The clarity thread

Exactly. The deal is to focus on price and understand what it is telling us.

Very interesting point of view from a coder. You probably have a good experience of indicators. Do you mean that all the indicators you write for other people dont works?
I think that PA is like indicators, sometimes works, sometimes dont. But you are right when you said that all depend on price.

I hope that there is another understanding of trading...

You are right. And this is why indicators still exist. Because there are still traders who use successfully indicators.

You have to examine your premise before you can determine if your conclusion is correct.
By definition professionals and instutions are good at what they do. If they were not able to make a consistent profit on trading, then they would not do it. This is business sense. A 50/50 implies that there IS ALWAYS A LOSER. THERE WILL NEVER BE A LOSER , because if they were losing, THEY WOULD NOT TRADE. A LOSER WILL BE ELIMINATED, until there are no more losers. It makes no business sense to consistently lose. Professionals and banks, are by definition, not suckers.

Therefore, the market is not a 50/50 game among banks and professionals. Rather, it is a game where anyone can win and the market will continue to function.

-----

You say that the outcome of a "system" is random. But then later you say that people who dont follow a system can achieve success. So logically there is a non-random way of achieving success. Since the definition of a system is "a way of consciously analyzing the market in order to consistently win", then the professionals must also be following a system.

I know you mean that systems are trading methods which follow strict rules/indicators. However, this does not have to be the case. This is because the human mind latches onto a language (a "way of thinking/system"). Then it fills out the details so that the language (for example supply/demand) follows the reality of the market, just like when you learn your native language. In order to do this, of course the person must step out of the shadows and admit that he/she must learn from the market, and not some get-quick rich fantasy. The funny thing is that this fantasy is perfectly possible once this is done.

There are plenty of successful traders who have written about their success and shared. For example ,see that ratios and harmonics thread.

I can understand this is a hard concept to understand, maybe the best way to figure out the situation is to just analyze and understand what markets are and how they works.
To make a long story short (long/short, lol), we have the price, the demand on the bid and below, the offer on the ask and above.
Whenever price go up, some active trader is buying what the passive traders (market makers and other traders) are offering on the ask price and above.
When price go down, some active trader is selling what the passive traders are demanding on the bid and below.
Anytime the price move up, a buyer have bought, a seller have sold.
Anytime the price move down, a seller have sold, a buyer have bought.

When price go up of let's say 10 pips, a huge amount of traders (or just one trader with a huge capital) have bought, and a huge amount of traders have sold.
Now, everytime price do move, somebody is having a loss inflated, and somebody is having a profit growing.

The moral of the story is, anytime price move, up or down, there are sellers who have sold, and buyers who have bought, at any given time in the market there are an amount of opened sell positions and buy positions, at any given time there are partecipants making money and partecipants loosing money, the amount of profits of the winners is exactly the amount of money that loosers are loosing.

The idea that the amount of profits is bigger than the amount of losses is simply heretical and pure madness.

I don't like to compare the financial markets to poker, but in this case poker can be useful, just think about a poker match, for example:
5 partecipants, each of them put 10k usd of capital. ***They ALL are "professional" poker players.
Now, in the game there would be exactly 50k, there will be some losers, there will be some winners, the amount of money the winners can make is exactly the amount of money that losers can lose. It's mathematical, 50k in the game, some must win, some must lose. They are all professional, they are not suckers, they all play from 10 years and know perfectly the rules and the tricks of the game, anyway in order for somebody to win, some other must loose. A scenario where everybody magically win 50k is simply not possible.

In the markets the same do apply, the amount of money in the financial markets is not a magic infinite number, it is instead the exact amount of money that all the partecipants carried with their trades. If somebody make a million dollar profit, somewhere in the world there must be somebody (or the sum of many) that have suffered a million dollar loss.
The difficulty of this concept here is that nowadays financial markets work on a global scale, therefore maybe the today profit of a japanese investment bank is the loss of a canadian hedgefund, we have partecipants from all over the world that participate in this huge financial orgy 24h/24h, there are hundreds of major financial instruments correlated, it's easy to lose orientation and forget about the laws of physics.
With this i still don't care where do my profits comes from, or in who's pocket my losses goes, the importance of this concept is that it's mathematically impossible to have more winners than loosers (in terms of profits/losses), the profits/losses ratio is exactly 1:1.

