Pivot Trading

Hi Davit

Wow !!! I woke this morning and found that it had all come together for my UC, NC and EC. Was so excited I closed all of the positions before the spreads began went crazy at 7 am Eastern Ausie time. I forgot to take a snapshot of the trades. I am sorry for that Davit but managed to make $308 of real money on 3 these trades. Great start for the month of September. If you are down in Aussie again you will have a place to stay if you are in beautiful Queensland.

It is fantastic to see that the Davit school of learning is getting new pupils every day. Congratulations Davit. Once again thank you so much for this Master Class.

Hey Magic, congratulations and good job. You have super clean charts that look great. Would you show me which candle was your first position?

Got to go in just a bit...headed to Friday night football.

Later,
TX

Magic, on your NC positions.

Hi Tx15

My first short was on the yellow line.
My second short (red line) was a sell stop (just under the R100 line) that I took before I went to bed and it triggered during sleep time.
Hope the football went well!

Great job but you do realize you took way too many losses unnecessarily on UC in great spot like 3104 3103 and so on.
Looks like you got out early as well.
Overall great start for Sept.Just keep in mind that I sense the reason you closed those trades early because your lots were big so you panicked...and closed perfectly well placed trades...that's my reading on your trading by simply looking at your closed trades.
By simply reducing your lots you could of ride that baby 90pips south all of them without stress or worry!Anyway thanks for the invitation and I will keep it in my head

half closed small loss half I added from 7596 area.There is harmonic pattern that I like to wait to see how it plays next week

he is using my template you can as well

One thing I noticed that you can have 100 traders here on this thread but in 3months I bet only 3-5 will still be doing this.I don't fault guys dumpling then moving on..
If you look at 1st 50 pages traders posting almost none here now...I find it fascinating. Its the reason why I really don't care how many people post here what I care how many guys will be here by Dec.So how does one measure successful system? I will let you figure that out yourselves.

Hi Davit, quite right, I have been here since the start. I don't post much but I have followed, read, learnt and implement trades on the strategy/system with success. I trade other styles as well and you are 100% correct....time and perserverance is key to FX. I will be here in dec no doubt about that. Keep up the good work and well done to all that try and learn. Regards

I keep rereading and rereading "Trading in the Zone" by Mark Douglas
Reason is every chapter is simply gold nuggets.
He highly influenced how I trade.He made me understand what true probability is and sample size (one needs large sample size to test how successful my system is hence "trying" out short time is futile



