Best Thread BBmac's Gbpusd thread
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bbmac
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Price reaches 97% of it's 20day average pip range in the L-H run-up today and 'stronger offers 6745/50 say mni, just shy of a previous 1hr swing hi=prev res=potential res zone...at which point another 1min Reversal set-up develops (same set-up as has occurred twice more in the run up today examples of which are in the posts above.) A supporting 5min and 15min regular bearish divergence based reversal set-ups supported a hi-probability against trend selling opportunity...they are shown below;
the 1min Rev Extr ii set-up supported by
and
G/L
Price reaches 97% of it's 20day average pip range in the L-H run-up today and 'stronger offers 6745/50 say mni, just shy of a previous 1hr swing hi=prev res=potential res zone...at which point another 1min Reversal set-up develops (same set-up as has occurred twice more in the run up today examples of which are in the posts above.) A supporting 5min and 15min regular bearish divergence based reversal set-ups supported a hi-probability against trend selling opportunity...they are shown below;
the 1min Rev Extr ii set-up supported by
and
G/L
Few comments and maybe subsequent questions to your posts which I must say have been highly informative.
1) divergence, be it classic or hidden is usually taken with established trend. Entry is on lower tf to the tf of the established trend
2)If a LL or V forms near a level with divergence then trades can be taken without an established trend.
3) reversal trades with divergence only to be taken at levels
is this correct?
Also, when do you know a HL is formed or a lower high? is this once a high (low) is broken to form a HH (LL)? as in post 325, where the first HL could easily have formed a lower high? or because we had a H which took out a LH and thus there is more chance of HL forming next than a LH?
In post 326, the highest high is labelled as a H and not HH, whyis this? The fact we took out a HH means we have now formed a second HH? or is it because we formed a LH in that segment of the trend?
Sorry if this all sounds convoluted but its something that greatly interests me and your take of price action is very close to how I trade myself...
1) divergence, be it classic or hidden is usually taken with established trend. Entry is on lower tf to the tf of the established trend
2)If a LL or V forms near a level with divergence then trades can be taken without an established trend.
3) reversal trades with divergence only to be taken at levels
is this correct?
Also, when do you know a HL is formed or a lower high? is this once a high (low) is broken to form a HH (LL)? as in post 325, where the first HL could easily have formed a lower high? or because we had a H which took out a LH and thus there is more chance of HL forming next than a LH?
In post 326, the highest high is labelled as a H and not HH, whyis this? The fact we took out a HH means we have now formed a second HH? or is it because we formed a LH in that segment of the trend?
Sorry if this all sounds convoluted but its something that greatly interests me and your take of price action is very close to how I trade myself...
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bbmac
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re questions
A few questions here, I'll do my best to answer them in the order you raise them, below;
1. Regular (classic) or hidden divergence can be a useful too at areas of potential support/resistance -and- potential sbr/rbs respectively and can be against the trend on the next higher t/f (+) -and- with the trend on the next higher t/f (=) after a pullback to potential sbr/rbs on that next higher t/f.
2. Regular divergence set-ups can occur at aHL, H, HH, LH, L or LL on the next higher t/f, and this can occur against a trend present on the next higher t/f (+) -or- indeed in ranging conditions on the next higher t/f (+) If for example there was a trend present to the 1hr t/f and regular div only on 1min that would suggest a very shallow pullback only,,..howevere if that 1min regualr div set-up was supported by regualr div on 5min and 15min, that would suggest a deeper pullback at least...so the rule of thumb if couter-trend trading is to look for supporting regualr diverence/osc extremes on t/f's above that of your trigger t/f, particualrly if against a trend present on t/f's above that that the highest t/f reg div/osc extremes exists upon. Ensure too that there is potential supp/res factors at the place the reg div/osc extremes develop.
3. Yes, I only trade regular divergence/oscillator extreme based reversal set-ups (against next highert t/f [+] trend or ranging conditions) @ pre-identified potential support/resistance.)
