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(binned per thread starter’s request) Chapter 1 - reference point

  • #1
  • First Post: Dec 1, 2015 10:33am Dec 1, 2015 10:33am
This is thread is intended to be Chapter 1 of 4 chapters covering trading as I have come to define it. Which are:

1. Having a defined POINT OF REFERENCE in this complexity we know as [PRICE]
2. Choosing what DIRECTION to trade, BUY/SELL??
3. Deciding WHEN to place the trade
4. When to EXIT the position and repeat.

I know these have been discussed in different threads, but here I would like to begin from the very basics.

Each topic will have its own thread so as not to clutter with back and forth posts. I will update with links later.
I believe we all need to have clear cut answers to these questions as the foundation for trading professionally.

PROLOGUE:

FX trading and trading in general is a profession of probability, NOTHING IS 100% CERTAIN (to the best of my knowledge), these series of chapters aims to remove as much discretion as possible from trading forex , anything that can be defined should be defined, anything that can be optimized should be optimized. The less the number of random variables the better our final probabilistic outcome. Getting there is the mission.


PLEASE THIS IS NOT ANOTHER PISSING CONTEST!!

Technical, Fundamental, Hand signs, Beer consumption, Butterflies are all relevant...as long as you can clearly prove/defend it.

If you choose to reply to this thread, you agree you are equal with every other poster. Your trading history is irrelevant. Think of this as a gathering of philosophers come to solve interesting questions.

If you have an opinion or do not agree with an opinion, kindly explain your point to the detail.
Please take the time to think of answers to issues arising from your own opinions and provide answers before hand.
I would like the threads to be short and concise.


It would be great if we can follow the format I will lay down in the next posts.
  • #2
  • Dec 1, 2015 10:46am Dec 1, 2015 10:46am
Let us begin:

CH 1 - REFERENCE POINT

---
In order to place a trade one needs a point of reference, else your boundaries will be infinite. I mean without a point of reference there is no definition as to; Where/When to enter, what direction to enter or exit a trade.

Limits of a Reference Point RP;

A reference point for this discussion can either be,
[a] Time based (Mondays at 5:17p.m, May 1 every year... time.)
[b] Price based (vanilla price, candle high, low, whatever... price.)
[c] Price and Time based (May 1 every year, at xx-price.)

Problem ??

How do we define the optimal RP for a trade?

Problem boundaries:
- Optimal RP must be independent of any of the other variables (trade direction, exit, entry)

Q: Why do I suggest this problem boundary?
A: (a) other variables are not conclusive (yet),
(b) without it, Optimal RP will be subject to trading style.

- Optimal RP must have fixed/mathematically sequential intervals (I believe the reason is obvious).

NOTE: It is my wish that we eliminate as much discretion as possible in determining an Optimal RP.
The more non-random variables we have, the closer we are to defined trading.
---
  • #3
  • Dec 1, 2015 10:52am Dec 1, 2015 10:52am
a, TIME BASED Solution to Problem;

Reference point should be based on time only.
Q1: Why?
A1: Because, it is the simplest method, it is recurring and it is independent of other variables.

Q2: What is the best time?
A2: No idea. But we know this
- The longer the time interval, the fewer the trades.
Q3: Does trade frequency affect profitability?
A3: No? Yes?
- The more the trades the more the cost of trading (spread, slippage, commissions e.t.c)
General answer: Yes.

So we can agree that a longer time interval is better.

Q4: How do we define long interval and short interval?
A4: To answer this, let us begin with a daily interval (because this is the basic interval all humans carry out activities on i.e wake up - work,play,do nothing - sleep repeat)

DAILY INTERVAL = SHORTEST INTERVAL FOR RP.

How then do we define the longest interval?

To answer this let us begin with a yearly interval (because all major businesses tend to close their accounting books on a yearly cycle.)

YEARLY INTERVAL = LONGEST INTERVAL FOR RP.

Now between a day and a year, we have the intermediate intervals as, DAY,WEEK,MONTH and YEAR.