Banks and professionals do lose money, even more, banks loose soo much that end up bankrupt, evaporating the savings of thousands of unaware families.
When there are too many private (families) savings on stake, governments are forced to save the bank, give her moneys in order to not destroy thousands of families, commercial activites, etc., this is what happen with "bailouts" .

The whole banking industry is right now in the verge of collapse because of bloated losses accumulated in the years and huge leverage exposure (yeah they also use big leverage).
The biggest central banks of the world (fed, boe, boj, ecb etc.) are costantly pumping liquidity in the banks to keep them afloat.

And because of the orgy nature of the financial markets, we have often the chain-reaction situation, when a bank is forced to liquidate an asset (kind of margin call) and sell violently a market, price go down, making other banks having huge losses, some getting forced to liquidate too, and letting the market collapse even more, letting other banks in trouble, etc.
In other words, what happen during the financial crises, what happen with the bubbles that pops, what may happen soon again on the equities.

Even Warren Buffet, the most famous and sophisticated investor, had different years closed in loss, in the order of billions of $.

The "consistency" like some may understanding is just a fable, it don't exist.
The first truth of this game is that no matter what, nobody know where market is going, and even the best ones do have huge losses from time to time, sometime even the best ones goes even broke (the best traders, the best banks, the best hedgefunds, nobody is safe).

This is an important myth to debunk, the myth that the "professional" always win, that they know where price will go, that they have some kind of special system or special knowledge. It's not true.

I am willing to let this thread go in a particular direction, a powerful and constructive direction that will open the eyes and will change the entire life of who will understand it, but in order to understand what's true we need first to point out and understand what is not true, that's why i'm hitting the "no holy grail" "no system" "no always win" "professionals also loose" buttons, before move forward we need to completly erase all the incorrect concepts and belifs, because in this business an incorrect concept/belif will make at some point the difference between success and defeat.

In the end, it doesnt matter does it, because i know you are wrong.

There is no truth in the game, only your own truth.

Good luck believing you cant be consistent at forex, thats the most harmful belief you can ever have if you want to be, i dont know, consistent and earn a living from forex.

Your whole ideals contradict themselves, not because they are not well thought out, but because the core ideal that you have been arguing has already been proven false by countless generations of traders whos only job have been trading.

Your myth is that you believe its impossible. IMPOSSIBLE TO BE CONSISTENT. You will probably argue this point, but IT IS WRONG. Why?

Existence proof: there exists consistently profitable traders.

the end. thats all i got

No more philosophy from me, im backing out because we dont agree.

(btw i know what you are doing. you are being sneaky. you are saying that the first step in becoming profitable is to believe you cant be consistently profitable, and the only goal of this statement is to get rid of some other subsidiary beliefs/myths that people have which cause them to fail.)

Actually my point is not that's impossible to be consistent, it is possible, and it is possible to make a living with trading, it is possible to build a huge capital starting from scratch.

My point was just that not everybody can make consistent profits, aka there must be some suckers that pay. (again, the market is soo big that who really cares who's the sucker?)
The important thing is to not be the sucker, it do happen to sucks from time to time, even to the consistently profitable traders, and that was the other point.

A huge post to make a few points, and at the end i see it ended up in big confusion, sorry eheh.

I would say this "consistently profitability" "zero sum game" "professionals vs retail" etc. stuff has been covered enough, no more philosophy.

(yes a powerful enough winning streak can de-stabilize everyone, unconsciously letting belive that no loss can ever been made anymore, and that's the beginning of the end of the "consistency". is important to always be alert, when you belive that you have finally reached the consistency, let your guard down, shit happen).

agreed, i had fun though enough of that though!

I was thinking, seriously, what kind of contribution can be given to the community with this thread.

Well, frankly i don't think there (at least from me) can be any relevant contribution, yes we can continue with "philosophical" discussions about various aspect of trading, then go on with the market itself, the psychology of the trader, and this and that..

