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Technical Analysis Fallacy

  • #16,221
  • Edited 7:29pm Jun 8, 2010 7:09pm | Edited 7:29pm
Quoting badxboxplayer
Dont know if it's just the wine but...???? hmmmm 2007..? just drive!!

sorry


Maybe I was sidetracked for a while.

OK, time to swallow some pride... I've had notes from the first 200 pages for a while, and it was these notes (they are pretty in depth) that I read when I was asked to read the first 200 pages. I had completely forgotten that I had even made so many posts in the thread in the past... and I can understand why thread participants would have been inclined to be impatient with me if they were aware of all my previous posts. So, I forgive, I'm sincerely sorry, and apologise in particular to FTI. I was really clueless that you'd attempted to help me out in the past.

Leon
Living the adventure in my head.
  • #16,222
  • Edited 7:25pm Jun 8, 2010 7:17pm | Edited 7:25pm
Quoting Leonlorenzo


Maybe I was sidetracked for a while.
no probs.. as long as your on the correct track now..
i reckon you know the score...oo euro movin ...profit to take

sorted..bed time now,might take day off market tommorow after today..!!but you never know
Ok too many posts from me...may have negative effect

sorry

dave
  • #16,223
  • Jun 8, 2010 7:28pm Jun 8, 2010 7:28pm
Going for a change.
Here is an example of a beautiful rescue operation I just did.
This afternoon at work
in the middle of my activities
I opened my oanda account and I saw the
wild volatility.
I jumped in and I took a bad trade.
Terrible timing!?
So I waited until the momentum of the
north was extinguished.
I entered again.
I waited.
It went through my B/E
but since this is a range strategy
I waited some more.
When the southern momentum
was done
then I just closed the trades.
I took home 30 pips.
A very simple rescue.
Thanks chief.
I would not be able to do it
without your ass kicking
and forcing me to abandon
all the stupid trading ideas
I collected from trader wananbe books
and other trash. Ole!

Bias: short
skew: -1-1+2
Attached Image (click to enlarge)
Click to Enlarge Name: Rescue.jpg Size: 80 KB
Empty as water and soft as a facing wind mountain
  • #16,224
  • Jun 8, 2010 7:41pm Jun 8, 2010 7:41pm
Hope you all had a great trading day. Really good trading environment so far this week, even without any significant FA activity. Very tired now and time to call it a day. Tokyo is not off to much of a start for me, and my eyes are heavy (oh heck, I fell asleep -- lol). luSan, nice rescue. See you all at London and good trading to you all.
  • #16,225
  • Jun 8, 2010 7:44pm Jun 8, 2010 7:44pm
nice Lusan

I guess i was taking profit when you entered..

sorry

watching Queen live in Montreal now... class,,can't sleep money still to be made..!!!
  • #16,226
  • Jun 8, 2010 7:50pm Jun 8, 2010 7:50pm
Quoting Leonlorenzo


Maybe I was sidetracked for a while.

OK, time to swallow some pride... I've had notes from the first 200 pages for a while, and it was these notes (they are pretty in depth) that I read when I was asked to read the first 200 pages. I had completely forgotten that I had even made so many posts in the thread in the past... and I can understand why thread participants would have been inclined to be impatient with me if they were aware of all my previous posts. So, I forgive, I'm sincerely sorry, and apologise in particular to FTI. I...
No need to swallow anything, I wasn't digging for dirt or anything, was just backtracking...just saw the post and wasn't sure..

Just hope you find success in whatever form you need it to be..

that's it...

my years worth of posting!!!

dave
  • #16,227
  • Jun 8, 2010 9:07pm Jun 8, 2010 9:07pm
FTI said:

Normally I want to start with a blankmind,
but when I have over-nights, I would continue from there.
Don't thinmk its a walk in the park, sometimes esp when markets get confused, it can get very scary.
esp whrn the book gets very large. and it keeps snowballing on you.