I'm not sure I understand the final question you ask, but as general info, I look for fractal swing lo/hi's on the respective t/f, ie a candle where at least the candles immediately straddling it either side are higher /lower lows and for a fractal swing Lo/Hi respectively...the more pronounced the fractal swing the bigger the imbalance of demand/supply -or- supply/demand respectively. A HL follows a L or HL, a H follows a LH, a HH follows a H, a LH follows a H or a LH, a L follows a HL, a LL follows a L.
If a HH is succeeded by a H it is because there is a LH below the said HH before it was succeeded...the new H being higher than the last HH. A HH succeeded by a new HH can do so from a HL,L or LL so long as there is no fractal LH after it.
In looking to re-enter a trend you have to do so on the t/f below that the trend exists upon, and then look where the hidden divergence set-up develops @ on that and the higher t/f upon which the trend exists. Ie using an uptrend eg, a HL/HL would be perfect respectively but sometimes you may see a L/HL...the most important is that the HL exists upon the t/f where the trend exists.
A few questions here, I'll do my best to answer them in the order you raise them, below;
1. Regular (classic) or hidden divergence can be a useful too at areas of potential support/resistance -and- potential sbr/rbs respectively and can be against the trend on the next higher t/f (+) -and- with the trend on the next higher t/f (=) after a pullback to potential sbr/rbs on that next higher t/f.
2. Regular divergence set-ups can occur at aHL, H, HH, LH, L or LL on the next higher t/f, and this can occur against a trend present on the next higher t/f (+) -or- indeed in ranging conditions on the next higher t/f (+) If for example there was a trend present to the 1hr t/f and regular div only on 1min that would suggest a very shallow pullback only,,..howevere if that 1min regualr div set-up was supported by regualr div on 5min and 15min, that would suggest a deeper pullback at least...so the rule of thumb if couter-trend trading is to look for supporting regualr diverence/osc extremes on t/f's above that of your trigger t/f, particualrly if against a trend present on t/f's above that that the highest t/f reg div/osc extremes exists upon. Ensure too that there is potential supp/res factors at the place the reg div/osc extremes develop.
3. Yes, I only trade regular divergence/oscillator extreme based reversal set-ups (against next highert t/f [+] trend or ranging conditions) @ pre-identified potential support/resistance.)
I'm not sure I understand the final question you ask, but as general info, I look for fractal swing lo/hi's on the respective t/f, ie a candle where at least the candles immediately straddling it either side are higher /lower lows and for a fractal swing Lo/Hi respectively...the more pronounced the fractal swing the bigger the imbalance of demand/supply -or- supply/demand respectively. A HL follows a L or HL, a H follows a LH, a HH follows a H, a LH follows a H or a LH, a L follows a HL, a LL follows a L.
If a HH is succeeded by a H it is because there is a LH below the said HH before it was succeeded...the new H being higher than the last HH. A HH succeeded by a new HH can do so from a HL,L or LL so long as there is no fractal LH after it.
In looking to re-enter a trend you have to do so on the t/f below that the trend exists upon, and then look where the hidden divergence set-up develops @ on that and the higher t/f upon which the trend exists. Ie using an uptrend eg, a HL/HL would be perfect respectively but sometimes you may see a L/HL...the most important is that the HL exists upon the t/f where the trend exists.
bbmac
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Th 26th Nov 09
Nice steep downtrend on the lower t/f's with Hi-probability Re-entry (to next higher t/f trend after a pullback) set-up opportunities as well as thrust candle entry opportunities to the trend.
Price reaches 130% of it's 20day average pip range and finds demand/support in the previous 1hr swing lo=prev supp=potential support zone that is co-existant with an obvious near-term prev sw lo on 4hr...at whch a 1 and 5min regular divergence based repeating reversal set-up develops on both t/f's, the 5min supporting the 1min set-up...and a nice +25+ pip gain ensues.
Even against trend there are hi-probaility trading opportunities, although most would tell you there are not.
