Dispatches from the Front

FreedomThruTradingForex.com is the vehicle I use to share personal and financial freedom with my clients.

We have two types of clients: Paying and non-paying:

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Our non-paying clients are young people in third world countries – mostly orphans – whom we teach, amongst other things, to trade Forex.


Once trading successfully, they can escape poverty, feel good about themselves, and lead a life worth living... indeed, lead a life filled with opportunities they previously would never have dreamed possible.


Right now, we are in the final stages of developing a prototype system, teaching a class of “untouchable” low-caste year 11 and 12 orphans in a remote area of southern India how to successfully trade Forex.


This project has generated so much interest that even a number of our paying clients are planning to help us teach and mentor these 3rd world orphans.​
 
Price & volume run hand in hand. Price movement or oscillations are the reflections of the sentiment or the emotions of the individuals that trade inside of any market IN REAL TIME. Volume shows the amount of that collective sentiment that is effecting the market at any given moment. Time is the monitor where we view a combination of price and that sentiment.

The most common viewing options for traders are Minute Charts, Ticks Charts, Range Bar Charts and Volume Bar Charts to use as that monitor.

1. Minute Charts - Varying number of shares or contracts traded per bar. (Volume unstable)
2. Tick Charts - Constant number of Ticks but still a varying number of shares or contracts traded per bar. (Volume unstable)
3. Range Bar Charts - User defined bar range but still varying number of shares or contracts traded per bar. (Volume unstable)
4. Volume Bar Charts - User defined number of shares or contracts traded per bar. (Volume Stable)

Price will always be stable because it can not be manipulated. It is a perfect reflection of any Market at any given moment (past & present). Volume Bar Charts then give stability to Volume and Time (Chart Increment). The user (YOU) define the number of contracts or shares that make up each bar. Less contracts or shares gives you faster charts and would be used for intraday or scalp trading. More contracts or shares traded per bar gives you slower charts and would be used for Swing, Position or Long Term trading. The environment is now perfectly viewable, stable and non-varying. You now need to choose the chart increment to best suit your trading style (Intraday, Swing, Position or Long Term) and as stated earlier, spend the screen time to learn just exactly what does price do consistently in the "time frame" that you wish to trade.

I don't use the term "interrupt" because it implies a subjective action. I prefer "read" because what the ultimate result of this environment is, is to be objective in your decision making process trading on price consistencies.

Price does move methodically. One just has to view it in a stable non-varying environment to see it.

ProfLogic
 
I liked that post too. If one is not interested in velocity, e.g if examining the varying composition of effort in regard to aggression on both sides, then it makes sense to work in units of effort.

Volume Bar Charts then give stability to Volume and Time (Chart Increment).

But this bit slightly bothered me. Sure, time charts show effort in lumps and pauses, whereas volume charts smooth out the lumps by standardising the volume into regular units; but in doing so the time scale becomes irregular, or unstable. e.g A set of vertical lines at 5 minute intervals on a volume chart will compress during low activity and expand as it increases. On the x-axis, one much choose between regular units of time or effort; it is impossible to have both, at least when plotted against price.

Also does he mean "interpret" not "interrupt" towards the end?

All of which is unnecessary nitpicking on my part and I may well have misunderstood what the Prof. meant by stability.
 
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Minute and/or Range Bars

.
Quote from TL Trader:

I use both. I watch for the same thing
on both, TL's and simple horizontal S/R levels. As far as I'm concerned range bars are nothing revolutionary.

There are just another way to chart prices. Like any other method they have their pros and cons. Some cons are you won't have NRB's, WRB's, inside bars or outside bars. Pros are you'll have a much less cluttered chart when volatility is low since new bars print only when there is [ vertical] price movement [beyond your calibrated threshold].

