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We were fools to believe candlesticks can predict

  • #21
  • Edited 4:37pm Oct 21, 2013 3:58pm | Edited 4:37pm
I'm not laughing


[highlight=rgba(255, 255, 255, 0)]One of the best pieces of advice I ever received from a fellow trader was this;[/highlight]


[highlight=rgba(255, 255, 255, 0)]Start by lowering your expectations to a win rate of 50%. At 50% immediately you are forced to do a few things;[/highlight]

[highlight=rgba(255, 255, 255, 0)]Your Trades:[/highlight]
[highlight=rgba(255, 255, 255, 0)]- let winners run [/highlight]
[highlight=rgba(255, 255, 255, 0)]- cut losses short[/highlight]
[highlight=rgba(255, 255, 255, 0)]- put s/l in a place that gives your trade the best possible chance[/highlight]
[highlight=rgba(255, 255, 255, 0)]- look for good r:r[/highlight]
[highlight=rgba(255, 255, 255, 0)]- be selective with your trades
[/highlight]

[highlight=rgba(255, 255, 255, 0)]Your Mindset:
[/highlight]
[highlight=rgba(255, 255, 255, 0)]- accepting that chance of loss is high, and planning for it
[/highlight]
[highlight=rgba(255, 255, 255, 0)]- accepting as per your thread title that "knowing" is a fools game
[/highlight]
[highlight=rgba(255, 255, 255, 0)]- realizing that you don't need to "know" where the market is going next to win
[/highlight]
[highlight=rgba(255, 255, 255, 0)]- no longer a victim of false expectations and heart ache[/highlight]

[highlight=rgba(255, 255, 255, 0)]You might say "well what is my edge if I only need 50% wins, why not flip a coin?"[/highlight]

[highlight=rgba(255, 255, 255, 0)]Your "edge" whether that be candlesticks or fundamentals or sentiment trading or whatever it may be, will hopefully be able to beat the spread in the long run and hit out enough returns that exceed your risk (r:r) of at least 1:1.5. That is all you need to slowly win, compound and yes make lots of money.[/highlight]
Howlin' at the Moon on the Roof
  • #22
  • Oct 21, 2013 4:19pm Oct 21, 2013 4:19pm
Mark Douglas (Trading in the Zone, The Disciplined Trader etc ) puts it well re his 5 fundamental truths of trading;


1. Anything can happen.

2. You don’t need to know what is going to happen next in order to make money.

3. You need an edge.

4. There is a random distribution between wins and losses for any given set of variables that define an edge.

5. Every moment in the market is unique.





ex member
  • #23
  • Oct 21, 2013 4:22pm Oct 21, 2013 4:22pm
Quoting bbmac
Candlesticks or indeed any price -versus- time charting reflect the change in price over a given time and as such they reflect the net market action over that time. Their repeating 'patterns' can undoubtedly be used to obtain an edge in the market but do not involve prediction.
Your eyes are playing tricks on you friend as the patterns never repeat... no two moments are ever the same and this is why your "edge" either doesn't exist or is rendered inefficient by the market shortly after you discover it. This idealistic notion that using "crowd psychology", one can somehow predict the outcome of when consumer A wants to buy from producer B is not logical. You are simply underestimating the sheer size of the game you're playing.
  • #24
  • Oct 21, 2013 4:24pm Oct 21, 2013 4:24pm
Quoting bbmac
Mark Douglas (Trading in the Zone, The Disciplined Trader etc ) puts it well re his 5 fundamental truths of trading; 1. Anything can happen. 2. You don’t need to know what is going to happen next in order to make money. 3. You need an edge. 4. There is a random distribution between wins and losses for any given set of variables that define an edge. 5. Every moment in the market is unique.
Here is something you should read.

Pasted from: http://www.forexfactory.com/showthre...81#post7027181
Be careful with the message in this book, I've read it myself a few times over the years and also watched his workshop How To Think Like a Professional Trader (http://markdouglas.com/workshops.html) where he explains his ideas clearer than the book in my opinion. The approach he explains makes perfect sense, it's all very logical and without question will make you a more disciplined traded BUT it does not guarantee the method you are using which underlies your strategy will make you money. Some of the concepts like trade in a series of trades, focus on the average and work on probabilities are great but unless the method you are applying these rules of execution to, actually has an edge.. you're just being a more efficient net loser (I speak from personal experience).

