Technical Analysis alone will not give you an edge

See, this is what I'll never understand. What exactly do you mean by a "selected chart"? Pick any chart, any pair, any time frame and show me where price didn't respect round numbers FAR more often than not. When doing so, understand that the "exact" round number is more the center of the area and price WILL often bounce a bit above or below them on the smaller TF's often giving us the wicks on the larger ones.

I post charts on my thread all the time where the levels I've picked in advance are respected. I get really tired of folks claiming they are "cherry picked" charts. I'm not posting them to prove anything to anybody. I post what I see and I trade what I see. My journal is just that. "My" journal. I have no agenda to convince or instruct anyone.

Spend a weekend (or hundreds of them) looking back over any chart. I think you'll find your answer doing that far easier than trying to prove or disprove the infinite number of "theories" here.

Anyway, good luck.

all numbers are not equal its very simple

Anticipating the actions of the crowd. THIS is the most robust strategy. The pro traders always try to stay on top, in the present moment, and think and project ideas one( or a few) steps ahead so they can react in advance to the common human reflexes. (fear, greed, and expectations.)
Given different specific situations, and conditions you can expect the crowd to react in a certain way. Market participants will either follow trends, or react to fundamental information. When the majority accumulates positions on the wrong direction, the market will run away from them( simple cause and effect)
Also most people tend to underreact to good news, and over react to bad news creating temporary panic which often can lead to micro crash. These things happen almost every day.
For example market breaks up out of a range, the crowd buys, market reverses, makes new low, and hits the stops.....
Or bad news comes out, the market falls and everyone's sells like crazy expecting doom and gloom, only to find later the market completely reversing in the opposite direction.....
Or on good news people underreact and fade, go against the move, only to find later the price exploding in 100 pips move against them forcing everyone to cover for loss.
These things are not random at all. The patterns are extremely consistent. Because human behaviour( psychology) is very consistent given certain stimulus. All people have the same natural reflexes......and biases.

I agree with you but the thought is occurring lately in my brain is this.If majority of trades are executed by Algo robots how does human emotion play in it.
I watched Ex Sachs trader saying all their trades are mechanical computer generated.They just have humans to monitor it.

First of all, the majority of algos(over 90%), do not even execute directional strategies. They just provide liquidity(market making) or search for arbitrage opportunities.
The smaller part of algos that DO execute directional speculative strategies are doing the same thing as the crowd. They trade momentum, or mean reversion conditions,
OR they trade the news. (they "read" headlines looking for key words...) and front run the crowd.
Also there are these super HFT algos(with colocated servers and all that.....) doing only front running ....but these are more common in the centralized markets (futures, stocks...) not so much in FX.

Whether or not you agree on the degree of randomness present in this market, it is useful to at least consider in terms of this market what randomness means and what lessons you can draw from it in terms of your chosen trading approach.

For a start, the definition of random needs to be defined in the context of this market. In this sense randomness simply means that fundamentally future prices cannot be predicted. It does not necessarily mean however that the processes involved in determining price action are necessarily random in nature. Despite the unpopularity of 'random walks' they have been used successfully to model many complex systems in the fields of physics, IT, ecology, economics and meteorology. I actually prefer the term 'noise' than randomness as the implication is that 'noise' is better undertood as a complex signal that can be discarded or avoided due to its undecipherability. The noise itself can produce patterns of any form and the ability to decipher between random and non-random forms is an intensely difficult and near impossible task given the complex actions of the myriad of trade decisions made by it's participants. All that statistics are therefore used for is a tool to attempt to distinguish any possible non-random relationships that exist in the data in an objective manner. It is an uncertain science that uses maths to interrogate the price series as opposed to our brains that while being majestic problem solvers, often fall into illusory traps of bias with pattern recognition.

Random walks have a variety of different interpretations that do not preclude the ability of price trending from a low point A to a high point B. For example levy flight represents a random walk process in which the step-lengths have a probability distribution that is heavy-tailed. What this means is that there is a tendency or drift at discreet indeterminate intervals in otherwise unpredictable price movement on which we as traders can capitalise on. For example the impact of news events in periodically stepping random price movement towards a general biased direction.

Levy flight which comes under the heading of a random walk process takes a form that is particularly useful in describing consolidation ranges indispersed with periods of trending. The example below highlights levy flight in action.



Now in the context of the market I don't think that any trader that inhabits this forum really believes that in principle future price cannot be predicted. We all base our livelihoods on the principle that it can. What differs however is in our opinion of the degree of predictability of price action.

I can't speak on behalf of Red, but in my opinion, the concept of drift or the ability for some non-randomness to lurk in otherwise unpredictable noise is my predictive measure for how the game will play out in the future. I simply cannot assign a degree of exactness to the 'when' and the 'where' of price in the future. I can however use probability as a guide for future direction within defined levels of confidence.

One of the interesting podcasts I have recently been listening to features Perry Kaufman who actually has a few very interesting things to say about the degree of noise that exists in markets of different maturity. Emerging markets such as relatively new indices or instruments typically commence their life with relatively lower 'noise' than more mature markets. This is attributed to the nature of the participants at the early stages of a markets development who are mostly the instutional players of a particular size or scale. Arbitrage that exists in the market takes some time to disappear. The composition of participants and the nature of participation therefore seems to have a strong role to play in the way price action unfolds.

