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It's kind of curious...the war between price and indicators

  • #201
  • Dec 3, 2010 5:49am Dec 3, 2010 5:49am
another trick I use to know where market will close
if up day, and price already marked 75% of daily range ..say .0150
it is easy to know where the market will close for the day... usually in the upper part of the last 25% ...

Knowing that... the market will close on above certain price level.. can you make some profitable trades based on pullbacks........ you bit.....
  • #202
  • Dec 3, 2010 8:04am Dec 3, 2010 8:04am
@mahdiquant
To quote you earlier:
"If dynamic RR is better than static RR then that might imply that a dynamic reference point is preferred to a static one."

The two do not have to be mutually related, for one can have a dynamic RR from a fixed reference point.

On the other hand, one can have a fixed reference point, or a dynamic one, depending on their preferences. You can compare the advantages and disadvantages of each, and see which one meshes best with your trading style.

Consider that you began trading when EUR/USD was at parity; this was your line of reference, and you deemed it to be sufficient to keep it fixed. Fast forward to today. Would you have made money by buying up and selling down? Can you identify the factors, that at the end of the day, would cause you to make or lose money? Perhaps position size? Frequency of entry?

@Trader_V
I agree, we have presented mutual interpretations of this topic. But it seems that you are hung up on precisely when/where to enter the market.

How would you respond if I were to tell you that entry is not important, provided that:
1. We keep our risk as small as possible and;
2. Let our rewards grow to their greatest extent?

Let's take some different ways of entering the market:

  1. Peter Crowns DIBS Method: The thread I believe is entitled "No Free Lunch" or something along those lines, and his entry criteria is to go long at the break of the high of an inside bar, and short at the break of the low of the inside bar. Can you see his reference point? Additionally, he keeps his risk as small as possible by taking partial profits, and moving stops to break even, and in he has posted a few charts where he has really let those winners run for great reward!
  2. J16 Pin Bar Method: I believe in summary, we go long at the break of the high of a bullish pin-bar, and go short at the break of the low of a bearish pin-bar. Can you see his reference point? Just like Peter Crowns, James also keeps his risk as small as possible using similar methods, and lets his winners run to maximize his reward.
  3. Graeme's .00 Entry Method: In his thread, Graeme provided a simple system of entering at the break of price ending in .00. When price was heading up from one .00 to the next, it is a signal to go long. When price was heading down from one .00 to the next, it is a signal to short. The reference point here is glaringly obvious!

All of these entry methods have their ups and downs, and as you can see, they are essentially trend-following methods. We know however, that the bane of trend-following systems is that they perform terribly during periods of range. How can we mitigate losses during such time? Unless you are able to somehow identify when the market is going to trend, and when it is going to range, we will have to settle for the best of both worlds - catching portions of the trend, and portions of the range, by spacing out our entries.

All of these systems of course have losses - they are a part of trading that is inevitable. But by allowing our winners to run, do you see that this is the only way that they can outstrip our losses and let them add to our bottom line?

Of course you can go ahead and pick these systems, but you wont be as comfortable using them, as their creators; or persons who have genuinely identified them, before being made aware of systems being based around it. That is why there would be no point in CrucialPoint disclosing the details of his system. Not only did he work hard to create it, but because he knows its intricacies inside-out, it puts him at an advantage to confidently utilize it to his greatest extent. He is simply saving you from a world of hurt, in his own way - tough love as he calls it! So find an entry method - one that you can defend logically - and provided you are consistent with it, you can now direct your attention to bigger issues - where to exit!

@newyear498
You seem to be caught in the oscillatory phase, jumping from system to sytem. You will soon realize that there are essentially two types of profitable traders; at least in my humble opinion:

1. Traders who are cogniscant of the concept of a trend, respect it, and attempt to extract as much profit from it as possible, and;
2. Traders who have access to information which allows them to make informed anticipations of possible trend movements, and then attempt to extract as much profit from it as possible.

I believe "Order Flow" traders fall under category 2. While it is a very interesting method to view the market - by no means is it the only, nor does it hamper the profitability of the traders who fall under category 1. When it boils right down to it, there will be many instances where traders under category 1 and category 2 enter essentially the same trades, because fundamentally they are doing the same thing - following price.

