It's kind of curious...the war between price and indicators | Page 6 | Forex Factory

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It's kind of curious...the war between price and indicators

  • #101
  • Edited 6:45pm Nov 28, 2010 6:32pm | Edited 6:45pm
vx13,

Let me just say that I admire your attitude, specifically the way you're handling the naysayers posts (myself included). In this business, it's rare to come cross someone as honest and who doesn't have the typical big/insecure trader's ego.

Quoting vx13
Looks like on the pole indies and price are tied sorta. Price is up for now but those two have been switching off first place for awhile now. Indies have been in first now and then and they've never been more than two votes from each other. Interesting stuff. No price past has been down there for awhile now but it's always been about half of what the indies and price votes are. Just somethings that needed to be noticed.
My guess is about 60-70% of the people here are into PA with no indies. The people who pick the third option "Trading only in the present with no price past" are also probably PA/no indies traders, and they picked it because it sounds good and makes sense, even though, as I mentioned, all of us use past info when trading (there's no way around it).
  • #102
  • Edited 7:18pm Nov 28, 2010 6:59pm | Edited 7:18pm
nubcake,

You're right, game A and B both are negative expectancy games, BUT game B has one (or more) state in which it has positive expectancy. Here's an extract from Wikipedia:

 

  1. While Game B is a losing game under the probability distribution that results for Ct modulo M when it is played individually (Ct modulo M is the remainder when Ct is divided M), it can be a winning game under other distributions, as there is at least one state in which its expectation is positive.
  2. As the distribution of outcomes of Game B depend on the player's capital, the two games cannot be independent. If they were, playing them in any sequence would lose as well.

The role of M now comes into sharp focus. It serves solely to induce a dependence between Games A and B, so that a player is more likely to enter states in which Game B has a positive expectation, allowing it to overcome the losses from Game A. With this understanding, the paradox resolves itself.

[/End of quote]

So basically, while attempting to apply this to the market, you will need to be able to create/trigger a state of positive expectation in Game B, thus negating the need for using this paradox (which isn't really a 'paradox' because it's resolvable). It's an interesting academic exercise and can be applied in certain fields, but not the markets nor the casinos.

  • #103
  • Nov 28, 2010 7:30pm Nov 28, 2010 7:30pm
this post will be a little inconsistent because i'm replying in a lot of places to text that wasn't directed at me but to others... so here goes :

Quoting vx13
Marv, I'm going to be honest with you. I have no freakin' clue in the entire world xD
count me in there too.

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Ah! You're a life-saver, nubcake.
And yeah I definitely agree. A lot of people are trying to apply a pure Parrondo Paradox which has been stated several times on this thread and others that that is impossible. But it seems that a modified paradox works. I'm still trying to break it down.
many a word means many a thing... it strikes me that in this case "modified" might be a red-herring in peoples interpretation of it. i suspect the modification is not on the parrondo paradox itself but instead is in how the paradox as it stands on its own can not be mapped 1 to 1 to trading. as it has already been stated now and years ago the paradox does not fit the context of trading. i suspect the modification is possibly in how the concept of parrondo is manipulated to fit into a trading context. just like buying a pair of new business pants may not fit you correctly, so you need to have it altered to fit your shape properly. they are still pants, just stretched here and shortened there to match the circumstance they are applied.

or to put it bluntly... i don't think the modification is of the degree that a horse has been turned into a donkey. instead a horse has been given a haircut and hoof-shine.

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Maybe people just haven't really delved deep enough or people are too focused on other ways of trading or who knows. I'm not saying you're wrong because you may be right and even the best of the best have tried the paradox and it didn't work.
i haven't seen anyone who has appeared to successfully apply parrondo explicitly state that it does not work. i have seen failures state it does not work. smj had his ea. it could have been flawed and producing fluke results due to some extreme universal joke until it finally imploded... but the end of the recycled thread was open ended and had no suggestion that the concept was flawed. it was working, and then the thread ended. suggests to me perhaps he took it and ran away with the golden goose.

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And smjones seemed to profit in the live forward test while going through many different phases of the market.


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The games and subgames of the paradox have an "edge" inside each of them if I'm not mistaken and I don't see how it was a joke. It seemed like an astounding effort with great results. I don't know. I don't know him personally so I can never be too sure.
go back to my previous post and re-read what i said about expectancy and probability, and how the games have neg expectancy. that's why the paradox is a paradox to those observing it. watch the sawtooth step animation at cut the rope and you will see game a and b both lose individually overall.

after just writing an nice long explanation on some things i realised i have fallen down the rabbit hole and lost my way, and now i'm confused. my previous post is actually incorrect, so disregard. "game a" and "game b" are not the same 50/50 minus costs overall... or they are, but not in the way i had seen them in my head at first, so just ignore until clarity returns.

now the whole Spearion post is messing with my head >/

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I believe the line goes "One step out of line is still one step in the right direction"
nice. good phrase.