When I was a young dealer, they used to comment that I had balls of steel.
But mostly after the trades, I feel very balls broken ,
and used to recover by intense wiskey sessions.
If you ever sat with positions where your hand are shaking and you mind have to hold steady and steadfast ,
then maybe you may understand.

For new traders you may be going to the little boys room more often than necessary.
I have had experiences where new dealers, vomitted on the desk before.
I am the type of trainer that throws them into the deep ends.
Ultimately their books are mine, so if they get into trouble, I have to take over.

The trick is to hold very steadfast to the position allowing the snowball build on you,
the maxim is to be able to take the punches first,
once the rubber band swings back, whack them like theres no tomorrow,
within your capacity and keep taking profits along the way untill the frenzy slows off
then square down for the next attack.
Important thing is to know your limits, if you have been snooked out of step,
once you you get the chance bail out, log stock and barrel.
Try not to turn, if you do, you may become a pig.

Now if anyone goes bankrupt doing this don't take it out on me.
I m just trying to tell you how its done. Like the WWF ppl say" don't try this at home".
We train and train to be able to reflex like that and to hold with our limitations.
Remember its not easy.
Tailor it for yourself within your risk appitite and limits.
Don't kill yourself over it. Never risk more than10% of net worth on any battle.

Stop loss are for suckers (oops sitting ducks)
Sure it gives you peace of mind , thats because you're not watching after your babies,
but at what price?
Dance the dance.
If you cannot take the heat, stay out of the kitchen,
If there's a problem. Chances is either over leverage or over trading, or undercapitalise.
These mkts you are trading in, are killing fields,
and there's lots of calm on the surface,
in the undercurrents, theres lots of killing going on.
And I kid you not.

Don't for one moment hink that, just because you learned something fromme.
You can go out with your guns blazing.
There's lots more than meets the eyes. So be cautious.
Ultimately at the end of the day, its all YOU.

If your plan is to piranya bits and pieces from the market.
Remember, that Hansel and Gretel got themselves in a cage by picking uo bread crumps.
If you are picking up crumps, try not to take on the entire market swings.

Next post, I may introduce a little chinese story to you.

regards

The truth is the market is actually a battlefield. And do not be mistaken that anyone can move it as they pleases. But don't be mistaken that the Banks are there to Screw traders up, Their role is as custodian and moderator(if you like to the activities) Marketmakers (Interbank, not those you may be familiar with) They are liquidity providers helping large corp orders get filled. esp when mkt thins out and orders at at different level staring at each other, So they move around with price shades to try to get the orders to match out. therby providing a service to the corp. community.
To transfer risk from party to party. They move together because they can actually "feel" each other from the way the prices are quoted. How its shading , whethers its tearing, where certain sector are scuttering because they have been hitted by giant corp. You would be suprised at how large some order get. Imagine a customer calling you for a price to deal for 500 million USD on 1 price. What would you do? And for info that's middium cust. Do you know what's the daily transacted volume?

Maybe if you will ponder on this questions ?
What is the market you are actually trading in?
Whos market is it? whos the owner?
Why does it move? What makes it move?
Have you heard of "open market operation"?

We are actually going into the Structure of the Markets.
If you have time, read this link carefully.

http://www.ny.frb.org/education/addpub/usfxm/
also wiki about "Bretton Woods Agreement"

For Indept understanding read this book, I think may be out of print. try library
"Paper Money" by Adam Smith, dell publishing Co copyright by George J W Goodman.1981


regards
  • #16,228
  • Jun 8, 2010 9:12pm Jun 8, 2010 9:12pm
There are many ways to trade, and for everyone the decision making process is different.
What you have discribed are very mechanical methodology.
It would be the way to go , if you were a machine.

Try to feel the market, ask yourself questions all the time.
You are not carzy if you ask the questions , only if you listen.

