Building an equity millipede

LOL... I was just like Warburg and now look what this thread has made me...38 posts till date and counting!!! I think I will go back into hiding again

Its all relative.

Although age, marriage, children, grandchild finally dawned the meaning to its full extent on myself but surprisingly I still have moments of enlightments when I connect the happenings of reality to that very sentence.

I can only imagine what thoughts was going through Einstein's thought process when he cemented that phrase for the centuries to come.

There is no one definitive or conclusive answer.

What is love?
What is death?
What is evil?

Throughout the thread I have given examples from casino games. I have great interest in gambling and believe that is the best business in the world. Since I know statistics very well, gambling is one business that you cannot lose unless there is no customers. However, I do agree that the moral behind the business is questionable and I justify myself by donating much of the profits.

Although I didnt quiet financially succeed enough to purchase a casino, I do have minor stakes in gambling operations overseas and various local and interstate pokie machines.

And they are absolute gold mine. Gambling interest is highly sought after and very hard to purchase for a realistic amount.

From my personal minor stakes in overseas gambling interest, I have become very well accustomed to all table games and its 'house edge.'

The least favourite game from the owners point of view is poker and blackjack. House only takes ante from poker and professional card counters take advantage of any shoe of cards without CSM (continuous shuffling machine).

Apart from the above 2 games, everything else cannot be beaten without any mechanical intervention.

Today I would like to tell you a true story that happened during one of the routine visits some time ago.

There was a gentleman who made an exorbitant amount of money whilst he was staying at a casino. He only played roulette and seem to have the midas touch. The management couldnt work out if this person is experiencing a genuine stroke of long lasting luck or something else. There was 20 personnel watching his every move and only on the 3rd day of his gambling spree did we notice that he was continuously tapping his feet before placing his bets. It was a definite set routine of action before placing his bet. Is it a habit? We wondered. Many of the large gamblers have telltale signs and habits whilst they gamble. After few hundred bets, the computers calculate the gamblers % of edge and it was alarmingly higher than most gamblers. A % that cannot be sustained continuously and it seems to be rising whilst it should be decreasing. Something was going on. We thought perhaps the wheel had a fault and it was aligned on an angle to cause a bias but this person would sit on different tables and different dealers.

Soon it was realized that this person had a mechanical palm device with a camera attached in the middle of his heavy framed glasses he was wearing. The camera takes few still images of the ball rotating around the wheel and then calculates the orbital decay of the ball and forecasts the trajectory on the 'segment' of the wheel the ball will land. And then the 'segment' is broadcasted in a very concealing earpiece. So before the ball is launched by the dealer, he would place few small bets here and there. You can continue placing bets whilst the ball is in motion and whilst it was in motion he would receive an insight to which segment it will land so he will place bets in that segments before the dealer calls out no more bets. He tapped his feet to reset the program for the next spin but since the palm device was in his shoe he couldnt tap it correctly without few attempts to reset. So we caught him out.

Continuing on..

Hi all,


I hope I am not out of line to offer this suggestion regarding entry timeframe signals.

Perhaps it might help to use a timeframe that has an ATR around the pips amount that you are willing to risk. I think this could help with the spread issues that most of us face as well as slow down the frantic pace of entries that many of us (including myself) are attempting.

In the charts I have attached both charts are 'fully enlarged' and it is obvious to see the part that spread will play in trading decisions. In the 5 min chart the spread will gobble up alot of my entries. By moving out to the 1 hour (since I am currently will to risk maybe 15 or 20pips - please note the current ATR) entries MIGHT become more reliable if we are really in a trend. This is not to say that 1 hour charts are the answer but rather to point out that timeframes other than 5min might be considered for less volitile entry signals.



Good trading to all

Dan

Morning All,
Just want to share with you something I noticed about momentum last night. If I were trading 2 months ago I would have seen the highlighted candles as tweezer tops and looked to go short. However, as I watched these candles forming the price was pushing up then getting pushed back down pushing up then back down about 3 or 4 times on each candle. It made me realise that the buyers were not giving up. I thought if they keep pushing and the sellers suddenly give up then they will burst through the resistance. That's exactly what happened.
This really cheered me up after a frustrating day because I felt I had learned something about momentum. You have to watch the candles as they are forming not just analyse the completed candles.
Hope this makes sense and helps someone.
Regards,
Ben

That is an amazing story! Thanks for sharing it.

And there was another gentleman.

He was a swedish person. Very quiet and calm and soft spoken. He was a regular patron who respected other gamblers and the dealers and would often be comped by the management. He was genuinely liked.

Some days he won, some days he lost.