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Thanks for still supporting the cause!
you stole my sunday... or was it, you gave me a sunday. either way i did a lot of reading yesterday, so thanks to YOU.

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In your statement, even if the game evens out to 50:50, there is still game A to consider.

To me I think instead of low-prob and positive expectancy balanced with high-prob and negative expectancy, it's more like they compliment each other it such a way that makes a kind of magical positive expectancy high-prob market-killer. And then there's game A...

i'm now confused... it was all clear to me yesterday, now gone.

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I still believe in the paradox but not trading it in a pure sense. In a mod sense like smjones and John1.
tradable or not it's still interesting and fresh to me as it is to you, so it's 'cool'. a new toy to play with for awhile until i get bored. like i said above smj didn't say anything EVER about it not working in the extracted thread... the thread simply ended. that could mean a few things. if this thread suddenly disappears it'll tell me something as well *nudge nudge*.

perhaps he just realised a mistake in his thought process and went on to other things. or he is on his island somewhere.
Congratulations ScalaFX for coming out of the closet!
  • #104
  • Nov 28, 2010 7:35pm Nov 28, 2010 7:35pm
Quoting Marv
vx13,

Let me just say that I admire your attitude, specifically the way you're handling the naysayers posts (myself included). In this business, it's rare to come cross someone as honest and who doesn't have the typical big/insecure trader's ego.



My guess is about 60-70% of the people here are into PA with no indies. The people who pick the third option "Trading only in the present with no price past" are also probably PA/no indies traders, and they picked it because it sounds good and makes sense, even though, as I mentioned, all of...
yeah. this goes back to the Spearion post which at first i was seeing one way, but now i'm seeing in a different way and confused. it was clear to me yesterday >/
Congratulations ScalaFX for coming out of the closet!
  • #105
  • Nov 29, 2010 12:26pm Nov 29, 2010 12:26pm
Man you guys have gotten really deep in this thread LOl.

Ok I am going to take a stab at what I believe CP has been eluding to with his posts.

If you listen carefully to what he has been saying most systems that folks are trading and even selling for that matter fail to do one of the most crucial things. Draw a line in the sand determining where the buyers have outweighed the sellers indicating you should only be looking for buying opportunities and vice versa for sellers.

In his charts that he posted you will remember there was a buy hemisphere and a sell hemisphere that indicated where you would look for buying a selling opportunities. In fact he went as far as posting multiple charts with different ways of depicting those buy and sell zones.

He also says follow the trend. And in one of his posts he mentioned using retracements. A trend following system can be developed that removes all subjectivity if you are keen enough to pick up on the basics. The first of those basics is determining the trend. Which translates into the buy and sell hemispheres. Once you do that you need to identify a setup within the retracement.

With a trend following method you are not looking to trade at the beginning of a trend but rather within a trend. So you identify a setup that occurs in your buy or sell hemisphere and and pull the trigger when the setup occurs. Now you have to perform trade management.

There are different ways to manage a trade, use a trailing stop, a predetermined TP, scale out, or manually exit your trade based on momentum.

The bottom line here is being consistent. Whatever your method for entering and exiting you need to be consistent.

Now digging a little deeper there has been talk of not using history to trade from. I think you need to put a limitation on this when you say history. Do you mean historical data dating back 4 years or just a couple weeks?

If you seriously take a simple look at all that has been said in my post here and go back and look at CP's posts, what you will deduce is that you can trade profitably frmo a 1M or Tick chart if your charts only loaded data starting at the begining of each trading day.

CP if I am way off on what I have said here please feel free to correct where needed.

This thread provided a great conversation that has sparked some interesting thoughts.

Kudos to all who have contributed!

Cheers!
Nothing is impossible, with a willing mind!
  • #106
  • Nov 29, 2010 5:51pm Nov 29, 2010 5:51pm
Quoting Trader_V
Man you guys have gotten really deep in this thread LOl.

Ok I am going to take a stab at what I believe CP has been eluding to with his posts.

[color=black][font=Verdana]If you listen carefully to what he has been saying most systems that folks are trading and even selling for that matter fail to do one of the most crucial things....
http://cdn.forexfactory.com/images/s...m/applause.gif You are spot on. It makes me happy to see the people who gets it. I'm not talking in riddles, yet certain people will receive the message loud and clear while others won't. Some people are just not ready.

Ok, when I say things like "one is not ready", according to Marv these are vague statements. OK, I'll make it clear:

"One is not ready" means =
"One has not accumulated certain knowledge or learned certain lessons... That when new information are given to them, they are unable to link/interconnect the new information with the old to make/comprehend the bigger picture."

