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Technical Analysis alone will not give you an edge

  • #221
  • Nov 5, 2015 12:24pm Nov 5, 2015 12:24pm
Quoting Xela
{quote} I agree. Because no one aspect of trading will, in itself, give you an edge. Edges come only with patience, discipline, statistics, probability, education, experience and practice (there are no productive short-cuts).
This is true. I read somewhere that you need to learn everything about trading then discard most of it.
It never gets easier, you just get better
  • #222
  • Nov 5, 2015 12:35pm Nov 5, 2015 12:35pm
Quoting tashkent
{quote} you claim future is predictable and to support this all you can come up with is historic event? Incredible!
Let me be clear. The price action that followed the gbp announcement fit the structure of the gbp crosses, and as predictable patterns emerged this morning, the follow on price action followed. The fa was not random, the PA matched structure per expectations being met by the fa, and patterns developed that proved the market movers were trading the market in typical form. That's why I traded gbp crosses today. Now, here's a prediction for you. Tomorrow is NFP in the US at 8:30 am NY time. I will trade any currency pair where the fa matches structure, and as typical patterns develop. Since NFP typically sucks as a trading opportunity, I anticipate very few trades tomorrow. But anywhere that PA subsequent to the fa, that matches my analysis of market structure, is where I will trade. As I write this, it occurs to me that if you don't understand structure, everything in the market seems random, because you don't understand what's going on, in which case, you are gambling. Good luck.
  • #223
  • Edited 6:16pm Nov 5, 2015 2:14pm | Edited 6:16pm
Quoting GEfx
{quote} Let me be clear. The price action that followed the gbp announcement fit the structure of the gbp crosses, and as predictable patterns emerged this morning, the follow on price action followed. The fa was not random, the PA matched structure per expectations being met by the fa, and patterns developed that proved the market movers were trading the market in typical form. That's why I traded gbp crosses today. Now, here's a prediction for you. Tomorrow is NFP in the US at 8:30 am NY time. I will trade any currency pair where the fa matches...
Don't bother....this debate will continue forever. Academics and economists have been arguing for random walk and efficient market hypothesis for decades......it's the same old BS....it always starts the same way. Someone comes up with elegant theory, and invents 100 pages of math to support it and to prove......
While I respect all opinions, it is obvious that some people are too lost in their own mathematical complications. Smart people often invent problems where there are none.
In the meantime the "ignorant" traders who just trust what they see with their own eyes, continue to accumulate profits........
Most of the greatest speculators and traders of all times use technicals as the basis for their strategies.
Even on institutional level, the technical patterns play key role in decision making.
One of the most successful hedge funds of all time - Renaissance Technologies made billions using pattern recognition methods and data mining....
33 years in business, currently over 27 billion AUM.
https://en.wikipedia.org/wiki/Renaissance_Technologies
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  • #224
  • Nov 5, 2015 2:39pm Nov 5, 2015 2:39pm
Quoting GEfx
{quote} Let me be clear. The price action that followed the gbp announcement fit the structure of the gbp crosses, and as predictable patterns emerged this morning, the follow on price action followed. The fa was not random, the PA matched structure per expectations being met by the fa, and patterns developed that proved the market movers were trading the market in typical form. That's why I traded gbp crosses today.
i apologize, but this is nothing but than a usual mumbo-jambo. anybody who claim they can predict the market does the same thing: show something from past and say how well it worked out. but they immediately forget the things that did not work out, which usually happens more often.
Quoting GEfx
{quote}Now, here's a prediction for you. Tomorrow is NFP in the US at 8:30 am NY time. I will trade any currency pair where the fa matches structure, and as typical patterns develop. Since NFP typically sucks as a trading opportunity, I anticipate very few trades tomorrow. But anywhere that PA subsequent to the fa, that matches my analysis of market structure, is where I will trade. As I write this, it occurs to me that if you don't understand structure, everything in the market seems random, because you don't understand what's going on, in which...
i am not seeing any predictions? you are just saying that you will react to the news
well, i understand the market structure a little but i will not claim that i can analyze it. here is the simplest illustration of the market structure:
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it is decentralized market and nobody has %100 access to all information. most transactions are done for business purposes and a only a small portion comes through speculative transactions. everybody, be it business or individual, trying to get a better price so that they can sell or buy later for profit.
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the transactions - the fundamental blocks of the exchange rate flow in random (although i do not believe there is absolute randomness). you will ever never know from whom will come the next transaction, nor the size of the transaction and or the time. so from very beginning, everything is based on chaotic behavior. those transactions constitute the volume and volume gives you the patterns - the trends and ranges.
I do not believe patterns alone give someone an edge but i think they can be tradeable under specific circumstances. but again, the success is not guaranteed. this is just a small edge.
I already wrote in my previous posts about how complicated markets are. markets are much more complicated than anybody can imagine. therefore i look with suspicion to anybody who can claim they can analyze the market structure and can predict the future. but if you are just trying to predict the future looking at the patterns, then well, best of luck in your endeavors.
As Above, So Below
  • #225
  • Nov 5, 2015 2:45pm Nov 5, 2015 2:45pm
To the random believers.