He played few table games but stayed mostly on roulette. And then our tech team analysed that he had an edge over the game of roulette. After calculating his last few hundred bets he had a % edge over the house. It was miniscule but definitely alarming. Genuine stroke of luck or something else?

Is he a feet tapper? No, but technology always gets better.

And we couldnt catch him out. He became our target and every action was monitored and archived. After more data, it was hard statistical fact that he had an edge. We called him in.

What happened was amazing, he admitted he has a skill. He honestly upskilled his focal interpretation enough to actually calculate the orbital decay though his eyes and mind. It was not as accurate as using a mechanical device but it definitely beat over the house edge and he was making money. We had a long debate whether it is classified as cheating as many punters try to imagine the orbital decay but this person took it one step further and actually upskilled in it. And to call this person a cheater would place all other gamblers who try to calculate the orbital decay as cheating as well. We were cautious as this gentleman was very calm and collected and above all educated. Before we even asked how, he admitted to practice it at home on a real size roulette table. It took him many many many thousands of live viewing and now it became second nature. A single look at the ball spinning for a normal punter doesnt mean anything whilst a single look from this gentleman gave him 1000 details of the next outcome. This was the first time he was caught as he preferred to gamble on our grounds more often as it was closer to his home.

We let him keep the winnings however banned indefinitely from our grounds.

As far as I know he travels around the world doing what he does best.

Continuing on..

Graeme,

Thank you for your stories. Some people will believe them and some will not. I do.

The shear magnitude of what you are describing lends it credibility IMHO.

To me the lesson is believe in what you do, and play the odds and you can be successful.

Thanks again for sharing your experiences.

URock

Thank you very much Graeme. So I'm thinking the first story was about poking and prodding to find the right 'entry', like we are doing trading Forex, and the second about finding the one thing.

Kindest Regards,

Cam

SO what does my story has to do with trading?

Well the underlying mathematical variables between gambling and trading is very similar.

Both dealing with infinite variables.

There are average gamblers who think they can come up with patterns on the previous win/lose streaks, increasing bet size, decreasing bet size, martingale, anti-martingale and all sorts. They all fail as they try to attach a mathematical variable to infinite randomness. And amusingly this happens in trading with so many traders looking at indicators of past history to forecast future. Thats why all admit that indicators do not work well but when they do work, do you think it worked cause of the indicator or just pure randomness that happen to give the trader using that indicator a stroke of luck?

There is one very large advantage to trading then to gambling. Even though both are dealing with infinite possibilities with both similar 'patterns' of past history but trading has the key element of growth.

Growth.

In gambling, you cannot let a bet ride since sooner or later the next hand will go against you and will lose everything that has grown in a single instance.

However, in trading, you can let a position grow and grow and grow and you could possibly diversify and capture the short/medium term profit when it goes against you.

And everything else is the same..

Participation.
Gambler placing bets, traders placing entries

Low-risk entry
Gambler placing a bet on red as the last 7 outcome was red believing this is prime opportunity, trader placing an entry on volatile breakout

But growth alone cannot make you the best trader. You also require that special edge that the swedish gentleman had. And the great thing about trading is that there are special edge already proven by professionals of past era and present era that have worked wonders over and over and over again.

Please allow me to show you something new today on the charts..

Look around this forum and notice few established and followed traders.

Some mention volatile breakout.

I have mentioned volatile breakout twice before but it had less reception than the flying buddha.

Reason?

Flying buddha gives the trader a definite answer to when to enter whilst volatile breakout requires slightly more lateral thinking.

Volatile breakout is my bread and butter.

Where is the volatile breakout in this established volatile downtrend?

http://img94.imageshack.us/img94/7607/aa1e.png

http://img33.imageshack.us/img33/29/aa1sz.png

2 things happen.

1. Price will hit your sell stop and clearly close below the sell stop. That is volatile breakout.

2. Price will hit your sell stop and stall creating a new support at your sell stop. This is failed and you close the position if the price closed above your sell open price or below your buy open price.

Lets see what happened to the above

http://img190.imageshack.us/img190/3140/aa1y.png

What happens at the circled? Price retraces all the way back to sell open price but doesnt close above it. There is possbility that you have moved your SL to BE after the bold down candle but for me I usually dont place stop loss unless there is important news coming up. Most often I will leave the position and when I need to go out for the day then I would move SL to BE.

Let me show you a failed volatile breakout.

