5% of traders make it?

[barjon]

Mmmm, it has settled down a bit lately but a few weeks ago when the DOW day’s range was a thousand points on several days and it was leaping about by hundreds in seconds it could hardly be down to fundamentals.

Similarly, when money is pouring into (or out of) funds the fund managers must buy (sell) whether they like it or not. This affects the price and it’s the money flow, not fundamentals, that has driven it.

Good fundamentals may well win out in the end, but there’s often a roller coaster ride on the way with the end miles away.

 

[piphoe]

the "blue chips" are a sure bet!

my dad talks about the blue chips as sure investment

 

[FXX]

Mmmm, it has settled down a bit lately but a few weeks ago when the DOW day’s range was a thousand points on several days and it was leaping about by hundreds in seconds it could hardly be down to fundamentals.

Similarly, when money is pouring into (or out of) funds the fund managers must buy (sell) whether they like it or not. This affects the price and it’s the money flow, not fundamentals, that has driven it.

Good fundamentals may well win out in the end, but there’s often a roller coaster ride on the way with the end miles away.

Fundamentals stretch more than just the scheduled releases. You have sentiment that is driven by other factors including political and geopolitical, seasonal, weather, speaches, market correlations etc. Just as typical fundamental drivers at play work price movements so do these other factors.

If I am not mistaken, the Dow was subject to huge Volatility swings due to vix, interest rates, and risk off sentiment driven by geopolitical factors.

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[piphoe]

Fundamentals stretch more than just the scheduled releases. You have sentiment that is driven by other factors including political and geopolitical, seasonal, weather, speaches, market correlations etc. Just as typical fundamental drivers at play work price movements so do these other factors.

If I am not mistaken, the Dow was subject to huge Volatility swings due to vix, interest rates, and risk off sentiment driven by geopolitical factors.

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BS:cheesy:

including political and geopolitical, seasonal, weather, speaches, market correlations etc.

they can't predict the weather the next day, and they are meterooligists

and weather next week, fuggaboutit

 

[FXX]

BS:cheesy:

including political and geopolitical, seasonal, weather, speaches, market correlations etc.

they can't predict the weather the next day, and they are meterooligists

and weather next week, fuggaboutit

No but a hurricane will affect an area economically and in some areas oil production.

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[FXX]

BS:cheesy:

including political and geopolitical, seasonal, weather, speaches, market correlations etc.

they can't predict the weather the next day, and they are meterooligists

and weather next week, fuggaboutit

What do you think seasonal factors are and do you know they affect things like sales and commodity demand?

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[barjon]

Fundamentals stretch more than just the scheduled releases. You have sentiment that is driven by other factors including political and geopolitical, seasonal, weather, speaches, market correlations etc. Just as typical fundamental drivers at play work price movements so do these other factors.

If I am not mistaken, the Dow was subject to huge Volatility swings due to vix, interest rates, and risk off sentiment driven by geopolitical factors.

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You mean almost everything. Why not just watch what price is actually doing, rather than what it should be doing according to your analysis of the fundamentals.

 

[FXX]

You mean almost everything[emoji38]. Why not just watch what price is actually doing, rather than what it should be doing according to your analysis of the fundamentals.

I never said it was easy and yes you have more work to do than you would with TA. This argument of price being sufficient for success is synonymous to a conspiracy theory. If it were that simple then why would investment banks, hedge funds, and professional independent traders spend money on news terminals. They could save a ton of money just using charts.

The reason is they favour FA and everything that goes with it because it produces higher quality signals. Nothing is perfect and it isn't always correct but that is more often than not a function of other information that hasn't been digested than it is a failure of direction off the back of FA. This is why the big firms have teams of analysts to cover as much scope as possible.

With TA you are playing a coin flip because there is this illusion of historical price producing outcomes. It isn't all bad because levels do play a part in price but the key misunderstanding with this is that it is believed to play a role in the unfolding direction of price. This is the trap that gets all TA traders.

Ultimately price direction is not driven by historical price movement, it is driven by factors that affect the underlying value.

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[Brumby]

With TA you are playing a coin flip because there is this illusion of historical price producing outcomes. It isn't all bad because levels do play a part in price but the key misunderstanding with this is that it is believed to play a role in the unfolding direction of price. This is the trap that gets all TA traders.