It is a fact that smaller time frames pattern repeat in larget time frames.
Some believe in the fractal nature of the markets others call them price maps created by market makers.

A small collection of those patterns: https://imgur.com/a/BGRQb

What is the probability of repeating so many price points in sequencial order?

Now trading them is another story.
Captain Jack proved that it can be done.
the 3rd wave is the crowd's wave
  • #226
  • Nov 5, 2015 2:51pm Nov 5, 2015 2:51pm
Quoting alphaomega
{quote} Don't bother....this debate will continue forever. Academics and economists have been arguing for random walk and efficient market hypothesis for decades......it's the same old BS....it always starts the same way. Someone comes up with elegant theory, and invents 100 pages of math to support it and to prove...... While I respect all opinions, it is obvious that some people are too lost in their own mathematical complications. Smart people often invent problems where there are none. In the meantime the "ignorant" traders who just trust what...
I think you are right...I'll give up soon. LOL.
  • #227
  • Nov 5, 2015 2:56pm Nov 5, 2015 2:56pm
Quoting GEfx
{quote} I think you are right...I'll give up soon. LOL.
eventually you will, because neither you nor anybody else simply can not prove you can predict the future
As Above, So Below
  • #228
  • Nov 5, 2015 3:07pm Nov 5, 2015 3:07pm
Quoting tashkent
{quote} i apologize, but this is nothing but than a usual mumbo-jambo. anybody who claim they can predict the market does the same thing: show something from past and say how well it worked out. but they immediately forget the things that did not work out, which usually happens more often. {quote} i am not seeing any predictions? you are just saying that you will react to the news well, i understand the market structure a little but i will not claim that i can analyze it. here is the simplest illustration of the market structure: {image} it is...
I don't claim to predict the future...I claim the forex is not random. I claim that I use TA to trade in a non-random, highly manipulated and controlled forex market. There is a difference. And if you can't analyze market structure, you don't understand what it is or what's been happening (things are just randomly occurring, damn!). Market structure does not predict the future, either. It tells you what the market has been doing and why; and if it continues to roll along in the existing structure, where is the market is headed. By analyzing and understanding structure, you can anticipate what ever the market is going to do next. Before the market begins to move, it signals its intent, loud and clear. When this market begins to move, it does so within the structure, and since market movers use the same processes and procedures to do their jobs, TA allows us to follow along with what they are doing. When PA stops unfolding within structure (it changes!?!), you stop trading until a new structure is clear. No mumbo or jumbo, just trading.
  • #229
  • Nov 5, 2015 3:07pm Nov 5, 2015 3:07pm
Quoting juriFX
Some believe in the fractal nature of the markets others call them price maps created by market makers.
and what would be the reason for that?
  • #230
  • Nov 5, 2015 3:30pm Nov 5, 2015 3:30pm
Quoting GEfx
{quote} I don't claim to predict the future...I claim the forex is not random. I claim that I use TA to trade in a non-random, highly manipulated and controlled forex market. There is a difference. And if you can't analyze market structure, you don't understand what it is or what's been happening (things are just randomly occurring, damn!). Market structure does not predict the future, either. It tells you what the market has been doing and why; and if it continues to roll along in the existing structure, where is the market is headed. By analyzing...
fair enough. i understand your point.
happy pipping my friend.
As Above, So Below
  • #231
  • Edited 4:29pm Nov 5, 2015 4:03pm | Edited 4:29pm
Quoting GEfx
Thought I'd step in here to be a mitigating factor to the BS that is spreading about the forex being a random market. Today, the calendar of FA clearly showed that the BofE was scheduled to make their announcements on interest rates and monetary policy at 6:00 AM CST. The subsequent PA in GBP crosses, and the predictable patterns that developed during as PA moved, were not random. Same can be said for PA that follows important FA, and the follow on PA as the market adjusts to previous PA, and so on. And like I stated in a previous post, we are not...

