Technical Analysis Fallacy

Hi Guys
Thanks Auxesis and MaMood for your answers.
This trend thingy is very tricky for me. The problem is that in all directional move we have a pull backs. If we look on a daily time frame and for example we are in up trend and we experience a pull back few days so in the smaler time frame of up trend lets say 4hour or 1hour we will see down trend that is within the uptrend it is minor relative day trend.
IF i decided that we are in up trend on a daily than i have to look for up trend in smaler timeframes but because of the pull back i see down trend in smaler time frame.
What do you guys do in situation like this
I attached 3 pictures of EURUSD Daily 4hour and 1 hour
On daily we clearly can see uptrend and than a pull back that in 4hour and 1hour looks like down trend? What you will do how do you handle situation like that ? Or situation like this is from "turn on wind" department ?

Thanks
Michael

Hi Dakoo,

I agree IB spread and server stability is good (have used them since 2002), when I began my interest in Forex in 2007/2008 I made a little study to see at what unit size their tigther spread would offset commission (they charge something like 2 basis point*unit size, min $2.5) but that was before I stumbled upon this thread and use skews.

Do you also find IB's Forex accounting confusing? Unlike Forex brokers they do not automatically convert P&L into my account's base currency, for example if I trade USDJPY in an USD based account I will find JPY hanging in my account after squaring. It takes a manual order from me to convert back to USD and the spread is not transparent. But then I guess when Forex brokers do the conversion automatically it also costs spread, it's "hidden" that's all.

I once asked a Saxo rep the "cost" of trading EURUSD in an account based in DKK, I reckon it could be costly because USD/DKK has wide spreads, he seemed to think so. I want to investigate if a DKK base account is viable because Danish tax laws require every trade's P&L converted to DKK using rates at date of closing and it's a lot of hazzle which a DKK based account would bypass.

Am I obsessing too much over the cost of doing business or do others have similar concerns depending on their countries of residence?

Rgs,
Baifu

Hi Michael,
Some early fti posts on the topic, I am also interested to read more about trends.

(nov 29 2007)
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 the middle of the road, when both bus comes.

(Later, same day in reply to the question)
Q:
Mostly I understand what you are saying - although I have a question in relation to your intraday trading compared to reading the trend off daily charts - that is the trend on Euro has been up, however you obviously get days of "bear" candles within the uptrend - would you still have been looking to buy on these days - or is this where you start moving to the smaller timeframes to determine the days move?

(FTI reply)
regarding trends,
trends mean different things to different people.


the accepted defination 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 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.

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 , youmust be aware of the the players, esp CB.
If you look at your daily chart , you had 3 days warning of letargy 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 aside.

When we manage daylight trading, profits attained from that activity is normally used to enhance the cost of the at risk position.
Thats why I do not place stop loss, and by virtue of the overnight being only a fraction of daylight trading.
the Cost of the overnight is normally way off the charts.

http://www.forexfactory.com/showpost.php?p=1736755&postcount=69

Hi Michael

fti:
"Well you will get it right, the more practise and on the job training , the better you will develop. But you got to get out the scorpions thattells you what you must do when this happens , or that happens. Waste lots of energy, thinking about stuff that you have to think about when you get there.Every level is an opportunity. Every price is a chance. At every turn you must respond. Doing nothing is also a respond. But doing nothing can also lose opportunities.
Analysis is a journey of decisions and strategies. There is no one fix. How you respond depends on the mix I hand mentioned in the early pages. How well or badly you do depends on your ability to deal with the terrain and self. Of course your resources and cap, fences you into certain boundaries. over extend that and you find yourself in dark and scary places.Do scaled models of your possible strategies, and analyse yor response your feel. Then try feel the market as best you can. Develop multi faceted response. Best must be of reflex in nature.Once you feel fear , pull the plug.I fear your exposure to rigidity may make your learning curve steeper. But if you deligently think and read the posts and analyse and organise. You must surely get there.You cannot learn dancing sitting in the corner thinking.
The fact that you had the balls to show your weakness , puts you on the plains to learn the real skills. To deal and trade sucessfully , mean lots of errors and craziness. A little bit funky and rock and roll. A bit of everything and lots of determination. Of course being pointed to the right direction, takes the trouble in chasing your own tail in circles.
regards.