Interval Analysis;

If our RP interval is daily, this would mean everyday all other variables are recalculated. (Assuming) the variables conclude to give 1 trade everyday. We would make a max of 240 trades a year. (This might be modified when the other variables are considered)

DAY: Max trades = 240 trades a year.

WEEK: Max trades = 56 trades a year.

MONTH: Max trades = 12 trades a year.

YEAR: Max trades = 1 trade a year.

Average = 77 trades a year.

The closest interval to 77 trades is the WEEKLY Interval. Therefore we can conclude that our initial optimal RP should be WEEKLY.\

RP = TIME BASED, WEEKLY.


The floor is open..
  • #4
  • Dec 1, 2015 11:45am Dec 1, 2015 11:45am
how i see it in theory is kinda like this

1. every 2 units are related mathematically somehow. We all know this, if it weren't so reality as we know it would not exist. Basically the same as saying math exists.
2. quantum synchronization has proven scientifically, without doubt that differing units are in fact related mathematically. That is very much a hidden truth that most people fail to recognize for some ung-dly reason.
3. therefore price and the other unit time must be related, somehow. The way they are related therefore MUST make co-ordinates.
4. This is what gann must have believed also in my estimation.
5. Therefore what you have to do is create a co-ordinate system.
7. Therefore you ought to have a price reference point AND a time reference point in order to trade with perfection and predict with perfection>>>>

https://www.google.com/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#safe=off&q=tunnel+through+the+air+pdf

the only fractal co-ordinate systems i know of are gann's work and this>>>https://www.youtube.com/watch?v=unqKSfZfzho that makes a whole number co-ordinate system. pretty amazing.

its beyond me though... i'm just a fib guy. i could be way off too
  • #5
  • Dec 1, 2015 1:40pm Dec 1, 2015 1:40pm
Quoting sinqua
DAY: Max trades = 240 trades a year.
WEEK: Max trades = 56 trades a year.
MONTH: Max trades = 12 trades a year.
YEAR: Max trades = 1 trade a year.
Average = 77 trades a year.
If the day is your smallest unit and the year the maximum length and if you want the average, shouldn't you calculate the actual average?
Because between a day and a year, we have the intermediate intervals as, DAY, 2 DAYS, 3 DAYS, ... , and YEAR."

1/240 x (1+2+3+4+....+240) = 1/240 x 240 x (240+1) / 2 = 120.5

Average = 77 120 trades a year. :nerd:


@dagoods (http://www.forexfactory.com/dagoods)
3. therefore price and the other unit time must be related, somehow.
Sure time is money
No greed. No fear. Just maths.
  • #6
  • Dec 23, 2015 3:00am Dec 23, 2015 3:00am
Quoting dagoods
how i see it in theory is kinda like this 1. every 2 units are related mathematically somehow. We all know this, if it weren't so reality as we know it would not exist. Basically the same as saying math exists. 2. quantum synchronization has proven scientifically, without doubt that differing units are in fact related mathematically. That is very much a hidden truth that most people fail to recognize for some ung-dly reason. 3. therefore price and the other unit time must be related, somehow. The way they are related therefore MUST make co-ordinates....

This is a pressing argument for the PRICE - TIME RP. Interesting manipulation of mathematics, I remember the is related to electricity and transformers, but who knows what can be gleaned off it.
  • #7
  • Dec 23, 2015 3:07am Dec 23, 2015 3:07am
Quoting PipMeUp
{quote} If the day is your smallest unit and the year the maximum length and if you want the average, shouldn't you calculate the actual average? Because between a day and a year, we have the intermediate intervals as, DAY, 2 DAYS, 3 DAYS, ... , and YEAR." 1/240 x (1+2+3+4+....+240) = 1/240 x 240 x (240+1) / 2 = 120.5 Average = 77 120 trades a year. :nerd: @dagoods (http://www.forexfactory.com/dagoods) 3. therefore price and the other unit time must be related, somehow. Sure time is money

Ah what you say is correct, except I do not consider 2 days, 3 days...19 days as valid reference points. My valid intervals were Day, Week, Month and Year because human behavior (business and otherwise) revolve around these intervals.