This is failed breakout

http://img836.imageshack.us/img836/5306/aa1d.png

http://img705.imageshack.us/img705/2117/aa1p.png

Most likely I wouldnt have SL but be very cautious about the triple wick bounce.

http://img829.imageshack.us/img829/1583/aa1m.png

But what if a different trader using same breakout method came little later than the first trader and went towards the opposite direction.

http://img130.imageshack.us/img130/7701/aa1t.png

And we all know what happens..

What about another example..

http://img42.imageshack.us/img42/7397/aa1r.png

What happens if the next 4hr candle hits the sell stop but doesnt close below it?

http://img693.imageshack.us/img693/4514/aa1a.png

So it became a failed breakout. I usually close it for a small loss.

Sell stop gets hit and price closes below it. Leave it to grow.
Buy stop gets hit and price closes above it. Leave it to grow.

Sell stop gets hit and price closes above it. Close it.
Buy stop gets hit and price closes below it. Close it.

This way we are only taking volatile breakouts. Please allow me to show you on eur/usd daily chart.

And only sell when 5ema is down and buy when 5ema is up

http://img828.imageshack.us/img828/8240/aa1ly.png

And it happens everywhere.. but the trick is to always pick your volatile breakout so your hard stop loss if you use one is very small

Graeme, excellent lesson, thank you very much ! It's 1:50 AM UK time but I had to stay awake and see these posts :-)

I trade volatile breakouts when I can find them, but now with this information I am going to be more confident when doing so.

Just with breakouts is profitable.

So why is everything seem to work?

It all works because we add 3 ingredients.

1. Participation
2. Low-risk entry
3. Growth

Then everything works.

I chose gbp/aud as my project the next 2 weeks. It was one of my examples from the weekend and I mentioned I will be keeping this pair close to me.

See how I only used breakouts to have positions comfortably. I purposefully did not use any flying buddhas just to show all that everything works whilst it doesnt work.

Weekly gbp/aud
http://img835.imageshack.us/img835/8122/aa1x.png

Daily gbp/aud
http://img443.imageshack.us/img443/3397/aa1c.png

4hr gbp/aud
http://img690.imageshack.us/img690/1506/aa1s.png

Some areas on 4hr chart where I would zoom into 5min chart for razor sharp entries

http://img442.imageshack.us/img442/258/aa1h.png

Thank you for the compliments, Cam

It makes my efforts worthwhile.

And my last chart. 5min of gbp/aud this week
http://img547.imageshack.us/img547/7070/aa1.png

This is golden, thank you. The broker I have my demo account with doesn't offer GBP/AUD, but from what I can see in the charts posted there was some beautiful trend action there.

Edit: They are sincere compliments Graeme. I didn't know much about trading when I ran into this thread, and ...maybe I don't know all that much currently either, BUT... I certainly know and understand A LOT more than I knew before because of your efforts.

Hi Guys...

Attached is an indicator you can place on your charts that will show the daily candle as a background image on smaller time frame charts. For example, it will show the daily candle formation on a 5 minute to 4hr chart.

It may be helpful to some.

Im currently

9 positions; unrealized 2200+ pips

21 breakevens (mostly on 5min)

18 losses; Average 21 pips loss per position, total just over 380- pips.

Current r:r if I close 1:6. This is not great and I wouldnt even consider it.

The only reason Im currently ahead of the group is not because im a super trader but:

1. Im not in a rush
2. I keep things simpler
3. Hindsight is working to my favour
4. Profit taking is stretched out

I have to admit, I could have been super aggressive and stayed up tuesday and wednesday and stacked heavier but I know everything is all relative and there is no point to overexpose myself.

I took it much slower and missed most/all of range and also missed few golden ones. It doesnt matter.

I want to say it again but the only reason Im in profit is because the market allowed it and my price interpretation/weekly forecast is correct.

My forecast for next week on gbp/aud?

http://img842.imageshack.us/img842/8601/aa1u.png

Next week, I will watch for retrace.

But here is a list of things that I anticipate in preference of order

1. NO retrace. Just volatile breakout down
2. Less than 33% retrace and then volatile breakout down
3. 50% fib
4. Uh oh... Price coming back near open price of this week's candle which means I will start again.

Most likely will be 2 or 3. But who am I to judge the market but just follow.

If next week is 1 or 2 then I would be easily 4000+ pips end of 2 weeks.

I prefer not to see 3 because 50% retrace would mean most of the legs will be closed out on BE and then I would have to start again at 50% fib which I dont mind and I know its part of my job requirements.

Godspeed to all and I will take a step back again.

Sincerely,

Graeme

Hehee, amazing results Graeme. It did not go nearly as well for me, but I'm not upset, nor planning to give up, I will keep on participating, and patiently waiting for the market to be ready to give.