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Technical Analysis Fallacy

  • #29,721
  • Edited 10:26pm Dec 16, 2011 10:11pm | Edited 10:26pm
Quoting the redlion
to be honest the scientist in me, needs logic, not intuition nor ball park subjective information processing.

if you can do that, then my hats off to you.

to me A+B=C so then BC=A and to me, when trading because i take it as a business, it is important to have objective data.
Red lion have you heard the fact that people from strong academic backgrounds such as lawyers and doctors struggle in trading for the very reasons you mention in your post above? Apparently you seek a structure and order (or a logic) in the markets that simply doesn't exist in such a variable and gamed type environment be it the financial markets, because that's kind of how your brain has been programmed to function and receive information. I just remember reading that a while ago now, it could of course be complete nonsense. Your post just made me think of it.

What do you think?
Time hides Nothing
  • #29,722
  • Dec 16, 2011 10:43pm Dec 16, 2011 10:43pm
perhaps your have some valid points regarding the market not being scientifically logical in the sense that you cannot predict price due to the independent variables that exist by a conglomeration of participants with a plethora of various interest.

however i do think that i can use observations and mathematics to understand, my trading system and to spot inefficiencies in the markets. so far i have been doing ok for my self , meeting monthly targets and the such......


i do not attempt to predict or even say that i KNOW with a degree of certitude what the next step will be in the market as far as price goes. Truly from your post i deduct that you subscribe to the idea that there is structure in the market, and that although the market is not predictable, it does correlate well with the heisenberg's uncertainty principle in the sense that one cannot pin point all variables at the sub molecular level such as precise speed location and direction, and the more we attempt the more inaccurate the results. Having said that one can actually estimate the general direction just as in the market.

what i attempt to achieve is not holy grail predictions but sound statistical data that can serve as a baseline in order for me to have a more structure calculated approach as opposed to basing my decisions purely on subjectivity.

there are variables in trading that are within my realm of control, for example my money management, my risk assessment, my risk parameters and my contingency plan; and as i put forth, some principles do not hold up in statistically based experiments to reduce the risk exposure and potential for loss, one of those is the idea that we can RESCUE the trade as often as we do, there are times for everything and rescuing generally (averaging down) quantifies your commitment to a bad trade.


also there are mathematical principles that do hold up in the market and that is the idea of volatility, and normal price variations, recognizing the bargains as you put it in another thread is key. So recognizing the turning points from the bargains is CRUCIAL, and standard deviations (2) from average price is a solid concept.

how do you come up with an accurate estimate of normalcy if we do not have sound statistical baseline. Therefore Average Ranges, average highs, average lows, and running statistics on what the market has done in the past is our only way we can make decisions that happen in real time. It is not 100% infallible but it's all we've got.
AVT INVENIAM VIAM AVT FACIAM
  • #29,723
  • Dec 16, 2011 10:58pm Dec 16, 2011 10:58pm
Interesting, thanks for the reply. I agree on your logic of creating methods based centered around most probable outcome, I personally don't trade in such a mathematical (or objective analytical) way but that's just me.

If my memory serves me correctly I believe the article I read related more to investment type strategies which is more centered around the analysis of fundamental factors in markets which (information being conveniently distributed) is a headache for traders trying to profit from "what should be" or "what should happen".

Anyway... Thanks again for your insights.
Time hides Nothing
  • #29,724
  • Dec 16, 2011 11:16pm Dec 16, 2011 11:16pm
As Martin D Evans stated in his research, the market is driven by information, and i do use fundamental analysis but as a secondary to my Technical Analysis.
as he stated fundamental factors contribute to the decision making, the environment that promotes X behavior in investors.

edit* i forgot to mention that the price you see on your screen at any given time is the value of the market at that point in time.
so it is a conundrum, and i suppose my brain works that way, and everyone adapts differently to uncertainty, this is my way of adapting.