I find them attractive for charting instruments like all sessions stock indexes and currencies. Where it's common that not much happens for hours at a time. I'm not much on using indicators myself but if you are it may be worth experimenting with constant range bars. Can't say as to whether it would make any particular indicator strategy profitable or not.
[superfly]
 
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As the acknowledged master of delusion (I practically invented the concept), I wish to contribute my favorite in the realm of trading: the Complexity Delusion. Perhaps because so many modes of thought (subpersonalities) war inside most traders' heads at any given moment, the resulting gestalt is that trading must be a complex endeavor. So many ideas and purported systems to sort out.

The simple fact is that it's all about range. You trade the time frame where there is range and where your anxiety is the least. For example, I am most comfortable scalping when the recent range on a one minute chart is about 20 ticks. A minute is an eternity for me (ADTD: Attention Deficit Trading Disorder). Five minutes and the universe is due to start contracting.

Add to that knowing when price has reversed and you can make money. Which bring me to indicators. You all know in your hearts that they are all the same. I once stacked twenty up like layers of a salami sandwich and they all turn about the same time, usually AFTER it is perfectly clear visually that price has reversed, 3-4 ticks.

So you don't need fancy charts. Three overlays will do. One slow one for the current trend. A faster one to show the recent price range. And a really fast one to see price reversals. I quantify all this with studies and red light/green light helpers, but it's really that simple. In whatever time frame you're comfortable with. It works just fine for one minute or one day.

So how do you know if you suffer from The Complexity Delusion?

Do you have big screens?

Multiple screens?

So many panes and studies that your neck and eyes hurt from trying to scan them?

Torpor after watching the market for as little as 30 minutes?

Contradictory signals?

Keeping on trading after the range goes to four ticks because your indicators tell you to?


Personally, I use all my other computers and monitors to keep a steady stream of soothing porno videos running. And a great big motivational screen (for that great big snatch) of last week's best Britney picture, to remind me of what my aspirations are.

Anon
 
Let us now direct our attention to another, equally fascinating and baffling in supposedly grown-up people, the delusion of physicality. As I write the price of ES is 1433.25. Not 1433.pink or fluffy.25. It's a firm numerical value. We use hard numbers to measure time, position, velocity, mass, momentum, volume, pressure, mass flow rate, etc. And the market is characterized by time, price, "volume" (haha!), "depth" (double haha!), "liquidity" (don't make me say it), etc.

So there must be something inside there ticking and whirring, right? Huffing and chugging along with mathematically precise (to the tick) predictability. That's how our Joe makes his living, selling us on the idea that a single-order infinite impulse response filter is just the handy-dandy thing we need to get rich. Pay him a little more and he'll custom design an nth-order Kalman filter for you, just for you alone to regale your trading friends. Simply tell him how noisy (manipulative jinking) you think the market is, how laggy your connection is, how much meaurement error (slippage) there is, and voila! A system soundly based in signal estimation theory!

The sad fact is that the REAL market algorithms determine where the biggest fools took positions and where their stops are and what it takes to make them doubt and sweat and act impusively.

Anon
 
My pet peeve (everyone should have one, they're very companionable if you get the right breed) is The Semantic Delusion. Being part Cherokee (but light enough to pass for white), I have the indigene's proclivity for naming things for what they are. For example what I call "the bird whose call sounds like hard sizzlin' bacon" a paleface would call a grackle. One suspects that the grackle is thereby diminished, ugly though it may be. Thus to think that we understand a thing simply labelling it is to delude ourselves deeply. We casually toss about here "double top", "head and shoulders", "cup and handle", "blowoff", to name but a few, as if that explained anything and as if that implied understanding of nearly infinitely variable phenomena.

But I am just an irascible old Confederate to whom "multiculturalism" is the new code word for miscegenation and the "Federal" government is still an occupying power. So remember your Shakespeare and your Stein when you use words cavalierly, especially in trading. And never trust the type of indicator developed by illiterates who don't know the meaning of the word "stochastic".

Anon
 
"You don't need more self-control, you need lower latency and faster execution."

"You don't need to understand market mechanics, you need an autoadaptive digital signal processing indicator."

"You don't need more patience, you need lower commissions for more trades."