Category 2 traders simply differ in their method of entry, by recognizing that at a macro-level; the forex market is not random. As retail traders, we account for a massive, less than 5% of the total volume of the price movement! It is the other market players, such as Hedge Funds, Multinational Companies and Commerical and Central Banks who dictate the movement of price. Compared to us retail traders - they are hampered by so many restrictions that it provides for scenarios where there is a greater probability of price moving in one direction, as opposed to others.

Retail traders have it quite easy, when we think of the fact that we are not hindered by size, financial regulations, or investor mandates, just to name a few hitches. The fact is that there will be scenarios where certain goals/activities/compliances must be achieved, and when this happens, then price will follow consumed liquidity - and category 2 traders anticipate the direction of price movement based upon information gathered.

Gathering the requisite information is not an easy task, and not everyone has the expertise or time available to be constantly keeping abreast with it, and anticipating it correctly (let's not forget that in the markets - anything can happen). This is why others may simply opt to remain as a category 1 trader, and get the best of both worlds - capitalizing on prolonged price movements; trends, while not having to outlay the time, resources or expertise to correctly anticipate "order flow".

But go to class I must - it seems quite timely as I have appeared to have gone off on a wild tangent! Please remember that these are only my humble views, and they are not necessarily right. I guess sometimes I need to put my thoughts on to paper; or in this case a post.

Good trading to all,
xXTrizzleXx

  • #203
  • Dec 3, 2010 8:17am Dec 3, 2010 8:17am
Quoting xXTrizzleXx
@mahdiquant
To quote you earlier:
"If dynamic RR is better than static RR then that might imply that a dynamic reference point is preferred to a static one."

The two do not have to be mutually related, for one can have a dynamic RR from a fixed reference point.

On the other hand, one can have a fixed reference point, or a dynamic one, depending on their preferences. You can compare the advantages and disadvantages of each, and see which one meshes best with your trading style.

Consider that you began trading...
As far as what you said to me.. I agree with everything you said.. and no I have 1 main system I trade for full lots and I like to test out different things with backtesting and penny trades

but anyways my main point if I had one is that professionals don't trade with a MACD and such for the most part.. so why would you want to trade that way? with all those fancy indicators.. the professionals love that your systems involve junk indicators and take your money for the most part
  • #204
  • Dec 3, 2010 9:22am Dec 3, 2010 9:22am
Quoting xXTrizzleXx
You will soon realize that there are essentially two types of profitable traders; at least in my humble opinion:

1. Traders who are cogniscant of the concept of a trend, respect it, and attempt to extract as much profit from it as possible, and;
2. Traders who have access to information which allows them to make informed anticipations of possible trend movements, and then attempt to extract as much profit from it as possible.
Both your examples use the trend. I disagree, you don't need a trend to profit. All you need is for price to move. Trend, range, spike, retrace, etc.
  • #205
  • Dec 3, 2010 9:48am Dec 3, 2010 9:48am
@newyear498:
Good to know that you have an inquisitive mind, and are always open to testing new ideas - a very commendable trait. With regard to indicators; I have mixed feelings towards them. They can be used and interpreted in various ways, some correct, some incorrect, but in my experience, just using Price is easier. That said, I do know some traders who make good money using indicators only, and some who combine both. I guess it's the way they are used that matters.

@eurotrash:
I will admit that I am a tad biased towards trend trading, but I try to keep an open mind. Perhaps in a few months or years I will have a paradigm shift and see things from a new perspective. Always good to have opposing views every now and again.

Unfortunately my tenure here will be limited as final exams are approaching..but I hope the thread carries on in a productive direction.

Until then;

Respectfully,
xXTrizzleXx
  • #206
  • Edited 2:25pm Dec 3, 2010 1:33pm | Edited 2:25pm
Hey there xXTrizzleXx,

Ok I enjoy you bringing some thoughts into this discussion but I have to clear up a few things that you have said here so that we can keep the discussion on track.

If the heart of CP's trading methodology were to draw just draw a line in the sand and trade in that direction until it's time to draw a new line I would agree with most of what you had to say.

However, that's not what CP's trading methodology (from what I can discern) is all about. Yes he draws a line in the sand but what he is saying is that his line is based on price and where it is at this very moment. Not drawing a line at the previous day, hour or 5M high or low. So it's no a debate about deciding where to enter per say but more of an investigation on how you can enter the market based on the here and now price and return a profit.

