Ridiculous Trading Myths | Page 16 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Trading Myths and Some Forex Math 337 replies

What are your favorite trading myths? 145 replies

Popular Trading Tips: Truths or Myths 36 replies

Dispelling Some Myths on Trading Practices 23 replies

Trading Myths 35 replies

Attachments: Ridiculous Trading Myths
Exit Attachments

Ridiculous Trading Myths

  • #301
  • Nov 15, 2010 2:07am Nov 15, 2010 2:07am
I won't comment on whether trading is gambling, but I will address some statements of those who think it is not.

Quoting hubbahubba
http://cdn.forexfactory.com/images/smilies/yim/sigh.gifEverytime I read about guys who like to gamble approaching Forex the same way I just gotta roll my eyes. Like watching a slow moving train wreck.
You think gamblers can't aim to find situations that give them positive expectancy?

Quote
suggesting instead of trying to be the gambler it is more accurate that we are trying to be the casino.
Which would be futile. The casino collects the spread and commissions - we pay them. Having an advantage doesn't make us the house.

Quote
The casino consistently makes money. The casino is subject to the same math as the gambler but they ALWAYS always always make sure the odds are in their favour...ALWAYS.
No, they try to make sure the odds are always in their favour. It's actually not the case, but most casino patrons don't know any better.

Quote
Everyone remember the 1995 movie "Casino" with Robert Deniro? Remember how he approached gambling when he ran the Casino? He was looking at it from the casinos side. He took it very seriously and understood all the angles.
Do you think that professional gamblers are any less serious than professional traders? Consider that De Niro played a sports/racing bettor in that movie - do you think his character would have taken that any less seriously?
  • #302
  • Edited 2:27am Nov 15, 2010 2:23am | Edited 2:27am
Every time you buy something for a price and hope to sell it for a profit you are taking a gamble. You can always improve your odds of making a profit, just like cards or forex.

I know nothing at all about gambling and not much about statistical analysis either, however it is obvious to me that cards, roulette etc must be based on probabilities just the same as trading candlestick patterns.

I have no doubt someone has done the stats regarding results of various chart patterns, personally I don't care that much, I trade what works for me with the highest probability and least stress.
  • #303
  • Nov 15, 2010 3:31am Nov 15, 2010 3:31am
Quoting Slack
1) You should wait for candle open/close to confirm...


Price doesn't care what time of the day or night it is. She doesn't have to wake up at some specified time in order to make to work on time or pick up the kids from day care.


Please add to list as you see fit.

To be honest, if I saw a strong weekly close below 1.6 on cable, I would see a bearish probability - if I were trading on that time scale. It's a factor of probability when there is a strong close below a strong support or resistance level. It adds weight to trading decisions.

So I don't at all agree with the simplistic premise of this thread.

As far as the gambling argument is concerned - everything we do is a gamble. Choose a job, choose a restaurant, cross the road, these are all considered by probability mathematics. The shame about the word gambling is that it has negative connotations brought about by obsessive, self destructive losers.
Gone to a better place
  • #304
  • Nov 15, 2010 3:37am Nov 15, 2010 3:37am
Quoting smikester
To be honest, if I saw a strong weekly close below 1.6 on cable, I would see a bearish probability - if I were trading on that time scale. It's a factor of probability when there is a strong close below a strong support or resistance level. It adds weight to trading decisions.

So I don't at all agree with the simplistic premise of this thread.

As far as the gambling argument is concerned - everything we do is a gamble. Choose a job, choose a restaurant, cross the road, these are all considered by probability mathematics. The shame about the...
I missed the comment about candle closes.

I ABSOLUTELY agree the close of the candle IS important.
  • #305
  • Nov 15, 2010 3:57am Nov 15, 2010 3:57am
Quoting jag1966
I missed the comment about candle closes.

I ABSOLUTELY agree the close of the candle IS important.
The OHLC of a bar is very important, tell me what happing with the market - how to read the bulls/bears are doing with the market.

A bar that opens HIGH and closes LOW tells me bears controlled the market and theres a high probability that tomorrows trend is down. Vise versa for bars that open LOW and closes HIGH.

The further apart the OPEN and CLOSE tells me the trend. If the OPEN and CLOSE price are close together, tell me hesitation is in play and to be cautious of tomorrows trend.

Major support and resistance levels helps me gauge possible reversal levels.
  • #306
  • Edited 5:33am Nov 15, 2010 5:13am | Edited 5:33am
Quoting Slack
1) You should wait for candle open/close to confirm...


Price doesn't care what time of the day or night it is. She doesn't have to wake up at some specified time in order to make to work on time or pick up the kids from day care.


Please add to list as you see fit.

So You think that there is no cycles!?

Price does not care about candle open/close, but peoples (traders) do!
Traders are buying and selling and they move the price! Traders have to wake up at specifaed time in order...

Why...?
  • #307
  • Nov 15, 2010 5:19am Nov 15, 2010 5:19am
Quoting The7
The Trend is your friend.