Most of the news coming out of Europe has been negative, and one with a basic on understanding of macro economics could have foreseen the mess we are in right now. How can this be an auxiliary in your trading? the fact that the Euro reached such levels in previous bull run, that technically was at a historically expensive price, seeing the fizzling out of buying momentum, and taking into account, that the price at that time was located in an extreme in standard deviations, could have let you to believe that shorting it was safer than the credulous concept that all was well in the Euroland and the market was going to sustain is trajectory. However if one takes the approach in our money management strategy that the market is completely random, we do prepare for the fact that it could go up for ever, so taking a short position but insulating yourself from a big loss (via stop loss at an area reasonably placed at a distance from volatility, which would be based on statistical analysis of ranges, would have been prudent)

as i recall price ranged there for couple of days so placing entrances on the highs of the ranges would have been less risky. When trading i usually try to use probability, and risk aversion.

i place my entrances close to the point that i know i would be wrong if the market surpasses that area, with the theory that the closes i am to that point where i am proven wrong the less my loss will be.

in essence when trading, i try not to get hit in the face, once that is accomplished i will let it run till i believe that objectively, the market has changed, whether my holding time be a five minute wave, hourly, daily is of little importance.

i do not know if answered your question or i am just ranting.
AVT INVENIAM VIAM AVT FACIAM
  • #29,725
  • Dec 17, 2011 1:17am Dec 17, 2011 1:17am
Quoting auxesis
today's taf thread

http://www.youtube.com/watch?v=ZqlMziPml8Q

  • #29,726
  • Dec 17, 2011 1:28am Dec 17, 2011 1:28am
My trading explorer dissapeared.
- Explorer is deactivated because there have been no open trades for more than 20 days
Anybody the same problems? Because i was trading every day... Maybe i am watched? I hope not:-) Rgds
  • #29,727
  • Dec 17, 2011 2:13am Dec 17, 2011 2:13am
Hi All
I am constantly reader of this thread for very long time . Every now and then i am amazed why people have to be so vicious or call each other names. This Thread is stands first of all for the Human in you to be humble . The Way of mother Earth first of all. Do not make something to someone that you dont want to be maked to you. It is such an easy task. Just to think how would it be if the same things will go your way .
It is sad to see that such a beautiful thread with so much wisdom of life and od threading looses its path .
FTI is the owner of this thread and as such he have to be respected for his thoughts for his presentationin here. I cant even count the people in this thread that said THANKS to him for pening their eyes There is so many people it means that there is people that conects to his thoughts and his presentation.
And We as Lurkers or COntributors can only try descus or add our thoughts about how we do it based on FTI teachings .
There is no need in this thread for other techniques or methods Because all that we need to understand FTI is in here. And as folowers everybody take to himself something that he easy relates to it in trading.
It some time a shame to what tones this thread gets.
Sorry if my words bother or disrespect someone it is not the meaning Michael

p.s. Enlish is not my native language sorry for mistakes
Do not be victim to conflict of the General and Commander in you - by FTI
  • #29,728
  • Dec 17, 2011 2:33am Dec 17, 2011 2:33am
Quoting the redlion
in my testing i am putting my money
i have found that Jessie Livermore's approach to it i actually very safe.

trade less= less mathematical probability against you
enter at extreme points = pivotal points
and using a stop loss away from volatility by taking into account standard deviations and Average ranges with an initial position like fti (scout)

and letting it ride, while observing the market for changes, as well as his rule of NEVER AVERAGE DOWN
ALWAYS AVERAGE UP, i found this through money management, risk assessment testing to...

This quote is excellent

TradeStar
Haste not to Enter AND Haste not to Exit !-TradeStar
  • #29,729
  • Dec 17, 2011 6:46am Dec 17, 2011 6:46am
Hi Redlion,

What do you think about my attached performance from 17th Nov todate?
I didn't use any analysis just went with the flow, just took very little help from moving averages and volumes.

Till last Wednesday I was running at 80% gain but then I lost a battle on Thursday due to my stupid opening of several trades without keeping gaps and that dragged my account down to about 63% return as I had to close my trades due to un-necessary exposure.