But is really something new? Probably not.
The success do not stand within any aspect of trading itself, the success comes only from the ability of the trader to decode, see, the reality itself.
And this ability go far beyond the trading sphere.
Maybe we can describe this ability this understanding of the world around us, as intelligence.

Therefore, i just figured out that no matter what we can write here, any reader will decode the informations and have his/her own personal understandment.

What can we say, i would conclude this experiment with a simple set of advices/realizations that for me make up the success in trading:

1) nobody know if price will go up or down next. (regardless of what indicator / system / analysis is being used)
2) the best way of make consistent profits is buy low and sell high
3) the best way of make consistent losses is buy high and sell low
4) leverage can be your best friend as well as your worst enemy
5) if there is a trend, don't trade against it
6) don't use strict stoplosses, remember the rule n° 1)
7) it's ok to buy more as price go down, and sell more as price go up, keeping in mind to not go against rule n° 5)

That's all, thanks for your time spent here, i hope you all had some fun here.
As for me, it was really a huge pleasure!

Thanks spaceduck

Im going to add one more thing

1. If you believe that the end of a swing can be predicted accurately even before it has begun, then you will start seeing success.

It doesn't matter if it isn't true, all that matters is an unshakeable belief that the market is 100% deterministic, and then you still start seeing more , more, and even more high probability set ups. You will begin to see the heartbeat of the market

Hey, maybe the market can be predicted, no matter what anyone says!

heresy

But your mind needs a firm belief to fixate upon in order to direct it and throw away everything you dont want.

Thinking about the mind and her potentiality, let me put here a youtube video that maybe can be very interesting for some:

Hi spaceduck,

I dont post much nowadays unless something really catches my eye, and i must admit your thread is of interest and if this is you saying your 'goodbyes' then farewell, although would of been pleased to read more about your wisdom/expertise (hopefully you will continue).

Since price direction cannot be predicted with consistent accuracy, then, what else is there to do? follow the market? Or build a system that does not depend on direction to profit? A good trader once told me that any robust system can profit buying into a bear market, and profit selling into a bull market.

Regards.

I'm happy to read your post, you got really the point!

"Since price direction cannot be predicted with consistent accuracy, then, what else is there to do?" >>> This is the 1 million dollar question, it's the "key question" for the continuation of this thread!

"follow the market?" >>> Not really, the very act of "follow" will bring profits only during strong trends, but eat out all the profits as soon as the market start ranging.

"Or build a system that does not depend on direction to profit?" >>> Kind of, we should keep in mind however that the direction of the market is very important in order to maximize the profits and avoid take unnecessary risks. So, we need to keep an eye opened on the market direction, knowing that the market direction itself is always a dynamic variable that can change at any time for any reason.

And this bring us to your last sentence:

"A good trader once told me that any robust system can profit buying into a bear market, and profit selling into a bull market." >>> This is the point of all, since we cannot predict the direction with consistent accuracy, the only way to trade profitably is trade in such a way that the randomness of the market direction will not drastically affect the profits.

The only way to trade in a such way, is by concentrating on the concept of buy low and sell high, but I think at this point in order to go ahead and move on, we may need some practical example, this would mean bring on this thread some charts, of course some current market examples (realtime examples, not charts of the past).

I'm also curious to see if somebody would be able to find out some common rules that would lead to the creation of a system, of course i don't think it's possible, eheh.


Any contribution, idea, opinion, comment, request, whatever is always welcome!

Hi, "building a system that doesn't depend on direction to profit" reminds me of a mean-reverting approach (e.g. place limit buys below price, limit sells above price, take profit on the mean price over a certain period).

In case of a trend there could be a rule in place to close all (counter trend) open positions and resume trading only once the trend is over.

It boils down to the central question: How to distinguish trending from ranging periods (based on mechanical rules/statistics or based on discretion/intuition) so that the profits cumulated during ranges are bigger than the losses of closing the counter trend positions once a trend emerges?

