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"Look, for example, at this elegant little experiment. A rat was put in a T-shaped maze with a few morsels of food placed on either the far right or left side of the enclosure. The placement of the food is randomly determined, but the dice is rigged: over the long run, the food was placed on the left side sixty per cent of the time. How did the rat respond? It quickly realized that the left side was more rewarding. As a result, it always went to the left, which resulted in a sixty percent success rate. The rat didn't strive for perfection. It didn't search for a Unified Theory of the T-shaped maze, or try to decipher the disorder. Instead, it accepted the inherent uncertainty of the reward and learned to settle for the best possible alternative.
The experiment was then repeated with Yale undergraduates. Unlike the rat, their swollen brains stubbornly searched for the elusive pattern that determined the placement of the reward. They made predictions and then tried to learn from their prediction errors. The problem was that there was nothing to predict: the randomness was real. Because the students refused to settle for a 60 percent success rate, they ended up with a 52 percent success rate. Although most of the students were convinced they were making progress towards identifying the underlying algorithm, they were actually being outsmarted by a rat."
P64 HOW WE DECIDE
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Remember what H. Rearden said:
Now, 2 patterns of market behaviour happen on a regular basis:
1) the price breaks to new high's (or low's)
2) the price reverses from new high's (or low's)
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If price is NOT making a new high then it must be reversing from the high.
If price is NOT making a new low then it must be reversing from the low.
GREEN RAT REVERSAL TRADE
1) price within 20 pips of the daily low - that is OPPORTUNITY
2) red/black candle closes
3) green/white candle closes - note the high price of the green/white candle
4) enter long at the green/white candle's high price
5) STOP LOSS IS 10 PIPS
6) Take whatever profit you can.
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RED RAT REVERSAL TRADE
1) price within 20 pips of the daily high - that is OPPORTUNITY
2) green/white candle closes
3) red/black candle closes - note the low price of the red/black candle
4) enter short at the red/black candle's low price
5) STOP LOSS IS 10 PIPS
6) Take whatever profit you can.
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You are either a RED RAT, a GREEN RAT or a YALE STUDENT. If you do not understand the reason you can not be both a red rat and a green rat then you are YALE MATERIAL: