Questioning common beliefs

[Forexmospherian]

Just had a quick look on your thread...seems very short on charts, but I did find one example...and you trade off these, ( erm )charts do you ?

Yes - all and sundry say that - but then want to know why I am so accurate and work off 5 pip stops

Tried nearly a year of naked charts - now that's a bit like throwing darts and guessing - lol - even when you are experienced with reading PA

Now when you get profitable trades with RR's over 5 in less than 30 mins - I will know you have made it ;-)

Meanwhile - just think what you are missing ;-)

Good trading

PS - also profitable - EVERY DAY - how many traders do you know like me then ??

Regards

F

 

[Forexmospherian]

The trend is your friend

On the whole I buy into this premise for the following reasons only:

1) If you are trading with the direction of your chosen size of auction rotations you are likely to have a smaller adverse excursion from your point of entry and larger target. This will result in a higher reward to risk ratio for your trades over a meaningful sample size.

2) If you are trading against the direction of your chosen size of auction rotations you will likely have a greater adverse excursion from your point of entry and smaller target. This will result in a lower reward to risk ratio for your trades over a meaningful sample size.

Assuming you are going long or short on a coin toss, which do you think will net you the biggest gain/smallest loss (please delete depending on your skill level)?

Maths and market understanding init.

If you can trade both ways most days with no bias - small tight stops and just reading structure / time and PA - you can even make more money through better RR's than just following the weekly trend.

A great example last 4 days is the AU - nearly made as many pips buying - as selling

I have tried all ways - and both ways for me have given me far better results - even if some days over 70% of your trades are in one direction - ie that of the intraday trend - not the weekly or monthly

Regards

F

 

[robster970]

Trends for me are short term, intraday movements. I'm generally reading exhaustion of a move and then pre-empting price moving in the opposite direction as a result of observing short term volatility disappearing. Auction rotations today were between 1-4 pts (e-mini) by the looks of it. I've stopped earlier in December for an extended holiday. I might start posting a little again as the quality of dialogue has gone up.

 

[CityMasterTrader]

The second common belief I would like to question is:

The trend is your friend


Well is it? Quite a strong statement to make, especially when we have to define trend. And your definition is probably different to mine and different to the one who invented the phrase. But even once you take your specific definition, is it better or worse to trade with the trend? Have you checked or assumed it's true?


Is the trend your friend on all timeframes, on all instruments? Is it ever a good idea to trade against it?


All thoughts welcome on this or the previous post, and indeed any other common beliefs that you think are worth questioning.

Trend is indeed subjective, however, when it is very clearly up/down/sideways on a long enough timeframe (i.e. daily, maybe over several months) it is generally accepted that there will be enough market pressure at the key levels for the trend to persist until something big results in a breakout or breakdown. It is also another way saying ‘trade what you see and not what you want to see’ and ‘don’t try and call the bottom of the top’, which is something that tends to hurt people. You’re unlikely to find any stats on this (how can you say I would have bought here and not here). Good luck with whatever trend you trade.

 

[NVP]

The trend is your friend

On the whole I buy into this premise for the following reasons only:

1) If you are trading with the direction of your chosen size of auction rotations you are likely to have a smaller adverse excursion from your point of entry and larger target. This will result in a higher reward to risk ratio for your trades over a meaningful sample size.

2) If you are trading against the direction of your chosen size of auction rotations you will likely have a greater adverse excursion from your point of entry and smaller target. This will result in a lower reward to risk ratio for your trades over a meaningful sample size.

Assuming you are going long or short on a coin toss, which do you think will net you the biggest gain/smallest loss (please delete depending on your skill level)?

Maths and market understanding init.

and at least it cuts out 50% of the signals ...right ?

N

 

[NVP]

Well - I can only relate to Forex trading - as that's all I have traded over 11 yrs via internet platform.

Forget the country - forget the fundamentals - forget the history - forget even what happened yesterday - Give my my charts on my time frames and i can trade it profitable from European Open to London close - profitably - day in day out and on and on and on - ie a bit like a duracell battery ;-)

With regards to throwing darts blindfolded - is that a joke ;-)

Yes for sure it applies to probably 80% of all traders with less than 3 years PA and price structure experience . Yes - i would need to see the day's calender ( only that day) to see what "gameplan" might be tried - I don't need the volumes - I don't need squawk box - I just need 2 -6 hrs over a 10 hr day to sit there any make money.