The potential support is here
The 1min set-up is here, notice the double regular immediate bullish divergence on the 1st oscillator
The supporting 5min set-up is here
You can see how the 1hr prev sw lo zone is co-existant with a similar prev sw lo zone on 4hr here
G/L
Nice steep downtrend on the lower t/f's with Hi-probability Re-entry (to next higher t/f trend after a pullback) set-up opportunities as well as thrust candle entry opportunities to the trend.
Price reaches 130% of it's 20day average pip range and finds demand/support in the previous 1hr swing lo=prev supp=potential support zone that is co-existant with an obvious near-term prev sw lo on 4hr...at whch a 1 and 5min regular divergence based repeating reversal set-up develops on both t/f's, the 5min supporting the 1min set-up...and a nice +25+ pip gain ensues.
Even against trend there are hi-probaility trading opportunities, although most would tell you there are not.
The potential support is here
The 1min set-up is here, notice the double regular immediate bullish divergence on the 1st oscillator
The supporting 5min set-up is here
You can see how the 1hr prev sw lo zone is co-existant with a similar prev sw lo zone on 4hr here
G/L
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bbmac
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re-test of potential support zone
Price re-tests the potential support zone discussed in post above , no 1min set-up but a great 5min bullish pinbar develops, for another hi-probability entry @ an effective HL, price now buying above the last LH and =LH of the downtrend..hi-probability pip gain again with entry at close of the 5min pinbar.
G/L
Price re-tests the potential support zone discussed in post above , no 1min set-up but a great 5min bullish pinbar develops, for another hi-probability entry @ an effective HL, price now buying above the last LH and =LH of the downtrend..hi-probability pip gain again with entry at close of the 5min pinbar.
G/L
bbmac
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selling continues after pullback to 6575
Price sees a shallow pullback off the same Low as this morning in the 1hr/4hr potential support zone discussed above following a sell off from the 6575 first pullback hi, this 2nd test, see-ing a 1min regular bullish divergence based reversal set-up. This is followed by a 1min hidden-divergence Re-entry (to next higher t/f trend after a pullback) set-ups develops which goes on to see a 'with trend' downside breech of the support zone price currently around 6475 correct at time of writing.
This current low is at the top of the next near-term obvious 1hr previous swing lo=prev supp=potential supp zone that is also co-existant on 4hr:
Price has now breeched the 1hr and 4hr ascending potential support trend lines and is @ 145% of it's 20day average pip range so far today, with t/f's to 1hr now in a downtrend, correct at time of writing.
G/L
Price sees a shallow pullback off the same Low as this morning in the 1hr/4hr potential support zone discussed above following a sell off from the 6575 first pullback hi, this 2nd test, see-ing a 1min regular bullish divergence based reversal set-up. This is followed by a 1min hidden-divergence Re-entry (to next higher t/f trend after a pullback) set-ups develops which goes on to see a 'with trend' downside breech of the support zone price currently around 6475 correct at time of writing.
This current low is at the top of the next near-term obvious 1hr previous swing lo=prev supp=potential supp zone that is also co-existant on 4hr:
Price has now breeched the 1hr and 4hr ascending potential support trend lines and is @ 145% of it's 20day average pip range so far today, with t/f's to 1hr now in a downtrend, correct at time of writing.
G/L
bbmac
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Below current price...4hr
Below current price and the below the prev 1hr/4hr swing lo=prev supp=potential support zone discussed in posts above are the 38.2% 5707-7044 @ 6431 and the 76.4% 6285-7044 swing @ 6404. The previous swing lo=prev support=potential support zone below these fibs is co-existant on the daily t/f.
G/L
Below current price and the below the prev 1hr/4hr swing lo=prev supp=potential support zone discussed in posts above are the 38.2% 5707-7044 @ 6431 and the 76.4% 6285-7044 swing @ 6404. The previous swing lo=prev support=potential support zone below these fibs is co-existant on the daily t/f.
G/L
bbmac
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Fri
More $ buying on back of Dubai problems has seen cable plummet again. Price pulled back from the overnight / asian lo of 6374 to a pullback hi of 6429 before london open and the selling of this pairing started again.
