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EurAnalysis Kindergarten 24 replies

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  • #14,321
  • Dec 12, 2011 4:56am Dec 12, 2011 4:56am
Quoting AaronWard
I forget the stats, but I had a marinally profitable strategy I back tested. Open a long and a short. Each has a TP of 20 pips and a SL of 100 pips.

The idea is that you will see almost no daily bar without a 20 pip shadow on both ends. I never traded it because I hate trading a mathematical model.

Anyway, how would you use these stats to trade?
well i usually trade on the premise that it is easier to day trade in the direction of the day and by pure mathematical probabilities we know that P(A)=X/Ω correct? where X is the chosen direction Ω being the sample space or possible outcomes.

so then our probability of failure is 50% price will either close above or below open.

so knowing what statistically it HAS been doing it is easier to pic a direction according to FA, TA, and so forth. when i trade i just ask myself above or below open.

so in essence it helps pick a direction
AVT INVENIAM VIAM AVT FACIAM
  • #14,322
  • Dec 12, 2011 4:59am Dec 12, 2011 4:59am
interesting gbpusd eurusd divergence, which do you think that will win?
  • #14,323
  • Dec 12, 2011 4:59am Dec 12, 2011 4:59am
Probability

P(A) probabilities lets us obtain real and predictable measures about random events. It gives meaning to seemingly random data, and helps us quantify possible outcomes.
We can assign a level of certainty about an the occurence or non occurance of an event measured from 0-1.

probability is measured as such (expected outcome) divided by (number of possible outcomes) Ʃ/n

the probabilities of rolling a dice n=6 sides and the probability of landing on 4 ( Ʃ=1) is
1/6= %16.67 and conversely we can say that we have 100-16.67= 83.33% probability against you.

In flipping a coin, Ʃ=1 possible outcomes / n=2 , if flipping 2 coins the probability of 2 heads landing is (1/2)(1/2)=1/4 = 25%

when flipping 10 coins the probability of getting 5 heads and 5 tails is = 50%,
of getting 10 heads in a row is 1/2*1/2*1/2*1/2*1/2*1/2*1/2*1/2*1/2*1/2=10%

the probability of X and Y event happening is written P(A∩B) = P(A)*P(A) OR
Ʃ/n * Ʃ/n= P(A∩B)

probability of X OR Y= P(AUB) = Ʃ/n + Ʃ/n

always go for "and" avoid "or"
you have a bottle of pills with 3 different types of pills
6 tylenol pills, 4 senokot, 4 compazine
what are the odds you will get the tylenol?

N=6+4+4 so that n= 14
so that Ʃ=6 tylenol= 6/14=3/7= 43%
so that to get a tylenol or a compazine P(AUB) = Ʃ/n + Ʃ/n = 6/14+4/14= 10/14= 5/7= 71% probability of pulling out a tylenol or compazine pill = P(AUB)= Ʃ/n + Ʃ/n
however the odds of pulling a tylenol and a compazine pill is = (6/14)(6/14)= 36/196=18%

so in conclusion reducing the power set and the sampling pool reduces negative probabilities

as to have OPEN as the reference point above or below = Ʃ=1 and possible outcomes n=2
as to have P(A)= Ʃ/n to 0.5=50%

so that is the reasoning behind my madness
AVT INVENIAM VIAM AVT FACIAM
  • #14,324
  • Dec 12, 2011 5:04am Dec 12, 2011 5:04am
Quoting the redlion
well i usually trade on the premise that it is easier to day trade in the direction of the day and by pure mathematical probabilities we know that P(A)=X/Ω correct? where X is the chosen direction Ω being the sample space or possible outcomes.

so then our probability of failure is 50% price will either close above or below open.

so knowing what statistically it HAS been doing it is easier to pic a direction according to FA, TA, and so forth. when i trade i just ask myself above or below open.

so in essence it helps pick a direction...
Interesting. I am still working on this, but one thing that I find helpful is paying attention to the direction of the frankie and then the London breakouts. Even if they retrace, they are much more likely to continue in that direction.

For me the most important single thing is deciding to range trade or to trend trade that day.
Kill the ego, or it will kill the mission.
  • #14,325
  • Dec 12, 2011 5:05am Dec 12, 2011 5:05am
Quoting the redlion
Probability

P(A) probabilities lets us obtain real and predictable measures about random events. It gives meaning to seemingly random data, and helps us quantify possible outcomes.
We can assign a level of certainty about an the occurence or non occurance of an event measured from 0-1.

probability is measured as such (expected outcome) divided by (number of possible outcomes) Ʃ/n

the probabilities of rolling a dice n=6 sides and the probability of landing on 4 ( Ʃ=1) is
1/6= %16.67 and conversely we can say that we have 100-16.67=...
Make it more complex, it's always nice to calculate human emotions in calculator.
I have studied the same thing but I said fack this sh!t when I learned basic chart reading and SD.
  • #14,326
  • Dec 12, 2011 5:06am Dec 12, 2011 5:06am
Price is attempting for a correction and is bouncing of 32816 ressistance, which is last weeks low.

