, from it (indicators, line studies, S/R, candle and chart patterns, etc). Obviously it doesn't include things like option placements, open interest, sentiment, news outcomes, COT, economic data, etc, all of which aren't available via an OHLC price chart.
  • #277
  • Mar 13, 2010 7:59pm Mar 13, 2010 7:59pm
I don't think TA is bs but I'm personally spending most of my time figuring out what CREATES those bar formations and trendlines etc.. People's perceptions create the formations. Combining orderflow rumors with deep thought will take one to the next level I think. I'm studying Pring but I just don't feel satisified. Even if Pring brings me to profitability I won't be satisified until I gain real insight into the market.
  • #278
  • Mar 13, 2010 8:58pm Mar 13, 2010 8:58pm
Quoting Deusomega
Combining orderflow rumors with deep thought will take one to the next level I think.
It's no rumor. It's either there or it's not. You pay attention to factors that could induce orderflow, but you don't trade it until you confirm that it's there.

Thanks from the bottom of my heart to Darkstar and Mike. The lights have come on, everything is clicking. It's far simpler and centered in the camp of common sense then I ever thought. I feel like I've made the whole circle now. It's not PA+ orderflow, it's not TA + orderflow, it's no secret pattern that forms. It's figuring out what those who move the market are thinking, and knowing what to look for to verify those things. It's looking at THE MARKET, not your subjective idea of what the market is. It's not a chart, not a bar or candle, not a trendline or MA. It's reasonable money flow by reasonable (not all the time) people.

Darkstar, I was reluctant to believe you at first when you told me I was close. I was soo stuck on looking for the almighty magical obscure pattern that I forgot all about those letters at the top of the screen. This is going to sound pretty funny, but after you came in and told me this, I actually spent time studying my own posts looking for answers! No, I've never been formally diagnosed with insanity, but I'm admittedly pretty thick. I'm thankful that you guys never came in and just told us the easy answers. You helped push, but you made us carry our own weight. I beleive that trading should be like any other job; the harder you are willing to work the greater the reward.

I feel as if I've been climbing a mountain, feeling like I'm not getting anywhere, and in the last couple days I've looked up to find myself not at the peak but at a significant base camp. I KNOW I have to work the rest of it out myself, but now it's just a matter of putting the pieces I have together into a working unit.

I did not see this thread turning into such a master piece (not at my hands but by those of you who have been so generous). I plan on maintaining my long term approach, but with some confirmed new tools that have my full confidence for the first time.

If you guys ever find yourself in the midwest, the steak is on me. You haven't had a steak until you've had good ole Nebraska corn fed beef.

All the best,

Scotty B
  • #279
  • Mar 13, 2010 10:44pm Mar 13, 2010 10:44pm
just to add something here for people to think about if they haven't already... it is my belief that everything you have been given to you by your platform (i.e. mt4) is all there to distract you... including the lovely lovely candlesticks themselves (and bar charts, and to a lesser extent line charts). It is like a story in a book. Yes, perhaps the story you need to listen to is there, but to find it you need to read the graffiti scribbled on the walls on each of the technicolor rainbow pictures throughout the book. the actual words typed in the book for you to clearly read and study are only a distraction from what is actually right in front of you. it just takes some interpretation.

i'm not profitable. that is all.
Congratulations ScalaFX for coming out of the closet!
  • #280
  • Mar 13, 2010 10:53pm Mar 13, 2010 10:53pm
Quoting nubcake
just to add something here for people to think about if they haven't already... it is my belief that everything you have been given to you by your platform (i.e. mt4) is all there to distract you...
It's not there to distract. I think a better analogy would be to say it's a language all it's own. The hard part is learning how to read it and find the message. It just takes time. I have a ways to go still myself, but accepting this is the first step.
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