I seem to have hit a nerve.

Your qouting me fundamentals, clearly there are no outside factors influencing a random chart, i thought this discussion was about TA

To be honest my friend, I find it a tad arrogant, that your telling me i don't make money from trading.

I'd like to think that after all these years i have a pretty decent understanding of 'market structure' or put another way the structure of randomness.

Do you genuinely not see any similarities between the charts i've posted and your own charts in terms of movement and structure.

The problem is, people just don't understand the nature of randomness, any set of random data presented in a line chart displays the same properties. over and over.

heres an update on the potential trade i marked before, price did indeed reverse at the line, coupled with a head and shoulders pattern and a ABCD move which completed to the pip.

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Wow, price reversed exactly as predicted, thats 2 trades placed and 2 trades won in 2 days, do i now call myself a trading genius, do i claim to have unlocked the secrets of the market. no. because it was done on randomly generated data. yet both those set ups worked. I had absolutely no idea which way the market would go when i placed them, just like i don't when i place a trade on eur/usd, usd/jpy. dax or dow. The other four instruments i trade.

Please note, - i do not trade the setups that i have posted on these charts in my real trading, these were for demonstration purposes only theyare just some common examples of how various people trade. absolutely nothing wrong with them though.

gefx, i have to say, your assumption that the markets are not random and that you can 'accurately' predict future movements is a very dangerous game to play.
I'm sure that in real life you seem like a perfectly rational individual, yet like so many who get into trading a fog of delusion seems to descend. So many folks here seem to think that if your a losing trader this proves that the market is random and those who are winning is proof that it is non random.

There are many ways to try test for randomness, but i'm pretty sure as future mathematicians and physicists try to determine whether quantum theory is random or not, i honestly can't imagine them saying' "i know, lets place a series of bets, and if we make money this will be irrefutable proof that its not random and if we lose we'll know for sure that it is".

I urge anyone who uses this kind of reasoning, to think what your saying in the cold light of day, when your away from trading and the fog of delusion has lifted.
  • #232
  • Nov 5, 2015 4:47pm Nov 5, 2015 4:47pm
Quoting alphaomega
{quote} Don't bother....this debate will continue forever. Academics and economists have been arguing for random walk and efficient market hypothesis for decades......it's the same old BS....it always starts the same way. Someone comes up with elegant theory, and invents 100 pages of math to support it and to prove...... While I respect all opinions, it is obvious that some people are too lost in their own mathematical complications. Smart people often invent problems where there are none. In the meantime the "ignorant" traders who just trust what...

I never said i believed in EMH, i dont.

