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Price action is dumb, and you're lazy for thinking otherwise

  • #121
  • Jul 26, 2011 7:12am Jul 26, 2011 7:12am
Quoting TekBiz
Do you know how gravity works? Yet, you use it everyday to predict movement don't you?
I take his statement with a grain of salt.. In all honesty I don't know for sure why the methods I discovered work or do not work

I only have my theories which are sound and logical..

but he focuses more on the components of said systems.. if your using a RSI.. do you even know how it calculates.. if not then how can you even begin to develop a logical theory why it fits into your system / your system works or does not work

makes sense to me
  • #122
  • Jul 26, 2011 7:30am Jul 26, 2011 7:30am
Quoting newyear498
but he focuses more on the components of said systems.. if your using a RSI.. do you even know how it calculates.. if not then how can you even begin to develop a logical theory why it fits into your system / your system works or does not work
Do you know how the heat alters the proteins inside an egg when you boil it? (I don't). Yet, we still boil our eggs.

Point being that you don't need knowledge of how things work in order to use them. The desire to figure out how stuff works is merely an intellectual one, and does not necessarily affect the ultimate utility.

Yet, I agree that one who doesn't possess the intellectual curiosity of how and why things work, probably wouldn't prosper in the domain of financial markets.
The nail that sticks out gets hammered back in
  • #123
  • Jul 26, 2011 7:33am Jul 26, 2011 7:33am
Looks to me like your thread title is calling out just about anyone and everyone who uses Technical Analysis. So you'll forgive me if I wind back the thread and respond to your intro ...

First, as you don't bother to qualify what you mean by price action I'll do it for you.

Price Action = "What price does over time." (Let me know if you disagree.)


You know Calculus, so you understand integration and differentiation,etc. and you'll agree that typical time frame charts takes the raw signal (price over time) and simplify this (OHLC) to make it more manageable. Indicators usually do some kind of filtering for further simplification.

So, unless they're trading by throwing darts, tossing a coin or using a horoscope, people are looking at charts based on price - price data with some kind of loss in signal quality and delay.

Most of us prefer to work with candlesticks, indicators, etc, but as long as you're careful, your decisions can still end up being based on PA. If not, you're still using a simplified version of PA.

The problems start when you're reading meaning into these simplified charts that isn't really there (future price moves) or is a subjective interpretation ("What pin bar? I don't have a pin bar on any time frame."), or delayed (MA strategies anyone?).

Tell me you trade without a chart and without TA and I'll buy that you think PA is dumb, and that we're all lazy, otherwise I say you are one of us. Maybe, you just haven't realized it yet
  • #124
  • Jul 26, 2011 7:38am Jul 26, 2011 7:38am
Quoting Noloqy
Do you know how the heat alters the proteins inside an egg when you boil it? (I don't). Yet, we still boil our eggs.

Point being that you don't need knowledge of how things work in order to use them. The desire to figure out how stuff works is merely an intellectual one, and does not necessarily affect the ultimate utility.

Yet, I agree that one who doesn't possess the intellectual curiosity of how and why things work, probably wouldn't prosper in the domain of financial markets.
Yeah I understand the truth lies somewhere in the middle.. concerning eggs.. its like.. if you want a good depiction of the market then you have to put it like this

you plan to open your own egg scrambling company.. but first you need to know the probability an egg will scramble.. if you open it without first doing some research you might find past performance does not mean the egg will scramble this time

so if your theory that eggs will scramble is wrong you fail

for us.. we have scientist who did the research and say don't worry about why.. just like in a financial world a bank could teach traders a method and say don't worry about why we did all the numbers all ready just trust us..



but I'm just being to specific and bending your example to the way I see it reasonably makes sense applied to the market



let me be honest.. I do the same thing.. first I see egg scrambles.. then I come up with theory why.. then I scramble eggs

sometimes I come up with theory that egg will scramble and test it as well


so the truth lies in the middle
  • #125
  • Jul 26, 2011 7:54am Jul 26, 2011 7:54am
@superdezign
Well. Trading needs knowledge of indicators and not mathematics. You r right that most people or I would say almost all traders dont know the logic behind indicators. They use indicators to analyze market. I dont think any trader will use mathematics and statistics to analyze the indicators because it is of no use unless you want to develop a new indicator or customize an indicator.
Above all Mathematical and Statistical explanation of indicators or strategies is a nice topic.
  • #126
  • Jul 26, 2011 10:36am Jul 26, 2011 10:36am
Quoting superdezign
Well

Now that I have your attention hear this: Using price action as a method of entry/exit is ridiculous, You can't use a single variable to predict itself. Technical analysis falls under the same category of invalidated trading.

Every trader I have talked to who is a technical trader has been unable to answer this one simple question:

Why does you system work?

I can tell you exactly why the way I trade is the way I trade. I can tell you why it works, the principals it is based off of, and why it will remain robust. Every move I make...
There is no such thing as prediction at least not in the markets, but the markets do work in a way where one can say if this happens then this may happen.

