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Technical Analysis Fallacy

  • #49,801
  • Sep 4, 2014 9:17am Sep 4, 2014 9:17am
Quoting fti
now that opportunity presents it self we take a look at the crossing issues again. if one was long euros and crossed the euro cables . you would be long euro short cables. what happened to your positions. see where the euro cable market. so remember lesson, ok. NEVER. regards
I'm so sorry to ask this.
I have read this many times over but i am not sure if i understand.
Please let me know if i got this right.
"If one was long euros" - would mean that one is long EURUSD.
But the market is going down now.
"... and crossed the euro cables" - i take this to mean that i am Buying EURGBP.
"you would be long euro short cables" - yes i agree, this would make me long Euro, short Cable and short USD.
EUR GBP is has torn and has moved down. - yes i can see that but i cant understand the significance of what has happened...
but i will nevertheless make a note of this rule of never crossing crosses...
  • #49,802
  • Sep 4, 2014 1:20pm Sep 4, 2014 1:20pm
Quoting appleboy
{quote} I'm so sorry to ask this. I have read this many times over but i am not sure if i understand. Please let me know if i got this right. "If one was long euros" - would mean that one is long EURUSD. But the market is going down now. "... and crossed the euro cables" - i take this to mean that i am Buying EURGBP. "you would be long euro short cables" - yes i agree, this would make me long Euro, short Cable and short USD. EUR GBP is has torn and has moved down. - yes i can see that but i cant understand the significance of what has happened......
You totally disorientated.
see if you understand this.

If you long euro. and losing.
I said never cross out the euro positions as swis mentioned by "hedging" it. Some peeps use term as lock.

If trader decided use cable. cable is GBP/usd.
Then only thing trader can do is sell cable.
which makes a long euro short cable position.
SHORT USD in the euro trade is offsetted by the LONG USD in cable.
so USD is no play is a squared.
so the final risk exposure would be Long EURO/GBP.
the thinking is that if euro continues to drop will be offsetted by GBP gains.
so loss situation is in a lock. and further losses can be avoided.
This thinking is an err.
If you look at euro cable now. you can see why.
Do the arithematic.

why i say never is because in the situation of locking euro/usd position only way is to sell GBP make that cross lock.
if one buys GBP one is crating a double currency long position , not a cross.
Any way if you averaged long currencies by adding another animal into the equation.
As you can see when trend continues you have a doubled loss.

If you shoet GBP/USD you also incure loss as your bleeding is not halted.
this is because euro the weaker component of the lock incures deeper losses than the gains from GBP.
only option a trader has at that juncture is cut loss EURO/USD.
Then free up moneys for selling into euro or GBP.
Is only way out.If trend is perceived to continue.
Crossing it out will incure more margin requirements and if your perception is correct also incures more losses.
even if you are correct.

regards
  • #49,803
  • Edited 10:27pm Sep 4, 2014 3:45pm | Edited 10:27pm
Quoting fti
{quote} You totally disorientated. see if you understand this. If you long euro. and losing. I said never cross out the euro positions as swis mentioned by "hedging" it. Some peeps use term as lock. If trader decided use cable. cable is GBP/usd. Then only thing trader can do is sell cable. which makes a long euro short cable position. SHORT USD in the euro trade is offsetted by the LONG USD in cable. so USD is no play is a squared. so the final risk exposure would be Long EURO/GBP. the thinking is that if euro continues to drop will be offsetted...
Gd Morning Chief, can't sleep, good to have some company so early in the morning.
Thank you for your explanation as above.
I see it much clearer now.

So in essence, EURUSD and GBPUSD both usually move together
in a down market, they should move down together.
so if i am long EURUSD and i am wrong, i must NOT think that i can "hedge" my losses by selling GBPUSD.
Hedging is only for natural risk, Created risk is called speculation and cannot/ must not be hedged.
Any attempt to buy or sell GBPUSD to "hedge" the bleeding EURUSD will result in incurring additional margin requirements as well as creating double losses
moreover, the gains from GBPUSD may not offset the losses for EURUSD
so an additional "animal" to my equation will be bad for my book whichever way the GBPUSD and EURUSD goes
it would make better sense to determine if the Initial position is to be kept, if not, to relieve one's book of the burden, if yes, to initiate rescue MO , god forbid it becomes positional MO.

Much obliged ...