I will say though - I am no fortune teller - static analysis is dead analysis for me and I only want to trade in the "now" - not for 2 - 4 or 8 hrs ahead

Hope that helps completely dismiss that one ;-))

Regards

F

yep..agreed

over the years I have come full circle and am very much back in the here and now moment ......

Wildes wrote some good stuff in the Adam theory where he stated the future direction and strength of a Market was related to previous bars - but with diminishing returns on accuracy as you went backwards in time....

I like that and try to use it

N

 

[Shakone]

What's good for the goose is good for the gander

I don't think this is true in trading. It's worth keeping in mind, whenever you get advice from anyone, that they may not be trading with the same philosophy as you. What's good for a fundamentalist may not be good for a contrarian, and what's good for someone who can watch price intraday may not be good for someone who can only check in after work once a day. There are some things that are true across most styles (cutting losses, running winners) but a lot of the other details can vary.


A corollary to darktone's excellent suggestion

Your stop size should be dependent on the timeframe you are trading

What has the chart that you're looking at got to do with anything? The market doesn't care what you look at. Even if you change the statement to holding length...well you don't know how long you will hold it for, might be a bad trade from the off and you want to get out after a few minutes. Why wait for an entire day or week's move against you to admit you timed it badly.

 

[Shakone]

Trends for me are short term, intraday movements. I'm generally reading exhaustion of a move and then pre-empting price moving in the opposite direction as a result of observing short term volatility disappearing. Auction rotations today were between 1-4 pts (e-mini) by the looks of it. I've stopped earlier in December for an extended holiday. I might start posting a little again as the quality of dialogue has gone up.

Interesting, so what you do is pre-empting the next swing or trend, which some may call contrarian. That's why I prefer the Line of Least Resistance term even though others hate the term. Because there's a lot of built in baggage about trend.

But with your word 'pre-empt' you've brought up another question to my mind, and I don't know if you'd agree it's questionable, but here goes

It is better to wait for confirmation

Is it? Some of the best trades come before you receive confirmation imo. Remember that if you go long as a trader, you need someone to buy from you higher up so that you can exit with a profit. Can't make money otherwise. If you enter long before what most view as confirmation, then you'll probably have others jumping in long once it is later confirmed. Of course it might not be confirmed, in which case you'll have to skilfully get out. Does it result in more losers but higher expectancy? Worth thinking about as new entries open themselves up to you (entering before the breakout for example).

 

[Mr. Charts]

One of the best threads for a long time
Well done to the OP

 

[Shakone]

Trend is indeed subjective, however, when it is very clearly up/down/sideways on a long enough timeframe (i.e. daily, maybe over several months) it is generally accepted that there will be enough market pressure at the key levels for the trend to persist until something big results in a breakout or breakdown. It is also another way saying ‘trade what you see and not what you want to see’ and ‘don’t try and call the bottom of the top’, which is something that tends to hurt people. You’re unlikely to find any stats on this (how can you say I would have bought here and not here). Good luck with whatever trend you trade.

Yeah good post, but what is 'long enough' and what is 'clearly'. I've seen a clear up trend and a friend is waiting for his MAs to cross before it changes from a downtrend. Sideways can also be quite difficult to spot unless you zoom out a bit.

On the stats of picking the top, well looking at the DOW for example, in the last 4 and a half years, any entry long that was below 15900 would be currently showing a profit if held. Any entry short that tried to pick a top below 15900 would be currently showing a loss, and maybe a big loss, if held. I'm not suggesting buy and hold, I'm trying to make another point.

 

[malaguti]

It is better to wait for confirmation

Is it? Some of the best trades come before you receive confirmation imo. Remember that if you go long as a trader, you need someone to buy from you higher up so that you can exit with a profit. Can't make money otherwise. If you enter long before what most view as confirmation, then you'll probably have others jumping in long once it is later confirmed. Of course it might not be confirmed, in which case you'll have to skilfully get out. Does it result in more losers but higher expectancy? Worth thinking about as new entries open themselves up to you (entering before the breakout for example).

Thats a good one. You know my preferred trading style, using point and figure. That is all about waiting for the breakout to happen, and then some. I haven't been able to get in early with great success, so I prefer to wait for the breakout, and then some more like I say, but the number of winning trades has gone up significantly. I don't mind joining the party late at all. One of my rules is WAIT.
Then if the trade doesn't work, at least I cant kick myself afterwards

 

[robster970]

and at least it cuts out 50% of the signals ...right ?

