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Technical Analysis Fallacy

  • #22,681
  • Feb 3, 2011 12:54am Feb 3, 2011 12:54am
Good Morning Friends,

found the following tube in an other thread:
"The Day the Dollar Died"

Well - will start shorting the dollar soon
and buying some more gold


Wisch you a great trading day!

Cu,
Niels
  • #22,682
  • Feb 3, 2011 1:22am Feb 3, 2011 1:22am
Quoting lovecraft
@sylar, hello and nice to meet you.
@maheswara, understood. If it interests you, a lot of my previous trading was not in forex and did not involve directional bets.
I see , eventually it comes down to what kind of risk you are comfortable managing ...
about traders that look for one-all-fit strategy , its a phase for newbies , but most will leave the phase when they understand deeper about trading , only a handful rejects understanding further and put efforts instead in wrong places , but such is the nature of our business , without them taking the other side of a trade, who else would ?
To Live is the rarest thing in the world , Most people exist , that is all
  • #22,683
  • Feb 3, 2011 1:56am Feb 3, 2011 1:56am
I think you've got that the wrong way round. Only a handful progress, the majority put their efforts into the wrong areas (IMO).
  • #22,684
  • Feb 3, 2011 2:09am Feb 3, 2011 2:09am
Quoting maheswara
I see , eventually it comes down to what kind of risk you are comfortable managing ...
about traders that look for one-all-fit strategy , its a phase for newbies , but most will leave the phase when they understand deeper about trading , only a handful rejects understanding further and put efforts instead in wrong places , but such is the nature of our business , without them taking the other side of a trade, who else would ?
You got that right. But the hunt for the perfect indicator/strategy/model doesn't appear to be just a phase for newbies. Look at the plethora of technical indicator discussions on this forum, in stark contrast to fti's pulling back the curtain. From my perspective, the lure of technical analysis seems to never go away. I am including quantitative analysis within the definition, because, as was discussed on the Wilmott forum, the only difference between the two is in degree of rigor. They're all trying to find repeating patterns.

If you look at the volume of new academic papers coming out every year with a new take on the stochastic calculus models, it appears that the search for the holy grail will never end. When SABR models seemed to describe volatility surfaces with greater precision, markets became a self fulfilling prophecy as money poured into those calibrations. Same with the new fangled 18 factor model rolled out by Goldman's quants right before the quant blow-up of '07. I remember when I was a student, a guy got recruited to the Nomura mortgage backed desk right out of his masters program when it became known that his new model predicted prepayments better than anything they had at the bank at the time. We were always hiring fresh PhD's who could build better and better models, and when the models would eventually blow up, they'd go back and add a new filter or something. Not too different from a guy adding an ADX filter to his MACD system.

Apologies for taking this too off-topic, but I just wanted to share how the TAF approach can be equally revelatory to people from different backgrounds. Sorry about that.
  • #22,685
  • Feb 3, 2011 2:10am Feb 3, 2011 2:10am
Quoting ukmanthailan
I think you've got that the wrong way round. Only a handful progress, the majority put their efforts into the wrong areas (IMO).
Oops, you hit this first before I could submit my reply. I agree. at all levels of this game.
  • #22,686
  • Feb 3, 2011 2:16am Feb 3, 2011 2:16am
Quoting lovecraft
You got that right. But the hunt for the perfect indicator/strategy/model doesn't appear to be just a phase for newbies. Look at the plethora of technical indicator discussions on this forum, in stark contrast to fti's pulling back the curtain. From my perspective, the lure of technical analysis seems to never go away. I am including quantitative analysis within the definition, because, as was discussed on the Wilmott forum, the only difference between the two is in degree of rigor. They're all trying to find repeating patterns.

If you look at...
keep it coming... nice read
Success consists of going from failure to failure without loss of enthusiam
  • #22,687
  • Feb 3, 2011 2:17am Feb 3, 2011 2:17am
Ok, so my performance is kind of interesting. My foreign cap keeps increasing, padded by attacks and rescues. However...