This is why we all use money. Because we follow the trend. But we dont know what a trend is, when it starts and when it ends...Maybe we should say: The Trend is your Ex-Friend"
http://1.bp.blogspot.com/_xC7lw-J4SP...end+phases.bmp First phase is called accumulation. At this faze further direction of movement is unknown.

Second phase is called distribution. At the distribution faze direction of further price movement is known.
And traders are getting into positions.

Third phase is acceleration which is caused by large speculative firms like investment banks,
retirement funds, large private investment firms, hedge funds,etc.

Fourth and the last phase is called consolidation which is caused by closing the positions(taking profit).

The best way to get in and out of a position is as it is shown on a picture.

For central line you can use moving average.

(Text is taken from:http://dozvola1.blogspot.com/2010/05...nd-phases.html)
  • #308
  • Nov 15, 2010 6:12am Nov 15, 2010 6:12am
Quoting hubbahubba
Gambling involves games of chance where probabilities remain constant.
I couldn't find that in any of the definitions of the word "gambling" from all different dictionaries/encyclopedias.

Gambling:

 

  1. The act of playing for stakes in the hope of winning.
  2. Gambling is the of money or something of material value on an event with an uncertain outcome with the primary intent of winning additional money and/or material goods.
  3. An activity characterised by a balance between winning and losing that is governed by a mixture of skill and chance.
  4. To take a risk in the hope of a favorable outcome.
  5. Money that is risked for possible monetary gain.
  6. To play games for money.
  7. A risky act or venture.
  8. Gambler - someone who risks loss or injury in the hope of gain or excitement.


Again, gambling = risk taking.
A professional gambler = a professional risk taker.

Any other (negative) connotations you might think of with regards to the term are the result of the way society/religion typically views "gambling" (thanks to the behavior of addicted non-professional gamblers), not the term itself which is rather neutral (morally speaking), and is not specific to any "type" of games such as games of chance, games of skill, etc.

To gamble is to risk something (such as money) on an event that isn't 100% certain. Period.

  • #309
  • Nov 15, 2010 7:45am Nov 15, 2010 7:45am


"Scalpers have always been loved and accepted by Forex Brokers."


  • #310
  • Edited 9:59am Nov 15, 2010 9:03am | Edited 9:59am
People who say that probably don't even bother to read the terms/conditions of most br0kers.

Edit: To be fair though, br0kers prohibiting/discouraging scalping is usually just a countermeasure against traders attempting to exploit different delays/latencies between different price feeds.
  • #311
  • Nov 15, 2010 10:35am Nov 15, 2010 10:35am
Quoting jag1966
I missed the comment about candle closes.

I ABSOLUTELY agree the close of the candle IS important.
How exactly is a bar that closes at 8am (for example) more important than if it were to close at say 7:56? That is just one time scale I am using. Same argument applies to all time scales. The bar close is no more important than the opening and all points in between. Bars/Candles are an illusion. Really the most accurate chart with the most information would be a tick chart with every tick for the last month spread out on a monitor the length of a football field.

NOTE: I am not talking about times of day such as when London or NY open or close. What happens around those times are of course important.
  • #312
  • Edited 11:02am Nov 15, 2010 10:45am | Edited 11:02am
Quoting hubbahubba
How exactly is a bar that closes at 8am (for example) more important than if it were to close at say 7:56? That is just one time scale I am using. Same argument applies to all time scales. The bar close is no more important than the opening and all points in between. Bars/Candles are an illusion. Really the most accurate chart with the most information would be a tick chart with every tick for the last month spread out on a monitor the length of a football field.

NOTE: I am not talking about times of day such as when London or NY open or close....
It has already been answered on this thread a few posts back, OHLC of bars are in themselves SR. A close above or below a recent H or L can have great significance, on any timeframe. A close above your 8am candle for example will have great significance to the m15, m30, h1 and h4 ( h4 depending upon your brokers time ). I use it, it works well for me.
  • #313
  • Nov 15, 2010 11:01am Nov 15, 2010 11:01am
Quoting hubbahubba
How exactly is a bar that closes at 8am (for example) more important than if it were to close at say 7:56?...
Good question. I think the answer lies in the fact that people interpret (or have come to believe) the close as being significant, therefore they are reacting upon it, and thus creating a self fulfilling prophecy. In my view, this potential self-fulfilling prophecy effect is at the root of all technical analysis. If there would be life on another planet, would their technical analysis cover the same areas as it does on Earth?

On the other hand, the "close" effect can be exploited by betting on it as it's approaching, allowing the market to price in its effect before it has happened, thus resulting in efficient markets with no exploitable edge.

The truth lies somewhere in the middle. Sometimes the edge exists, then the market picks up on it, the edge fades away and the market becomes efficient again.
The nail that sticks out gets hammered back in
  • #314
  • Nov 15, 2010 11:12am Nov 15, 2010 11:12am
Quoting jag1966
It has already been answered on this thread a few posts back, OHLC of bars are in themselves SR. A close above or below a recent H or L can have great significance, on any timeframe. A close above your 8am candle for example will have great significance to the m15, m30, h1 and h4 ( h4 depending upon your brokers time ). I use it, it works well for me.
How? Explain it in terms of what the people in the market are doing. I already know the answer but you are going to have to figure it out for yourself.