CHAPTER 7
THE TRADER'S EDGE: THINKING IN PROBABILITIES
Exactly what does it mean to think in probabilities, and why is it so essential to one's consistent success
as a trader? If you take a moment and analyze the last sentence, you will notice that I made consistency
a function of probabilities. It sounds like a contradiction: How can someone produce consistent results
from an event that has an uncertain probabilistic outcome? To answer this question, all we have to do is
look to the gambling industry. Corporations spend vast amounts of money, in the hundreds of millions,
if not billions, of dollars, on elaborate hotels to attract people to their casinos.
If you've been to Las Vegas you know exactly what I am talking about. Gaming corporations are just
like other corporations, in that they have to justify how they allocate their assets to a board of directors
and ultimately to their stockholders. How do you suppose they justify spending vast sums of money on
elaborate hotels and casinos, whose primary function is to generate revenue from an event that has a
purely random outcome?
PROBABILITIES PARADOX: RANDOM OUTCOME, CONSISTENT RESULTS
Here's an interesting paradox. Casinos make consistent profits day after day and year after year,
facilitating an event that has a purely random outcome. At the same time, most traders believe that the
outcome of the market's behavior is not random, yet can't seem to produce consistent profits. Shouldn't
a consistent, nonrandom outcome produce consistent results, and a random outcome produce random,
inconsistent results? What casino owners, experienced gamblers, and the best traders understand that
the typical trader finds difficult to grasp is: even that have probable outcomes can produce consistent
results, if you can get the odds in your favor and there is a large enough sample size. The best traders
treat trading like a numbers game, similar to the way in which casinos and professional gamblers
approach gambling. To illustrate, let's look at the game of blackjack. In blackjack, the casinos have
approximately a 4.5-percent edge over the player, based on the rules they require players to adhere to.
This means that, over a large enough sample size (number of hands played), the casino will generate
net profits of four and a half cents on every dollar wagered on the game. This average of four and a half
cents takes into account all the players who walked away big winners (including all winning streaks),
all the players who walked away big losers, and everybody in between. At the end of the day, week,
month, or year, the casino always ends up with approximately 4.5 percent of the total amount wagered.
That 4.5 percent might not sound like a lot, but let's put it in perspective. Suppose a total of $100
million dollars is wagered collectively at all of a casino's blackjack tables over the course of a year. The
casino will net $4.5 million. What casino owners and professional gamblers understand about the
nature of probabilities is that each individual hand played is statistically independent of every other
hand. This means that each individual hand is a unique event, where the outcome is random relative to
the last hand played or the next hand played. If you focus on each hand individually, there will be a
random, unpredictable distribution between winning and losing hands. But on a collective basis, just
the opposite is true. If a large enough number of hands is played, patterns will emerge that produce a
consistent, predictable, and statistically reliable outcome.
Here's what makes thinking in probabilities so difficult. It requires two layers of beliefs that on the
surface seem to contradict each other. We'll call the first layer the micro level. At this level, you have
to believe in the uncertainty and unpredictability of each individual hand. You know the truth of this
uncertainty, because there are always a number of unknown variables affecting the consistency of the
deck that each new hand is drawn from. For example, you can't know in advance how any of the other
participants will decide to play their hands, since they can either take or decline additional cards. Any
variables acting on the consistency of the deck that can't be controlled or known in advance will make
the outcome of any particular hand both uncertain and random (statistically independent) in
relationship to any other hand. The second layer is the macro level. At this level, you have to believe
that the outcome over a series of hands played is relatively certain and predictable. The degree of
certainty is based on the fixed or constant variables that are known in advance and specifically
designed to give an advantage (edge) to one side or the other.
The constant variables I am referring to are the rules of the game. So, even though you don't or couldn't
know in advance (unless you are psychic) the sequence of wins to losses, you can be relatively certain
that if enough hands are played, whoever has the edge will end up with more wins than losses. The
degree of certainty is a function of how good the edge is. It's the ability to believe in the
unpredictability of the game at the micro level and simultaneously believe in the predictability of the
game at the macro level that makes the casino and the professional gambler effective and successful at
what they do. Their belief in the uniqueness of each hand prevents them from engaging in the pointless
endeavor of trying to predict the outcome of each individual hand. They have learned and completely
accepted the fact that they don't know what's going to happen next. More important, they don't need to
know in order to make money consistently.
Because they don't have to know what's going to happen next, they don't place any special significance,