I get emails from different people saying that I opened the floodgates in their trading. While I get some emails saying that I talk a lot of useless sh*t http://cdn.forexfactory.com/images/s..._the_floor.gif

"Do you mean historical data dating back 4 years or just a couple weeks?"
The moment I open my charts and let's say the price is 1.000. That is the only information I need. This is because I know that 95% of the time price will close above or below this price any point in time, in the future. Place a boundary/hemisphere at 1.000, Trader V, mate it's a done deal.
  • #107
  • Nov 29, 2010 6:43pm Nov 29, 2010 6:43pm
Quoting vx13
There's just something about the war between price and indicators that make me chuckle xD

But in all seriousness I do have a question that I'm sure the better minds of FF can figure out better than I.

It's been said that indicators are useless because they are based on price and price is the only true indicator you need. Don't get me wrong, this statement is 100% true.

But it's also agrued that price is its own right is lagging. To determine a trend (or range), a certain amount of bars have to go by. We must look to the past to see where...
I like what you said about indicators viewing back farther in most cases.. hmm
  • #108
  • Nov 29, 2010 8:01pm Nov 29, 2010 8:01pm
Quoting CrucialPoint
"Do you mean historical data dating back 4 years or just a couple weeks?"
The moment I open my charts and let's say the price is 1.000. That is the only information I need. This is because I know that 95% of the time price will close above or below this price any point in time, in the future. Place a boundary/hemisphere at 1.000, Trader V, mate it's a done deal.
Thank you sir

I believed I was interpreting most of your information correctly. Now I just need to figure out the MA's you use

I currently use a trend following method of my own. I have mybuy and sell hemisphere based around a combination of price action and an indicator. I know of another trader who trades similar to your style. Which I have to say I am fully intrigued by but have not seemed to be able to master
Nothing is impossible, with a willing mind!
  • #109
  • Nov 29, 2010 8:21pm Nov 29, 2010 8:21pm
Quoting Trader_V
I currently use a trend following method of my own. I have mybuy and sell hemisphere based around a combination of price action and an indicator. I know of another trader who trades similar to your style. Which I have to say I am fully intrigued by but have not seemed to be able to master
I have to admit, it's the Exit that causes the biggest problem. It took me 2 years of intense research to get the Exit right.
  • #110
  • Nov 29, 2010 8:54pm Nov 29, 2010 8:54pm
Quoting slimcat
I think what crucial point is saying is that you can trade price with only reference to the last bar ie if daily bar is down then price will continue down until the opening price of subsequent bars is breached.

For example
First day down, second day opens and open price of first day acts as resistance, price goes down, third day goes up, third days close is above second days open, price is supported at second days open. Now price will need to get above first days open, as this will act as resistance and so on
Basically this is using the opens...
That was for illustration purpose. You don't need any last candle (no history) I was just referring to the last candle so everyone knows where to look at because of the closing price. One needs a reference point.

I don't use support/resistance. Opening price becomes a reference point. You can convert open/close as support/resistance if you want, but I don't deal with support/resistance. You can pick any random number, go back in history, and find evidence that it was a S/R level. It's an illusion that validates a belief.
  • #111
  • Nov 30, 2010 8:24am Nov 30, 2010 8:24am
Quoting CrucialPoint
That was for illustration purpose. You don't need any last candle (no history) I was just referring to the last candle so everyone knows where to look at because of the closing price. One needs a reference point.

I don't use support/resistance. Opening price becomes a reference point. You can convert open/close as support/resistance if you want, but I don't deal with support/resistance. You can pick any random number, go back in history, and find evidence that it was a S/R level. It's an illusion that validates a belief.
This is to help out Slimcat's thinking process on this one. Forget about the previous days O/C. Think more current, like CP is saying today's open. Today's open becomes your line in the sand that determines your buy and sell hemispheres.

Now remove thoughts of support and resistance. Again like CP said, if you choose any random place on a chart (and I mean completely random!) and draw a horizontal line, on that line you can prove to yourself that it was at one point or another a place where price touched it and it acted as support or resistance. Think of the term that every trading sales site has on their material "past performance does not reflect or gurantee future occurances". S/R is the same thing. We can only suspect that a S/R area will hold, but cannot gurantee that it will hold when price reaches it. Now right along with that I can share with you that S/R does become a factor when looking for exits but not for entries.

And as always CP please feel free to correct me if I am way off base

Cheers!
Nothing is impossible, with a willing mind!
  • #112
  • Nov 30, 2010 8:31am Nov 30, 2010 8:31am
isn't that a contradiction? on one hand any price point will have it 'act' as s/r somewhere historically and therefore is arbitrary, but on the other hand when looking to exit they are no longer arbitrary? i can see why this might be the case, but i'm curious as to others thoughts.
Congratulations ScalaFX for coming out of the closet!
  • #113
  • Nov 30, 2010 8:39am Nov 30, 2010 8:39am
So CP said something in one of his posts that really got my wheels turning. While I am still trying to wrap my head around his style of trading (and I believe I am closer now than I was previously) something he said rang a bell in my head that has been resonating for days now.