Price has arrived @ the prev 4hr swing lo = prev support=potential support zone that is co-existant on the daily t/f, that was discussed in post #344. Under this zone and barring the unbreeched fibs of the 5707-7044 move (61.8% @ 6152, 76.4% @ 5982) you have to turn to the Daily chart for potential support/rbs factors..it is shown below:
The 4hr screenshot below shows the descending channel on that t/f and on the daily t/f now we have the L below the last HL, a LH and L as 1hr/4hr are firmly in a downtrend
G/L
More $ buying on back of Dubai problems has seen cable plummet again. Price pulled back from the overnight / asian lo of 6374 to a pullback hi of 6429 before london open and the selling of this pairing started again.
Price has arrived @ the prev 4hr swing lo = prev support=potential support zone that is co-existant on the daily t/f, that was discussed in post #344. Under this zone and barring the unbreeched fibs of the 5707-7044 move (61.8% @ 6152, 76.4% @ 5982) you have to turn to the Daily chart for potential support/rbs factors..it is shown below:
The 4hr screenshot below shows the descending channel on that t/f and on the daily t/f now we have the L below the last HL, a LH and L as 1hr/4hr are firmly in a downtrend
G/L
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bbmac
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volatility
Clearly volatility has increased over last few days across many instruments...in cable the currrent intraday low [finding some support in that prev 4hr/daily swing lo=prev supp=potential supp zone discussed in posts above,] saw a breech of the 3rd and most extreme fib tunnel (red solid) on 5min as the first 2 narrowed, something I have rarely seen since the heady days around the height of the financial crisis (Lehman's collapse etc..)
Clearly volatility has increased over last few days across many instruments...in cable the currrent intraday low [finding some support in that prev 4hr/daily swing lo=prev supp=potential supp zone discussed in posts above,] saw a breech of the 3rd and most extreme fib tunnel (red solid) on 5min as the first 2 narrowed, something I have rarely seen since the heady days around the height of the financial crisis (Lehman's collapse etc..)
bbmac
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Pullback or more ?
Extended +100+ pip pullback so far off the current i/day lows at that 4hr/daily potential suppoirt zone discussed in posts above..there were Regular divergence/oscillator extremes based repeating reversal set-ups to 1hr (The 1hr is shown below)
Price has now breeched the 61.8% of the 6529-6270 (current i/day lo) swing and this is now the biggest pullback of the fall from 6744.
G/L
Extended +100+ pip pullback so far off the current i/day lows at that 4hr/daily potential suppoirt zone discussed in posts above..there were Regular divergence/oscillator extremes based repeating reversal set-ups to 1hr (The 1hr is shown below)
Price has now breeched the 61.8% of the 6529-6270 (current i/day lo) swing and this is now the biggest pullback of the fall from 6744.
G/L
Hi bbmac,
Scenario: cable dropping sharply but approaching previous swing on the higher time frames. Divergence developing on the medium term time frames. You would like an entry and stop. Where do you take it from there?
Also have spotted terms like 1 min Aii and 1hr c....what is that please?
Scenario: cable dropping sharply but approaching previous swing on the higher time frames. Divergence developing on the medium term time frames. You would like an entry and stop. Where do you take it from there?
Also have spotted terms like 1 min Aii and 1hr c....what is that please?
bbmac
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answer to question above
Yeh the pullback just popped above the last LH and oscillator peak of the downtrend on 15/30min (on my osc settings) thus invalidating the hidden divergence..see 30min screenshot below,...your s may be different as diff osc settings.
I was wondering where the sellers might come in again, but although I had a 1min trigger reversal set-up to short I could not identify any potential res/sbr factors at 6440 area.