emotional or otherwise, on each individual hand, spin of the wheel, or roll of the dice. In other words,
they're not encumbered by unrealistic expectations about what is going to happen, nor are their egos
involved in a way that makes them have to be right. As a result, it's easier to stay focused on keeping
the odds in their favor and executing flawlessly, which in turn makes them less susceptible to making
costly mistakes.
They stay relaxed because they are committed and willing to let the probabilities (their edges) play
themselves out, all the while knowing that if their edges are good enough and the sample sizes are big
enough, they will come out net winners. The best traders use the same thinking strategy as the casino
and professional gambler. Not only does it work to their benefit, but the underlying dynamics
supporting the need for such a strategy are exactly the same in trading as they are in gambling.
A simple comparison between the two will demonstrate this quite clearly. First, the trader, the gambler,
and the casino are all dealing with both known and unknown variables that affect the outcome of each
trade or gambling event. In gambling, the known variables are the rules of the game. In trading, the
known variables (from each individual trader's perspective) are the results of their market analysis.
Market analysis finds behavior patterns in the collective actions of everyone participating in a market.
We know that individuals will act the same way under similar situations and circumstances, over and
over again, producing observable patterns of behavior. By the same token, groups of individuals
interacting with one another, day after day, week after week, also produce behavior patterns that repeat
themselves. These collective behavior patterns can be discovered and identified bv
analytical tools such as trend lines, moving averages, oscillators, or retracements, just to name a
few of the thousands that are available to any trader. Each analytical tool uses a set of criteria to define
the boundaries of each behavior pattern identified. The set of criteria and the boundaries identified are
the trader's known market variables.
They are to the individual trader what the rules of the game are to the casino and gambler. By this I
mean, the trader's analytical tools are the known variables that put the odds of success (the edge) for
any given trade in the trader's favor, in the same way that the rules of the game put the odds of success
in favor of the casino. Second, we know that in gambling a number of unknown variables act on the
outcome of each game. In blackjack, the unknowns are the shuffling of the deck and how the players
choose to play their hands. In craps, it's how the dice are thrown. And in roulette, it's the amount of
force applied to spin the wheel. All these unknown variables act as forces on the outcome of each
individual event, in a way that causes each event to be statistically independent of any other individual
event, thereby creating a random distribution between wins and losses. Trading also involves a number
of unknown variables that act on the outcome of any particular behavior pattern a trader may identify
and use as his edge. In trading, the unknown variables are all other traders who have the potential to
come into the market to put on or take off a trade.
Each trade contributes to the market's position at any given moment, which means that each trader,
acting on a belief about what is high and what is low, contributes to the collective behavior pattern that
is displayed at that moment. If there is a recognizable pattern, and if the variables used to define that
pattern conform to a particular trader's definition of an edge, then we can say that the market is offering
the trader an opportunity to buy low or sell high, based on the trader's definition. Suppose the trader
seizes the opportunity to take advantage of his edge and puts on a trade. What factors will determine
whether the market unfolds in the direction of his edge or against it? The answer is: the behavior of
other traders!
At the moment he puts a trade on, and for as long as he chooses to stay in that trade, other traders will
be participating in that market. They will be acting on their beliefs about what is high and what is low.
At any given moment, some percentage of other traders will contribute to an outcome favorable to our
traders edge, and the participation of some percentage of traders will negate his edge. There's no way to
know in advance how everyone else is going to behave and how their behavior will affect his trade, so
the outcome of the trade is uncertain.
The fact is, the outcome of every (legal) trade that anyone decides to make is affected in some way by
the subsequent behavior of other traders participating in that market, making the outcome of all trades
uncertain. Since all trades have an uncertain outcome, then like gambling, each trade has to be
statistically independent of the next trade, the last trade, or any trades in the future, even though the
trader may use the same set of known variables to identify his edge for each trade. Furthermore, if the
outcome of each individual trade is statistically independent of every other trade, there must also be a
random distribution between wins and losses in any given string or set of trades, even though the odds
of success for each individual trade may be in the traders favor.
Third, casino owners don't try to predict or know in advance the outcome of each individual event.
Aside from the fact that it would be extremely difficult, given all the unknown variables operating in
each game, it isn't necessary to create consistent results. Casino operators have learned that all they
have to do is keep the odds in their favor and have a large enough sample size of events so that their
edges have ample opportunity to work.