I can answer all your questions as i know exactly why the way i trade works,the exact market principles that it is based off and why it has been a robust method of trading since trading began and why it will remain so for ever.

pip
Follow The Markets Structure - Patience and Discipline
  • #127
  • Jul 26, 2011 10:48am Jul 26, 2011 10:48am
Quoting TekBiz
Do you know how gravity works? Yet, you use it everyday to predict movement don't you?
This is such a straw man argument !! What has gravity to do with RSI??

superdezign has some good points there. Most traders dont know what they are doing and why. My system works becouse it has an edge. In fact any system has to have an edge in order to work. Regardless of money managment.
  • #128
  • Jul 26, 2011 11:16am Jul 26, 2011 11:16am
I keep getting different renditions of the same explanation of their system...

"it works because it works" seems to be the theme of most traders on this forum...

And unless every trader that has dropped the infamous "it works because it works" is in the minuscule 2% of successful traders out there, then, and I hate to be the one to break this egg, but... You might be in the overwhelming majority of people who ultimately fail trading the markets...

The other thing that keeps popping up...

"do you really need to know everything about everything"
"do you really need to know how gravity works"
"(insert over generalized statement with lack of depth here)"

Ok, no, you dont need to know how gravity works to stay attached to this earth... Or to throw a ball down a field..

But if there was a goal post down the field, I bet if you took 9.8m/s (that's gravity folks) and formed some sort of calculation to determine how hard to throw the ball, what angle, ect. You could hit that target everytime.. Yeah you could just close your eyes and toss that bastard down the field, and you will hit the target a decent bit of the time, but that is not going to work forever.

The market is a crazy machine, and if you do not understand how it works, then you are setting yourself up for failure.

All I wanted to see was how many people actually understood what they are doing..

and I have gotten from...
Oh I just buy tomatoes and hope some greater fool buys them off me for more money... (terrible analogy, by the way)

to...

(Insert explanation of why it's a waste of time to understand what you are using to trade because it works sometimes)

I did not start this thread to argue with you guys on the validity of TA.. I just wanted to see if anyone could validate what they do. But what it seems like (and please don't attack me on this one, because it's really just my opinion) everyone is just taking stabs in the dark, fooled by randomness, tricked into thinking they have an edge in a system that is mostly random..

If you think the price of a company/the value of a currency/whatever is determined by a couple of random lines on a chart you are only fooling yourself..

I am not saying there aren't ways to exploit the market in a non-fundamentalist nature, but TA for the most part seems to be the push button method of trading that most people just drift to who do not want to put any real effort into designing a profitable trading method...

PLEASE!!!! PROVE ME WRONG!!!

But I'm tired of the same lacking justifications I keep hearing out of people here, they just sound like excuses for why they do not want to put real effort into understanding their system...

So, if you want to try and say something along the line of..

"It works because it works, stop being mean and leave poor old TA alone"

....I dont want to hear it....

BUT

If you actually have an intelligent point.. I would be super happy to hear it!!

Readyyyyyyyyy
GO!
  • #129
  • Jul 26, 2011 11:18am Jul 26, 2011 11:18am
Quoting Noloqy
...
I actually did some statistical research on certain indicators, including Welles Wilder's Relative Strength Index, and found that when RSI dropped below 70 (which is considered to be a sell signal,) the subsequent bar is expected to close higher* (on average 2.4 pips, disregarding bid-ask spread, tested on hourly EURUSD data.)

Oddly enough, in this case the indicator provides a signal in the opposite direction of the empirical finding(!). Draw conclusions as you like, but there may be people exploiting the newbies that follow the common trading...
Its good that you tested it and there is nothing odd about it. Most things written down about patterns and indicators have no statistical backing.

People who follow 'common trading rules' or patterns deserve to lose money if they don't backtest for themselves that they work (or at least have worked in the past) for the markets and timeframes they are interested in.
  • #130
  • Jul 26, 2011 11:43am Jul 26, 2011 11:43am
Quoting CindyXXXX

Now what say you
I'm waiting
Time hides Nothing
  • #131
  • Jul 26, 2011 11:49am Jul 26, 2011 11:49am
Quoting superdezign

I am not saying there aren't ways to exploit the market in a non-fundamentalist nature, but TA for the most part seems to be the push button method of trading that most people just drift to who do not want to put any real effort into designing a profitable trading method...

PLEASE!!!! PROVE ME WRONG!!!



Readyyyyyyyyy
GO!

Well if you want to know what method i trade ,wich btw will give you the answer as to´ why´ it works , .. then take the time and read thru these books articels.. etc.. ..

http://www.informedtrades.com/blogs/...y-library.html

http://www.informedtrades.com/blogs/...2nd-floor.html

or simply start studying this ..

http://www.informedtrades.com/blogs/...n-courses.html

and i would highly recomend the free webinars held here .. every session can be watched in the archives ..

http://www.ltg-trading.com/archives.html

happy reading !
  • #132
  • Jul 26, 2011 11:58am Jul 26, 2011 11:58am
Hi Superdezign ...