As for the terms you mention I look for certain repeating oscillator divergence (both hidden and regular)/extremes and band deviation patterns @ potential supp/res/sbr/rbs factors. These are termed either as a hidden divergence based Re-entry (to next higher t/f trend after a pullback) set-up or a regular divergence/osc extremes based Reversal (against trend) set-up. The Re-entry set-ups are numbered type 1,2,3 and 4 whilst the Reversal set-ups are classed as types A, Aii, B, C, Extreme and Extreme ii. Seq refers to when the set-up develops with regular sequential as opposed to regular immediate divergence.
Yeh the pullback just popped above the last LH and oscillator peak of the downtrend on 15/30min (on my osc settings) thus invalidating the hidden divergence..see 30min screenshot below,...your s may be different as diff osc settings.
I was wondering where the sellers might come in again, but although I had a 1min trigger reversal set-up to short I could not identify any potential res/sbr factors at 6440 area.
As for the terms you mention I look for certain repeating oscillator divergence (both hidden and regular)/extremes and band deviation patterns @ potential supp/res/sbr/rbs factors. These are termed either as a hidden divergence based Re-entry (to next higher t/f trend after a pullback) set-up or a regular divergence/osc extremes based Reversal (against trend) set-up. The Re-entry set-ups are numbered type 1,2,3 and 4 whilst the Reversal set-ups are classed as types A, Aii, B, C, Extreme and Extreme ii. Seq refers to when the set-up develops with regular sequential as opposed to regular immediate divergence.
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bbmac
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w/e 27/11/09
The Weekly candle closes as a doji as price bounes off the 4hr/daily prev sw lo=prev support=potential support zone highlighted in earlier posts. the t/f is effectively ranging with bullish biais.
Turning to the daily and a perfect bullish pinbar close on the Daily candle. Friday's Low was effectively a LL on this t/f establishing a downtrend, 100 sma however remains above 200sma. Fibs to the 7044 current yearly hi are plotted from the swing lopws @ 3503, 3647, and 4389 and the area of the recent 5707 lows was in a 3 fib cluster connected to the fib retracements of those swings (now a previous swing lo=prev supp=potential support zone on this t/f, co-existant with the Weekly t/f, as is the prev sw hi zone shown in red.)
Turning to the 4hr, Friday's close just off it's Hi was around the 38.2% of the recent 6876-6269 (Friday's lo) swing, co-existant with the 50% of the more recent 6744-6289 swing down and 200sma on this t/f. Price is effectively ranging with a bearish biais, on this t/f after a recent H then L, and like the Daily t/f, the 100sma remains above the 200sma. The yellow fib is the 5707-7044 swing up.
The blue and red zones are co-existant with previous obvious near-term swing lo/hi's on the Daily t/f.
Friday's pip range was 139% of it's 20day average, and the week's pip range was 89% of the 52week average, with the monthly so far being @ 53% of the 12month average, so with one trading day of the month left it is likely to be a far smaller range than the 12month average, particularly if price does not go below Friday's 6289 low.
The 1hr t/f is an uptrend after a H above the last LH of the prev downtrend, followed by a HL and a HH at Friday's 6509 Hi, although unlike the 4hr/Daily, it's 100sma remains below it's 200sma.
The blue and red zones are co-existant with previous obvious near-term swing lo/hi's on the 4hr t/f.
G/L with forthcoming week's trading.
The Weekly candle closes as a doji as price bounes off the 4hr/daily prev sw lo=prev support=potential support zone highlighted in earlier posts. the t/f is effectively ranging with bullish biais.
Turning to the daily and a perfect bullish pinbar close on the Daily candle. Friday's Low was effectively a LL on this t/f establishing a downtrend, 100 sma however remains above 200sma. Fibs to the 7044 current yearly hi are plotted from the swing lopws @ 3503, 3647, and 4389 and the area of the recent 5707 lows was in a 3 fib cluster connected to the fib retracements of those swings (now a previous swing lo=prev supp=potential support zone on this t/f, co-existant with the Weekly t/f, as is the prev sw hi zone shown in red.)