With more mature complex markets however, the nature, scale and composition of participants serves to capitalise on any arbitrage present and quickly exploit these latent opportunities. In this sense, the more mature markets are more efficient. As a result what emerges in these mature markets is intense complexity in price action that results in a far greater extent of 'noise'. We must always remember that in this zero sum game, there is always the counterparty who is taking an opposite view on the way they think price will play out. In complex markets, arbitrage opportunities are extremely quickly exploited leaving a feeding frenzy in it's wake and a lot of wounded participants. The patterns of activity left behind from this feeding frenzy are therefore exceedingly complex and their predictive power is harder to crack.

If you view the markets this way and you take heed of the noise and any directional bias in the price data you can take steps in your trading plan to trade in the direction of the bias and avoid the noise. All this is seeking to do is capitalise on those moments when price action is 'slightly' less random than usual and placing trades that expolit slight statistical edges at these times or locations.

While random price action may be a dirty word to some, there are ways to take advantage of it if you can accept it and exploit it in your favour. A trading edge is reliant on identifying when a statistical edge is present in the market, acting accordingly and avoiding market environments that are more unpredictable.

Long term fundamental changes in price that develop into multi year trends is not random.

I think if you aren't using fundamentals then it can appear to be random, so in essence the OP is right.

Technical analysis never has and never will predict the future, though it can help you to capture the future.

Just my opinion.

Hi CJ,

Hello Mr. Scott,

I sold both covered and naked, out of the money, options to generate additional income for my accounts. I do not trade forex options although many choose them over spot forex.

-CJ-

I used to buy them

Options or not, guess the point is the information is on your chart.

1 got couple round thinggyy in fruit of loom thinking can make it to the market ....

2 it is a strategy thingyy ... not system ..... so dont streess out ...

3 fundy is ... bitchess doing ... squirtinggg ....

4 the only way ta is fail ... is when there is a intervention ... or meat cigarr smokin hott ....

5 some times a go some group of trader have created these strategy in to ea ... look around will find it ... its paid ... some point ...

taa daaa

Did you make money? Used to love watching them expire...lol

-CJ-

Yes, years ago. Used to buy way out of the money options on volatile stocks. Best ones were sold at strike. Rarely held to maturation as only 10% are exercised. R/R made it profitable. Just thought skenobi does a good job explaining the affect of options on fx spot market.

ooppppsss before ... taa daa ... yearss back before .. eur 04729 TA ... yes TA ... REMEMBER ... TA has given a head up that eur is going south

fundy ... yesss yeaahhh yeahhh baby ... in the moan of any sweet thingyy ... those lil country will not able to meat cigar sized with biggy cigarr country ... size matter ...lol , so thats the fundyy .....

logical ... vs logicall ... ? after alll chaching chaching the one do metter what ever starategy ... is .

if only ... IF ONLY ... all these can be coded hard coded ... 50 % is captured by the bot ... itss alll goooddd .... .

Is that you Bill?

-CJ-

whois bill ? I dunno , hugs & kiss for you PIRATE ! ....

Hahaha! Aye matey! Hope all is well...

-CJ-

also from nature ,markets are fractal ,which means the only difference between any time frame is how far you could project

http://www.wavesstrategy.com/FreeArt...px?Article=604

Fractal Nature: An unsaid truth of markets and why patterns work? Spot the difference!!!
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Written by Ashish KyalWednesday, March 20, 2013 4:05 PM
We believe in the theory that freely traded markets are patterned and exhibits fractal nature.
This makes them behave in a predictable manner. By pattern we mean that there are certain structures that repeat itself from time to time and can be seen on charts that shows prices of any tradable instrument. The “Fractal Nature” is again an important concept which states that these repeatable patterns occur on varied time scales and can be seen on 1 minute charts to Daily charts to Monthly charts. Fractal structure is seen in nature across from DNA to snowflakes to galaxies and so it is also seen in stock markets which reflect collective emotions and social mood of humans.

http://www.forexfactory.com/showthre...38#post8545938

Before discussing the randomness of the price, one need to have a clear understanding of the market (and in no way i am claiming that i clearly understand the markets). my simple mind tells me that financial market is a complex system with hundreds of components (instruments, mechanisms) interacting with each other every single moment and adapting to the outcomes of these interactions. Just to give a few example for financial market components: capital markets (stock markets, bond markets), commodity markets, money markets, derivatives markets, futures markets, foreign exchange markets and so on. Now, at the same time, financial market, as a complex system, is also in an intimate interaction with all other complex systems (like political systems, biological systems, behavioral systems etc.) that exist in today's world and each tick we are seeing in our screens is grand total of all these possible interactions which are affecting the price movement right at this moment.

Therefore, i really can't make a sense of anything that tries to predict the future by back-testing the past data. that historical data, is something like a decomposed organic body from which left only chemical components/elements. back-testing the historic data is like trying to resurrect a life organism out of chemical elements and trying to test how this body will react to a given live condition. Because this is what the current price exactly does - the market reacts to live conditions of this moment through complex interactions and as a result, prints a value.

Now we can ask the question: is this value random? is the market chaotic? is the price predictable?