Have you ever thought why lots of methods and strategies are making money to 5% and not to remaining 95%?

Most of us trying to look for Holy Grail and ignore the simple fact the market are simply demand and supply reaction and nothing else. It is YOU who is who is Holy Grail and YOU don't need lots of analysis IMHO.

I used to do end of day trading and I think I was and is good at it, in the last year I made 30% return and I was using stops and was using at PA and support/ resistance but by using FTI strategy I have increased my returns significantly and I have not even gone for maximization yet (1+1+2+3+5+8+13). If I keep doing the way I have done in last few weeks then I don't even have to maximize.

Past performance is no guarantee for future results as you know I am still new at it.

Regards
Abdul Samad
Attached File(s)
File Type: zip performance from 17Nov2011 todate.zip   9 KB | 654 downloads
  • #29,730
  • Dec 17, 2011 6:54am Dec 17, 2011 6:54am
Quoting Fana
My trading explorer dissapeared.
- Explorer is deactivated because there have been no open trades for more than 20 days
Anybody the same problems? Because i was trading every day... Maybe i am watched? I hope not:-) Rgds
Hi Fana,
My broker account is linked with CURRENSEE.com and I think it is better than FF trade Explorer.
  • #29,731
  • Dec 17, 2011 6:56am Dec 17, 2011 6:56am
Many people think that when they order leveraged order, that they possess that ordered money. In other words that they have this tool for themselves to use. Do you think it is true? Imo, when you order leverage, IT IS YOUR account money, what for that moment are owned by your creditor. Rgds
Simpleman, thank you. I reloaded it and it seems it worx.
- I started to develep twoo MM for myself : Defensive and ofensive. Defensive is very low leverage or no-leverage. Ofensive only with already gain capital and currently i am testing my mindset parametres and limits. because WHEN you decide to play leveraged game, for that day you must play it. Not cut big loss, not close small profit. (you have to play it hard all - same as with low leverage but bigger). Market decides-stay logicall.
  • #29,732
  • Dec 17, 2011 7:20am Dec 17, 2011 7:20am
Quoting simpleman
Hi Redlion,

What do you think about my attached performance from 17th Nov todate?
I didn't use any analysis just went with the flow, just took very little help from moving averages and volumes.

Till last Wednesday I was running at 80% gain but then I lost a battle on Thursday due to my stupid opening of several trades without keeping gaps and that dragged my account down to about 63% return as I had to close my trades due to un-necessary exposure.

Have you ever thought why lots of methods and strategies are making money to 5% and not...
i am not looking for the holy grail, and i never said you cannot profit, i have, fti has, we all have as far as i know. i am not saying it is not profitable. However i am saying there is more than one way to skin a cat, and doing "lots" of analysis, is not a bad thing.

holding ideas up for reason, scrutiny, and having intelligent discussions on the matter is not a bad thing.

i was an avid supporter, and i read the thread many a times, i am not coming from the point of skepticism due to ignorance one the ideas that fti postulates, i do however want you to ruminate for a second on the increased risk exposure that averaging down entails.

I am not attempting to discredit fti, he teaches price action analysis at its purest sense, and it is the very back bone of trading, the preamble of this thread is an eye opening enlightening post, most of his posting as it is popular here in the first 200 pages are full of wisdom.

the idea however on non rigid expectations and predictions of the market turned dogmatic in my opinion. To the point that all technical analysis is discounted as a "fallacy" and even when evidence is presented on the fact that to suggest exponential risk exposure in an averaging down process to be specious. It is refuted and attacked here, all other forms or styles, any type of intelligent discussion is met with cantankerous diatribe in this thread.

no room for disagreement nor exchange of ideas, i have taken quite a bit of time, running a risk assessment and contraire to my initial defense which is evidence all around Forex Factory of the rescue skews and attack skews, i as a man on grounds of objective statistical findings am force to admit i was wrong, and a stop loss is not detrimental as fti teaches. in fact it palliates the loss potential.