Turning to the 4hr, Friday's close just off it's Hi was around the 38.2% of the recent 6876-6269 (Friday's lo) swing, co-existant with the 50% of the more recent 6744-6289 swing down and 200sma on this t/f. Price is effectively ranging with a bearish biais, on this t/f after a recent H then L, and like the Daily t/f, the 100sma remains above the 200sma. The yellow fib is the 5707-7044 swing up.
The blue and red zones are co-existant with previous obvious near-term swing lo/hi's on the Daily t/f.
Friday's pip range was 139% of it's 20day average, and the week's pip range was 89% of the 52week average, with the monthly so far being @ 53% of the 12month average, so with one trading day of the month left it is likely to be a far smaller range than the 12month average, particularly if price does not go below Friday's 6289 low.
The 1hr t/f is an uptrend after a H above the last LH of the prev downtrend, followed by a HL and a HH at Friday's 6509 Hi, although unlike the 4hr/Daily, it's 100sma remains below it's 200sma.
The blue and red zones are co-existant with previous obvious near-term swing lo/hi's on the 4hr t/f.
G/L with forthcoming week's trading.
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bbmac
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Tech analysis-Precictive?
I received an email asking why I make no attempt to map out possible future price movement scenarios based on my '..extensive...' tech analysis? The mail goes on to suggest that I '..must have an idea based on this analysis and my own trading experience..', so why not include it in my posts?, ... I thought I would replicate the reasons I gave here.
The principle reason is that tech analysis is not predictive..as Mark Douglas (Trading in the Zone, The Disciplined Trader etc...) says, and I have oft repeated, no one knows what will happen next, so for me I make no attempt at predictions. My tech analysis provides me with a trading edge and knowing what the t/f's of interest to me are doing-based on price action analysis doing ( ie trending or ranging) as well as what the potential support/resistance/sbr/rbs is on my intermediate and trend t/f + allows me to act on my trading edge only in the highest probability price action circumstances.
Prediction is futile and I see may traders sharing their agonised opinions and analysis on various forume (most notably FF.com) about future price scenarios...but as Mark Douglasalso correctly states, you do not need to know what will happen next in order to make money...you just need a trading edge that is a set of variables that when present indicate a higher probability of a gain than a loss over a historical sample of times it set-up.
Of course it is difficult not to form an opinion on where privce may be headed over whatever time scale. but to do so can limit your ability to act upon a perfectly formed trading edge that sets-up contrary to this pre-conception, so it is always best to keep a clear and open mind. Even worse than a technical pre-conception, I see many traders on threads compleletly unable to act upon a technical edge because it runs contrary to their fundamental/global macro viewpoint , ie some will not buy the £ at the moment until the Uk economy recovers...this is crazy to mix the 2 forms of analysis. Even in the strongest bull or bear runs we see sustained movements in the opposing direction.
G/L
I received an email asking why I make no attempt to map out possible future price movement scenarios based on my '..extensive...' tech analysis? The mail goes on to suggest that I '..must have an idea based on this analysis and my own trading experience..', so why not include it in my posts?, ... I thought I would replicate the reasons I gave here.
The principle reason is that tech analysis is not predictive..as Mark Douglas (Trading in the Zone, The Disciplined Trader etc...) says, and I have oft repeated, no one knows what will happen next, so for me I make no attempt at predictions. My tech analysis provides me with a trading edge and knowing what the t/f's of interest to me are doing-based on price action analysis doing ( ie trending or ranging) as well as what the potential support/resistance/sbr/rbs is on my intermediate and trend t/f + allows me to act on my trading edge only in the highest probability price action circumstances.
Prediction is futile and I see may traders sharing their agonised opinions and analysis on various forume (most notably FF.com) about future price scenarios...but as Mark Douglasalso correctly states, you do not need to know what will happen next in order to make money...you just need a trading edge that is a set of variables that when present indicate a higher probability of a gain than a loss over a historical sample of times it set-up.