N

Yes it does, although I do take counter-trend also if the price action looks favourable enough. I'm not wedded to it tbh but as a rule of thumb, it's not a bad one imo.

 

[robster970]

It is better to wait for confirmation

Is it? Some of the best trades come before you receive confirmation imo. Remember that if you go long as a trader, you need someone to buy from you higher up so that you can exit with a profit. Can't make money otherwise. If you enter long before what most view as confirmation, then you'll probably have others jumping in long once it is later confirmed. Of course it might not be confirmed, in which case you'll have to skilfully get out. Does it result in more losers but higher expectancy? Worth thinking about as new entries open themselves up to you (entering before the breakout for example).

Horses for courses this one - trade entry location vs confirmation.

The earlier you get in (therefore the lower the confirmation), the greater the r:r but you have a lower win%

The later you get in (i.e. you have achieved confirmation), the lower your r:r but an increased win%

It's a function of how important being right is to you ;-)

The definition of 'best' trade is not always monetary and may in fact be psychological, even if you pretend that this isn't the case.

 

[Forexmospherian]

Is it better to wait for confirmation

Depends on your confirmation levels ;-)

Trading is not a science - it is not all black or white - there is a lot of grey areas.

The market is dynamic and evolves - fixed static methods need to be continually fine tuned and adapted to every new trade circumstance

For example - some of my best trades will always start at a daily high or daily low - when price hits an interim S or R - and the price is in the middle of a hr or half hr time window and after price stops and then retraces over just 3 pips - I can go in on full barrel - with multi lots knowing I should easily get an RR of 2 within 10 minutes - and then if price holds above my entry I might over the next 30 /60 mins have a trade with an RR of 4 or 6 - or even 10 on rare occasions of a move of over 50 pips in under the hr.

So my confirmation levels could be said to be not acceptable - or very weak to many normal swing traders - but to me trade set ups like that are AAA++ ones

Then in other cases - I can have many other "clues" that I call them - that point to a trade - but something is not quite correct - ie the time is wrong - the previous last 15 mins was not a strong enough move - or there are conflicting clues and so its not a strong AAA trade for me - and even if I could see massive support or R within 10 pips - I would still not take it - even with a 20 or 25 pip stop - which really I would not entertain anyway.

Although I work on fixed ( mental ) stops ( with one click in and out) - i have to wait for price to be in my "trade window" to take it. If price was not correct and I needed a larger stop - i would ignore it - and wait for another one to come along.

With targets - the market is dynamic as we have said - so they need to be fluid and adjustable according to flows and time - yet again for me - a "grey area"

Many traders require set fixed rules and keep to them rigidly.

I like rules - but they need to be flexible - within set margins - so confirmations for me on trades is flexible - as is the targets ;-)

Hope that makes sense

Regards

F

 

[Shakone]

Is it better to wait for confirmation

Depends on your confirmation levels ;-)

Trading is not a science - it is not all black or white - there is a lot of grey areas.

The market is dynamic and evolves - fixed static methods need to be continually fine tuned and adapted to every new trade circumstance

For example - some of my best trades will always start at a daily high or daily low - when price hits an interim S or R - and the price is in the middle of a hr or half hr time window and after price stops and then retraces over just 3 pips - I can go in on full barrel - with multi lots knowing I should easily get an RR of 2 within 10 minutes - and then if price holds above my entry I might over the next 30 /60 mins have a trade with an RR of 4 or 6 - or even 10 on rare occasions of a move of over 50 pips in under the hr.

So my confirmation levels could be said to be not acceptable - or very weak to many normal swing traders - but to me trade set ups like that are AAA++ ones

Then in other cases - I can have many other "clues" that I call them - that point to a trade - but something is not quite correct - ie the time is wrong - the previous last 15 mins was not a strong enough move - or there are conflicting clues and so its not a strong AAA trade for me - and even if I could see massive support or R within 10 pips - I would still not take it - even with a 20 or 25 pip stop - which really I would not entertain anyway.

Although I work on fixed ( mental ) stops ( with one click in and out) - i have to wait for price to be in my "trade window" to take it. If price was not correct and I needed a larger stop - i would ignore it - and wait for another one to come along.

With targets - the market is dynamic as we have said - so they need to be fluid and adjustable according to flows and time - yet again for me - a "grey area"

Many traders require set fixed rules and keep to them rigidly.