to recapitulate, more tolerance and logic is needed, i myself was subject to attacks. Disrespect and held to a double standard here not too long ago for disagreeing with the teachings. I think when we stop questioning and analyzing and simply implementing blindly we become ignorant.
i do understand that i am occasionally at fault of hubris.....at times.

but some general statements that are said all throughout this thread are pretty ambiguous, and the overall belligerent posture when trying to describe the dance in a more analytic way, is uncalled for. I do not need to read any more of the 200 pages, some things are plain wrong.
AVT INVENIAM VIAM AVT FACIAM
  • #29,733
  • Dec 17, 2011 7:36am Dec 17, 2011 7:36am
Happy weekend everyone. Been doing some reading this snowy and cold morning, thought these we interesting in preparing for next week.
http://www.cnbc.com/id/45699896
http://www.cnbc.com/id/45702367
I think we can assume that the downgrade of Belgium is just the start of what will be a full downgrade of Europe in the coming days and weeks. I think the work being done in Europe from this point on has more to do with what the new European arrangement will be, than saving what exists today. Every European country will go on the defensive to protect themselves, and remember you never gain anything playing defense. Probably a rough 2012 for all of them.

I will be doing chart work tomorrow rather than today. Was hoping to see fti this weekend, and continue to be very worried about him. God bless him, and God bless all of you, too. Have a good weekend!
  • #29,734
  • Dec 17, 2011 7:42am Dec 17, 2011 7:42am
Quoting Fana
Many people think that when they order leveraged order, that they possess that ordered money. In other words that they have this tool for themselves to use. Do you think it is true? Imo, when you order leverage, IT IS YOUR account money, what for that moment are owned by your creditor. Rgds
Simpleman, thank you. I reloaded it and it seems it worx.
- I started to develep twoo MM for myself : Defensive and ofensive. Defensive is very low leverage or no-leverage. Ofensive only with already gain capital and currently i am testing my mindset parametres...
exactly fana, just for the sake of proving me wrong try trading with a stop loss away from volatility, picking an entrance at an extreme in deviation from normal price trajectory, and do not average down.

if your performance or you losses are bigger than increasing risk exposure through rescues, i will gladly concede that i am wrong.

as i said before, i have been there and done that.

you, yourself taught me how to trade the dance remember? and i thank you.
Mammood has been an influential part of my growth and i am forever indebted in gratitude to him. i do thank fti for sharing his knowledge.

however when using the skews, in averaging down, i have founded to be detrimental. Averaging up or attack mode is a better idea, granted you can recognize the change quick enough and do not get caught in
1 erroneous direction
2 a corrective wave

Do not trade any different than what brings you success as far as the analysis part of the equation. But i invite you to write down, your triggers, write down what the dance means to you. How you derive to the decision to take the trade in what you perceive to be a higher probability entrance, and write down why you exit.

trust me, you might think i might be over complicating things but i strongly believe that the best strategy is not, MINE, is not FTI, is not MAMOOD, is not anyone else's but but the ones you devise and i think fti himself said this.

it is easier to follow your rules when they make sense to you, and fit your personality. It is easier to understand what went wrong when you have clear ideas on why you do things.

otherwise we end up chasing our tail endlessly. I do not presume to be better than anyone here or trade better than anyone. I am sure some do better some do worse and at the end of the day nothing really matters but the individual's account growth. However i do see some dangerous fault in some logic here, i have been in that position of trying to clear the mind of thought, and ego and follow the market, feel the pulse. Listen to her, and when out of step rectify. I found it very difficult and it wasn't my intellectual capacity i assure you, it is the ambiguity of it.
AVT INVENIAM VIAM AVT FACIAM
  • #29,735
  • Dec 17, 2011 7:51am Dec 17, 2011 7:51am
Quoting the redlion
i am not looking for the holy grail, and i never said you cannot profit, i have, fti has, we all have as far as i know. i am not saying it is not profitable. However i am saying there is more than one way to skin a cat, and doing "lots" of analysis, is not a bad thing.