In defense of TA I think it is important to differentiate between TA and trading because the "trap" you alluded to is not necessarily associated with TA but false expectation of TA and its application in trading. Some of the broad problems associated with trading and the consequent failures are to do with things like ;
1)The development emphasis on methods and strategies as opposed to the "trader";
2)The loss aversion syndrome and the inability to cut losses and to stretch profits;
3)Incorrect use of leverage, and being ignorant of "risk";
4)Over emphasis on prediction rather than probabilities; and
5)That price reading and candles are synonymous.
I will briefly expand on points (4) and (5) as they directly correspond to your points raised. Traders are generally psychologically geared to fail in trading and that includes driven by the idea of buying low to sell high. The inevitable outcome and expectation is that if one can predict direction than success will follow. Unfortunately trades generally have even probabilities (flip of a coin) and edges are ephemeral and marginal. The counter argument is even if the trade odds are even but if the RR are attractive enough than on the long run, the expectation should be positive if one can cut losses and stretch profits. Trades that have better signals are those as you pointed out are those with missed expectations. The corresponding setups in TA is what we call failures. Bill McClaren in his newsletters used to mention the term “Fast moves come from false moves”. Trend Dynamics third law of trading states “positive trade expectation occurs when the perception of the probability of a price action event diverges from the actual probability of such an event”. Higher probability trades do come from having the patience to wait for the right set up and that can come from both fundamental or technical drivers provided one knows what to look for. I do concede that fundamentals have an edge in providing confidence because of knowing “why”.
I would also briefly touch on price reading which I think is increasingly becoming a lost art. It is laughable that when traders talk about candles and being able to point out bars like “doji” or harami” as somehow is synonymous as reading price action. When I started in this business I attended 2 workshops in 2002/2003 conducted by Dan Gramza on candle charting. He was the expert on candles at that time (besides Steve Nison). During lunch, I was sitting opposite him and a conversation turned to candle setups, trigger and inevitable question thereafter “then what?” Basically his comeback was to do your own research. My point is unfortunately most traders are taught a form of price reading and not the tradecraft of price reading. Price reading is an art of reading order flow, relating each price bar to interlocking action and reactionary price levels and understanding context to overall major and minor swing points. I followed Timothy Morge for years and watched hundreds of hours of his teachings. He could spend an hour just describing price action and reading order flow of just one price chart and teaching how to position for a trade and avoiding being washed and rinsed. One can only relate to quality after having experience what it is like and unfortunately there are plenty of poor quality TA education out there. I am not saying that Dan Gramza is a poor educator but getting quality TA education is a rarity.

 

[barjon]

I never said it was easy and yes you have more work to do than you would with TA. This argument of price being sufficient for success is synonymous to a conspiracy theory. If it were that simple then why would investment banks, hedge funds, and professional independent traders spend money on news terminals. They could save a ton of money just using charts.

The reason is they favour FA and everything that goes with it because it produces higher quality signals. Nothing is perfect and it isn't always correct but that is more often than not a function of other information that hasn't been digested than it is a failure of direction off the back of FA. This is why the big firms have teams of analysts to cover as much scope as possible.

With TA you are playing a coin flip because there is this illusion of historical price producing outcomes. It isn't all bad because levels do play a part in price but the key misunderstanding with this is that it is believed to play a role in the unfolding direction of price. This is the trap that gets all TA traders.

Ultimately price direction is not driven by historical price movement, it is driven by factors that affect the underlying value.

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The big boys you mention are wanting to be ahead of the game and it is they who set the price ball rolling as they react to the fundamentals. When they react it causes price movement and it is that movement we lesser mortals try to latch onto via price reading/TA.

 

[FXX]

The big boys you mention are wanting to be ahead of the game and it is they who set the price ball rolling as they react to the fundamentals. When they react it causes price movement and it is that movement we lesser mortals try to latch onto via price reading/TA.

Please do help me understand the following:

1)What is your confirmation of the big guys moving on something?

2)How do you measure the potential time the move will be in play?

3)How do you manage your risk on the trade?