At one point I strongly advocated the Mark Douglas material as he appears to be a decent guy offering sensible advice in the world of sharks and scams but as a result of a better grasp on the subject and personal experience... I'm now of the belief that the material alone will not improve your chances of making money and could instead cause you to blindly persist in a disciplined process of losing money not accepting defeat. This could appear blasphemous to his supporters and I can respect that, I would have had a similar reaction prior to reaching this conclusion. Before you jump to his defence, it's worth considering how successful he has been himself as a trader. You'd assume as the empirical evidence of his own methods, he should have been reasonably successful as a trader but this does not seem to be the case as for most of his career he has either been a losing trader or a trading coach and he explains this clearly in his book.

(from Preface, Trading in the Zone)

1978, started trading, unsuccessful
1981, got a job as broker for Merrill at CBOT, "within 9 months, lost nearly everything I owned"
1982, started working on his first book "The Disciplined Trader..."
1983, left Merrill to start a consulting firm, "where I presently develop and conduct seminars on trading psychology...act in the capacity of trading coach", "as of this writing I have spent the last 17 years discussing the psychological dynamics behind trading."
2000, Trading in the Zone published

Mark Douglas is a writer, perhaps a trading psychologist or coach, but... I see no evidence of him being a successful trader.
  • #25
  • Oct 21, 2013 4:36pm Oct 21, 2013 4:36pm
Patterns do repeat (howsoever you define them or identify them) - it's what they are called patterns...they repeat in all aspects of life; nature, mathematics etc, and indeed on charts...I have been using the same 'patterns' and by that I mean repeating set-ups, for 8 years. I agree that there is a very high chance to an almost certainty that each moment in the market is unique, comprised of different buyers and sellers for different reasons than last time the 'pattern' developed, but the resulting repeating actions do repeat and these can be graphically observed and identified. I am not talking about prediction - that is bumkum....I am talking about gaining an edge from such as explained above - which is entirely different from prediction. When I act at one of my repeating set-ups developing by entering the market I have no idea whether on that occasion it will result in a successful outcome or not. But I do know that over x trade samples based on historical (to that point in time) large sample empirical results - I will achieve a net gain by doing so until the edge stops working for whatsoever reasons. So long as your edge is based on the underlying principles of price movement (that of the supply of and demand for any given asset class/instrument) and assuming this does not change, then your edge should remain useful.

Quoting TranceTrader
{quote} Your eyes are playing tricks on you friend as the patterns never repeat... no two moments are ever the same and this is why your "edge" either doesn't exist or is rendered inefficient by the market shortly after you discover it. This idealistic notion that using "crowd psychology", one can somehow predict the outcome of when consumer a wants to buy from producer b is not logical. You are simply underestimating the sheer size of the game you're playing.
ex member
  • #26
  • Oct 21, 2013 4:41pm Oct 21, 2013 4:41pm
I entirely agree with your conclusions re Mark Douglas - but his probable inability (or otherwise - we don't know for sure) to make money from trading is of no consequence to his central messages which are sound. Indeed if that is the case it may be because of the point you describe in your 2nd main point in your post above- ie that one needs a proven edge in the first place...and this too I entirely concur with.

Quoting TranceTrader
{quote} Here is something you should read. Pasted from: http://www.forexfactory.com/showthre...81#post7027181 Be careful with the message in this book, I've read it myself a few times over the years and also watched his workshop How To Think Like a Professional Trader (http://markdouglas.com/workshops.html) where he explains his ideas clearer than the book in my opinion. The approach he explains makes perfect sense, it's all very logical and without question will make you a more disciplined traded BUT it does not...
ex member
  • #27
  • Oct 21, 2013 5:00pm Oct 21, 2013 5:00pm
Quoting Jhig
Some of us have been giggling for awhile now. Rule No 1: You can never predict the future of market movements. NEVER! The only thing that any trader can do is give a *educated guess* on the future of direction/price.
You mean direction. Market movements do have high percentage certainties how ever the the direction is in question.
  • #28
  • Oct 22, 2013 12:46am Oct 22, 2013 12:46am
Quoting bbmac
Candlesticks or indeed any price -versus- time charting reflect the change in price over a given time and as such they reflect the net market action over that time. Their repeating 'patterns' can undoubtedly be used to obtain an edge in the market but do not involve prediction. A Trading Edge is simply a repeating circumstance or set of circumstances that suggests there exists a greater probability of price moving one way over the other (for howsoever long,) based on the historical precedent of such to that point in time. Additionally...
The repeating pattern is random ....
  • #29
  • Oct 22, 2013 1:17am Oct 22, 2013 1:17am
Quoting pemully
we practiced witchcraft,believing that candle bars would predict the future.We will be studied and laughed at,by future generations.We were traders.
Did someone get burned?