holding ideas up for reason, scrutiny, and having intelligent discussions on the matter is not a bad thing.

i was an avid supporter, and i read the thread many a times, i am not coming from the point of skepticism due to ignorance one the ideas that fti postulates, i do however...
Redlion,

Everyone here has the responsibility to take what is offered and incorporate that into their own unique method to which they are personally and singularly responsible. The path of self-discovery..... everyone who trades will trod that path and it at times feels comfortable to seek the help and camaraderie of fellow traders.... how do you trading it? what do you do?

Those answers at times can be helpful, but also can lead a person into a path that will slow or inhibit their learning curve without proper instruction, specially in the internet world.

all that being said,

FTI traded at the top of his field, overseeing and educating a Tier I Bank. He put forth his "way", if one wants to call it that, in this thread. Why he did it in this or that fashion, used specific terminology, we can only speculate... however I truly believe it was all with a purpose. That being to ground the beginning trader with the proper fundamentals to build upon.

Fti started and learned from some big names, educated over a spectrum of different charting analysis, once he posted a great picture of one of his mentors square of 4 charts..... but with all the background he possesses... he starts us out not with any type of chart help other that pure price action..... and you have to stop and ask yourself why?... IMHO, it's because it works and that's how they trained...... from past trial and errors at the bank.

When we introduce anything that is in opposition here in this thread it takes away from what FTI tried to accomplish here.

If you take what's given here and transform it into something you can profit from, GREAT! That's what He wanted..... people to prosper. But please, if your going to discuss matters that are contrary to what FTI taught, please, out of respect to the author and the integrity of the thread, do so on a different thread.

respectfully,

a
  • #29,736
  • Dec 17, 2011 7:59am Dec 17, 2011 7:59am
GEFX, yes, France has resorted to point fingers at Britain.

down grade them first, like school children. A Downgrade of France and Germany would be very interesting, however i do not know how much is already priced in.

The Fed continue to assure us that they will not "bail out Europe" but they are acting as backstop for liquidity by opening the dollar swap lines.

i do not know how honest Bernanke is being with the swaps, or perhaps outright loans at very cheap rates with money fresh out of the printer? which does sound like a sneaky Bail out maneuver.

The COT is showing extreme net short positions on non commercials and extreme net long positions on commercials offsetting their exposure to the falling rates.

i took several long trades as i saw the selling pressure diminishing momentum but i do not dare hold the weekend with the talk of further downgrades as you mention so i am effectively out of the market as of now.

we are approximately about 400+ pips below monthly open and price right now i believe it to be at a crucial point. 1.30 is a tale tale number, although most views are bearish, last time COT showed so much conviction on the downside we moved all the way past 1.42 before correcting. I do believe that if there is no attempt to decisively break the 1.30 level we are on our way to a correction.

somehow what is good for Germany and their price stability, low inflation target with a booming exporting economy seems to be bad for the entire zone. Some fiscal Unity and not ruled by the interests of a few would be ideal but we all know human nature is not such.
AVT INVENIAM VIAM AVT FACIAM
  • #29,737
  • Dec 17, 2011 8:09am Dec 17, 2011 8:09am
Quoting the redlion
i am not looking for the holy grail, and i never said you cannot profit, i have, fti has, we all have as far as i know. i am not saying it is not profitable. However i am saying there is more than one way to skin a cat, and doing "lots" of analysis, is not a bad thing.
Hi RL,
Thanks for your reply, yes you are correct there are several ways to profit from the market and whatever way you have found must and should work as you have tested it already.

Some methods give better returns than the others and I think FTI's method gives superior results, one can tweak the strategy a bit and still get good results but if changed it a lot that means you have come up with different strategy and you are trading different strategy.

As far as stops are concerned, I have used them on shorter time frames and it just gets hit and then I had inferior/negative returns. Even if you keep it away from the volatility how would you know that volatile point is the final volatile point and price is not going beyond it.