Edit: And I have just vouched for Kno, because this guy is smart and good economist indeed.

T
"I know one thing, that I know nothing." Sokrates
  • #14,327
  • Dec 12, 2011 5:09am Dec 12, 2011 5:09am
Quoting GoldMan.
Make it more complex, it's always nice to calculate human emotions in calculator.
I have studied the same thing but I said fack this sh!t when I learned basic chart reading and SD.


i agree with you, but still if you look at a daily chart, price close above or below open most of the time, rarely at open.

so then mathematics to help with chart reading skills, is actually pretty helpful for me at least, combine that with, a simple moving average and standard deviations, and helps you pin point lest risky entrances. of course as you mentioned it is price movement itself and as i taught buma the oscillations, of ABC due to order matching.
AVT INVENIAM VIAM AVT FACIAM
  • #14,328
  • Dec 12, 2011 5:12am Dec 12, 2011 5:12am
Quoting GoldMan.
Make it more complex, it's always nice to calculate human emotions in calculator.
I have studied the same thing but I said fack this sh!t when I learned basic chart reading and SD.
hes a pretty kickass quANT to me. had achat with how he trades and the formulas and damn.... its hard to digest but in a certain interesection it makes sense.

the standard deviations i kinda started that not using wiht price but with time... got taht good +93 on dow for taht
Have I got something on my face, SOLDIER?
  • #14,329
  • Dec 12, 2011 5:13am Dec 12, 2011 5:13am
Quoting the redlion
eur taking a beating today,-120 from open price.

although it does look like price is at support 1.32 i doubt it will hold.

seems like a failed upward move, all news are negative, still trading below monthly open, i would look to short this on rallies.

i was running some statistics on the euro

usually

82.00%of the time price falls <55 pips from open closed above open
77.00%price fell >55 pips from open price closed below open
68.00%when prices breaks previous low closes below open
Hi Redlion,
Just on the stats - what time period did you use to compile those statistics? Also, were you just using the London session?

thanks

LP
patience is a virtue
  • #14,330
  • Dec 12, 2011 5:14am Dec 12, 2011 5:14am
Can someone tell me something as a n00b --

If historic prices are 'significant' how come it could just breeze through the yearly low with not so much as one green candle?

Cheers
::Swarvy Pip Stealing nomad:: :-:Trading THV:Version 4 MTF Template!:-:
  • #14,331
  • Dec 12, 2011 5:17am Dec 12, 2011 5:17am
Quoting WickedPips
Can someone tell me something as a n00b --

If historic prices are 'significant' how come it could just breeze through the yearly low with not so much as one green candle?

Cheers
It hasn't breezed through the yearly low.
patience is a virtue
  • #14,332
  • Dec 12, 2011 5:18am Dec 12, 2011 5:18am
this is something i taught buma and i think it is the most important thing in trading. all the other added tools help but one must not lose sight of this-------------------------->







great!!!! you'll have me here ranting till you REALLY start Analyzing the market.

there is a reason they call it TECHNICAL ANALYSIS, (not TECHNICAL PREDICTION)


analyze>plan>observe>implement>anal yze>observe>plan>implement AT ALL TIMES.

regarding assuming you are always wrong, put it this way.

you see price is losing upside buying pressure, at about 1.35 right? by the look of the candles you spot a loss in speed, and now some selling pressure is evident. looking at other time frames or reference points in your chart, you notice that price is no longer going up. and what goes up MUST come down, the problem is.

how far?
when will it resume going up?
what if it continues further up before it comes down?

think of a plan, to put it simple you add your first position and you wait how the market is reacting, if you are confident on your analysis you add you second position, or methodically scale in.

you observe, price never moves in a straight line, so on every impulse wave you will have corrective waves, you measure the force, you observe and assess if your analysis is still valid (dont chicken out and pull out, BUT CONSTANTLY PERFORM OBJECTIVE MARKET ANALYSIS)

what happens if you were wrong? do you just put a stop loss and bite the bullet?

or do you average down close to market to get out b/e at a corrective wave?