A bar is not real. It's a way to represent the market over a slice of time as a single entity but it is NOT the market.

ONLY argument that can be made for bars IMHO is the self fulfilling prophecy argument. However, in the case of daily bar it will look different depending on which timezone your broker uses.
  • #315
  • Nov 15, 2010 11:34am Nov 15, 2010 11:34am
Quoting hubbahubba
A bar is not real. It's a way to represent the market over a slice of time as a single entity but it is NOT the market.
Nobody said it's the market. lol

A candle/bar is a good way to show price movement in time, period.

It's up to you to try to read past, recent, and current market conditions and estimate where it will be going next.

Quoting Noloqy
therefore they are reacting upon it, and thus creating a self fulfilling prophecy.
That's a myth.

Technical analysis has no reason to work. This is proven by the fact that there is no chart pattern (or combination of patterns) that give a consistent edge in the market. This is because the masses of buyers and sellers, their methods, motives, volumes, time-frames, etc. are too randomly distributed.
  • #316
  • Nov 15, 2010 12:00pm Nov 15, 2010 12:00pm
Quoting hubbahubba
you are going to have to figure it out for yourself
haha, thanks for that, I have.
  • #317
  • Nov 15, 2010 12:50pm Nov 15, 2010 12:50pm
Quoting Marv
That's a myth.

Technical analysis has no reason to work. This is proven by the fact that there is no chart pattern (or combination of patterns) that give a consistent edge in the market. This is because the masses of buyers and sellers, their methods, motives, volumes, time-frames, etc. are too randomly distributed.
I agree with you that its a myth, I disagree that the cause you provide. "Heterogeneity of motives" does explain that there is "no system that knows it all."

You talk about that there is no pattern that gives a consistent edge. However, following the heterogeneity of motives argument, there should be no edge at all - based on technical analysis - for any duration for any system. As I find this extremely unlikely, I posit that there is bounded heterogeneity of motives, and instead explain the observation that edges come and go through a continuous search for exploitation by participants, and a lagged ability of "the mass" to catch up on this (and in turn making the market efficient again, through for example anticipation effects.)

A trader's edge then lies in the ability to detect the growing and deterioration of exploitable patterns. In this sense the trader follows a system, but knows when to stay out despite a signal.
The nail that sticks out gets hammered back in
  • #318
  • Nov 15, 2010 3:02pm Nov 15, 2010 3:02pm
Quoting Marv
Nobody said it's the market. lol

A candle/bar is a good way to show price movement in time, period.

It's up to you to try to read past, recent, and current market conditions and estimate where it will be going next.



That's a myth.

Technical analysis has no reason to work. This is proven by the fact that there is no chart pattern (or combination of patterns) that give a consistent edge in the market. This is because the masses of buyers and sellers, their methods, motives, volumes, time-frames, etc. are too randomly distributed.
Is there a point in there somewhere? I know you desperately want to disagree just for the sake of disagreeing but you are going to have to try harder I think.

The more time I spend on these threads the more I understand why the successful traders don't spend any time here.
  • #319
  • Apr 14, 2011 1:42am Apr 14, 2011 1:42am
Quoting The7
The Trend is your friend.

This is why we all use money. Because we follow the trend. But we dont know what a trend is, when it starts and when it ends...Maybe we should say: The Trend is your Ex-Friend"

Well said, however, TRADING PLAN is very important. And since no man know when trend ends, trailing is our companion
  • #320
  • Jul 2, 2011 9:07am Jul 2, 2011 9:07am
Quoting jag1966
Every time you buy something for a price and hope to sell it for a profit you are taking a gamble. You can always improve your odds of making a profit, just like cards or forex.

I know nothing at all about gambling and not much about statistical analysis either, however it is obvious to me that cards, roulette etc must be based on probabilities just the same as trading candlestick patterns.

I have no doubt someone has done the stats regarding results of various chart patterns, personally I don't care that much, I trade what works for me with...
yes, and just because you count cards at the casino doesn't mean it's an automatic win... there is still luck involved as well as strategy such as money management.

The only advantage counting cards gives you is to know when the time is most favorable to up your betting, but it is not a guaranteed winner because when you bet high you do so with a high 10 card count.

Given that, the dealer has just as much chance as you do of getting a hard 20 or BJ. However, this information can also tell you not to take a hit on anything over a hard 11... but there in lies the gamble. Just because you have a high 10 card count doesn't mean the next card to come out will be in your favor.

You are only playing the odds at that moment in time when favorability is on your side. If you don't count you will never know when is the most favorable time to up your bet other than to get on a long win streak. In the end you're either right or wrong.

The same could be said in forex, just because you think the market is oversold or overbought doesn't mean it can't become more oversold or overbought. Again that pesky little thing called RISK.
0 traders viewing now