Any trader can develop a system that gives them hard and fast rules to determine the trend which translates into a bias for the Buy/Sell hemispheres. And The DIBS method and Graeme's method do just that with a hard and fast line at a specific price level.

Many other systems on ths forum do the same thing. Some use Pivots, others us an MA or combination of MA's, orhters use nothing but S/R areas. But what is intrguing here is that CP has stated that none of those things are needed. Only price and entering when price is moving in a general direction.

If you look back on one of my previous posts I mentioned that it's possible that he is using some type of price action setup based on a candle formation after a pullback. He responded with "yes that was the old days of trading, it's so much simpler now".

So I am not hung up on determining an entry. I am hung up on determining his method of trading. In an attempt to understand maybe something new about price that I have not yet been exposed to.

Anyone who has been involved with trading for any period of time will tell you that it is absolutley the exit that matters much more than the entry. So these things I am fully aware of and in fact use within my own trading style. In fact my method of trading keeps me out of ranging periods and gives me rules to define if there is a trend in place, whether I am in the buy or sell hemisphere, where I should enter and where I will take my profits to protect capital. My exits are well defined as are most successful traders. Whether it is a trailing stop, scaling out of a trade or a hard TP at a defined R:R, exits are defined.

Quoting xXTrizzleXx
@Trader_V
I agree, we have presented mutual interpretations of this topic. But it seems that you are hung up on precisely when/where to enter the market.

How would you respond if I were to tell you that entry is not important, provided that:
1. We keep our risk as small as possible and;
2. Let our rewards grow to their greatest extent?
I agree this is at the heart of all good trading methods. Have a defined risk with an attempt to keep it as small as possible and let winners run as far as we can while capping our losses and preventing them from getting away from us.



Quoting xXTrizzleXx
Let's take some different ways of entering the market:

  1. Peter Crowns DIBS Method: The thread I believe is entitled "No Free Lunch" or something along those lines, and his entry criteria is to go long at the break of the high of an inside bar, and short at the break of the low of the inside bar. Can you see his reference point? Additionally, he keeps his risk as small as possible by taking partial profits, and moving stops to break even, and in he has posted a few charts where he has really let those...

...

Ok like I mentioned previously, yes Peter draws a line at the open based on a specific time. When price is above this line he looks for longs and shorts below the line. This is a little different from what you stated in your post. So he looks for an inside bar above his Buy/Sell line and only takes trades in that direction. He does not take a trade on either side of the inside bar. So in fact his reference point is the line that he draws for his buy/sell areas not the top or bottom of an inside bar.


Quoting xXTrizzleXx

  1. J16 Pin Bar Method: I believe in summary, we go long at the break of the high of a bullish pin-bar, and go short at the break of the low of a bearish pin-bar. Can you see his reference point? Just like Peter Crowns, James also keeps his risk as small as possible using similar methods, and lets his winners run to maximize his reward.

I am intamtely familar with James16 and in fact I have known Jim for a few years now. The Pin Bar method as you have described it is incorrect. Again this is not a trade that takes a by and sell on both sides of a pin bar. In fact the pin bars are to be located at the peak or valley of a retracement or pull back or to be located at a price pivot zone also known as support and resistance. Then a trade is to be taken only in the direction of the pin bar not a trade in either direction once a pin bar is formed. So this method does not apply nearly as much to the discussion in this thread.


Quoting xXTrizzleXx

  1. Graeme's .00 Entry Method: In his thread, Graeme provided a simple system of entering at the break of price ending in .00. When price was heading up from one .00 to the next, it is a signal to go long. When price was heading down from one .00 to the next, it is a signal to short. The reference point here is glaringly obvious!

Now I am not very familiar with this method. However but this is more along the line of what we are talking about when it comes to having a reference point. But I will look into this one a little futher now that it's been pointed out to me

Quoting xXTrizzleXx
All of these entry methods have their ups and downs, and as you can see, they are essentially trend-following methods. We know however, that the bane of trend-following systems is that they perform terribly during periods of range. How can we mitigate losses during such time? Unless you are able to somehow identify when the market is going to trend, and when it is going to range, we will have to settle for the best of both worlds - catching portions of the trend, and portions of the range, by spacing out our entries.
!
You are absolutley correct that trend following methods get slaughtered in ranging markets. But a key concept is that CP mentioned that a system should perform equally as well in ranging and trending markets. Again I reference a post he made with a chart showing that he took trades against the trend with a positive outcome. So while those who can I dentify a range and are patient to wait for a new trend to form they will prevent losses and heavy drawdown periods but this leads me back to only trying to understand how CP is trading the markets which allows him to do both.