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so perhaps the thing to do is to leave the position to bleed if position is still desirable
and if i want to forage for further foreign capital, to forage from other currencies

all that recent activity is wrecking havoc in my book...
gotta reread the thread and flow with the chaos...
  • #49,804
  • Sep 4, 2014 5:10pm Sep 4, 2014 5:10pm
haven't have a single ounce of guts to long EUR USD yet....so i am still short EUR USD


V
  • #49,805
  • Sep 4, 2014 5:33pm Sep 4, 2014 5:33pm
words cannot express how annoying it is to trade with the fifo'first in, first out' rule -_-
it forces me to remove strategic scout locations in order to scale out profit smoothly from my attacks
this country is ass for traders
dodd-frank act cftc
:'/
what bs
sorry had to go on a rant, it isn't usually a problem since I'm late for moves
but when I'm early, I get handicapped
though, can't wait for U.S. to force stop losses on me on behalf of expert trader politician's opinion:to minimize risk + show accurate picture of p/l & "transparency" for our beloved investors whatever that means...
free market cost my set-up a little money
you face spreads, makes sense
then you face rules, which don't make sense to me.
Can someone explain the free mkt I'm playing with?
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  • #49,806
  • Sep 5, 2014 1:58am Sep 5, 2014 1:58am
Quoting appleboy
{quote} Gd Morning Chief, can't sleep, good to have some company so early in the morning. Thank you for your explanation as above. I see it much clearer now. So in essence, EURUSD and GBPUSD both usually move together in a down market, they should move down together. so if i am long EURUSD and i am wrong, i must NOT think that i can "hedge" my losses by selling GBPUSD. Hedging is only for natural risk, Created risk is called speculation and cannot/ must not be hedged. Any attempt to buy or sell GBPUSD to "hedge" the bleeding EURUSD will result in...
is good that you accept the conclusion .
but problem is i detect you don't understand still.
you haven't looked at it from many perspectives.
there many permutations.

i give you afew to hget you staarted.

what happens to you book.

-- when the trend trending.
--when into retracement phase.
--when in congestion phase.
--when in reversal phase.

these just the general phases.

then the specifics of it in the phases with differing volitility scenarios.

maybe if you accept it, then you can learn from markets what indeed actually happens.
then in differing tenure window plays.
maytake some time.

i know at least you trying to understand.
and i thank you for accepting the advice without understanding the details.

regards
  • #49,807
  • Edited 3:06am Sep 5, 2014 2:22am | Edited 3:06am
Quoting Swis
words cannot express how annoying it is to trade with the fifo'first in, first out' rule -_- it forces me to remove strategic scout locations in order to scale out profit smoothly from my attacks this country is ass for traders dodd-frank act cftc :'/ what bs sorry had to go on a rant, it isn't usually a problem since I'm late for moves but when I'm early, I get handicapped though, can't wait for U.S. to force stop losses on me on behalf of expert trader politician's opinion:to minimize risk + show accurate picture of p/l & "transparency" for our...

eeeer if you book and costing is marked to markets.
It makes no difference.
FIFO is to help peeps not get illusion of their actual situation and positions.
Peeps always have tendency believe that losses not realised is not losses.
mostly unless see bleeding, thinks it ok.

you getting negative in the mind and frastration is creeping in.
try not judge and ask fair.
try find acceptable balance and improve from there, starting with self.

everyone want to dominate freedom, they don't understand freedom.
Thank God none is given infinite time.

was a tiime men could dominate.
but was only limited to their life span.
Now systems dominate, what's the implications.
again only time will tell.

But you may never know, you info database is bias.
any database that has value is owned. What's in public domain is just crab.
so now you know what the masses gets help shape their lifes. seafood?
anything of value in public domain. You just wait, someone will try to own it.

wow , such beauty, i love you.
thats why i gonna lock you up in my castle. give you freedom.
so long as yoou do it my way, you have freedom do as you like.

regards
  • #49,808
  • Sep 5, 2014 3:10am Sep 5, 2014 3:10am
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  • #49,809
  • Edited 5:05am Sep 5, 2014 4:38am | Edited 5:05am
Quoting fti
{quote} eeeer if you book and costing is marked to markets. It makes no difference. FIFO is to help peeps not get illusion of their actual situation and positions. Peeps always have tendency believe that losses not realised is not losses. mostly unless see bleeding, thinks it ok. you getting negative in the mind and frastration is creeping in. try not judge and ask fair. try find acceptable balance and improve from there, starting with self. everyone want to dominate freedom, they don't understand freedom. Thank God none is given infinite time....