PS: of course you have to go with the trend. But trend means different things to different mindsets. You need get you definations done. Whats a trend to you and whats market trend. No need to tell me that mother is a woman.
Don't lock yourself to others definations. First know yourself, your strengths and weaknesses and your financial muscles. Then find out what markets has to offer you and how you can sync with her.Then you train reflex and reactions to her courtings. As your flexibility and senses develops, you will see the rigidity i am trying explain to you.
to be able to scalp tight ranges and contrarian trading style you need be market makers. Unless you have theoritical edge (ie spread advantage) it is futile efforts. And thats a different story and skill set altogether."

new york close @ 3410 and its all the same just follow her, and it feels like she wants to continue north, we shall see.

looking at a weekly chart of e/u cant help but to take note of areas.
3799
3432-47
2982

J.P. , although in a silver short squeeze is trying to stay ahead of the curve with copper
http://www.telegraph.co.uk/finance/n...er-on-LME.html

Myself, besides having mm right to handle the day, know the terrain as were working the 5 min.,15 min., hrly.
As we maintain our flexibility we look at cycles whithin cycles. whats your quarterly charts say ?, monthly ? weekly ? daily ?
Are you as mindful of these as you are of what the 5, 15min. and hourly are doing ? It may help you.
where are we in each of there trends ? knowing as a general rule the higher time frame is the stronger trend.( the trick is not to get hung up on what the trends we reviewed as cast in stone, like setting up a automated trade because of a indicator, its something your aware of as you flow with what shes doing.)
However, to me keeping in mind the different time frames helps me to have a feel of where we are and what she might be trying to do when we see a topping , bottoming or a quick move up or down a 100 or so pips or a breakout.

For example I was aware of e/u 2960 being a quarterly low area, I kept that in mind and moved up because thats where she took us.
I mentioned in a post friday morning what I was seeing as I viewed the terrain and that looking at a monthly chart my bias is down from 3410, I do not automatically put the trade in but I try to feel the flow and she acts like she wants to climb, so my bias is up to start the week. I dont no what she will do but with the help of the other 2 kingdoms, they will tell us and I will follow as we start our new week.

Some recent thoughts I had and thought this was a great thread to post them.
　
Recently I have been talking with my wife about how much I have learned about myself since I have started trading and spending so much time studying about the psychology of it. I am now convinced that if I had spent more time learning about me as opposed to learning about the charts my learning curve would have been much smaller. I placed my first trade in the stock market in 1998. Since then I have read everything I could get my hands on about charts, indicators, patterns, candle formations, etc. Nothing about me as an individual trader, what makes me tick. I have even read a lot about market psychology. The missing link has been between my ears. The psychology of how I trade.

I grew up raising cattle and working hard for every nickel I had. “You got to go to work boy”, “money doesn’t grow on trees” , “You think I am made out of money”, “The stock market is gambling“ , “Don‘t waste your money“, “Save your money” . Just a few of the things I had heard repeatedly. All can be true, but if that is your focus in life, wrong as hell. The point of this is that you can never feel guilty or wrong for taking a profit.

Raising cattle required that they had to be sold. But before that something was bought. A profit had to be made. What if I bought the cattle on Wednesday, boarded them at the auction till Sunday and sold them Monday morning at a profit. My dad would have thought that was brilliant. But if I had bought a cattle futures contract on Wednesday and sold it on Monday that would have been gambling. WHAT THE HELL IS THE BLOODY DIFFERENCE. That my friends is part of the mind tricks that would run through my brain. Even the cattle were bought and sold at an auction. The futures contract is bought and sold at an auction as well. As far as I am concerned there is less risk with a futures contract. You could have a couple head die on you, that doesn’t happen with a futures contract.

The point of all this is that you need to find all mental barriers that may be holding you back and resolve them. They cannot be ignored. It is the subconscious mind that they effect and it is with the subconscious mind they we become great traders.


When we start to understand the psychology of trading and how our minds react to it, we will start to see the markets from a “birds eye view”. I like to picture myself at times looking down at all the orders being placed. The big banks in Europe placing orders to run price right into where they have a big stack of orders waiting to be filled. When I do this I begin to see their work on the charts.


It is happening every day. They don’t give a crap about you. All you are to them is money to be taken.

If you had a million dollar of order to place, where would you place it?
　
This is from a post from November 21. (See chart)

The candle I have indicated is why I try to be careful with the Asian session, especially when there is a bank holiday in Japan.

Because of the lack of volume it is very easy for big money to move price. Their orders were not at the lower supply zone where I was trying to get in on the ride. They were all sitting like vultures on the supply level above it. They cleaned out stops to get to the level and when it was hit it opened the flood gates of shorts. I nailed it there though and road the wave down with them. HEEEEEEEHAAAAAAAA

It is a dirty game they play but we just need to see it and be aware. Then protect our selves. Illegitimi non carborundum. I should not have even been looking at the charts till just before FF. Sam Seiden has even taught to take the upper zones when they are tight like that. Trade and learn...sometimes you learn the hard way. Through out the whole night I did not get upset about a thing with the stops that got hit.....Stuck with it till I saw the opening then pounced on it. I feel good about that. I have come a long way. So I pat myself on the back for that and give me an attaboy.