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[FXX]

In defense of TA I think it is important to differentiate between TA and trading because the "trap" you alluded to is not necessarily associated with TA but false expectation of TA and its application in trading. Some of the broad problems associated with trading and the consequent failures are to do with things like ;
1)The development emphasis on methods and strategies as opposed to the "trader";
2)The loss aversion syndrome and the inability to cut losses and to stretch profits;
3)Incorrect use of leverage, and being ignorant of "risk";
4)Over emphasis on prediction rather than probabilities; and
5)That price reading and candles are synonymous.
I will briefly expand on points (4) and (5) as they directly correspond to your points raised. Traders are generally psychologically geared to fail in trading and that includes driven by the idea of buying low to sell high. The inevitable outcome and expectation is that if one can predict direction than success will follow. Unfortunately trades generally have even probabilities (flip of a coin) and edges are ephemeral and marginal. The counter argument is even if the trade odds are even but if the RR are attractive enough than on the long run, the expectation should be positive if one can cut losses and stretch profits. Trades that have better signals are those as you pointed out are those with missed expectations. The corresponding setups in TA is what we call failures. Bill McClaren in his newsletters used to mention the term “Fast moves come from false moves”. Trend Dynamics third law of trading states “positive trade expectation occurs when the perception of the probability of a price action event diverges from the actual probability of such an event”. Higher probability trades do come from having the patience to wait for the right set up and that can come from both fundamental or technical drivers provided one knows what to look for. I do concede that fundamentals have an edge in providing confidence because of knowing “why”.
I would also briefly touch on price reading which I think is increasingly becoming a lost art. It is laughable that when traders talk about candles and being able to point out bars like “doji” or harami” as somehow is synonymous as reading price action. When I started in this business I attended 2 workshops in 2002/2003 conducted by Dan Gramza on candle charting. He was the expert on candles at that time (besides Steve Nison). During lunch, I was sitting opposite him and a conversation turned to candle setups, trigger and inevitable question thereafter “then what?” Basically his comeback was to do your own research. My point is unfortunately most traders are taught a form of price reading and not the tradecraft of price reading. Price reading is an art of reading order flow, relating each price bar to interlocking action and reactionary price levels and understanding context to overall major and minor swing points. I followed Timothy Morge for years and watched hundreds of hours of his teachings. He could spend an hour just describing price action and reading order flow of just one price chart and teaching how to position for a trade and avoiding being washed and rinsed. One can only relate to quality after having experience what it is like and unfortunately there are plenty of poor quality TA education out there. I am not saying that Dan Gramza is a poor educator but getting quality TA education is a rarity.

I have also watched some of Tim's videos and his art of TA is on a different level to what you see available on the web. He still hand draws some charts, a practice he has done for many years.

A lot of good info in your post by the way including a more elegant breakdown of the TA problem so many have to deal with

 

[barjon]

Please do help me understand the following:

1)What is your confirmation of the big guys moving on something?

2)How do you measure the potential time the move will be in play?

3)How do you manage your risk on the trade?



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I’m not skilled enough to do this with precision which is why I just use a TA based characteristic of price movement which occurs all the time. Broadly explained here
http://www.trade2win.com/articles/2006-trading-business which covers how I tackle risk.

 

[FXX]

I’m not skilled enough to do this with precision which is why I just use a TA based characteristic of price movement which occurs all the time. Broadly explained here
http://www.trade2win.com/articles/2006-trading-business which covers how I tackle risk.

Thanks for sharing. Definitely one of the more sensible approaches. I can also see that based on the continuation expectations that there is a requirement for an existing trend in place. This is also where i see the risk in the strategy itself as you are deriving opportunity through assumption of continuation. The fundamental drivers in my experience have equal amounts of instances where continuation resumes,as there are instances where it doesn't.

The importance of the underlying driver plays a role as well, where some translate into a session reaction while others span multiple sessions or even weeks. This is another risk to this strategy as you don't have context as to how far this is likely to play out and assume on every trade there will be a continuation and you are looking to grab a very small piece of the potential.

Keeping in theme with the previous point, there is also the risk to the amount of profit potential. If for instance the underlying driver is a major deal to the market then your target should extend beyond where you originally intended. Without knowledge of what is driving the market you have to assume every trade is scoped only at your target area. Where i am going with this point is you could add a lot of value to your margins if you included FA in your target decision making process. It will filter out those trades where the underlying driver has played out or just beginning. It will keep you out of trades where there is actually no reason for a continuation to take place. It will also provide opportunity to get in much earlier on a move meaning you add a new dynamic to your strategy where on one hand you look for continuation and the other you look for the beginning of a new move.