Look at the chart, ask yourself,
what didi the market do when it was last at this level, historically?
was this levels significant chart wise?
which direction is the market trending?
try to feel if its try to go up or down?

if you have determined the direction, its most likely to go.
if you use indicators, try to determine the nearest safe levels to sttempt entry,
try the super over bought or oversoldlevels.in you bolinger bands.
fabonnacci levels are supposed to show market at its best equilibrium,
when at the fabo levels, whatch the mkt, is it behaving steady?
MACD are just multiple averages and are lag indicator,
intrendy mkts they widen ,
in letagic mkts they close up,
incongestions they spagattie cross.
don't read too much into that.

after entry watch the mkts.
Is it doing what you thought it should be doing?
are you comfortable with the position, if yes then add to the position.
if not get out, find a different level. and do itagain. and again until you are satisfied with your position.

when you are riding pprofits, take some out at the oversold levels to reenter near the overbought levels , vice versa.
After a few weeks , you should have a better feel of the market, you are trading.

Don't watch too many pairs.
focus on majors,
GBP and EUR should move quite in syn. YEN should behave the reverse.
watch those intermarket relationships, if any is not behaving normally ,
then be aware that something is happening in the fundamental front.
try to find out if there;s any special reason from the news releases.

On the questions you asked

1.yes, most dealers have basic grounding in technical analysis, it differs from one to another.
Most dealers do not deal in time frames, we manage it mark to NOW,
if its going up forever, we'll keep turning long forever.

You must understand that unlike traders, the market keep making the dealers short of usd if usd keeps going up.
This is because customers will keep buying usd from them making them short,
so the dealer will have to go interbank and keep getting his dollars back to stay abreast of the markets.
For dealers, timeframe is of no consequence, it is constantly being managed.
Some dealers uses the averages, mostly just look at price levels.

There are special dealers in special Strategic Arbitrage & trading units that trades the markets like traders,
they manage exposures for the longer term.
Some of them are economist some are technical analyst.
at this section , some more advance instruments are managed, eg, OTC currency options and sythetics.

In answer to your question,
To me the most important indicator is price.
The market's sigma, which is the speed of move.
The Vega, which indicade the volitility factor in its trend and the time it consumes in it push.
You can determine all this from bare bar or candle charts.

the other indicator is true average,
with that you can determine if the volitility is out of line for your risk tenure,
you can best understand this by studying the original Dow theory.
Unfortunately there're many mutations of the Dow theory.
And those that are being used by conventional chartist today differs from my cup of tea.
I think you may get a good grounding of that from the book by R.Edwards/J. Magee.
I cannot remember the title of the book, but I can check for you when I return to Sg probably middle jan 2008. pls remind me.

the other improtant, read, is the market form.

I try to recognise the compounded formatioms in the bar charts.
A good reference to forms study wasdone by a researcher, by the name of John R.Hill,
I'm not sure if his studys are available to the masses.
They read compound chart formations.
An understanding of Hip and Lop patterns is foundational requirement.

A complimentary methodology is by complex candle chart formations.
I find the books (in english) on this too elementary.
I used to have an understudy who had a copy of the "secret" readings by rice traders in nihongo.
Unfortunately I've no contact with him for a long time since and my development on that has stalled.

I must stress, "never ever play god to the markets."
always stay in the "dance", feeling its moods and tempo,
using technical accrument to read the dance.
Implementing damage control when out of step.
That's actually money management.(another time)
Many analyst, behaves like fortune tellers, that is wrong.

All an analyst can master, is the art of dancing along with the market,
and recognising its behaviour as the dance progresses.
It is an on going process, not one read and you khow all, that cannot happen.
The markets are alive.

In a nutshell, There are other components necessary, other than technical analysis skills,
mindset, money moneymanagement are equaliy critical.