How many people bought the breakout right into that massive supply?

Trade safe

Rufus
　
I have also recently come to the conclusion that all crowd behavior can be put on a chart. Whether it be riots, political, religious, or even shopping habits. It can all be charted and the same indicators will apply.

LeBon ….. About crowds. Mass psychology of crowds
“Whoever be the individuals that compose it, however like or unlike be their mode of life, their occupations, their character, or their intelligence, the fact that they have been transformed into a crowd puts them in possession of a sort of collective mind which makes them feel think, and act in a manner quite different from that in which each individual of them would feel, think, and act were he in a state of isolation.”

People change when they join crowds. They become more credulous and impulsive, anxiously search for a leader, and react to emotions instead of using their intellect. An individual who becomes involved in a group becomes less capable of thinking for himself.
　
Now the key for me as a trader is to put myself above the crowd and see it as it exactly is. A mass of traders being manipulated by the whims of emotion. Then it becomes my job to take a position before the emotion of the masses changes and then ride it to profit. To me the big banks and money managers are the catalysts to the waves of emotion that will sweep through the markets. Their orders can stop price right in its tracks and reverse it. Right there my friends is where I want to be. Then the emotions of the rest of the traders moves my positions into profit.
　
I could keep on writing about this and I probably will latter. Needless to say I have started to sell off most of my books I have read on charts and indicators and such. Now I consider a lot of it garbage. Sure I will throw a stochastic on the chart once in a while especially in a range bound market. But it all comes down to price. Would I pay $10 for a gallon of milk…….? If it was the last gallon and I had a package of Oreo cookies yes. Otherwise no. Price combined with supply and demand is how I look at the markets. The stochastic doesn’t care about the supply of milk or whether or not I have a package of Oreo cookies. Price, supply and demand is all that matters at that point. The stochastic would be showing over bought at that point and the masses of the traders would be starting to short milk, but if there is no supply so price will keep rising.

I have rambled enough. Just wanted to get some thoughts down on paper. Then share it with others to get it locked into my brain. Sunday starts a new week for the markets and I will be ready for it.


Trade safe

Rufus

Hi Michael,

FTI recommended this book.... "Reading Price Charts Bar By Bar"

If you take some time to read this book, you will find your answers, as I did....

I started trading with FTI's explanation without looking at individual candles at all... I won 30+ trades consecutively, BUT I lost once, big time, when E/U collapsed last Monday. Then I read the book, still reading in fact, but there are concepts that are timeless (book written in 1951) and highly effective.

Grabbed 180 from E/U and 150 from G/U based on what the book taught.

I missed this one in my printouts

Rgs,
baifu

Hi Baifu

This sentence is very interesting:
"Of course being pointed to the right direction, takes the trouble in chasing your own tail in circles"

Rgs

Thanks Guys For your answers.
FTI to my opinion have a very good students that the most important lesson that he teached is to be helpful to others without any conditions.

I hope that all well with him .
Michael

Hi, guys.
Happy anniversary of the thread, many many thanks to fti and all that contributed to the thread.

While rereading the thread I noticed there is a link to "Art of War" audio book, but it is no longer working. I would be very happy if anyone of you can send me the audio book or a link for download. Since my spare time has been reduced hugely, it would be great to listening to "Art of War" while working or walking to work. If anyone can help me find that audio book, please send me a PM

Good trading to all in the coming week.

Regards, MyTbo


P.S. I am ,finally, going to get "Paper Money" around the end of the month... It was so hard to get it, since it was not available in my country and Amazon doesn't do shipments to Bulgaria.

I agree with you to some extent, but I would want to know your proposal on how best to trade. I've just started trading with THV V3 indicator and so far it has not disappointed me.

Where did you get it

I found it online via google search... I can send it via yousendit to you... PM me with your email address...

Somehow, IB's fx accounting doesn't give me too much grief. I let the residual balances pile up. hehe. and every once in a while i convert it. The conversion is based on their ideal platform, with a spread of 2 pips mostly. a 2 pip spread on a tiny residual balance is hardly a problem eh? the IB process is as transparent as it gets with the added benefit of zero broker games.
Regarding that DKK tax thing, you may have to do it by hand. bring out a USD/dkk chart for that respective date and choose the most advantageous price of that day to put in your converted p&l.

This stuff is interesting. Does it by any chance have anything to do with ed seykota's trading tribe process ? Or is it something else?

Regards.

Hi..

I'm totally lost yesterday.
The EU despite having an early bull direction (during European hour) but it was full of whipsaw.
As a trader we continually trying and we won't be knowing whether the start of will create a strong trend.

Anyone knows the dance step of this type of market?
http://img146.imageshack.us/img146/4185/whipsaw.gif