Practicalities and philosophy of trading from a profitable trader
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goldmember1
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Unfortunately no, it still drops.
I am glad you enjoy it - btw, its interesting that you mention you find the psychology interesting because I don't think I have mentioned psychology! (Unless I have a bad memory which is possible) I think I have just mentioned time and equity management along with application of statistics and am starting to come on to speculation.
The difference in ticks from broker to broker makes me wonder why people even vaguely touch VSA trading but thats another story.
lol
glad you enjoyed
Speculation Part 6
A lot of retail traders are pure chartists and they constantly spout the same phrases again and again - as you might have guessed I am not a fan. I think charts have their use but their use is overemphasised. How often have you heard the following:
"Trade what you see on the chart, not what you think."
"Charts tell you everything you need to know"
"Its all in the chart"
"Price Action pew pew pew!"
When I first came into forex (from shares) this is what I am came across, and the impression I got was that all the future events could be predicted from past events on the charts, and that you didn't need to know anything else other than what was on the chart. I don't believe this, and I will show you a few examples why.
**I know there are plenty of people who are pure chartists and will disagree but this is my opinion*****
Here is a real past example of a chart - the red line represents standard support and resistance. All these chart examples are real charts on "high timeframes."
Person A sees the price bouncing off the resistance line along the red line and taking out the lows, while the Person B sees a bottom and the price continuing along the green line and taking out the highs, and they have arguments about it on various forex forums. Person C who is new doesn't know who to follow because they both present such angry and argumentative evaluations.
Eventually the following situation resolves itself as:
Person A laughs his head off and claims that his Preying Mantis technique is the best ever and that it was "all in the charts" as despite an initial scare as the price spiked up, eventually the price went his way as "he always knew" because after all, it was all in the charts, and you just needed to read the charts, and it was obvious how it was going to take out the lows. Person C bows and scrapes to Person As smarts, Eventually Person B sheepishly returns and Person A lords it over him. BUT Person B claims that he took partial profits and then he swiftly set a break even stop loss, so he still made money. Amazing!
But Person A extols how "he knew" price was going to go down just by looking at previous price and Person C becomes his groupie while Person B slunks in the shadows. Soon another virtually identical situation comes up:
Person A excitedly says - look here is the same situation coming up again, and Person C follows. Person B claims that it has hit a bottom but no one cares about him because obviously he can't read charts because of the last situation.
So Person A claims it goes down to take out the lows while Person B claims it goes up again to take out the highs - note that these situations are virtually identical (they are real charts and are high timeframes).
But OH NO - look what has happened! Price climbs up and takes out the highs. Person B jumps up and claims that it was obvious it was going to happen because it was "all in the charts" and "he always knew" it was going up. Person A slunks off and again claims he took partial profits, and Person C gets confused.
How can two such venerable traders such as Person A and Person B both look at the chart and see the same chart but both be told different things and both be wrong? Person A might even throw in a he was wrong because "it was a Friday" there was divergence on copper, or another classic gem to hold onto the claim that the charts were telling him the future. Even better, wise old Person D might interject here and say: "and thats why one technique suits one person and not another" or a better classic "thats what makes a market."
Hopefully you are Person E and realise that Person A, B, and D are all talking total rubbish.
I'll elaborate on this post later as this post is already quite long.
James Austin
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we are all familiar with the immature interactions that are prevalent at forums
but what exactly are you wanting to say about tech analysis?
but what exactly are you wanting to say about tech analysis?
goldmember1
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Technical analysis is not carried out properly by many traders nor is it taught properly.
Speculation 7
So I have gone on at length about why traditional charting is fairly useless. This extends to teaching, and forex blogs. Sorry for labouring the point (I might be repeating the same points again) but I do get frustrated when people will constantly come to me with:
Other: "aha - but did you see today? A pivot lined up with a fibonacchi and the price fell, so you were wrong."
Me: "Groan - explains again."
Other: "Hmmm, I see. But what about this chart? There was a head and shoulder pattern."
Me: "Smashes head against wall."
I know this is somewhat beating a dead horse, but I will give it a go, because there are traders that will constantly argue with me on this point (btw the same applies to other charts as well including COTS). If I haven't convinced you at this point, then there is nothing else to say.
Here is another example that I noticed in commercial forex blog.
The professional forex trader/commentator would state that there was a head and shoulders occuring. When this did not occur, he predicted a double bottom. When this did not occur he just ignored it and pretended that nothing had happened and he would go onto make other predictions. Note that this particular forex blog gets a lot of traffic (I visit it from time to time and can't believe some of the stuff they come up with including their order levels at 10, 20, 30, and 40).