"You don't need enhanced powers of observation, you need a forecast for the shape of the day."

"You don't need to understand what's really happening, you need a backtested system (we have hundreds of them for you to choose from)."

Anon
 
The most common psycholgical challenge people encounter when trading

1) pulling the trigger

2) chasing markets after not pulling the trigger as required in the first place.

3) immediately overtrading after a loss to make it back.
 
. . . understand the auction market process, then build and refine your trading techniques. Keep it simple. Eschew wacky ideas, complex charts and magical indicators. Ignore all the noise. Forget the news, economic numbers huh who cares? (although you must know when important ones are due for release). Chatrooms and websites who needs 'em? Don't have opinions or take views. You want to be an empty vessel with a pristine mind totally focused on the market action in front of you. Trade what you see NOT what you think.

The more committed among you might want to shave your heads, don a brown robe and assume a zen like position . . .
 
dbphoenix said:
. . . understand the auction market process, then build and refine your trading techniques. Keep it simple. Eschew wacky ideas, complex charts and magical indicators. Ignore all the noise. Forget the news, economic numbers huh who cares? (although you must know when important ones are due for release). Chatrooms and websites who needs 'em? Don't have opinions or take views. You want to be an empty vessel with a pristine mind totally focused on the market action in front of you. Trade what you see NOT what you think.

The more committed among you might want to shave your heads, don a brown robe and assume a zen like position . . .
whatever it takes.........
recently bought myself a gladiator outfit ;)
 
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"You take a cage, with 5 monkeys. In it you place a bunch of bananas so arranged that taking a banana produces electric shock. You wait until all 5 monkeys have learned not to touch the bananas. You replace one of the monkeys. You switch off the electric shock arrangement.

The new monkey goes to take a banana, but is prevented from doing so by the other 4. You wait until the new monkey has learned not to take a banana, even though taking a banana will not now produce a shock.

Repeat the process of replacing an original monkey with a new one. Eventually you will have 5 monkeys who know not to take a banana, but don't know why."

via chump


This observation reminds me of many of those who follow technical analysis. They know they're supposed to be using it, but they don't know what it is or what it's supposed to do.
 
Everyone wants to attack trading as though they have to have a significant edge, like 70...80...90 percent. You have to realize that thats a HUGE edge, that most "odds-based" businesses don't ever achieve on a consistent basis. Look at a casino....their edge on a lot of games, that they make a lot of money on, are just slightly better than 50%... and some of their best games only have a few bets that give them as high as a 17% edge. And yet a lot of new traders seem to feel that if they aren't able to pump out 8 winners every 10 trades....then they're doing something wrong.

I know quite a few, very professional traders who probably having winning percentages as low as 20%....What! How can that be? That means that out every 10 trades they're booking a loser, on average, 8 times. Essentially, we would have to say, that they have no edge....and yet they've been able to make a living at it for decades because they know how to kick the crap out of the few winning trades they do happen to get into.

And to a certain extent, they think slightly different than a lot of traders might on a board like this. If they get into a winning trade, they're not looking to exit and book a small winner. They're looking for a decent pull-back so that they can add on to their trade. If a trade moves against them, no big deal, they just book a small loser on 1 unit. But if they get any kind of a decent move, they're finally getting stopped out of their trades for 15 to 100 units. Essentially risk-free most of the way because they were able to essentially "re-invest" their profits along the way and move up their stop....or I guess a craps player would say that they just "pressed it up."

Think about it this way. We know for a fact that there are professional craps players out there in the world. We also know for a fact, that no matter what they do, they will always have to overcome being on the bad side of every coin flip. No matter what bets they make, they will not only never have and edge...but the edge will always be against them. And yet I could personally introduce you to guys who have been able to make a living at it for more than 15 years. Made a living at overcoming a negative expectation game. So its important to understand that even if you don't have an edge, that doesn't mean that you can't make money.