I don't know your success rate but I would imagine it to be around 50 to 55 percent over a 12 months period.The reason i think it is about there is because of the lack of information you have available to filter out the losers and therefore have to take every setup.

food for thought perhaps?

 

[Brumby]

I have also watched some of Tim's videos and his art of TA is on a different level to what you see available on the web. He still hand draws some charts, a practice he has done for many years.

On the subject of risk, there is a very insightful video by Tim on how he traded Brexit. It is a gem.

 

[barjon]

Thanks for sharing. Definitely one of the more sensible approaches. I can also see that based on the continuation expectations that there is a requirement for an existing trend in place. This is also where i see the risk in the strategy itself as you are deriving opportunity through assumption of continuation. The fundamental drivers in my experience have equal amounts of instances where continuation resumes,as there are instances where it doesn't.

The importance of the underlying driver plays a role as well, where some translate into a session reaction while others span multiple sessions or even weeks. This is another risk to this strategy as you don't have context as to how far this is likely to play out and assume on every trade there will be a continuation and you are looking to grab a very small piece of the potential.

Keeping in theme with the previous point, there is also the risk to the amount of profit potential. If for instance the underlying driver is a major deal to the market then your target should extend beyond where you originally intended. Without knowledge of what is driving the market you have to assume every trade is scoped only at your target area. Where i am going with this point is you could add a lot of value to your margins if you included FA in your target decision making process. It will filter out those trades where the underlying driver has played out or just beginning. It will keep you out of trades where there is actually no reason for a continuation to take place. It will also provide opportunity to get in much earlier on a move meaning you add a new dynamic to your strategy where on one hand you look for continuation and the other you look for the beginning of a new move.

I don't know your success rate but I would imagine it to be around 50 to 55 percent over a 12 months period.The reason i think it is about there is because of the lack of information you have available to filter out the losers and therefore have to take every setup.

food for thought perhaps?

Thx. Food for thought indeed.

Whilst my trades are based on daily time frame I’m not usually holding for long enough for underlying fundamentals to play out. (Eg: the tech bubble where prices kept rising and rising even though the fundamentals were screaming NO, NO.)

The shorter term fundamentals must impact, of course, but I can’t compete with the big boys analysis so I can only try to guess their conclusions via the price movement. Price doesn’t always move as their analysis might conclude either. As I said if joe public are pouring money into funds the fund managers have got to buy even if they think it’s the worst idea in the world.

 

[NVP]

I spent about 24 hours solid trading Brexit ....will take a look at the video

I hope he didn’t end up as brain dead as I was ...bahahaha

Thanks
N

 

[NVP]

On the subject of risk, there is a very insightful video by Tim on how he traded Brexit. It is a gem.

Interesting video.....the guy is a great raconteur.....i,will look for,some more videos,from him...fascinating

Personally I never saw the market like that on Brexit day......I traded gu up to,the highs and then as the votes and realisation started to set in I followed price and sold it off through the night ......traded what I saw .....if I had wasted excessive time faffing about on all the forums and other squawk boxes I would have missed all the real meat .....

Anyway good video...thanks
N

 

[Brumby]

Interesting video.....the guy is a great raconteur.....i,will look for,some more videos,from him...fascinating

Personally I never saw the market like that on Brexit day......I traded gu up to,the highs and then as the votes and realisation started to set in I followed price and sold it off through the night ......traded what I saw .....if I had wasted excessive time faffing about on all the forums and other squawk boxes I would have missed all the real meat .....

Anyway good video...thanks
N

While Tim often talks about day trading the bond market, in the Brexit situation he had to position trade for obvious reason due to his position size. He indirectly talked about it in the video when he said that the British pound market was simply not big enough to handle his position size and that he also had to short British stocks. I don't know what would be his position size but I won't be surprise if it was in the Billions. It is public information that he trades for three sovereign wealth funds. What is not generally known is that he probably trades for the wealth fund of the British Royal family. In a private video a number of years ago, he mentioned to us that he had been approached by the British Royal family and that he had reluctantly accepted. Soon after I left his private service and so I can only speculate that the arrangement eventually went ahead.

 

[NVP]

I saw that ....Jesus .....the cable market couldn’t handle his position ?.....seriously ?

I thought he was kidding .......it would be serious billions given the actual situation the market was looking at.......it wasn’t a quiet dead end day .......

Shades of soros spring to mind

N