Quoting xXTrizzleXx
All of these systems of course have losses - they are a part of trading that is inevitable. But by allowing our winners to run, do you see that this is the only way that they can outstrip our losses and let them add to our bottom line?
I agree totally. Losses are going to occur. Keeping them capped and letting your winners go on is a winning scenario.

Quoting xXTrizzleXx
Of course you can go ahead and pick these systems, but you wont be as comfortable using them, as their creators; or persons who have genuinely identified them, before being made aware of systems being based around it. That is why there would be no point in CrucialPoint disclosing the details of his system. Not only did he work hard to create it, but because he knows its intricacies inside-out, it puts him at an advantage to confidently utilize it to his greatest extent. He is simply saving you from a world of hurt, in his own way -...
Ok I have ot disagree partially here. While I am aware that people who develop their own systems are intimatley aware of ever nuance, are you really saying that it is futile for anyone to share their method with others? There is not a profitable trader today who did not learn what they know from someone else. Some traders have taken bits and pieces from multiple systems to eventually make their own. But the bottom line is that they learned what they know from someone else.

While a trader may not be able to trade someone elses system flawlessly having not been the originator. They can't help from benefitting from learning something from that persons system. It should be up to each individual to decide whether a system in whole or in part is fits their trading style.

But in the end we should all continue to strive to learn more from others. For it is when we stop learning that our minds become stagnant and rusty. In fact you you are an advocate of that by way of saying "the Cowabunga System is not the only style of trading".

While it may be someones perogitive, at no time should it be someones right, to make an attempt to save someone else from themselves without knowing their abilities first.

We are all here to share and learn from one another. Many folks have done that in this thread. And I commend you sir/mam for providing some quality posts which further the discussion.

I think I have typed more in this post than anywhere else all day LOL

Cheers everyone!
Nothing is impossible, with a willing mind!
  • #207
  • Dec 3, 2010 9:45pm Dec 3, 2010 9:45pm
Quoting xXTrizzleXx
@newyear498:
Good to know that you have an inquisitive mind, and are always open to testing new ideas - a very commendable trait. With regard to indicators; I have mixed feelings towards them. They can be used and interpreted in various ways, some correct, some incorrect, but in my experience, just using Price is easier. That said, I do know some traders who make good money using indicators only, and some who combine both. I guess it's the way they are used that matters.

@eurotrash:
I will admit that I am a tad biased towards...
Yes, I am a very impatient trader and have learned to cope by trading for pennies when things are not ideal hah!

but yeah I think you are mostly right.. ok so someone can make money in range and such.. but honestly almost all the traders are making real money in the trends..
  • #208
  • Dec 4, 2010 9:02am Dec 4, 2010 9:02am
Quoting Marv
That is what the majority believes. Try not to rely too much on that information/mindset, and try to switch to the following information/mindset:

"Price", let's cross that and replace it with "Price movement". Let's focus more on movement not the actual price.

Price movement represents the imbalance between buyers' vs sellers' volume at certain points in time.

Volume is money that is in the market.

Big money, creates big buying/selling volume, therefore big money creates the big imbalances, therefore big money creates the big movements.

Small money creates noise at best, small waves, small corrections. Its influence is more and more visible when big money is taken more and more out without creating any big imbalance between itself, or when big money is still in the market but the big buying volume is very close to perfect balance with the big selling volume.

"in the market": big or small, no money stays in the market forever. It is taken out, sometimes quite predictably if well isolated by the observer.

Imbalance between the buying vs selling volume is more important than the volume itself. Volume is important only because the higher volume there is in the market (buying and selling volume), the stronger imbalances are likely to happen (and vice versa) and therefore the stronger moves. Strong moves mean opportunities to get in as price is making a nice and confident move, make some money, then get out without having your money invested on uncertain money.

Imbalance (resulting from imbalance between big money vs small money) creates a movement with a trajectory and a center of gravity. Around this center of gravity the rest of the money (i.e. the gradually smaller and smaller buyers/sellers) will flock, trying to make profit too.

