What's Sure And What's Not?

I'm wondering about this all day so I figured out to ask it here. When a price approaches/touches a support/resistance, be it fibo, pivot, whatever, how can we, as traders, be sure that the price will reverse or break through? Since nobody knows for sure whether the price will reverse or break through, why do we need support/resistance lines? Nobody knows at that very moment if any reverse/break through is a false/true signal, so why do we need the lines?

This goes for oscillators as well, RSI, Stoch, MACD, CCI whatever, when price reaches extreme zones, nobody knows for sure whether the price will go further extreme or reverse. A price might reach 80 RSI this minute, drops to 70 the next minute and the minute after goes up to 85 then stay there for 10 minutes or so, sending price upward for another 50 pips. This will surely trigger any stop loss for whoever expecting the overbought price to come down any sooner. This also applies to divergences, nobody can be sure if the price won't go 30 pips further before giving in to the divergence signal.

Also, MA crosses... what about them? How can anyone be sure that the price will go all the way after an MA cross and not cross it again before one can even cover the spreads?? Since nobody can be sure, why are people using it?

Price action... so called indicator'less' trading, the 'essence' of market, the 'purest' form of price analysis, isn't any better really... When there's a descending triangle pattern, how can anyone be sure if it will be a bearish breakout? When there's a bearish HSH pattern, is it 100% confirmation that the price will go south? When there's a pin bar, does it really give us a full go for the reversal??

What I'm trying to say is that, since the price is unpredictable, why do we have systems that try to somehow 'predict' it? I may not ask for a 'Holy Grail' or 99% winning system, but how a system can even claim if it has a 60% win ratio? Isn't anything more than 50% win ratio gives a 'SURE' positive growth provided we follow strict MM? Isn't such a system somehow is a 'Holy Grail' since it gives a 'SURE' positive growth? After 1 year of demo training and trying a lot of trading systems, I really can't say if I found a system that can give me at least 60% win ratio even if I adhere to strict MM...

I hope someone can prove me wrong about what I said so I can start having 'positive growth'.

You need to know the probability %s for breaks of support/resistance, fibo, pivot, RSI, Stoch, MACD, CC, etc. The % probability information for some of those is available.

First off, there are not absolutes in any form of trading, much like there are no absolutes (except death and tax's for the pun) in life. There are no guarentees that you will return home from work however there are high probabilities that provided you follow a certain system, model or way that they favour you.

Support and Resistances points or areas are just an eyeballed level where there has been a change in the past. If the area has had a number of changes or it has held a number of times then there is a greater chance that it may happen again. As for other factors, it is a matter of building a probable basis for a trade and having more in your corner for a trade. However this does not mean that just because you have more than 10 reasons why a trade will work that it will. "A person cannot experience being truely right or wrong until they have acted".

You dont need to be right more often than you are wrong to make money, you have to be smart enough to acknowledge when you are wrong, cut your losses and move on. When you are right it is your responsibility to build upon being right. So if you have some trade signals and you take them, the moment they prove to be false or not working out to how you would expect, or like them to, cut it, minimise the loss and move on. Far too many people treat it the other way. The allow losses to mount because they cant take losing and they cut there profits short because they are afraid of loosing it. Go figure.

So that is my return on you. Price action can be a pure form of simple trading. That is, you see a signal, you take a trade and you manage it. That is a beginning approach and I can tell you that there is far more to price action trading than just a Pin Bar, or an outside bar and I can also tell you that I have taken just as many loosing PA bars as winning over time however I also have learnt a thing or 2 that allows me to be comfortable with future trades.

Like I say there is nothing concrete, nothing absolute and no 100% definitive way to trade without loosing so you might aswell move past it and concentrate on taking trades, managing losses and building your account through whatever means you need.

Razor

Hi fxeturn, actually I have come to the conclusion that all the indicators and patterns are pretty useless in terms of giving a high percentage indication that price will continue one way or another. From what I have seen personally, nothing gives better than 50% probability of "predicting" which way the price will go next. There is an interesting article here regarding candle patterns: http://premium.working-money.com/wm/display.asp?art=329

It's an old article but it reinforced what I already suspected, that even the largely well regarded patterns such as pin bars (shooting stars/doji's) actually work out less than 50% of the time, and the patterns that do give better than 50% probability actually appear so infrequently that they become useless for a trader.

My honest opinion is that all s/r, TL, indicators are equally useless or useful. In real terms of whether they give you a mathematical edge, I believe they do not. A pin bar is no more likely to result in the market moving in one direction or another than my goldfish blowing bubbles in the morning is. BUT if you use a pattern or s/r or indicator to give you the confidence to enter the market and then manage your trade.....well then they are all useful and should be used.

Lot's of people will tell you the right way and the wrong way to trade. I would say there is no such thing. If it works for you, IT WORKS. I personally have nothing on my charts at all. What I use as a reason to enter the market would probably give some people on this forum heart failure.....but it works for me, and has done for many years. I just need a simple excuse to get in to a trade, and then I manage it in a purely discretionary way. It works for me.

Other people will rely on 10 different indicators which all have to "say" a certain thing.....and that works for them. I'm not right and they're wrong, nor vice versa.

Trading is about the individual.

You sound like you are coming to similar conclusions that I came to a long time ago. I would say that if YOU think that something is worthwhile or completely useless don't let anyone else tell you differently. I think that successful traders are the ones who find a way for themselves without being pushed one way or the other by the crowd.

I don't think any "system" exists which offers better than 50/50 odds. If it did, someone would have created a robot to trade it strictly, and the market as we know it would cease to exist. I think it's individual discretion which results in profitable trading and the appearance of having a 60% or more winning strategy. I personally think that no matter what excuse a person uses to get in to a trade, at the exact point of entry they have no better than 50/50 of being right. It's the way they then manage the trade to take profits early or let them run etc that changes the situation from 50/50 to more favourable.

Again this is all my opinion. There will be many here who totally disagree with me, and that is fine. As I've said trading is about the individual. But I do honestly think that all the lines, TL, S/R and indicators are useless in giving any mathematical advantage, although I would be interested if anyone has hard data to prove otherwise (it wouldn't be the first time my opinion was wrong).

I'll tell you what's sure, the only sure thing in forex is that you have 95% of probabilities of lose your pants, that's the only sure man, like in life the only sure thing is death.