A postulate can be this: Market have always a trend (ranging periods doesnt exist). A Cartesian thought (Descartes)



On a m1 only put a ema 40. If you see a ranging period on m1 go to m5, if you see a ranging period on m5 go to m 15 etc etc...



You will clearly see that there is always a trend... ranging period dont really exist...



Market is always on mouvement.




(A ranging period would be a dead market ______________________________)

I can't agree. A range by definition is the area between 2 different values ...

In theory according to my understanding price should be ranging in the absence of innovations (fundamentally new information that will cause market players to adjust & trade their idea of the "true value" of the pair).

In practice you can clearly observe something related before and during news (pre-announced and breaking) releases: Before the news item is out, price converges to (and cycles around) the "average opinion" level of all active market players.

As the news item is released, there is initial confusion on how to interpret the news (wild fluctuations). Then as the dust settles price is taken to another "average opinion" level (i.e. the opinion of the market players with the deepest pockets), until the next news item is released.

I would consider the time before the news item hits the market as a "ranging period".

Price going from the old "average opinion level" to the new level for me is the new "trend".

Once the new level is reached, price will range again in absence of new information (until the next news release).

Of course there are (at least) 2 problems:
1) How to deal with breaking news events that can happen anytime & cannot be anticipated?
2) How to determine when the new consensus range is reached (i.e. when the new trend stops).

Sure, but this cant be taken alone. What i said before is always true.



This is a "ranging period" in M1: area between 2 different values... EMA 40



The same "ranging period" on M5.. doesnt exist anymore...



Doesnt exist on M15 etc..


There is always a trend. Its just a question of time and the vison we could have with a tool (here MT4).

All range periods does not exist in another time frame. On Mt4 we have only a few period of time (5, 15, 30 etc). but there is a multitude of others.

Hi spaceduck,

Thanks for your interesting reply.

Is this not kinda contradictive? Maybe you could expand more on this?

Ahh, buy low sell high. I can see where your going with this to a certain extent, however, to 'buy low sell high' we need a floor, which in a dynamic non linear market identifying such floor could be random if not unpredictable...?

Say for example Coca Cola. As a retailer i 'know' what is cheap and what is expensive to buy. As a retailer i would need to 'know' and 'have':

1) the resale price the market is willing to pay (say 0.75 cents).
2) the purchase price, which should be cheap relative to a floor (floor being 0 cents per can of course!).

Once i know the real floor, i can gauge profit margins between resale value and purchase value.

buy = 0.35 cents
sell = 0.75 cents
risk = 0.00 cents

That is a true buy low sell high, but, with electronic markets it may differ....?

Regards

Hello,

Of course we need a "floor" in order to be able to buy low and sell high, we need a floor and a roof "level". Of course those floors and roofs are dynamic by their nature, like anything is dynamic in this universe, this mean they do born, make their life, and disappear.
In any given moment in every market there are hundreds of floors and roofs (note: i'm using the words "floors" and "roofs" just in order to explain this concept, we can call them supports and resistances or whatever you like, the word in se is not all that important) that co-exist together, from the ones with an half-life of a few minutes (let's say the ones observables on a tick chart), to the ones with an half-life of years (let's say the ones observable on a monthly chart), etc. etc.

To connect with a previous post, somebody mentioned the "ranges".
Yes when we have a floor and a roof, we can say those are in fact the bottom and top areas of a range, so of course at any given time there are hundreds of ranges that co-exist in every market.

Trend vs range:
Simply put, in order for a range to exist, price have to travel at least once from the support (floor) to the resistance (roof) of such range, or viceversa.
Now, in this act of travelling from an extreme to another, there it happen what we can observe as a "trend", in other words the travelling of price from point A to point B. Point A and B are the extreme points of a given range.
So, in my opinion is not really useful to try to distinguish "trendy from ranging" periods, it's just a matter of point of view, the very same market will be seen both as ranging and as trending from different traders (that presumibly are looking different "timeframes").

When you buy low and sell high, you position yourself before a trend (travel from point A to point B) develop, buy when nobody is even thinking about buy, and in most cases you will take the profits when the crew will start getting "in" the new trend.