You get the idea... Try to develop "that" kind of mindset and how to put it to action, instead of the basic more traditional stuff everybody else is doing.

Also, don't analyze one bar of movement and try to anticipate 3 bars of movement: the further it is in the future the harder it is to predict. Instead, analyze 100 bars of action (not just the apparent movements, but the possible underlying market action), as much information as you can collect, and then use it to pick one opportunity to predict a one or two bar movement, make the trade, close the trade, then start the whole process all over again. (btw, don't take these numbers here literally, but again: you get the idea)

Do that successfully and watch your experience, intuition, and profitability increase in time.

I hope that helps somebody a bit.
Quoting this excellent post since everyone seems to have missed it...
  • #209
  • Dec 4, 2010 9:24am Dec 4, 2010 9:24am
Quoting xXTrizzleXx
@newyear498:
Good to know that you have an inquisitive mind, and are always open to testing new ideas - a very commendable trait. With regard to indicators; I have mixed feelings towards them. They can be used and interpreted in various ways, some correct, some incorrect, but in my experience, just using Price is easier. That said, I do know some traders who make good money using indicators only, and some who combine both. I guess it's the way they are used that matters.

Great comment here xXTrizzleXx!

You are right on key when you say that it's in the way you use indicators that matters. I believe you have to still observe price as the 1st indicator then use indicators as a guide to help make a trade decision.

A good example of this is an MA cross method. The novice way of trading this method would be taking trades based on the cross of the MA's alone. But if you read the price action along with the cross you can turn a system that gets destroyed in a range into a system that gets you into a trend and allowing you to ride it with proper trade management.

I included an example here and I know CP does not use history for his trading information but for the sake of the example it's kind of important

Taking CP's idea I added 2 MA's based on the hourly TF to this chart of the E/J. Being on a 5M I added a 60MA representing 5hrs of time and a 24MA representing 2hrs of time. I had to dig a little to find a text book example so here we go.

If you would have just taken trades at the cross you would have had to small losses. But if you take the definition of a trend which is a series of higher highs and higher lows for an up trend and lower highs and lower lows for a down trend you will see that a trend is not present. It's in a range.

So using some simple price action principles and rules that allow us to get in on a trade during the 1st pull back as CP has also made reference to, you have a much higher chance at success.

So I have marked the Highest High (HH) and the Most Recent Low (MRL) on this chart. Knowing these to points can help you define rules for entry into a trend. So instead of just trading the 1st cross, you could wait for the cross to occur allow price to trade through the MRL then retrace to make a new Lower High possibly near the MA's giving you entry and stop loss criteria as well as creating Lower Highs and lower Lows hence giving you also trend criteria. So you never would have entered the 1st cross.

And if we apply the same principles to the 2nd cross we never would have entered there either. Because the MA's crossed to the downside warning us that the upward momentum may be weak so we would wait for the HH to be taken out enter based on the 1st retrace possible near the MA's for a lng trade. And once again this did not occur so there would be no entry.

So the basis is that indicators can help and provide themselves as a guide but always looking to price as your first indicator to make good trading decisions.
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Nothing is impossible, with a willing mind!
  • #210
  • Edited 12:17pm Dec 4, 2010 11:29am | Edited 12:17pm
Quoting eurotrash
Quoting this excellent post since everyone seems to have missed it...
Agreed to its excellence.


In fact, the author grossly underestimated the power of imbalance in trading price. That's all I do, look for " a trajectory and a center of gravity " in a 1'-TF candle chart, and the right imbalance, regardless of # of bars, can carry the market for hours.
It's just finding it in the candles, so that skill and number of bars are inversely proportional.

Volume: Perhaps, only lots of volume may also be due to a big trade divided into lots of trades, big hedges, or other hidden volume, so that small lots may still take over a busy candle's significance.
Higher TF's and averaging a candle at the same time of day over several days both help discount this and the nonstandard-market effects, only why use it if price does the same on the lowest TF (since each broke r, though having different prices than others', at least has its own readably coherent standard for price)?


Sorry if I got carried away, there are other approaches that use the post.
  • #211
  • Jan 18, 2011 6:04pm Jan 18, 2011 6:04pm
Quoting Trader_V
Great comment here xXTrizzleXx!