I'll try to better find a balance.
I just didn't get why I can't have the early troops ride a wave nicely while managing sizes on what I feel for best on others.
I like the little leverage the scouts provide, so removing them forcefully always hurts :'(
There way or the highway

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  • #49,810
  • Sep 5, 2014 5:25am Sep 5, 2014 5:25am
Quoting Swis
{quote} I'll try to better find a balance. I just didn't get why I can't have the early troops ride a wave nicely while managing sizes on what I feel for best on others. I like the little leverage the scouts provide, so removing them forcefully always hurts :'( There way or the highway https://www.youtube.com/watch?v=dCCkDQ6gbg4

hello frens, how are your doing? i am back and have a little time to spend here and would like to highlight fti's point of: "It makes no difference"

try simulate the following & calculate the net P&L (both realized & unrealized) for (1) FIFO and (2) your preferrrd way: long 1 at $1 followed by long 1 at $2, TP 1 at $3

then you may see that its a psychological issue.

FIFO:

Buy 1 at $1 - lets call this position A (net P&L = $0)
Buy 1 at $2 - this position B (unrealized P&L = $1, net P&L = $1)
Sell 1 at $3 - so position A will be squared according to FIFO (unrealized P&L = $1 from position B which is marked to mkt; realized P&L = $2 from position A, net P&L = $3)


your preferred way:

Sell position B at $3 (realized P&L = $1; unrealized = $2 marked to mkt; net P&L = $3)

now what happens when mkt retraced back to $0.50 after selling the position in both FIFO and your preffered way? see that there i no difference in net P&L?

so why FIFO? imagine the following case using your preffered way:

Buy 1 at $100 - position A
Buy 1 at $50 - position B
Sell position B at $75 (realized P&L = $25, unrealized P&L = -25, net P&L = 0)

now all is good if position A is correctly marked to mkt, but... some guy will always get creative to hide the loss... such as.. plugging in some numbers to value position A by citing illiquid mkt; using price transacted from mars or hiding the position in some backroom accounts. if one can choose which position to TP, one will always choose the one in profits, isnt it? then how abt the one in loss? hide it? human nature... mindset

i am pretty sure fti knows and have seen some of these things happening.. do correct me as it suits
THE ALL is MIND; The Universe is Mental
  • #49,811
  • Sep 5, 2014 5:37am Sep 5, 2014 5:37am
Quoting Jacque
{quote} hello frens, how are your doing? i am back and have a little time to spend here and would like to highlight fti's point of: "It makes no difference" try simulate the following & calculate the net P&L (both realized & unrealized) for (1) FIFO and (2) your preferrrd way: long 1 at $1 followed by long 1 at $2, TP 1 at $3 then you may see that its a psychological issue. FIFO: Buy 1 at $1 - lets call this position A (net P&L = $0) Buy 1 at $2 - this position B (unrealized P&L = $1, net P&L = $1) Sell 1 at $3 - so position A will be squared according...
Thanks Jacque!
I was starting to wonder if it was all psychological leverage. I just enjoyed seeing it there. I only try best manage most natural. I've recently implemented scaling out smoothly due to broken bone experiences, so then I ran across the issue and yeah. But thanks for that!I can now understand. I will try to run the maths on my position later to check and see the scenario and my understanding.
  • #49,812
  • Edited 6:34am Sep 5, 2014 6:17am | Edited 6:34am
Quoting fti
{quote} no right way wrong way, just rub lightly until hot. just don't rub against arteries flow. unless want get bruses.(near skin all arteries and for leg it flows down hor) if you know how open mak door of knee double effective, but is very painful stuff better you no simply open. open wrong door. ai yo rub knee outer and inner joint la, rub thighs for what? ai yo i get it. no tiing pls, that impeeds blood circulation la. just get knee pad keep knee warm la. regards oh by the way when no pain, is time rub zheng kut shui regularly for...
hey fti, thanks, can you please elaborate a bit on the effect of the zheng kut shui ? will it have clash with other chinese medicne?

Quote
Thanks Jacque!
I was starting to wonder if it was all psychological leverage. I just enjoyed seeing it there. I only try best manage most natural. I've recently implemented scaling out smoothly due to broken bone experiences, so then I ran across the issue and yeah. But thanks for that!I can now understand. I will try to run the maths on my position later to check and see the scenario and my understanding.