Do people really believe that you can make a fortune by looking at horizontal/squiggly lines and memorizing silly patterns. You can probably train a chimpanzee to do all of that. It doesn't really take much intelligence to trade "price action". If everybody is willing and capable of comprehending it, how much of an edge do you think you have?
  • #30
  • Oct 22, 2013 1:18am Oct 22, 2013 1:18am
patterns do repeat but they might work , managing failures and successes in a way that you get more $ in these entries is a possible edge.
  • #31
  • Oct 22, 2013 1:48am Oct 22, 2013 1:48am
Quoting chucklots
I think it's more like... Rule #1: You must be able to forecast/predict market movements if you plan to make any money in trading. I think an *educated guess* is a prediction.
Absolutely. Were the price entirely random all the time, there would be no money to be made through trading, because trading always implies prediction to some extent. Were it true, money could only be made by luck, and that being the case, trading being a meaningless word should be properly called gambling.

Prices are random most of time, but not all the time. There are windows of time where sufficient variables necessary to make a fair prediction of price movement become known. These windows of opportunity are what we as traders try to identify and take advantage of to make money.
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #32
  • Oct 22, 2013 1:51am Oct 22, 2013 1:51am
Quoting bbmac
I entirely agree with your conclusions re Mark Douglas - but his probable inability (or otherwise - we don't know for sure) to make money from trading is of no consequence to his central messages which are sound. Indeed if that is the case it may be because of the point you describe in your 2nd main point in your post above- ie that one needs a proven edge in the first place...and this too I entirely concur with. {quote}
I agree with all your posts on this thread. TranceTrader is a self-admitted failed trader and now he is here spreading his negative outlook around, because he thinks since he cant do it, no one else can.
  • #33
  • Oct 22, 2013 1:54am Oct 22, 2013 1:54am
Quoting XharpScalper
managing failures and successes in a way that you get more $ in these entries is a possible edge
Golden (Y)
So sorry for always replying late! But I got 2 Jobs!!
  • #34
  • Oct 22, 2013 2:41am Oct 22, 2013 2:41am
i think it is a kind of reverse psychology,
you think of something, then you think that something is wrong, and then you think that something wrong with your thinking
so you ignore the thing, but then something happens and you can't ignore it
now you're in schrodinger quantum paradox.
while you 're loosing, you can feel how it might be if you win
  • #35
  • Oct 22, 2013 2:49am Oct 22, 2013 2:49am
thanks...it's all a lot clearer now (!)

Quoting Gwan
i think it is a kind of reverse psychology, you think of something, then you think that something is wrong, and then you think that something wrong with your thinking so you ignore the thing, but then something happens and you can't ignore it now you're in schrodinger quantum paradox. while you 're loosing, you can feel how it might be if you win
ex member
  • #36
  • Edited 3:37am Oct 22, 2013 3:25am | Edited 3:37am
Quoting genie
{quote} I agree with all your posts on this thread. TranceTrader is a self-admitted failed trader and now he is here spreading his negative outlook around, because he thinks since he cant do it, no one else can.
Quite the contrary, I'm trying to save people from being blind-sided by convincing yet unsubstantial pursuits. I don't expect people to like what I am saying, this is generally what happens when someone starts to question conventional wisdom. The fact that you're resorting to unfounded personal attacks without knowing me suggests that my comments directly relate to something you've experienced yourself.
  • #37
  • Edited 4:31am Oct 22, 2013 4:20am | Edited 4:31am
Undoubtedly the thread starter's inherent suggestion in his post was that no edge could be found in price action ..and to this extent he/she is wrong, although it may be deduced from his/her post that he/she has found no edge himself thus far using candlestick analysis. Your responses to this thread too were based on the same underlying preposition re TA in general...which again is wrong. Your later more considered responses to the thread are however getting to the nub of the issue, - ie that there are many requisites to being a long term consistently profitable trader;