The weird thing is, if you look at the chart, the scout directions that I take are often wrong, but remedied by leveraged flips that are in the correct direction (allowing attacks to be in the correct direction). These flips in addition to proper attacks tend to be where I am making the foreign cap.

The results are embarrassing to say the least via 250k practice account. This is the worst of my days, and signal my use of aggressive skews and simply stupid moves. Never again will I let this happen.

**The VHands sim only allows me to choose 1,2,5,20 lots** This is VERY restricting!!

Please comment on my idiocy, I need a whipping.

EDIT: Note the ensuing idiocy happened after an earnest attempt to trade. After a bit, my roommate decided to watch a korean drama and all hell broke loose when I started to get interested in the storyline. Guess where it happened.
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  • #22,688
  • Edited 2:47am Feb 3, 2011 2:35am | Edited 2:47am
Quoting dongsky
keep it coming... nice read
thanks, dongsky. It's my honor to share feedback.
  • #22,689
  • Feb 3, 2011 3:27am Feb 3, 2011 3:27am
just deleted my previous post... don't want to stir up people's brain here... i was just carried away, thinking this was my journal my bad...

back to my cave... peace!
Success consists of going from failure to failure without loss of enthusiam
  • #22,690
  • Feb 3, 2011 3:31am Feb 3, 2011 3:31am
Quoting dongsky
does anybody knows what's going on with cable?
PMI figures
  • #22,691
  • Feb 3, 2011 3:31am Feb 3, 2011 3:31am
Quoting dongsky
just deleted my previous post... don't want to stir up people's brain here... i was just carried away, thinking this was my journal my bad...

back to my cave... peace!
No problems. Becarefull GBP news comming out, could affect EUR.
Good luck. Ray
  • #22,692
  • Feb 3, 2011 3:35am Feb 3, 2011 3:35am
Quoting 1234
No problems. Becarefull GBP news comming out, could affect EUR.
Good luck. Ray
yep just check calendar now Ray, cheers... trim down exposures and move scout and L1 to BE and a little pips gain

regards,

@ukmanthailan: Peace
Success consists of going from failure to failure without loss of enthusiam
  • #22,693
  • Feb 3, 2011 5:00am Feb 3, 2011 5:00am
I mentioned EUR support earlier, not because I follow it but as a lighthearted query, but now I have read an article on the technical outlook for EUR/USD and it also mentions 1.3760 as a major support level.

Thing is, from looking at my charts, I can't for the life of me see why - can anyone enlighten this poor fool?

EDIT: This is in no way the first time I have failed to understand support levels that other people mention in their analysis of currency pairs. Quite often they look like arbitrary figures pulled out of thin air to me. On the basis that it is more likely I am wrong and everybody else is right, I'd like to know what's going on!
  • #22,694
  • Feb 3, 2011 5:28am Feb 3, 2011 5:28am
Quoting ukmanthailan
I mentioned EUR support earlier, not because I follow it but as a lighthearted query, but now I have read an article on the technical outlook for EUR/USD and it also mentions 1.3760 as a major support level.

Thing is, from looking at my charts, I can't for the life of me see why - can anyone enlighten this poor fool?

EDIT: This is in no way the first time I have failed to understand support levels that other people mention in their analysis of currency pairs. Quite often they look like arbitrary figures pulled out of thin air to me. On the basis...
3760 = daily pivot S1
  • #22,695
  • Feb 3, 2011 5:36am Feb 3, 2011 5:36am
Quoting lovecraft
You got that right....
Hello Lovercraft. Interesting info:-). Thank you for sharing and welcome. Regards
  • #22,696
  • Feb 3, 2011 5:49am Feb 3, 2011 5:49am
Quoting Kaptain Ahab
3760 = daily pivot S1
Ah... OK thanks very much. I don't take any notice of those. That explains an awful lot though, cheers.
  • #22,697
  • Feb 3, 2011 5:51am Feb 3, 2011 5:51am
Quoting lovecraft
@sylar, hello and nice to meet you.
@maheswara, understood....
Lovecraft

Thks for the wonderful info. Do participate & enlighten us more in the coming days


Cheers
Philip
"Thinking Heart & Feeling Brain"
  • #22,698
  • Feb 3, 2011 5:52am Feb 3, 2011 5:52am
Quoting ukmanthailan
I mentioned EUR support earlier, not because I follow it but as a lighthearted query, but now I have read an article on the technical outlook for EUR/USD and it also mentions 1.3760 as a major support level.