no prob, hope you caught some pips on the ecb thingy & the US payroll data just now
THE ALL is MIND; The Universe is Mental
  • #49,813
  • Sep 5, 2014 6:48am Sep 5, 2014 6:48am
Quoting fti
{quote} eeeer if you book and costing is marked to markets. It makes no difference. FIFO is to help peeps not get illusion of their actual situation and positions. Peeps always have tendency believe that losses not realised is not losses. mostly unless see bleeding, thinks it ok. you getting negative in the mind and frastration is creeping in. try not judge and ask fair. try find acceptable balance and improve from there, starting with self. everyone want to dominate freedom, they don't understand freedom. Thank God none is given infinite...
I can dance to the flow of Your lingo chief! well said.
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Dedication brings Satisfaction and Success.
  • #49,814
  • Edited Sep 6, 2014 1:02am Sep 5, 2014 8:43am | Edited Sep 6, 2014 1:02am
Quoting fti
{quote} is good that you accept the conclusion . but problem is i detect you don't understand still. you haven't looked at it from many perspectives. there many permutations. i give you afew to hget you staarted. what happens to you book. -- when the trend trending. --when into retracement phase. --when in congestion phase. --when in reversal phase. these just the general phases. then the specifics of it in the phases with differing volitility scenarios. maybe if you accept it, then you can learn from markets what indeed actually happens. then...

Many things i have to accept first as truth from your experience before i allow my subconscious mind to work overtime in the background to decipher what it really means.

On the Crossing issue, please let me try to crystallize my thoughts again, perhaps if i were to write it out i would be able to gain a better understanding.
Hopefully i do not mislead my friends here.

Assume we are looking at the market state over the past few weeks, looking only at EURUSD, which has been dropping like a fly.

Assuming that i was long on the EURUSD,
Thus my EURUSD campaign would be in the red.
The options avail to me would be to read the current market relationships and opine if the position has merit enough to be kept.
If the position should not be saved, i am to cut the loss.
No other subjective thoughts should come into my mind.
If the position should be saved, i will begin Recovery protocol ie. Rescue MO. in the same pair.
Recovery protocol / Recovery MO would strictly entail the appropriate skews , taking into consideration capitalization, leverage , foreign capital , amongst other things to bring the book back to flat.

Recovery protocol cannot involve the selling and buying of a pair that correlates with EURUSD in an attempt to stem the bleeding.
EURUSD and GBPUSD usually move together.
Although the only way to "Lock" the long EURUSD position is to sell (a similar amount) into GBPUSD. ie. final position would be long EUR and short GBP , hence long EURGBP.
But both selling or buying the GBPUSD will not stop the bleeding and would subject the book to more stress.

OPTION OF SELLING INTO THE GBPUSD
Selling into the GBPUSD (in essence, creating a EURGBP cross) with the intention to "lock" or "hedge" the loss will not stop bleeding to the book because
1. there is no such thing as a hedge of a speculative risk position
2. additional margin is required to sell GBPUSD which would have been better used to rescue or turn on EURUSD
3. EURUSD being more in the red, is the "weaker" pair of the lock here and will incur greater losses than gains from GBPUSD

If after selling into GBPUSD, the market ...
a) continues to trend down, EURUSD would continue to bleed and GBPUSD profit would be insignificant.
b) retraces in a down trend, you would have a bleeding EURUSD and a bleeding GBPUSD
c) consolidates sideways, you would have a bleeding EURUSD and a GBPUSD P&L that is bouncing about like skittles on a loudspeaker
d) reverses , you would be in deeper crap as now BOTH your EURUSD and GBPUSD are bleeding.

OPTION OF BUYING INTO THE GBPUSD
If you decide to Buy into the GBPUSD, you would not be creating a cross, but would be creating a double currency long position.

If after buying into the GBPUSD, the market ...
a) continues to trend down, both EURUSD and GBPUSD would be bleeding massively ! double losses !
b) retraces in a downtrend, EURUSD would be bleeding, GBPUSD might be in profit for a while before turning red again
c) consolidates sideways, EURUSD would still be bleeding, GBPUSD might bounce between profit and loss
d) reverses , EURUSD would be recovering from a loss, GBPUSD will be slowly collecting pips.

How it plays out will be determined by the volatility scenario
but what is clear is that there will be much additional stress on the book

Thus the best option a trader has at that juncture is cut loss in the EUR/USD.
Then free up the money for selling into EURUSD or GBPUSD individually, and NEVER try to "hedge" via other majors to create "cross" creatures.

Would the above be mildly close to what you have in mind, sifu fti ?
So sorry to type to much....
Do correct if suits...

Much obliged ...
  • #49,815
  • Sep 5, 2014 8:48am Sep 5, 2014 8:48am
Quoting Phatori Gal
{quote} I can dance to the flow of Your lingo chief! well said. https://www.youtube.com/watch?v=baU1YgYeb7M
nice.
Have some indications ChebJia will be doing part 2 of 淡淡幽情 that was not finished.
I sitting waiting.