Day: Wake Up, Sleep
Week: Weekend break from work, school, e.t.c
Month: Salaries are paid, business inventories are checked e.t.c
Year: Need I say?

Nothing cyclic (that I am aware of) happens say every 17 days so I excluded taking such averages
  • #8
  • Dec 23, 2015 5:52am Dec 23, 2015 5:52am
Well what about workers who get paid bi monthly instead of every week is they get paid on the 15 and 30 ? So you could make a case for one additional time series if you are basing the on daily life.

Robert
Just wish I could code
  • #9
  • Dec 24, 2015 7:28pm Dec 24, 2015 7:28pm
Quoting Robert52
Well what about workers who get paid bi monthly instead of every week is they get paid on the 15 and 30 ? So you could make a case for one additional time series if you are basing the on daily life. Robert
Good point, adding that brings the average to about 67days, even closer to the WEEKLY than any of the others. Unless I have my maths wrong.
  • #10
  • Dec 24, 2015 7:53pm Dec 24, 2015 7:53pm
Look perfectly good to me

Robert
Just wish I could code
  • #11
  • Dec 27, 2015 10:04am Dec 27, 2015 10:04am
Quoting sinqua
{quote} This is a pressing argument for the PRICE - TIME RP. Interesting manipulation of mathematics, I remember the is related to electricity and transformers, but who knows what can be gleaned off it.

yes. It isn't a manipulation of price. It simply is what is. the fact that whole numbers themselves make a fractal pattern is wholly unmistakably ....,well you can fill in the blank....but surely not manipulated at all....it just is....
  • #12
  • Dec 27, 2015 11:56am Dec 27, 2015 11:56am
b, TIME BASED Solution to Problem;

Given the variability of price wrt. to currency pairs, its difficult (as well as simple) to assign a RP to PRICE. I have been thinking over the past days on how PRICE itself can act as a RP.

My conclusion.

Only Valid PRICE RP is - Whole numbers (00 levels)
Why?

Regardless of currency pair, these points are constant. One could also argue that prices ending in 1's or 2's are constant, well your choice.
  • #13
  • Dec 27, 2015 12:05pm Dec 27, 2015 12:05pm
c, PRICE - TIME BASED Solution to Problem;

Now to the choice preferred by dagoods, I find his idea's interesting but difficult to conceive, regardless I will attempt.

First idea's:

We already have our optimum TIME and PRICE RP's, the first obvious assumption is therefore.

- The closest 00 Level at the beginning of each Week.

Any idea's for/against the above conclusion is welcome.

Next:

Borrowing on the idea via the link by dagoods.
My first thought is, in applying such a mapping approach, one has to first convert TIME & PRICE into whole numbers from 0 - 9. (I see no reason to create a new approach if one has already been developed to a reasonable degree)
I will ponder on this over a few days...
  • #14
  • Last Post: Dec 27, 2015 12:07pm Dec 27, 2015 12:07pm
Quoting sinqua
b, TIME BASED Solution to Problem; Given the variability of price wrt. to currency pairs, its difficult (as well as simple) to assign a RP to PRICE. I have been thinking over the past days on how PRICE itself can act as a RP. My conclusion. Only Valid PRICE RP is - Whole numbers (00 levels) Why? Regardless of currency pair, these points are constant. One could also argue that prices ending in 1's or 2's are constant, well your choice.






https://www.youtube.com/watch?v=2Auiwko1m10

some indies i was trying to develop way back when.... if anyone is interested ..if nothing else have a play for some fun

enjoy!

PS rather than 00 perhaps vedic 1 can be done also
Attached File(s)
File Type: ex4 Vedic3-6-9 with lines(1).ex4   5 KB | 354 downloads
File Type: ex4 VedicData.ex4   6 KB | 344 downloads
File Type: ex4 VedicVariable2.ex4   6 KB | 327 downloads
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