Of course it is difficult not to form an opinion on where privce may be headed over whatever time scale. but to do so can limit your ability to act upon a perfectly formed trading edge that sets-up contrary to this pre-conception, so it is always best to keep a clear and open mind. Even worse than a technical pre-conception, I see many traders on threads compleletly unable to act upon a technical edge because it runs contrary to their fundamental/global macro viewpoint , ie some will not buy the £ at the moment until the Uk economy recovers...this is crazy to mix the 2 forms of analysis. Even in the strongest bull or bear runs we see sustained movements in the opposing direction.
G/L
searchlight
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Re: Tech analysis-Precictive?
Hi Bbmac,
Although I enjoy your analysis find them informative; I have a different take from you on the assumption that TA is not predictive. I would argue that, any analysis don't lend themselves to prediction is useless at best. Every time you place a trade you are predicting.(especially if you place an order for the trade to be activated if the certain conditions are met.)
While on the subject , I interpret Mark Douglas's explanation differently. I think what he is saying is that; your trading edge can not predict every trade as a winner (unless edge is %100) in micro level, but can predict that, you will be winner overall (in large enough sample) in macro level .
In other words if you have an edge that predicts ( yes your edge is your predictor in a way) % 70 winners after all is done and dusted (fibs,trend lines,s&r,ma combined and finally activated by Price action) you can not know which 70 trades going to be winners or which 30 trades going to be loser and in which combination/ order. hence the unpredictability of each trade. Yet you can predict with high certainty that over a large enough sample %70 will be a winner.Hence the predictability of an edge/market.
In conclusion when your edge (predictor ) present itself indicating likely direction of the market ; take the trade in the knowledge that , you have no idea if that particular trade is going to be a winner or not. Be content with it, because you don't know what the market is going to do next.(this where the; you don't have to know what market is going to do next in order to be a winner comes from...I think) Yet it is so predictable you know what is going to do most of of time in the same circumstances.
Best regards,
Searchlight
ps.( you ) used in general terms for (we/he/she...etc)
Hi Bbmac,
Although I enjoy your analysis find them informative; I have a different take from you on the assumption that TA is not predictive. I would argue that, any analysis don't lend themselves to prediction is useless at best. Every time you place a trade you are predicting.(especially if you place an order for the trade to be activated if the certain conditions are met.)
While on the subject , I interpret Mark Douglas's explanation differently. I think what he is saying is that; your trading edge can not predict every trade as a winner (unless edge is %100) in micro level, but can predict that, you will be winner overall (in large enough sample) in macro level .
In other words if you have an edge that predicts ( yes your edge is your predictor in a way) % 70 winners after all is done and dusted (fibs,trend lines,s&r,ma combined and finally activated by Price action) you can not know which 70 trades going to be winners or which 30 trades going to be loser and in which combination/ order. hence the unpredictability of each trade. Yet you can predict with high certainty that over a large enough sample %70 will be a winner.Hence the predictability of an edge/market.
In conclusion when your edge (predictor
) present itself indicating likely direction of the market ; take the trade in the knowledge that , you have no idea if that particular trade is going to be a winner or not. Be content with it, because you don't know what the market is going to do next.(this where the; you don't have to know what market is going to do next in order to be a winner comes from...I think) Yet it is so predictable you know what is going to do most of of time in the same circumstances. Best regards,
Searchlight
ps.( you ) used in general terms for (we/he/she...etc)
bbmac
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Re: Tech analysis-Precictive?
Hi, Symantics then probably,!? ...except that in my opinion each time you place a trade (when your trading edge sets-up) you are relying on the historical probability of the edge to continue to produce a gain over a sample of times it sets-up, ie you are neither predicting the outcome of that particular instance, or indeed the outcome of the sample, relying for this that your trading edge is based on sound principles tested in all market conditions/volatility - if this is not the case and your trading edge fails over a sample given changed market conditions/volatility than that the edge was based upon, then all the prediction in the world will have counted for nothing.
G/L
Hi Bbmac,
Although I enjoy your analysis find them informative; I have a different take from you on the assumption that TA is not predictive. I would argue that, any analysis don't lend themselves to prediction is useless at best. Every time you place a trade you are predicting.(especially if you place an order for the trade to be activated if the certain conditions are met.)