Now, if you feel comfortable that your trading approach does in fact give you an edge, then thats great...you actually should be a mechanical trader and very rarely will it make sense to be a discretionary trader. BUT....if you don't feel as though your trading model actually gives you a quantifiable edge, then you should be a discretionary trader, because making money might be dependent on having to overcome a negative expectation game.

Now even though the math is against them, the professional craps player does have two distinct adavantages over the casino: (1) they can choose when and how to put their money at risk, and (2) they can choose how much money they want to be at risk at any given time. This means that they can bet small when things are not going their way, and can bet bigger when the "law of averages" is taking a "random walk" and they're essentially "getting lucky."

Well, I'm sure you won't be surprised to find out that the discretionary trader also has some of these very same advantages, however, unlike the craps player, there will be certain "bets" we make where we actually do have the edge. And, if we take enough of them I assure you that we will lose plenty of them, just like we will win on some of the bets we made that we did NOT have an edge in.

So the point I'm trying to make is that whether you have an edge or not is not the most important thing, because we know that there are ways to compensate for playing a negative expecatation game. What IS the most important thing, is understanding what type of trader you are, and what type of numbers your trading approach produces, and making sure that you have a money management approach that is appropriate for the type of trading you do.

You know, there are some traders out there whose money management strategy is significantly more complicated then their actual trading rules. That says something.

Now, if you don't know what your numbers are off the top of your head, then that probably means that you're not keeping a trade journal, which could also could be one of the reasons you're struggling. If you don't keep a trade journal, then its hard to figure out what your numbers are, which means that you're not going to be implementing an ideal money management strategy, and in some cases, might have actually implemented the worse possible money management strategy.

Jachyra
 
Best post Ive read in weeks, trouble is unless one has been on the journey fact is harder to swallow than fiction
 
Great post

dc2000 said:
Best post Ive read in weeks, trouble is unless one has been on the journey fact is harder to swallow than fiction

Seconded - excellent post.
 
If you draw enough lines on your chart, eventually price will trip over one of them.

N.Q. Enqueue
 
Towards the end of the process (thus far), it has been one of simplification for me. Whereas I started years ago with a fairly simple idea, after having read more books on trading than perhaps I should have, I then began the process of complicating the method as a means of dealing with the losses that followed. What made me turn the corner from unprofitable to modestly profitable was a reversion to simplicity. Perhaps not quite as simple (or should I say, not quite as simplistic) as what I had started out with, but nowhere near as complex as when I was at my most unprofitably befuddled. Essentially, after accumulating all of the nonsense that I had read about trading, the productive work was in the shedding.

Thunderdog
 
Obscurantism: a literary style that is deliberately complex and misleading in order to hide the fact that the writer's ideas are vacuous. In this sense, what is meant to be obscured is not knowledge itself but rather the fact that the writer has no knowledge of his subject.

Wikipedia
 
Like the monkey comparison - technical analysis valid only if you believe the markets are cyclical and not random in behaviour. Techinical analysis more relevant to forex than shares.
 
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AsifA said:
Like the monkey comparison - technical analysis valid only if you believe the markets are cyclical and not random in behaviour. Techinical analysis more relevant to forex than shares.

I think you are missing the point AsifA. Like the monkeys that react on a pattern or signal without knowing why, some traders ignore the 'why' (you could call it context) they see patterns or signals in TA and don't realize that TA has little predictive value, unless they have come to understand the reasons why price moves in a non-random way. But anyway, if you like to discuss whether the market is random or not, I'm sure there are other threads better suited for this and I'll be very interested in your view on it.

AsifA said:
It was pathetic to see how you boys, profitmaker, grantx, dc2000, dbphoenix et al and of course Barjon ganged up on credo last week on the plain options thread. Even got him banned. Nice little elitist clique. Reminds me of Club Theory. Sorry to have attended uninvited.
.

As for the second part of your post, I fail to see the relevance of it in this thread. I'm sure barjon will appreciate any feedback you have to give on moderating in the approriate forum http://www.trade2win.com/boards/forumdisplay.php?f=16.
 
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