I said 'random walk with levy flight'

To be honest, i don't think my posts are complicated in any way and there are certainly no 'mathematical complications' lol.

and yet you post a video on jim simons, who uses some of the most complicated maths known to man.

I haven't watched the vid as i'm well aware of mr simons, in my opinion he is to mathematics what steven hawking is to theoretical physics. many traders don't know his math background and yet many math guys have no idea he's a hedge fund guy.

he was a child prodigy
he was a code breaker for the us military
he solved two, yes two, supposedly unsolvable math equations during his life
he spent 7 or 8 years recruiting some of the smartest people on earth to come up with his black box trading strategy.
which i'm pretty sure last year made a 27% return

alphaomega, i have read some of your other posts and you seem like a really smart guy, but are you seriously comparing what you may do to jim simons.
  • #233
  • Nov 5, 2015 5:18pm Nov 5, 2015 5:18pm
Quoting goodfella90
{quote} I never said i believed in EMH, i dont. I said 'random walk with levy flight' To be honest, i don't think my posts are complicated in any way and there are certainly no 'mathematical complications' lol. and yet you post a video on jim simons, who uses some of the most complicated maths known to man. I haven't watched the vid as i'm well aware of mr simons, in my opinion he is to mathematics what steven hawking is to theoretical physics. many traders don't know his math background and yet many math guys have no idea he's a hedge fund guy....

a question for you , why do you choose a "broker" to trade , who feeds you "random" data ; over a real market to trade off ? if they are in your opinion , the same ?

may it be , because these "random" generated markets are "stable" to world events ? news , catastrophes etc..? if so smooth move
  • #234
  • Edited 9:32pm Nov 5, 2015 5:52pm | Edited 9:32pm
Quoting goodfella90
{quote} I never said i believed in EMH, i dont. I said 'random walk with levy flight' To be honest, i don't think my posts are complicated in any way and there are certainly no 'mathematical complications' lol. and yet you post a video on jim simons, who uses some of the most complicated maths known to man. I haven't watched the vid as i'm well aware of mr simons, in my opinion he is to mathematics what steven hawking is to theoretical physics. many traders don't know his math background and yet many math guys have no idea he's a hedge fund guy....
I just wanted to give a good example and proof that it is possible to beat the market with strategy based on technical data.(patterns).
You don't necessarily have to trade like Renaissance Technologies......there are many other simpler ways to achieve the same result. Many many great traders don't use any sophisticated algorithms, they just use their eyes and simple techniques to identify the patterns. But in the end of the day it's the same patterns that produce consistent profits.. It doesn't really matter how you identify them.
You either ride the trends and exploit the momentum, or you play the mean reversion game. There is nothing else really. Technical Analysis is as old as the markets.
Just look at how Jesse Livermore breaks down the price action into 6 different segments( 6 phases) and this is 100 years ago....
Upward trend
Downward trend
Natural reaction
Natural rally
Secondary reaction
Secondary rally.
Very simple technique, but effective, it gives structure, and meaning. So you can build consistent strategy based on that structure. Cut losses, Catch the trends, add to winning positions.... this is classic trend following system.
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  • #235
  • Nov 5, 2015 6:28pm Nov 5, 2015 6:28pm
Quoting goodfella90
{quote} I seem to have hit a nerve. Your qouting me fundamentals, clearly there are no outside factors influencing a random chart, i thought this discussion was about TA To be honest my friend, I find it a tad arrogant, that your telling me i don't make money from trading. I'd like to think that after all these years i have a pretty decent understanding of 'market structure' or put another way the structure of randomness. Do you genuinely not see any similarities between the charts i've posted and your own charts in terms of movement and structure....
No, you have not hit a nerve of mine. I think Red started an interesting thread and I am participating in it.