Just my opinion not trying to influence.
  • #29,738
  • Dec 17, 2011 8:12am Dec 17, 2011 8:12am
Quoting auxesis
Redlion,

Everyone here has the responsibility to take what is offered and incorporate that into their own unique method to which they are personally and singularly responsible. The path of self-discovery..... everyone who trades will trod that path and it at times feels comfortable to seek the help and camaraderie of fellow traders.... how do you trading it? what do you do?

Those answers at times can be helpful, but also can lead a person into a path that will slow or inhibit their learning curve without proper instruction, specially in...
i do see and respect your point.

duly noted, but maybe more open mindedness, more empathy for the new comers, less hostility. From what i gather you are intelligent sensible noble person, it is evident in you.

You have to concede that sometimes people are treated pretty unfairly here at time. Camaraderie would be nice, helping the new comers, explaining our views on how we trade. Maybe i judge fti too harshly but did expect a lot more from him, than calling me personally an asshole face, and ungrateful shit with no provocation at all.
mla for once was also treated with hostility, actually anyone for that matter that is seeking further knowledge here in what in my opinion seemed like a cult behavior.

i do apologize maybe for jumping to conclusions but as we all accept that we have been helped and given a gift of knowledge. We should not be so quick to repel anyone seeking clarification at least in my opinion.

so as you stated in your post, i will desist from sharing some findings if no one is interested in me doing so.

and if you as a group would like me to stop posting here then do feel free to let me know and i will be on my way.
AVT INVENIAM VIAM AVT FACIAM
  • #29,739
  • Edited 8:42am Dec 17, 2011 8:14am | Edited 8:42am
Quoting GEfx
Happy weekend everyone. Been doing some reading this snowy and cold morning, thought these we interesting in preparing for next week.
http://www.cnbc.com/id/45699896
http://www.cnbc.com/id/45702367
I think we can assume that the downgrade of Belgium is just the start of what will be a full downgrade of Europe in the coming days and weeks. I think the work being done in Europe from this point on has more to do with what the new European arrangement will be, than saving what exists today. Every European country will go on the...
GE,

I personally can't see how the Euro can survive in it's present condition, and I can't see the respective members all agreeing to any one set of criteria and regulation that will save it..... so where do we go from here? It truly is "too big to fail".

If you look to some of history's past sovereign defaults, all are minuscule to what's about to happen..... it will be a global meltdown/fallout.

They have the band-aid on to hold it in place through out the new year, albeit with thin Christmas markets, expect some wild volatility going into mid-next-week thru years end. Any news will cause wild swings, and I personally expect us to see 28-2700 before Jan 1st. But the overall depreciation regarding the current bias, I believe has been seen.

Starting next year could be very interesting, I personally believe we will see the initial framework being set for a new global currency in the spring of 2012.
  • #29,740
  • Dec 17, 2011 8:33am Dec 17, 2011 8:33am
Fti never said not to cut losses, in fact he states that we should, he has merely given us a tool to recover some of them if we feel it is an option to do so at that time.


I believe the reasons we do not use manually entered stop losses is because it is part of the physiological training that we have to do to develop in our minds to be able to trade this way, to see what is really happening in the market (learn quicker) and how and why it moves the way it does, make a mistake and you could be taught a lesson.

 

  1. it keeps you on your toes while in the market (part of the dance).
  2. For me and I am sure for others it stops you taking chances and you analysis your entry better.
  3. You are not tempted to just let a trade run while you go off and do something else, so you live your trade and learn more.
  4. it teaches you the discipline to manually cut losses and admit you were wrong, this leads you then to want to find out WHY, YOU were wrong.
  5. Responsibility for what your doing and respect, not fear, of the market.

This is how I see the reasons for not using automatic stops. Perhaps other see it differently? We all have our own minds and boundaries.


Regards


Phil.

-be careful about what you allow to be put in your mind-
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