Thank you every one for your indulgence.
I am very tired, danced with the market yesterday the whole day and night,
what a ball.
So if you have questions just post them here and I'll get back to it after a good rest.

regards

Thank you for your kind words.
I normally keep the daily OHLC bar charts visable for
the EUR, cable, yen.(naked, term borrowed from leighsww)
chf is a bit of a wild lady, so i don't look at her much.
then I have the the short charts of the market I am actively trading.
normally sighting the 5min candles ,15min candles
and I keep hourly candles at the back of the screen just in case
the short charts becomes choppy then I refer to the hourly for direction.
On short charts, I have the hourly sma plotted to measure volitility.
I tend not to put studies on charts to distract proper reading of market form.
if the lady have long, trendy legs, I normally put the 15mins charts to the back as well,
so as not to clutter the screen.

http://cdn.forexfactory.com/images/buttons/quote.gif

  • #16,229
  • Jun 8, 2010 9:21pm Jun 8, 2010 9:21pm
"...So you would use the daily charts for trend and candle formations to indicate possible changes in movement. Do you use the hourly similarly? ..."

Yes I use Daily Chart studies to indicate trend,
I use short charts to indicate form.

Ponder this,
On the daily EUR/USD now we see possible topping formation, correct.

We may be right, So tell me where is it going?Should be Down, right?

When will we know if it is going down?
What if on the short charts, its going up?
So do we still want to go short?
So when should we go short?
When the short chart shows you that it topping out, right?

So if this market continues to go up. Then You miss the bus ( borrowed from leighsww) ,right?
You missed the bus going north, why?
because you were at the bus stand waiting for the south bound bus, right?

Thats why I, said.
Bull makes money, Bears make money, Pigs get slaughtered.

You see, when bulls are making money, Bears are not.
When bears are making money bulls cannot.
But the one whos trying to catch both buses will sooner be dead. Crossing the road from one bus stand to another,
Because he could be at the north stand when the south bus comes, or the south stand when the north bus comes.
or mostly in th middle of the road, when both bus comes.

Do I make any sense?

For dealers, its a different game, because when markets are going up in a BEAR market, customers keep making them short,
their book keeps getting bigger short, but their average cost of being short keeps going up.
all they have to do is to wait for the trend to enforce and
when the market returns to the point where the buying started ,
he would make nearly the amount of money that made him short in the first place.

For this to happen, he has to have a book big enough to accommadate the customer base.
AND as the market swings back towards the start point, he has to ascertain that his book of shorts, be kept constant.
This is because on the way down the customers will be making him long.
So by constantly covering back to back on the way down he maintains his book short.
So for the dealer, as long as he maintains his poise in the direction of the markets major trend,
he will always make "scalp money", guanranteed.

His modus operandi, is to "duck and move quickly"
so as to have a better average on the up swing towards stops to maximise his shorting near the top of the swing.
This scenerio is most effective if there are stop near levels where he las a large order to sell,
where he can help the customer sell OB and "kill the sitting duck stops" in the same blow.
Another senerio is where by the heavy selling is CB levels or specific sell zones,
where many teir 1 are ready to pounch on the buyers.
You must understand that only tier 1 and some big tier 2 will have this advantage.

This is the reason, why you have rubber band snap backs in the direction of trend directions,
and slow puffy moves counter trend.
Am I making any sense to anyone here?

So we use daily trend as the direction to build book size and short charts to make market for retraces.
Do discuss this on this trread, no questions are silly, just discuss until it becomes clear.
Don't understand !, argue until you understand.
Fight if you must, I will not complain.

YOU MUST GET THE CONCEPT OF MARKET STRUCTURE RIGHT TO UNDERSTAND THE CHARTS.