He said:

" The rule is a number that can be divided by the hour evenly (or divisible by the number of candlestick within the hour evenly)
Why hourly?... because the world's clock is synchronized hourly. "

I scratched my head over this one for a bit but then it clicked! Think about this... The FX markets only actually ever open and close on the weekends. They don't actually close and reopen each day. So there is no real consistent identifier for the daily open and close.

Sure you can use GMT or EST, or anything else for that matter. But if everyone else in the world is not looking at the same thing then why would you base a trading method or indicator based around a daily open or close!?!?!? That in itself is no different then you drawing an arbitrary line on your chart saying this is the open for the day or the close for the day.

Now on the other hand, we know for a fact that every clock in the world has a big hand that will strike 12 at the top of every hour.

Enlightning for this was

Cheers!
Nothing is impossible, with a willing mind!
  • #114
  • Nov 30, 2010 8:48am Nov 30, 2010 8:48am
Quoting nubcake
isn't that a contradiction? on one hand any price point will have it 'act' as s/r somewhere historically and therefore is arbitrary, but on the other hand when looking to exit they are no longer arbitrary? i can see why this might be the case, but i'm curious as to others thoughts.
I thought someone might say that LOL

I know what you mean. But think about it this way. Instead of examining S/R for entries examine them for exits.

We never know if S/R will hold or not. So if we are looking to enter the market based on a bounce off a S/R area it's a crap shoot.

Now assume you entered the market in the direction of a trend based on a retracement and continuation move. Because of mass market psychology when price approaches a S/R area it is important to observe how price reacts at that area. Since we don't know if it will hold or fail it would be premature to just exit haphazardly, but instead watch price as it hits that area and exit based on reversal.

So I guess really what I was saying was to not depend on S/R for entries but absolutely observe it for exits.

Hope that makes more sense.

Cheers!
Nothing is impossible, with a willing mind!
  • #115
  • Nov 30, 2010 9:00am Nov 30, 2010 9:00am
Quoting Trader_V
So CP said something in one of his posts that really got my wheels turning....

So the line in the sand, the hemisphere divider is the open of the hourly candle...?

ETA - sorry, I didn't mean my question to sound so simplistic. I was just clarifying my own thinking..
  • #116
  • Nov 30, 2010 9:12am Nov 30, 2010 9:12am
Quoting Delite
So the line in the sand, the hemisphere divider is the open of the hourly candle...?
I think what CP is actually saying is... It doesn't matter where you draw the line but stick to it. Now that being said I believe for him he may use the hourly since he is trading on 1M and tick charts.

So use the basis that he is providing and try this. Instead of using the open of the hourly candle use a MA setting based on that formula. i.e. on a 5M chart set your MA at 48 and that becomes your line. Or set it at 24 and that becomes your line.

Man CP is gonna smack me around for screwing up his info LOL!

Cheers!
Nothing is impossible, with a willing mind!
  • #117
  • Nov 30, 2010 9:40am Nov 30, 2010 9:40am
Quoting Delite
So the line in the sand, the hemisphere divider is the open of the hourly candle...?

ETA - sorry, I didn't mean my question to sound so simplistic. I was just clarifying my own thinking..
Just thought of something else. This also meshes with another thread that is on FF, "DIBS". There was a gentleman by the name of peter who traded insde bar patters on the 5M chart using the daily open as the line in the sand. Only trading long breakouts of the inside bars above the days open and shorts below.
Nothing is impossible, with a willing mind!
  • #118
  • Nov 30, 2010 9:49am Nov 30, 2010 9:49am
Quoting Trader_V
Just thought of something else. This also meshes with another thread that is on FF, "DIBS". There was a gentleman by the name of peter who traded insde bar patters on the 5M chart using the daily open as the line in the sand. Only trading long breakouts of the inside bars above the days open and shorts below.

Yes, I know that thread, but I think he was trading H1 inside bars, long if they above the price at 6am and short if below it.

The 6am bit seemed a bit arbitrary to me, and I often use the rollover price as a line in the sand. However, more recently I have been simply using MA's as a guide - the 12, 24 and 48 along with the daddy 200. Only when price is below all will I short or above all will I long. This may mean some missed trades, but does help to keep you out of trouble.

Couple this with the idea that the best trade is the first retracement, then there is the foundation of a pretty simple trading plan...
  • #119
  • Nov 30, 2010 9:53am Nov 30, 2010 9:53am
isn't a candlestick itself an indicator of price?
  • #120
  • Nov 30, 2010 9:54am Nov 30, 2010 9:54am
or hang on, isn't everything an indicator?
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