I like rules - but they need to be flexible - within set margins - so confirmations for me on trades is flexible - as is the targets ;-)

Hope that makes sense

Regards

F

To be clear F, I'm not necessarily advocating the opposite of the statements (although in some cases I would), merely that you don't take them for granted and look carefully at the situation for your own system.


The market is fractal, it behaves the same on all timeframes

Admittedly charts look similar on different timeframes, but are they really the same? Do humans react the same on a short term basis as they do when they've had time to sleep on it? Why should we expect all timeframes to behave in the same way? Aren't there different participants too?

 

[wackypete2]

The market is fractal, it behaves the same on all timeframes

Admittedly charts look similar on different timeframes, but are they really the same? Do humans react the same on a short term basis as they do when they've had time to sleep on it? Why should we expect all timeframes to behave in the same way? Aren't there different participants too?

Of all the beliefs and "isms" in this thread this is the one I believe to be the most wrong. Your last line says it all. There are different sets of participants looking at different time frames for different reasons, therefore on a time frame basis, charts do not behave the same way. An example is a small news spike easily seen on a 1m or 5m chart but not noticeable or irrelevant on a 4h chart. Traders looking at longer term charts might just "ho, hum" at the news while short termers might frantically try to duck and dodge in and out.

Peter

 

[Shakone]

For those on the thread who are only interested in Livermore's overall MONETARY success or failure, I suggest they are completely missing the point.

Livermore was nearing the end of his trading career before he committed pen to paper. His intention at this juncture was to impart his wisdom gained over many decades. It's also worth noting that he was a very tired man at the end. Tired men pass down to the next generation, for they know that their time is done.

Livermore always spoke about trading in terms of "markets and their condition", in other words, he may have been looking to trade an instrument, but within the context of the market as a whole.

He also said something along the lines of, "sitting out of the market", clearly he was referring to the times when "instruments", and by extension, "markets" were mixed. On reflection, One of his biggest regrets was, that he hadn't spent nearly enough time doing nothing, ie "sitting on his hands".

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My reasoning above is why I have massive issues with what I term "SINGLE INSTRUMENT MONKEYS" They may just as well be blindfolded and throw darts at a board, in terms of trade opportunity and outcome.

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Trading a single instrument in isolation based on it's chart and price action is a valid way to trade.

This is a tricky one. On the one hand I agree in that I think you should be aware of all things that can affect the instrument you're trading, including other correlated instruments and any relevant news. On the other hand, there are traits of price movement that apply to all instruments, and traits that are unique to the particular instrument. So specialisation to an instrument or a small group of instruments gives you knowledge of those unique traits that you otherwise might not have. Definitely worth questioning though.

Also as I mentioned once, I find it strange that new traders think they can trade 10 different forex pairs, a couple of commodities and an index or two, before they've even managed to trade one instrument profitably. How does one expect to trade a bunch of different things successfully, if he can't trade even one of them successfully?

 

[Shakone]

Support becomes resistance and resistance becomes support



So if I see resistance and it is broken, then when it returns, will it actually be supported, i.e. will there be traders willing to support price at that level and keep buying to keep it above, or will it simply be some traders with losing short positions exiting around that level by buying? Because if it's the latter, they have no reason to buy when price again hits that level, nor any reason to support price there. Can you tell when support is likely to become resistance (or vice versa) and when it is not?

 

[malaguti]

Support becomes resistance and resistance becomes support



So if I see resistance and it is broken, then when it returns, will it actually be supported, i.e. will there be traders willing to support price at that level and keep buying to keep it above, or will it simply be some traders with losing short positions exiting around that level by buying? Because if it's the latter, they have no reason to buy when price again hits that level, nor any reason to support price there. Can you tell when support is likely to become resistance (or vice versa) and when it is not?

I put this one in with all the other "hindsight" material. It may have worked fine in hindsight and show me loads of charts where it does work, and I'll counter with loads of charts that don't.
That could of course be argued that what I was drawing wasn't actually true support. so what is true support?...something that only works well after its happened. previous resistance, is just a buying opportunity for me...it means nothing after that. would I place a stop based on that fallacy, never

 

[Shakone]

A daytrader needs to trade every day, and should watch the screen all day long.



If you're not profitable every day/week/month, then your system is crap.



All good traders blow an account or two.