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regards
  • #49,816
  • Sep 6, 2014 9:55am Sep 6, 2014 9:55am
Quoting fti
{quote} ??? They murder you with volitility spreads and you cannot see? http://www.youtube.com/watch?v=X403uwWbyzo regards
hi fti,

actually, thinking it through for a longer time, doesn't that mean that i can sell the call and buy the put, and create a riskless bull spread?
i mean since the call cost 600 and the put cost 200 i can sell the call, buy the put and buy spot, and create a synthetic bull call spread, that collects premium, on top of being speculative and has a good chance to either make no money, but never loses money or collect premium and also make a speculative gain if the markets move upwards, all i need to factor in is the commissions, and cost of carry for the entire period, to do a var calculation.
  • #49,817
  • Sep 7, 2014 1:06am Sep 7, 2014 1:06am
Quoting CookieMonsta
{quote} hi fti, actually, thinking it through for a longer time, doesn't that mean that i can sell the call and buy the put, and create a riskless bull spread? i mean since the call cost 600 and the put cost 200 i can sell the call, buy the put and buy spot, and create a synthetic bull call spread, that collects premium, on top of being speculative and has a good chance to either make no money, but never loses money or collect premium and also make a speculative gain if the markets move upwards, all i need to factor in is the commissions, and cost...
Thank you for your insistance to discuss the long sword.
I already said, this does nothing for retail.
But has big impact on commercial/ institutionalised dealers.
and i already sid i will not train institution dealers for free on my retail thread.

You are of course free to discuss this anywhere you like.
But i don't think many wll tell you.
The knowledge is institutional and proprietery.
I will not break bond.
take care.

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regards
  • #49,818
  • Sep 7, 2014 4:47am Sep 7, 2014 4:47am
Quoting fti
{quote} Thank you for your insistance to discuss the long sword. I already said, this does nothing for retail. But has big impact on commercial/ institutionalised dealers. and i already sid i will not train institution dealers for free on my retail thread. You are of course free to discuss this anywhere you like. But i don't think many wll tell you. The knowledge is institutional and proprietery. I will not break bond. take care. http://www.youtube.com/watch?v=GH-KEDG-tbM https://www.youtube.com/watch?v=NP6vkt9tKR8 http://www.youtube.com/watch?v=l90PbgRpVmM...
hi fti,

don't get me wrong that I'm trying to get you to break your bond, I'm just iterating my thinking process of what the prospects which the quotes offer me, maybe i should not be so quick to judge the apparent bad situation, maybe a 2nd revision is due and can help me gain a deeper understanding into what that situation actually is.

I'm just trying to discover what i can do and how far i can go with this on my own, there is still so much unknown knowledge for me to explore and become better, and i find joy in this pursuit.

currently i think i should be able to create a modified mo using the zero cost collar, and dividends/interest/positive carry, and some other method to make it difficult to lose money in the markets, or at least skew the risk reward ratio, and the probability of success, to be in my favour.

the idea is kind of to already skew the probabilities to my side before the battle has even begun, and then all there is left to do is to win the battle, because i will have factored in all risk which i can think of.

however all in all, thank you for the thought provoking discussions, as these really made me think harder and discover something new.
  • #49,819
  • Sep 7, 2014 7:03am Sep 7, 2014 7:03am
Quoting CookieMonsta
{quote} hi fti, don't get me wrong that I'm trying to get you to break your bond, I'm just iterating my thinking process of what the prospects which the quotes offer me, maybe i should not be so quick to judge the apparent bad situation, maybe a 2nd revision is due and can help me gain a deeper understanding into what that situation actually is. I'm just trying to discover what i can do and how far i can go with this on my own, there is still so much unknown knowledge for me to explore and become better, and i find joy in this pursuit. currently...
Understood, my friend.
Yo are not totally in wrong direction.
But i just want to explain why there will not be much inpt from me on that aspects of trade.
I hope you will understand.

i tip help you off, look carefully at the greeks, and you need build very nice clear model see the shifts.
Good hunting. enjoy.

regards

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  • #49,820
  • Sep 7, 2014 7:21am Sep 7, 2014 7:21am
Quoting fti
{quote} Understood, my friend. Yo are not totally in wrong direction. But i just want to explain why there will not be much inpt from me on that aspects of trade. I hope you will understand. i tip help you off, look carefully at the greeks, and you need build very nice clear model see the shifts. Good hunting. enjoy. regards http://www.youtube.com/watch?v=gVMqE9LUfn0 http://www.youtube.com/watch?v=OpgBuDvU9gw
hi fti,

thanks for the tip

no probs there, i understand where you are coming from about the info.

the joy in the journey really is when one walks and experiences lots and discover one's true ability, isn't it?
partially why i like studying outside of school, its a blank paper, i draw anything as my creativity leads me to, then demo it, then use it on small monies, then put more monies in.
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