Touche Sis :-)
What many traders fail to realise is the unfathomable complexity in trading decisons made by market participants that ultimately is manifested in a buy/sell decision. Only a small percentage of those market participants are speculators like us retail traders.
If you can accept this complexity, then this market is not so hard to understand, and you do not need to step into scientific woo land to attempt to understand it. Order from disorder is a central pillar to the laws of classical physics and chemistry. It's how any large classical and complex system works such as our weather, steam engines and our financial markets.
Without perfect information on the mechanics of all the constituents of a closed system (such as this market) we simply cannot predict the exact nature of the outcome but using the Law of Large Numbers we certainly can predict (using probabilities) the average outcome of the entire system in very broad ways such as that price will rise, track sideways or fall. That's about all the reliable information we can extract from this market but this is enough to give the required edge to tip the results in your favour. For example, if we heat a hot air balloon, we cannot determine the exact mechanics of all the gas molecules but we can determine with confidence that the average result of increased molecular activity will cause the walls of the ballon to expand with a little bit more force and we can describe this movement by the gas laws.
The key to trading successfully in my opinion is to hone in on this principle of complex classical systems and find your edge by simply looking at the principle that price is inherently random in nature however within that randomness, there is a kernel of collective behaviour creating a bias (or in your terms 'Frequency Stability') that leads to periods of sustainable trending. Once you have the edge, you can then work out ways to magnify the result through diversification and leverage itself.
Some of the key things to remember with this market is that all participants do not have equal position sizes or agendas. If they did, then random walk would rule. Market behaviour associated with human beings and decision making (eg. price flexibility) plus dis-proportionate position sizes leads to bias or directional price movement. For example an institution has the task of unloading it's entire holding of a single instrument for hedging purposes. This committed and continued emphasis (sustained and coordinated action) and price tolerance against the swarm of traders taking counter positions each with a different agenda and trading timeframe amplifies price action towards a directed thrust until the process subsides. This is what creates directional price movement. This process continued at regular intervals creates trends whether they be sideways or up and down.
Really loving your thread Sis.......it is a breath of fresh air :-)
PS Sis... I can sense the relativist in you with your previous post and you are quite correct IMO. The only problem I am facing however is that in my approach the stats are clearly demonstrating that for a trend follower like me, trading in the direction of the primary trend (the longest available timeframe) no matter what timeframe you are working from appears to outperform counter-trend trades against that primary trend direction. Still early days however and I will be prepared to eat my hat...but that is clearly what my stats are showing so far across 24 instruments. But then again I do not trade with a profit target that might substantially affect the result for other techniques. What I put this down to is the 'anecdotal' notion that it is economic drivers that create the bias (or levy flight) in the long term such as central bank interventions, national productivity improvements etc.....etc which leads to sustained primary trend movements.
What many traders fail to realise is the unfathomable complexity in trading decisons made by market participants that ultimately is manifested in a buy/sell decision. Only a small percentage of those market participants are speculators like us retail traders.
If you can accept this complexity, then this market is not so hard to understand, and you do not need to step into scientific woo land to attempt to understand it. Order from disorder is a central pillar to the laws of classical physics and chemistry. It's how any large classical and complex system works such as our weather, steam engines and our financial markets.
Without perfect information on the mechanics of all the constituents of a closed system (such as this market) we simply cannot predict the exact nature of the outcome but using the Law of Large Numbers we certainly can predict (using probabilities) the average outcome of the entire system in very broad ways such as that price will rise, track sideways or fall. That's about all the reliable information we can extract from this market but this is enough to give the required edge to tip the results in your favour. For example, if we heat a hot air balloon, we cannot determine the exact mechanics of all the gas molecules but we can determine with confidence that the average result of increased molecular activity will cause the walls of the ballon to expand with a little bit more force and we can describe this movement by the gas laws.
The key to trading successfully in my opinion is to hone in on this principle of complex classical systems and find your edge by simply looking at the principle that price is inherently random in nature however within that randomness, there is a kernel of collective behaviour creating a bias (or in your terms 'Frequency Stability') that leads to periods of sustainable trending. Once you have the edge, you can then work out ways to magnify the result through diversification and leverage itself.
Some of the key things to remember with this market is that all participants do not have equal position sizes or agendas. If they did, then random walk would rule. Market behaviour associated with human beings and decision making (eg. price flexibility) plus dis-proportionate position sizes leads to bias or directional price movement. For example an institution has the task of unloading it's entire holding of a single instrument for hedging purposes. This committed and continued emphasis (sustained and coordinated action) and price tolerance against the swarm of traders taking counter positions each with a different agenda and trading timeframe amplifies price action towards a directed thrust until the process subsides. This is what creates directional price movement. This process continued at regular intervals creates trends whether they be sideways or up and down.
Really loving your thread Sis.......it is a breath of fresh air :-)
PS Sis... I can sense the relativist in you with your previous post and you are quite correct IMO. The only problem I am facing however is that in my approach the stats are clearly demonstrating that for a trend follower like me, trading in the direction of the primary trend (the longest available timeframe) no matter what timeframe you are working from appears to outperform counter-trend trades against that primary trend direction. Still early days however and I will be prepared to eat my hat...but that is clearly what my stats are showing so far across 24 instruments. But then again I do not trade with a profit target that might substantially affect the result for other techniques. What I put this down to is the 'anecdotal' notion that it is economic drivers that create the bias (or levy flight) in the long term such as central bank interventions, national productivity improvements etc.....etc which leads to sustained primary trend movements.
