Take the Emotional Bias Test!

Here is a cool trick I like to do to test people and myself for emotional bias. The currency pair shown in the chart doesn't exist for trading so don't try to find it.

Take a look at this currency pair... What would you say it's going to do in the short term? Looks like it's headed toward around 0.7450 to 0.7400 right? Then most likely another drop lower after consolidation.

This is a weekly chart.

Simply state your opinion if you are in agreement/disagreement and your thoughts about the currency pair. If you have figured out where I have gotten this currency chart from please don't tell anyone until they answer the questions.

I think short term it's going to bounce back up to .7850 or higher before it hits .75. This is because I am currently a contrarian.

I would say it will continue to go down because the ma looks like it is changing slope and the green line has changed to red.

If it the instrument doesn't exist then by definition there is no correct answer to your question

Also, personally I'd need more information than presented in the chart to be able to make a trade call.

Anyway, just for kicks, I wouldn't buy or sell. I see the pair in uptrend (HH,HL). Not selling cause the current downmove is countertrend and too close to last swing low meaning poor RR for shorts. Not buying, although RR and trend look favorable for longs, cause last candle is bearish.

LoL... Not very specific... Continue to go down below the prior swing low at 0.7400 I assume you mean.


Re: Vox Dei
I am not asking you to make a trading call. I'm asking you straight... "Where is it going?" I am not asking you if your going to buy when it gets to where you think it's going or if your going to short it to where you think it's going.

to be honest I would be careful going short on this one since it has already traveled south so much....so I would try to find fundamental factors that could change course or would look for diminishing momentum then the subsequent correction to attempt a short.

seems like it has being selling off so a counter trend trade would be too risky for me.

Irrelevant. Because of the physiology of trading any currency pair has the same physiological patterns. Same momentum and trend behaviors and etc...

This chart has a proper physiological pattern. Ill reveal what it is a chart of later. Many have recognized what it is.

Irrelevant... This is a EMOTIONAL BIAS TEST...

In a perfect world where all is just technical and physiological from this point on... With no unexpected news catalysts. Where do you think it is going to go? Looking like a early 2009, late 2010 scenario repeating over again is what I think. Deja-Vu!

I have provided a full chart below with a cyclic oscillator and a 20, 30, 10 proprietary filtered velocity MACD for those who can't make any decisions without a indicator... Moving averages on the chart are "based" off of the 20,30 ma's but are offset in a special way.

BTW, this test will ONLY work if you don't know where I got this chart.

the problem is that I do not trade that way.

I have to have a fundamental view of things and use the chart as timing.

a chart alone cannot really tell you where it will go.

it is a representation of past transaction that clue into the volatility, and conviction of the players involved as the momentum increases or decreases.

but is not a predictable ordered structured movement.

you see the problem is with the perception and the way your brain wants to interpret the information.

at the end of the day do you go short or long? how about flip a coin? would you do better then?


you can come up with all kinds of models but they are only as good as your assumptions. Most TA tools are basically an average, with their respected deviations for mean reversion or strength of trend gauging.

now..... no matter what the answer is to this test....the problem is that when the market opens the next day...it is chaos that determines the direction....million of orders of different sizes, by millions of different people with millions of different interests and views, tick after tick it is unpredictable but somehow they are all working from assumptions and models making the movement non random..

but it all comes down to this....

which way WILL you bet?

The current price of a security will go where the incoming orders place it. It will reject areas of inadequate liquidity, consolidate at areas of abundant liquidity. There's no way to tell where a security will be in the future based on historical data or indicators that derive their values from that same data.

There is not enough information given to make an informed decision.

Eh, well not everyone is going to understand what the point of this test is as they analyze things differently.

Kinda funny... I didn't realize that this was a perfect five wave bottom on the EUR/USD which requires at minimum two waves higher before a potential trend continuation down. (This is wave one)... Until I looked at the inverse.

So, for those that did the test for fun and properly understood the point of it? Did you come up with a different technical analysis of the charts above as the one you come up with on the one below?

If so you have a emotional bias. Don't lie to yourself...

This trick is more fun to play on friends you know who are technical traders or analysts... Find a stock or something they own. Generate the inverse chart and have them analyze it without realizing what it is.