I am not "quoting you" fundamentals. The subject of the thread is that TA alone does not provide an edge, to which I have agreed in previous posts here. I added my experience that market structure analysis is needed ahead of using TA; and I strongly disagree with the notion that the forex is random. It is not. As I have stated, the forex is the most controlled and manipulated market on the planet. As you can see in the charts, it moves from periods of equilibrium, to times of movement. Most of these times of movement are clearly, without question, predictable. If you can read a chart, and understand the underlying structure of the market, you can use TA to follow the market makers as the carry out their work. Let's be clear, every move on the charts has an explanation rooted in FA and structure. The route that is followed seems screwy, but generally makes sense. And sometimes, after careful consideration, the market makers can change their minds and reverse or stop. TA is pretty helpful in dealing with those issues, too

I did not say anything specifically about your ability to make money.

The similarities between your chart and, say, the GBPJPY, mean nothing to me, and should mean nothing to every currency trader. We are trading the forex, not the random number generator market (please, it you feel they are so similar, start up a random number generator market and see what happens). So no, aside from appearances, there is nothing similar to your chart and my forex charts. My forex charts have structure to them; yours do not. I know the characteristics of all the currencies I trade, and how FA and fundamentals impact the structure of the currency pairs. Your charts are have no substance behind them. Fundamental drive forex charts. Big or small, fundamentals and FA drive currencies. Every move. Every single move. It can be as big as NFP, or something smaller like a highly influential economists change of heart. Something happens, and they move. In your charts, nothing happens and they move. Get the difference? So as a trader, it's a good idea to stay connected to the market when you are trading, and only trade what you understand, not what you think. Analyze structure, understand it, and trade only when something happens within it.

I've been trading the forex for over 11 years. In that time, I've never found a scientist or a mathematician who could help me understand the forex. There are a lot of people at the University of Chicago in the finance and economics department who can, and did. Northwestern University, too. I suggest focusing the next few years on international finance and financial markets, on economics, and international banking and banking markets and mechanisms. Maybe spend 15 years consulting to corporations in those areas, too. Most of the clarity that is needed to trade can be found by following that path.

Good trading traders, and to the rest of you, good luck!
  • #236
  • Nov 5, 2015 9:11pm Nov 5, 2015 9:11pm
This is the most common and most persistent pattern in history. It repeats over and over and over for ever....... You can see it on any time frame, from tick to years and decades.... on any market!
In Forex you can observe this pattern almost every day on the micro time frames (under 60 min), and also can be observed upside down because two currencies are involved. (there is no bullish bias like in stocks or commodities.)
I can give you thousands of examples for this pattern, it's always the same basic structure and it follows the model almost perfectly every time.
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  • #237
  • Nov 5, 2015 9:46pm Nov 5, 2015 9:46pm
Congratulations, you've discovered the business cycle. You know, the one that's in every freshman econ textbook.
  • #238
  • Nov 5, 2015 9:56pm Nov 5, 2015 9:56pm
Quoting gravitist
Congratulations, you've discovered the business cycle. You know, the one that's in every freshman econ textbook.
It has very little to do with business cycle......The pattern often happens independently of fundamentals. Also it happens on ANY timeframe.
More often than not, it's a purely technical pattern, a direct result of positive feedback loop. Fundamental information can sometimes act only as a catalyst( trigger).
Also when large number of trapped traders are involved, it manifests as market crash(upside down), or simple stop run. And we all know that stop runs are extremely common in FX. They happen every day.
  • #239
  • Nov 5, 2015 10:35pm Nov 5, 2015 10:35pm
Quoting gravitist
Congratulations, you've discovered the business cycle. You know, the one that's in every freshman econ textbook.
It's a purely technical pattern 99% of the time..
Just look at these short term examples from 1m to 4h, (absolutely nothing to do with business cycle )
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  • #240
  • Nov 5, 2015 10:58pm Nov 5, 2015 10:58pm
Technical Analysis alone will not give you an edge? I must be an idiot to not have realized that....
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Believe your right, till proven wrong. Doubt is the greatest enemy.
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