I didn't wnat to get into this first, but since it is being asked here we go.
I wanted to get across the basic foundations right first,
cos if your foundation is slopy you will get a slopy structure built on it.
not so unlike building a house.
Nevertheless this is also the advance level of foundation and is an acceptable direction togo.

regards
"....no trends move in a straight line advance or decline.
within any major trend, there are minor trends, then there are intraday trend, hourly trends and so forth.
its your choice to decide which is within your scope to cope with.
For overnight positions, its only prudent to stay with the major trend, cos' no one knows when it will kick in.
for managed daylight you should always trade the dance.
a bad position in the 5 min plays can be made good in the hourly plays, and the latter can be made in 5 Hrsly and so forth.
It depends on your own stamina to cope.
Be aware that the overnight positions are only a fraction of the daylight management...."
  • #16,230
  • Edited 10:00pm Jun 8, 2010 9:30pm | Edited 10:00pm
Short- EU- 1.1946- 1 lot

EDIT: What would we consider a break of the daily trend? 600pips north?
On the 4h and 1h a break of about 1.1980 could be considered the beginning of an uptrend.
Living the adventure in my head.
  • #16,231
  • Jun 8, 2010 9:50pm Jun 8, 2010 9:50pm
Quoting luSan
Going for a change.
Here is an example of a beautiful rescue operation I just did.
This afternoon at work
in the middle of my activities
I opened my oanda account and I saw the
wild volatility.
I jumped in and I took a bad trade.
Terrible timing!?
So I waited until the momentum of the
north was extinguished.
I entered again.
I waited.
It went through my B/E
but since this is a range strategy
I waited some more.
When the southern momentum
was done
then I just closed the trades.
I took home 30 pips.
A very simple rescue.
Thanks chief.
I would not...
you were brave jumping into a short @1930 area after 2 days of the 1901 to 1915 area being the bottom.

kudos for sticking with it.
  • #16,232
  • Jun 8, 2010 9:54pm Jun 8, 2010 9:54pm
aux,
nice reminders.
  • #16,233
  • Jun 8, 2010 10:13pm Jun 8, 2010 10:13pm
Quoting Leonlorenzo


Maybe I was sidetracked for a while.

OK, time to swallow some pride... I've had notes from the first 200 pages for a while, and it was these notes (they are pretty in depth) that I read when I was asked to read the first 200 pages. So, I forgive, I'm sincerely sorry, and apologise in particular to FTI. I was really clueless that you'd attempted to help me out in the past.

Leon
dont worry about it , let it roll off your back and keep attempting to take it in with your reviews.


I keep seeing read the first 200 pages.

Dont forget there is dialog of fti walking stepmom through trades where we see the demeanor and mindset while his working with the girls beyond the 200 pages.
  • #16,234
  • Edited 10:31pm Jun 8, 2010 10:19pm | Edited 10:31pm
Quoting Leonlorenzo
Short- EU- 1.1946- 1 lot

EDIT: What would we consider a break of the daily trend? 600pips north?
On the 4h and 1h a break of about 1.1980 could be considered the beginning of an uptrend.
refer back to brick and mortars, the dow theory. cheers.

from fti:

Regarding trends, trends mean different things to different people. The accepted definition of a trend is a persistent direction of move, on an up trend the highs get higher and low stays higher, conversely a down trend, when the low gets lower and the high stays lower.


No trends move in a straight line advance or decline. Within any major trend, there are minor trends, then there are intraday trend, hourly trends and so forth. Its your choice to decide which is within your scope to cope with.


For overnight positions, its only prudent to stay with the major trend, cos’ no one knows when it will kick in. For managed daylight you should always trade the dance. A bad position in the 5 min plays can be made good in the hourly plays, and the latter can be made in 5 Hrly and so forth. It depends on your own stamina to cope.


Be aware that the overnight positions are only a fraction of the daylight management. In your example we have been in daily uptrend mode, but I did highlighted that the CB was watching and preparing. So even though it we are in a Eur uptrend , you must be aware of the players, esp CB. If you look at your daily chart , you had 3 days warning of lethargy and a final warning yesterday. Today a reversal is already in progress. So during these times either you take bigger risk to go reversal or just wait for clearer signs.or trade the daylight trend.