do you hold for price to come back? IT WILL ALL DEPEND ON WHAT IS GOING ON IN THE MARKET, IF YOU ASSESSMENT, YOUR POSITION STILL VALID

always know your threshold, always predetermine your risk parameters.
__________________
AVT INVENIAM VIAM AVT FACIAM
  • #14,333
  • Dec 12, 2011 5:18am Dec 12, 2011 5:18am
Quoting the redlion


i agree with you, but still if you look at a daily chart, price close above or below open most of the time, rarely at open.

so then mathematics to help with chart reading skills, is actually pretty helpful for me at least, combine that with, a simple moving average and standard deviations, and helps you pin point lest risky entrances. of course as you mentioned it is price movement itself and as i taught buma the oscillations, of ABC due to order matching.
Tried also many things and I can't say they did not work but I found myself much easier way and always trying to make trading more easier. But if it makes you money go with it but often we try to over complicate things.
  • #14,334
  • Dec 12, 2011 5:20am Dec 12, 2011 5:20am
Quoting WickedPips
Can someone tell me something as a n00b --

If historic prices are 'significant' how come it could just breeze through the yearly low with not so much as one green candle?

Cheers
because that is nt historic. to me historic price levels tend to pivot price uppity downity a tthat zone.

here are few examples
Attached Image (click to enlarge)
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Have I got something on my face, SOLDIER?
  • #14,335
  • Dec 12, 2011 5:20am Dec 12, 2011 5:20am
Quoting the redlion
Probability

P(A) probabilities lets us obtain real and predictable measures about random events. It gives meaning to seemingly random data, and helps us quantify possible outcomes.
We can assign a level of certainty about an the occurence or non occurance of an event measured from 0-1.

probability is measured as such (expected outcome) divided by (number of possible outcomes) Ʃ/n

the probabilities of rolling a dice n=6 sides and the probability of landing on 4 ( Ʃ=1) is
1/6= %16.67 and conversely we can say that we have 100-16.67=...
My 20 pip strategy produces an outcome of
-80 or +40 pips. For it to be profitable (which it was for the EU) you needed to win at least twice for every loss. I forget, but the success ratio was about 70%. So probabilistically the likelihood of this happening 10 times consecutively is .3 to the 10th power or .006%. So I played around with martingale. .006% is one chance in about 20,000 of crashing my account. End result was I would always crash my account. That was when I started distrusting mathematical models in forex.

I still use them, but I don't trust them.
Kill the ego, or it will kill the mission.
  • #14,336
  • Dec 12, 2011 5:21am Dec 12, 2011 5:21am
First of all Year lowes is at 1.314x something so we are not below that.
Second what do you mean by 'significant'? History is all we have.

Quoting WickedPips
Can someone tell me something as a n00b --

If historic prices are 'significant' how come it could just breeze through the yearly low with not so much as one green candle?

Cheers
  • #14,337
  • Dec 12, 2011 5:23am Dec 12, 2011 5:23am
Quoting the redlion
this is something i taught buma and i think it is the most important thing in trading. all the other added tools help but one must not lose sight of this-------------------------->







great!!!! you'll have me here ranting till you REALLY start Analyzing the market.

there is a reason they call it TECHNICAL ANALYSIS, (not TECHNICAL PREDICTION)


analyze>plan>observe>implement>anal yze>observe>plan>implement AT ALL TIMES.

regarding assuming you are always wrong, put it this way.

you see price is losing upside buying pressure, at about 1.35...

since redlion has taught me that trade with lowest risk i keep forgetting reward lol. i see targets but sometimes i chicken out like a fag like that dow short. it shouldnt be closed there.

another lesson i found out useful is that if u took a trde on specific tf, ur targets should be there and dont be an ass and look at m5 for exits...

trade taken on daily took profits on m5... thats me, chciken !


anyways 1% made.
Have I got something on my face, SOLDIER?
  • #14,338
  • Dec 12, 2011 5:23am Dec 12, 2011 5:23am
Quoting GoldMan.
Make it more complex, it's always nice to calculate human emotions in calculator.
I have studied the same thing but I said fack this sh!t when I learned basic chart reading and SD.
Lol, slowly and surely I am getting there with chart reading. What is SD?
Kill the ego, or it will kill the mission.
  • #14,339
  • Dec 12, 2011 5:24am Dec 12, 2011 5:24am
Quoting lovepips
It hasn't breezed through the yearly low.
]

The yearly low was a 1.3280??.. it went right through it like it didnt exist :/
::Swarvy Pip Stealing nomad:: :-:Trading THV:Version 4 MTF Template!:-:
  • #14,340
  • Dec 12, 2011 5:24am Dec 12, 2011 5:24am
Quoting AaronWard
Lol, slowly and surely I am getting there with chart reading. What is SD?
supply and demand
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