Yes, I would bet that it would go below 0.7400. I really haven't been trading forex for too long so I can't really say with much confidence.

Okay I recognize that chart...

Anyway my answer to your question (if you accept it) was implicit in previous post... no bullish candle on the current downswing means near-term momentum is to the downside... last swing low @ ~7400 means downside might be capped... and that's exactly why I was wary of selling/buying when I thought that was the goal of the exercise.

Great exercise btw

edit: nevermind you spilled the secret

Too many people in this thread are interested in trading calls when this WAS NOT the point at all. But anyway... Here is my analysis...

Because of long term downward momentum the EUR/USD is probably going to have a good short setup in the rally following the coming consolidation. We won't know for months... In order to do a long term short on the EUR/USD it needs to both sell off and rally again for a equivalent amount of time to the first rally. The second rally must be weaker in momentum than the first over the same duration of time.

There is NO long term trade setup with really good odds anywhere here on the weekly chart. Buying the next consolidation after three weeks of engulfing reversal is a okay trade setup but not as good as one would prefer because of the long term downward momentum on the MACD which needs time to burn off.


The dots on the chart are for statistical odds calculation. The size of the red dots tells me the heightening odds of price moving higher than those price levels the next cycle. The size of the green dots shows the heightening odds of price moving lower than those price levels the next cycle.

For a full odds calculation my wave count oscillator which generates the dot signals need to be combined with momentum, wave counts, and recent range. I also use a price projection method to solve good price levels to place trades.


Not even sure why I do long term analysis... I usually only hold trades for 15 minutes to a couple hours... But multi-timeframe analysis definitely helps predict and capture big runs on the shorter timeframes!

You know whats funny... I admit I kinda still have a slight bias. Thank god I follow my technical rules and am just a daytrader!

When I look at the inverse chart (USD/EUR) long term... I'm like... "Yep... Going to need two down cycles or a LOT of consolidation... This current downtrend is going to stick for months!"

When I look at the non inverse chart I feel tempted to search for a short setup off some resistance level... Wtf? LoL!!!

Here is the monthly chart inverse... I look at it and am like "Yep... Couple more months downward before any good buy setups on the weekly/daily charts."

I look at the monthly chart non inverse and am thinking "Time to start looking for daily/weekly short setups next month!"

Hilarious... It is really true that if you spend too much time watching a instrument it trains you to just keep trading in the same direction that has worked for a long time...

I was scared to death of trading the euro long setups until the breakout, then into September now I have no problem trading long for my little 15m-2hr long trades after the daily technical strength recovery really solidified.

I have also attached a daily chart with a analysis of my emotions in trading through the recent trends.

I haven't read anything but OP and I say price will retrace back to .8.

That E/U breakout to the upside was all technical. Didn't have anything to do with traders reacting to the Federal Reserve annoucing a plan that they're going to create $40bil/month of USD for an unstated amount of time or anything.

The foundation of these biases are useless in predicting future movement.

You seem to be forgetting the German courts okaying the printing of a trillion dollars in bonds by the ECB two days before?

News just catalyzes emotions. Nothing more... Those two events balanced themselves out fundamentally.


Quote from market wizards...

"==== How does your current trading for your own management firm differ from your trading at Salomon?
====
At the moment, I'm trading a lot smaller than at Salomon, which is a disadvantage.
==== How is large size an advantage? You're kidding. ====
No, I'm serious.
If a big buyer comes in and pushes the market 4 percent, that's an advantage.
He still has to get out of that position. Unless he's right about the market, it doesn't seem like large size
would be an advantage.
He doesn't have to get out of the position all at once. Foreign exchange is a very psychological market.
You're assuming that the market is going to move back to equilibrium very quickly-more quickly than he can
cover his position. That's not necessarily the case. If you move the market 4 percent, for example, you're
probably going to change the market psychology for the next few days.
==== So youre saying size is an advantage? ====
It's a huge advantage in foreign exchange."


If you think there are not banks big enough to control the patterns in currency markets you have something wrong with you in the head. Just look at the EUR/CHF peg. They want the currency above there... They can keep it there.