Too many great chapters in fact the whole book is amazing to me.Please read it.You will become better trader

Really good to read. Thanks !!!!

"At the moment he puts a trade on, and for as long as he chooses to stay in that trade, other traders will
be participating in that market. They will be acting on their beliefs about what is high and what is low.
At any given moment, some percentage of other traders will contribute to an outcome favorable to our
traders edge, and the participation of some percentage of traders will negate his edge"

Hi Davit

Thank you for the advice about taking smaller trades. You are right in that I did second guess my decisions and I did get out early with great positions. I did berate myself when I realized how much I gave up in lightening the load. I was worried about the Unemployment Report coming out of the US plus I was thinking that the continued low oils prices would continue to keep the CAD lower. Smaller lots would have eased the pressure so I will defiantly take that advice on board.

The pivots and learning to trade in small lots are a revelation!!!

Thanks for making the effort to help. Have a great week-end

Worrying and stressing is result of position size as you probably figured out correctly hence why I stress small lots so you can take trades in confidence based on the EDGE of this system by large enough sample size which naturally will take time minimum 3 months.
Green pips continue on

Agree its great article but he has so many in that book I particularly like chapters dealing with fear and set belief systems that are hindrance to become successful traders.
green pips

feel free to post trades!
Green pips Jalby

Hey Magic,
Thanks for your response. Actually, my wife and I went by to see my father-in-law, whose wife was admitted to the hospital late this afternoon. Never made it to the game; however, I took him a 1/5th of CR, and just now made it home with my wife who was the designated driver.

Will be communicating later, and enjoy your labor day weekend,
TX

Hi Guys,

I am new in Pivot & TDI but I want to learn about this trading method. Thanks Davit for sharing the indicators.

This is my first post. Next week, EURGBP, I am looking forward to place a pending buy at S100 level. What are your thoughts?

Davit, thanks for your quick response.
In the past, I was accustomed to placing a single position with a SL loss above or below the last swing high or low depending on direction of trade (taken out many times by spikes). My position was normally 1% of account. I am beginning to realize the advantage of taking the same 1% of account and dividing it into multiple positions. Place the first trade at a pivot where PA supports a long or short position, and if trade moves favorably, I can add additional positions at the dips, retracements, or whatever the PA candles are telling me. If PA moves against that position, I will look to place another position at the next pivot (yes, the 1st position is now negative; however, the loss is small and doesn't spook me). I will simply remain positive, knowing that the probabilities are in my favor in the positive area between 61 and 100 levels. This approach goes against my current mindset; however, as I continue to observe the consistent success of you, Arjun, and the other savy traders on this thread, I am gradually coming around. Scott Carney's Pdf is an excellent read, and certainly supports the harmonics that your thread is presenting. The adage, "you can't teach an old dog new tricks," does not apply to this old soldier...I will still be here in December and well beyond if the Lord is willing.

Wish all a safe and enjoyable labor day weekend,
TX

Davit, I made the statement to Magic for the sole purpose of giving him due credit for using your template and having initial success to establish confidence (your template includes all that we need to be successful and learn that which you have to share with us). I have used your template from the onset, and have no intentions of using anything else but your template. I am developing complete confidence in what you share on this thread, and absolutely appreciate all of the professionals that support you as we embark upon a trading methodology that we can pass on to our children and loved ones. I apologize if my statement to Magic may have offended you in any way. I have the utmost respect for you as a person and professional trader. If I didn't, then you would never have seen TX on any response.

These words I speak from my heart,
TX

>>>[quote=Davit;9117661]I keep rereading and rereading "Trading in the Zone" by Mark Douglas Reason is every chapter is simply gold nuggets. He highly influenced how I trade.He made me understand what true probability is and sample size (one needs large sample size to test how successful my system is hence "trying" out short time is futile CHAPTER 7 THE TRADER'S EDGE: THINKING IN PROBABILITIES.....

This is the very best advice that traders especially new traders are given in this thread. Please do not take it lightly. It will change your trading and in fact change your life. it takes time to put into practice what the book teaches. At the end of the day, it is worth all the effort you will invest and then more.....

I started trading in 2008 and my first contact with Trading In The Zone was 2010. I still have cause to look it up every now and then.

note: I shortened the post to avoid walls of text.

Great that I can read in advance partially.
I've ordered last week on Amazon: Trading in the Zone + Disciplined Trader + Reminiscences of a Stock Operator + High Probability Trading.
Only patience I need, shipping to my country takes one month...