You are right on key when you say that it's in the way you use indicators that matters....
As I understand CP, why would I represent 5H of time and 2H of time on the 5 min chart, as the globally used time frames are 15m 1h 4h and Daily. Instead I would use 12 SMA for 1h time, and 48 SMA for 4H, and 288 SMA for Daily interpretation, as for deciding is it ranging or not we could use measurement of the angle(steepness) of MA, as it's flattening when we get in ranging market. But I prefer the 1min it's somehow better for me.

Regards,
  • #212
  • Jan 19, 2011 2:05am Jan 19, 2011 2:05am
Quoting TheDivine
As I understand CP, why would I represent 5H of time and 2H of time on the 5 min chart, as the globally used time frames are 15m 1h 4h and Daily. Instead I would use 12 SMA for 1h time, and 48 SMA for 4H, and 288 SMA for Daily interpretation, as for deciding is it ranging or not we could use measurement of the angle(steepness) of MA, as it's flattening when we get in ranging market. But I prefer the 1min it's somehow better for me.

Regards,
I'm the same way. I use a 1min chart with a 60wma and watch how PA interacts with the line. If you get enough screentime, you have a good idea which way price is headed.
  • #213
  • Jan 19, 2011 6:17pm Jan 19, 2011 6:17pm
Quoting Magic Trader
I'm the same way. I use a 1min chart with a 60wma and watch how PA interacts with the line. If you get enough screentime, you have a good idea which way price is headed.
why did you used WMA, because it put more value on the recent data or there was another reason for that.

Regards,
  • #214
  • Jan 20, 2011 1:17am Jan 20, 2011 1:17am
Quoting TheDivine
why did you used WMA, because it put more value on the recent data or there was another reason for that.

Regards,
I just get a little clearer view of price using the WMA. I've tried EMA and SMA and it's not quite the same.

In the end, it really doesn't matter what you use. Just put in the screentime to get familiar with PA around your chosen MA.
  • #215
  • Jan 22, 2011 12:59pm Jan 22, 2011 12:59pm
Quoting Magic Trader
I just get a little clearer view of price using the WMA. I've tried EMA and SMA and it's not quite the same.

In the end, it really doesn't matter what you use. Just put in the screentime to get familiar with PA around your chosen MA.
I agree, it doesn't matter what MA you choose. I like to place an ema on a larger timeframe such as a 10 ema and then go to the smaller timeframe and trade with the trend all while looking at the how price reacts to the larger ema on that smaller timeframe.
  • #216
  • Nov 2, 2011 11:30am Nov 2, 2011 11:30am
Quoting nelson7
I agree, it doesn't matter what MA you choose. I like to place an ema on a larger timeframe such as a 10 ema and then go to the smaller timeframe and trade with the trend all while looking at the how price reacts to the larger ema on that smaller timeframe.
Bump.... This is a great thread
  • #217
  • Sep 3, 2016 4:55am Sep 3, 2016 4:55am
Hi to everybody,
i'm reading a very interesting discussion here, full of hints for a careful reader!
Thank you to all the smart contributors and let's hope it will be a long lasting thread.
Now some food for thoughts:

I think that the old diatribe about price and indicators is a matter wool goats; indicators are derived from price so they show price: therefore it means nothing to me to make a difference between price and indicators and also saying that indicators are lagging.
The study of price actions is the study of what price is doing: as we can only see what already has occured, so the past, looking at price action on a naked chart is a lagging activity anyway; also charts on themselfs are lagging because they show the consequence of the decisions made by market operators which are the cause of price movements, so charts show what market makers have planned to do in a previous moment.
Indicators are just a different way to look at price action: they are meant to draw on a chart what a trader has chosen to see making it easier to see, nothing more and nothing less.
They have the power to filter out from our charts what we consider noisy or confusing with the purpose to put in evidence what we consider important.
Therefore, in my opinion, what matters more in this topic is what indicators do not do: they do not predict; this is a real myth that traders must forget.
One important consequence is that if you don't know how to read price action you either don't understand indicators.
Said that, there are situations in which a naked chart tells much more than any indicator and situations in which a little suite of indicators, wisely chosen and well tuned with one another, can help a lot; beyond this there is the mind of each trader with his psychology and needs.
So there is nothing wrong with trading a naked chart or a chart with some indicators; what matters is how do you use indicators.