Thing is, from looking at my charts, I can't for the life of me see why - can anyone enlighten this poor fool?

EDIT: This is in no way the first time I have failed to understand support levels that other people mention in their analysis of currency pairs. Quite often they look like arbitrary figures pulled out of thin air to me. On the basis...
Although I don't trade those levels but this is what I can see:
Previously eur uptrend finished when break the neck around 1.3800 area (final push up was rejected at 1.3785). Last week, it made a reversal bar ahead of this neck, the high is 1.3758. The reversal bar failed due to rate expectation. This week eur is testing the neck area again. If failed high and 1.3758 area also failed support, the up leg would be weak.
It makes more sense to me if recall the headline last week when the reversal bar happend-- French said they will support every dip on eur drop. A former advisor to Chinese gov warned gov to be aware of the risk of investing in Europ, but Chinese Prime Ministor immedietely argued back, saying China will not let eur fall. So, my guess is-- if eur does fall below 1.3760, we'll need to see if Frech and Chinese will put money in their month or not.
Just my rambling. Rate story going to be on the show next hour. We'll see.
  • #22,699
  • Feb 3, 2011 5:59am Feb 3, 2011 5:59am
Quoting ukmanthailan
I mentioned EUR support earlier, not because I follow it but as a lighthearted query, but now I have read an article on the technical outlook for EUR/USD and it also mentions 1.3760 as a major support level.

Thing is, from looking at my charts, I can't for the life of me see why - can anyone enlighten this poor fool?

EDIT: This is in no way the first time I have failed to understand support levels that other people mention in their analysis of currency pairs. Quite often they look like arbitrary figures pulled out of thin air to me. On the basis...

I'll give it a try

when I think of support and resistence and on the orher side on the amount of participants that are involved in the market for whatever reason, it clear become a sbjective thing because for every participant in the market the S/R level could mean a different thing, other use ema's other use fib nr or big round numbers for defining S/R area, so there is a lot of subjectivism involved.

Now coming to your exemple why 3760 is a good support level?

whell is right near the prevoius day's low (.3766)

If you think in term of oreder flow, above the high and below the low of the previous day there will always be some cluster of stop order,sometimes it might be a couple of ticks below/above, but in that general area.

So traders are inclined to drive to market in that direction, is a great and efficient way of finding liquidity, that's what trading is all about, finding liquidity

It's about knowing the market structure and the enemy and how they use to operate in the battle field!

all the best!
  • #22,700
  • Edited 6:24am Feb 3, 2011 6:04am | Edited 6:24am
@ imjscn - Do you mean an hourly reversal bar on the 27th? If so I can see that and I also see it as a HIP (1.3758) on the daily charts...

-----------------

Regarding pivot points - taking the average of the previous day's high, low and close then multiplying it by 2 and subtracting the high to find the next day's resistance seems a bit arcane and moreover predictive, which I thought we didn't do.

-------------

@triger88990 - Cheers, I can see where you're coming from and it makes sense.

EDITED: Personally I've always looked at where we are now and then looked back to see if there was congestion or reversals in the past at that level, to ascertain if it might be a support / resistance point.....following fti's advice: "lWhat did the market do when it was last as this level, historically? Was this level significant chart wise?"..(at least that's what I assumed he meant)

It's nice to know what everybody else is thinking though. I was beginning to wonder if I was more stupid than I had realised (which I probably am)!
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