1. Accepting that you cannot predict
2. Accepting that you need an edge and accepting what an edge is and is not

then,

3. Having/acquiring a proven edge based on large sample empirical evidence
4. Knowing all you need to know about the edge - it's key typical - maximum performance metrics so that you can optimise your money and risk management to it and that that suits your own tolerance for risk etc.
5. Learning to have the required psychological skills to trade that edge with impunity on the instrument / time frame/market conditions that the edge has been proven to exist upon

Quite simply, most who start will never get past point 1, and if they do; the gap between stage 3 and 4 may be lengthy, [ to say nothing of point 5 which may well / almost certainly will be the lengthiest of all - ie years,] and most aren't prepared to / can't devote that amount of time for this - and if they can't - probably for purely mercantile reasons.

Quoting TranceTrader
{quote} Quite the contrary, I'm trying to save people from being blind-sided by convincing yet unsubstantial pursuits. I don't expect people to like what I am saying, this is generally what happens when someone starts to question conventional wisdom. The fact that you're resorting to unfounded personal attacks without knowing me suggests that my comments directly relate to something you've experienced yourself.
ex member
  • #38
  • Oct 22, 2013 5:59am Oct 22, 2013 5:59am
Quoting vox dei
{quote} Absolutely. Were the price entirely random all the time, there would be no money to be made through trading, because trading always implies prediction to some extent. Were it true, money could only be made by luck, and that being the case, trading being a meaningless word should be properly called gambling. Prices are random most of time, but not all the time. There are windows of time where sufficient variables necessary to make a fair prediction of price movement become known. These windows of opportunity are what we as traders try to...
Yes, precisely. When one buys/sells they are directly making the prediction that price will move in their direction. This is a simple fact to me. Some do not like this term I guess, and I have read many say "you don't have to predict, just follow" or "you don't have to predict" which is just simply wrong. One has to have an edge whether that be information, stats, knowledge, intuition, some skill they have that helps them determine this. If markets were truly random or 100% efficient it would be a waste of time and dare I say... gambling.

It's like forecasting weather, it's not 100%. They see situations they have seen many times... they could be wrong but they have something that tells them that these conditions warrant this happening with a certain percentage. Or when you watch a movie or read a book you can sometimes predict what may happen because you have seen this before, or situations like it, they pick up on the foreshadowing. This is akin to how some say in "the markets tipped its hand". That's why I think one has to have many years in markets to hone these skills. After that is it a matter of money management, and psychology to trade the plan.

Maybe these analogies are off because after all, it is a different thing we are talking about here, but I will stick with my first paragraph as being true fact lol.
  • #39
  • Oct 22, 2013 6:32am Oct 22, 2013 6:32am
lol @ the moderator who had to change the thread title..

Quoting pemully
we practiced witchcraft,believing that candle bars would predict the future.We will be studied and laughed at,by future generations.We were traders.
how will future generations trade? they certainly won't come up with something original will they?? i mean after all this discussion, rehashing, deconstructing, and recreating of ideas and methods going on here.. beating a dead horse with a candlestick

as for predicting, I can only tell that it's raining when it starts to rain. a weather man on the other hand, maybe he's right just 1 out of 3 days, but then he's the one that gets to report the weather.

my advice.. just don't rain dance?
  • #40
  • Oct 22, 2013 6:40am Oct 22, 2013 6:40am
Quoting chucklots
{quote} Yes, precisely. When one buys/sells they are directly making the prediction that price will move in their direction.
Or that price has moved the other way and they must buy/sell to exit a trade thus pushing price in the opposing direction. I feel its easier to predict where a group of traders will place their stops, and I need order feeds to hear about large traders entering the market.

Candles, patterns, all aftermath of buying and selling. If we can find an area others must trade, we can take advantage and trade with (or against) them depending on whats going on with that pair, positive sentiment or negative which would be the difference between a buy or sell.
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