Here comes another topic that is the foundation of everything else: Market Structure; it is not possible to make a correct use of any indicator and i would add also of any naked chart if you do not know what market is and how it works: and this is the most difficult but amazing brainteaser you can face with.
Someone asked me if figuring out this brainteaser was really necessary to my trading:
well, the question is not redundant because the concepts you may find are not applicable to real trading as they are, I mean it is not possible to translate those concepts into a trading system, at least not in the present.
But, my answer is a big "YES!" because solving that brainteaser allows you to look at charts differently, allows you to see what you have to see instead of what you want to see (which is, in most of the cases, right the opposite of what price is doing) and allows you to build your own tools system: in other words, allows you to become a profitable trader.
I know some very clever traders that are not even aware of this, they did not solve the brainteaser consciously, but they somehow got the intuition, so even though they are not aware of it and are not able to explain, they solved it in their subconscious mind.
I have a strong analytical mind and most likely this is at least one of the reasons i did not get that intuition, so i had to make my work and study to figure it out consciously: it has been a really hard task but also amazing and it is the foundation of all the new findings i make day in and day out: there is not an end to our learning process, in trading as well as in life.
I appreciate very much Trizzle's post, which received also CP's congratulations, it is a great synthesis that only who has chrystal clear ideas can make, and I agree almost with everything he wrote, but one thing:

".......is how do we predict when the market is ending and beginning its trending/ranging cycles?
We cannot........"

Once you get the hole picture it is not that difficult to assess, even in advance, market phases: trend, range, congestion.....thereafter it is just a matter of adapting with the current market phase and do act or do not act accordingly.
  • #218
  • Sep 3, 2016 5:41am Sep 3, 2016 5:41am

UNCERTAINTY


When it comes to money this word gets its highest and strongest power, because of all the psychological issues that money awakes in each human being.
I think trading is so difficult to learn because when we put money and uncertainty all together something in the mind immediately reacts and unables people from thinking how they should think: so they all end up "trading not to lose instead of trading to win" - quoting a great CP's sentence here -.

I understand the words "trading not to lose" as the vain attempt to make certain what is uncertain.
There is a big lag between noob traders approach to trading and market environment: most of them keep on thinking in terms of right or wrong, meanwhile market is just a world of possibilities: there is no right no wrong.
So what? which is the point of trying to be right when there is no right nor wrong?
This is the hardest psychological issue that must be overcome and requires a radical shift of mindset.
This apparentely little difference in perspective is strongly conditioning and affecting the hole thinking process of a trader, from reading price action to adding some indicators for a better understanding and to building a correct risk management strategy and to decision making process: in other words it affects the hole trading process and therefore final results.

Those results will be exactly the ones that the noob trader is struggling to avoid: losses.
This is one of the strongest and most unknown natural laws: as you believe in your heart, so it will be done: this is the law of life and of living.

I understand the words "trade to win" as the solution to the above big issue:
trying to make certain what is uncertain, that is to say trying to predict, trying to confirm, trying to be right, is fool!
There is no way to make it, but there is the way to be safe even in an uncertain environment: do not avoid uncertainty, manage it.
Therefore it is not a fancy trading system that will make you a pips reaper but the risk management strategy you use, supposed you have one.
Finally, i want to make it clear right now: i'm not speaking of money management but risk management: the difference is huge, although they both must play all together: money and risk management are two different things but they cannot exist without one another.
How to make it? stop thinking in terms of right/wrong and begin to think in terms of possibilities, it's that simple.
  • #219
  • Feb 5, 2020 10:01am Feb 5, 2020 10:01am
Quoting CrucialPoint
{quote} And that is the right question
95% of the time, Price will close above or below its Opening price. Less than 5% of the time it will close at its opening price.

I can prove you on PM that it is false. But you are not on FF anymore...

Green pips
Bottomless wonders spring from simple rules, which are repeated without end
  • #220
  • Oct 27, 2020 1:25pm Oct 27, 2020 1:25pm
Quoting limprobable
{quote} 95% of the time, Price will close above or below its Opening price. Less than 5% of the time it will close at its opening price. I can prove you on PM that it is false. But you are not on FF anymore... Green pips
Why don't you simply prove it there?
There is no try
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