"If you actually have an intelligent point.. I would be super happy to hear it!! Readyyyyyyyyy GO!"

I'm waiting for you
  • #133
  • Jul 26, 2011 12:06pm Jul 26, 2011 12:06pm
Quoting superdezign
I keep getting different renditions of the same explanation of their system...

"it works because it works" seems to be the theme of most traders on this forum...

And unless every trader that has dropped the infamous "it works because it works" is in the minuscule 2% of successful traders out there, then, and I hate to be the one to break this egg, but... You might be in the overwhelming majority of people who ultimately fail trading the markets...

The other thing that keeps popping up...

"do you really need to know everything about everything"
"do...

"All I wanted to see was how many people actually understood what they are doing.."

So, you still dont see how many people actually understand what they are doing. Might i suggest that is because you simply dont see. I would like to think ,given the time and space you have used, that you would at least understand that the good retailers who have given their time ( more than likely through boredom) all gather here to exchange ideas and all come from differing points of logic...with regards to their trading methodology. A different premise for each of us. What should have struck you as overwhelming is everyones acknowledgement of PA being instrumental in their methodology, whether included as a major trigger or a complementary trigger for entry and exit to a trade.
"Specsavers and should have " comes to mind where you are concerned.
All systems of divination, like music itself,work through patterns.
  • #134
  • Jul 26, 2011 12:24pm Jul 26, 2011 12:24pm
Quoting superdezign
I keep getting different renditions of the same explanation of their system...
What point are you making?

Physical laws are derived empirically. Newton's laws and after that Einstein's General Relativity both allow you to make calculations about gravity but neither explain gravity.

Physics explains lots of things, like why the sky is blue, but there is a fundamental set of properties of the universe that physics does not explain, although does have tools to make very accurate predictions.
  • #135
  • Jul 26, 2011 12:28pm Jul 26, 2011 12:28pm
Quoting Kang_Gun
10000% agree with you Dave :-D
GO....GO......GO..........

Regards,

KG
Thank you! You have no idea how much that little post means to me!
  • #136
  • Jul 26, 2011 12:30pm Jul 26, 2011 12:30pm
It works becouse human psychology is repetable so are certain patterns on the chart as a representation of the human psychology. As any financial market is a probability game you can tip the balance of probability on your side. This tiny difference beetwen 49.99 % of loosing trades and 50.01 % of winning is what makes the difference to your account. If you add more filters to your system (like playing only with a trend) it moves the probability even higher than shown above. As simple as that
  • #137
  • Jul 26, 2011 12:30pm Jul 26, 2011 12:30pm
Quoting kaspopsicle

"All I wanted to see was how many people actually understood what they are doing.."

So, you still dont see how many people actually understand what they are doing. Might i suggest that is because you simply dont see. I would like to think ,given the time and space you have used, that you would at least understand that the good retailers who have given their time ( more than likely through boredom) all gather here to exchange ideas and all come from differing points of logic...with regards to their trading methodology. A different premise...
I stopped reading this post after the second sentence. They all sound the same when it starts off that way...

Show me logic, that's all I want
  • #138
  • Jul 26, 2011 12:32pm Jul 26, 2011 12:32pm
Quoting kaspopsicle
Might i suggest that is because you simply dont see.

what do YOU see in the pic below?

DrDave
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To free Gazans of Hamas, use whatever it takes.
  • #139
  • Jul 26, 2011 12:32pm Jul 26, 2011 12:32pm
Quoting seqds
It works becouse human psychology is repetable so are certain patterns on the chart as a representation of the human psychology. As any financial market is a probability game you can tip the balance of probability on your side. This tiny difference beetwen 49.99 % of loosing trades and 50.01 % of winning is what makes the difference to your account. If you add more filters to your system (like playing only with a trend) it moves the probability even higher than shown above. As simple as that
Finally someone who knows how to pose a reasonable argument in a discussion

Hats off to you sir.

I see what you are saying with human psychology, but what part of human psychology are you focusing on and how does TA help exploit that?

(See how this works people? )
  • #140
  • Jul 26, 2011 12:32pm Jul 26, 2011 12:32pm
@superdezign


Quoting superdezign
I did not start this thread to argue with you guys on the validity of TA.. I just wanted to see if anyone could validate what they do.
Sorry, don't want to get contra here, but the facts are different - from your very first post:
Quote
Now that I have your attention hear this: Using price action as a method of entry/exit is ridiculous, You can't use a single variable to predict itself. Technical analysis falls under the same category of invalidated trading.

Tell me how that is not starting an argument? Calling a technique "dumb" in a thread title is not fighting talk? Lucky for you, all the folks on ff are either pussycats, or slow and don't realize when they are being insulted

And while we're here...

Quote
...
PLEASE!!!! PROVE ME WRONG!!!


Why for? Doesn't work that way. The burden of proof is on those who make extraordinary claims. And, this is what you are doing when you say that you understand exactly why your (presumably profitable) system works.
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