While on the subject , I interpret Mark Douglas's explanation differently. I think what he is saying is that; your trading edge can not predict every trade as a winner (unless edge is %100) in micro level, but can predict that, you will be winner overall (in large enough sample) in macro level .
In other words if you have an edge that predicts ( yes your edge is your predictor in a way) % 70 winners after all is done and dusted (fibs,trend lines,s&r,ma combined and finally activated by Price action) you can not know which 70 trades going to be winners or which 30 trades going to be loser and in which combination/ order. hence the unpredictability of each trade. Yet you can predict with high certainty that over a large enough sample %70 will be a winner.Hence the predictability of an edge/market.
In conclusion when your edge (predictor
Best regards,
Searchlight
ps.( you ) used in general terms for (we/he/she...etc)
Hi, Symantics then probably,!? ...except that in my opinion each time you place a trade (when your trading edge sets-up) you are relying on the historical probability of the edge to continue to produce a gain over a sample of times it sets-up, ie you are neither predicting the outcome of that particular instance, or indeed the outcome of the sample, relying for this that your trading edge is based on sound principles tested in all market conditions/volatility - if this is not the case and your trading edge fails over a sample given changed market conditions/volatility than that the edge was based upon, then all the prediction in the world will have counted for nothing.
G/L
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searchlight
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Re: Tech analysis-Precictive?
I think you are predicting the outcome each and every time you place a trade, by either going long or short. If that wasn't the case (your edge didn't predict the likely direction of given trade when it presented itself) all the analysis in the world counted for nothing.
In my opinion edge can not exist , without prediction being integral part of it.
Searchlight.
I think you are predicting the outcome each and every time you place a trade, by either going long or short. If that wasn't the case (your edge didn't predict the likely direction of given trade when it presented itself) all the analysis in the world counted for nothing.
In my opinion edge can not exist , without prediction being integral part of it.
Searchlight.
bbmac
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Re: Tech analysis-Precictive?
What if your trading edge operated on a 10% strike rate (ie averaging 1 winner in 10 ) but had a reward: risk ratio of 15:1, would you still be predicting a winning trade each time it set-up? Of course not beacuse actually statistically the highest probability is for a losing trade...so perhaps you would be 'predicting' the higher probability of a losing trade occurring?
An edge does not predict the outcome of the result, and it is an important distinction, albeit probably a more symantic/academic one when you reach a certain level of trading given a consistently profitable trading edge. An edge simply tells us that there is a greater probability of one thing happening other any other outcome given the historical evidence. This greater probability, for the reasons you stated in your first reply (ie we have no way of knowing in advance the actual sequence of winning/losing trades) does not represent prediction, just a greater probability based on historical precedence, and it is the historical nature of the precedence that renders such an edge non-predictable the next time is sets-up in the future.
(I know what you are saying, but to me it really is an important distinction, particularly for newbie trades who would do well to understand what a trading edge actually is and probably more importnatly, what it isn't.)
What if your trading edge operated on a 10% strike rate (ie averaging 1 winner in 10 ) but had a reward: risk ratio of 15:1, would you still be predicting a winning trade each time it set-up? Of course not beacuse actually statistically the highest probability is for a losing trade...so perhaps you would be 'predicting' the higher probability of a losing trade occurring?
An edge does not predict the outcome of the result, and it is an important distinction, albeit probably a more symantic/academic one when you reach a certain level of trading given a consistently profitable trading edge. An edge simply tells us that there is a greater probability of one thing happening other any other outcome given the historical evidence. This greater probability, for the reasons you stated in your first reply (ie we have no way of knowing in advance the actual sequence of winning/losing trades) does not represent prediction, just a greater probability based on historical precedence, and it is the historical nature of the precedence that renders such an edge non-predictable the next time is sets-up in the future.
(I know what you are saying, but to me it really is an important distinction, particularly for newbie trades who would do well to understand what a trading edge actually is and probably more importnatly, what it isn't.)
searchlight
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