Moreover there are times where there are no trends, or trends are slowing down, we call that topping or bottoming action. If you trade trends only, do not feel that you have to have a position. There are times when no position is a position.If you traded trends only, probably 70% of the time you would be side.When we manage daylight trading, profits attained from that activity is normally used to enhance the cost of the at risk position. That’s why I do not place stop loss, and by virtueof the overnight being only a fraction of daylight trading. the Cost of the overnight is normally way off the charts.


To understand the market movement, it is impossible, otherwise there will be no market.


The rule that the trader must conform to is sell high, buy low. that’s it.
  • #16,235
  • Jun 8, 2010 10:28pm Jun 8, 2010 10:28pm
Quoting Leonlorenzo
Short- EU- 1.1946- 1 lot

EDIT: What would we consider a break of the daily trend? 600pips north?
On the 4h and 1h a break of about 1.1980 could be considered the beginning of an uptrend.
A break of 1.1930 will leave all TFs (1m - 1d) as constituting down trends technically.
Living the adventure in my head.
  • #16,236
  • Jun 8, 2010 10:30pm Jun 8, 2010 10:30pm
Quoting Leonlorenzo
Short- EU- 1.1946- 1 lot
thats funny I have scout in long @ 1945, on my toes.
  • #16,237
  • Jun 8, 2010 10:34pm Jun 8, 2010 10:34pm
Quoting jest1081
refer back to brick and mortars, the dow theory. cheers.

[left]Regarding trends, trends mean different things to different people. The accepted [font=Arial][size=3][size=3][font=Arial][size=3][font=Arial][b]definition of a trend is a persistent direction of move, on an up trend the highs get higher [i][font=Arial][size=2]and low stays higher, conversely a down trend, when...
I've never even looked at Dow theory, I'll have to take a look. The definition of trend I'm currently using is the easiest to see, I'm looking at the last swing on every time frame, If the last move made was a high, then the trend is an uptrend.

Cheers for the pointers,
Leon
Living the adventure in my head.
  • #16,238
  • Jun 8, 2010 10:36pm Jun 8, 2010 10:36pm
Quoting lilpip
thats funny I have scout in long @ 1945, on my toes.
i would consider this eur being in twilight zone right now.
daily seems to have lost some steam downards, she seems to be consolidating right now, wither primed for lower bids or a possible retracement in due time. positions are risk right now, im strategising to play within the range bands until clearer footprints are established
  • #16,239
  • Jun 8, 2010 10:36pm Jun 8, 2010 10:36pm
Quoting lilpip
thats funny I have scout in long @ 1945, on my toes.
Good for us, at least we're not pigs .
Living the adventure in my head.
  • #16,240
  • Jun 8, 2010 10:38pm Jun 8, 2010 10:38pm
Hi guys,

As you know, I stalk this thread quite abit. Thought I'd share something I've been using with great efficacy using actually, the same info fti provided in the portion above quoted by auxesis.

I hv a close mate who interned on a dealing desk b4. He asked the flow trader, "how do you know when to buy/sell for your own book?"
he said,
"when the market's bid you buy when the market's offer you sell"

So we were gg "wtf?!" for a looonnng time, but recently, I realised that if you actually watch the bars you can "feel" whether the market is bid or offer. In reviewing some positions I took, well, I find that even if the major trend is down, you can get screwed shorting if the "now" market is bid.

My style's quite diff from that advocated here, but the principles are similar. I enter base on price action and not "feel the flows" and I don't average many small lots and stuff. More like a guerrilla strike, go full size (maybe 1/2 if i'm not THAT sure) of allotted risk, grab what I can, go.

What you can "see/feel" though, is the ebb and flow btw bid/offer moods.

Summary: I have been able to get a "feel" for the bid/offer mood of the market in the short term based on how the bars have been forming. I go with that for grabs.
One Mind, Any Market
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