Basically speculative patterns have little predictive power. This is the most important point to make. They have power if they can be statistically backed up over x number of scenarios, but teaching them in isolation, showing isolated charts has no predictive value. Isolated charts (even 3 or 4 or 5) have little value other than retrospective value or hindsight which is why so many hindsight teachers love them.
Tools such as support and resistance, fibonacchi lines, pivots, indicators themselves have extremely limited value by themselves and if you use them you should know what value they have (a point that I will discuss hopefully at some point in the future -they don't predict price to go up and down). A single support and resistance line does not tell you the direction - it just tells you that there was sell or buy interest in the past at that point. A single pivot line does not tell you how much the price will retrace - it just tells you the mathematical average.
The only predictive value they have is if they are taken in a statistically significant number (see my posts on statistics especially the p value ones) to be worthwhile. Teachers or systems who teach off technical analysis off chart examples without statistical backing are not worth the time to follow.
In my next post I will talk about the value of charts as I see them (at long last).
James Austin
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I agree. The patterns or tools that we use are irrelevant until backed by solid stats over a significant sample.
The entire game is reduced to the maths of it. Views, opinions, beliefs, feelings etc are meaningless unless supported by stats.
But isnt that stating the obvious.
The entire game is reduced to the maths of it. Views, opinions, beliefs, feelings etc are meaningless unless supported by stats.
But isnt that stating the obvious.
goldmember1
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Its not actually - trading is not just maths - there are a lot more factors (obviously some fundamentals are some of these factors) - but technical trading needs to be backed up with maths. You say its obvious, but how many retail traders you know of actually have a robustly tested method compared to those who do not?
Charting Part 1
What value do charts have then? They provide you with old and incomplete information about the following:
1) They inform you where some speculators have traded long or short (note they do not tell you how many speculators or what their intentions are)
2) Since prices are mean reverting in the long term, they give you a framework for calculating that mean/median/mode and the possible deviation
Of course, 1) is the concept behind support and resistance and 2) is the concept behind indicators
Then you might ask - if they can provide this information, isn't that enough to predict the future? I would say no (pretty much what I have been argueing over the past few posts).
You cannot reliably use these points to predict the future because you do not know how many speculators are represented, what their intentions or how much the price will deviate from the mean so they give an incomplete picture of past action. More importantly, these charts give no indication of what is going to happen to future speculators who are not already in position, or real money which has yet to enter the market.
The predictive value from charts for new future dealings is unreliable. Charts do not tell you how many 18 year olds are going to go to the USA, or how many X box Ones are going to be shipped to Japan. There is no "18 year old traveller indicator" or X box future sales pivot figure. They do not tell you what the coin flipper working for the investment bank is going to do. If you try and use charts alone you use incomplete information that does not have sufficient predictive value to predict the future.
Charts cannot be taken in isolation. All information must be built to produce a picture of technical analysis. I do not think technical analysis is one chart - for me it is years of charts building up a total picture so that you can actually build a strategy on 'reversion to mean.' If you do not have sufficient numbers to create a robust trading platform you cannot trade this reversion reliably.
M
malaguti
They also tell you whether the instrument is in an uptrend, a downtrend or just ranging. This in itself tells you a likely bias and the potential for this to continue, using Newton's law as an analogy.
They also tell you, where potential entry and exit points might be, without a chart how will you know?
I'm sure there are lots more, so I cant understand why you might have highlighted just a couple of points.
Its not always the fact, but the interpretation and application of that fact (your point 1) which is more important and its this that gives them their usefulness
Thats just my take of course
M
malaguti
You are not a professional trader I believe, do you mind me asking why you have made this assumption. Did you ask a professional?
i see a range, very early on, and I dont see a H&S
goldmember1
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The classic highly constructive Magaluti again!
Note that I termed the last section
Part 1 being the important section.
If you read again the post about the professional forex trader, I was referring to professional forex trader in a blog who made the assumptions about the head and shoulders not myself.
barjon
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that a belief or a fact?
M
malaguti
and to think I was trying to be constructive by at least giving you examples rather than ripping right into this diatribe
C
cablemonster
it's funny that because all of the professional traders I know neither have the time nor the need to make tons of posts on multiple internet forums like goldmember does. maybe he is an exception though, maybe he is a pro trader that likes to spam forums. :smart::smart::smart:
this place has gone seeeeeriously down hill.
M
malaguti
candlesticks
M
malaguti
For me its all in the title
Practicalities and philosophy of trading from a profitable trader
I haven't seen any practicality, and certainly no indication (I was going to say evidence...bring back beginner joe!) of profitability, just lots and lots and lots and lots and lots...bored yet? and lots of philosophising
HOWEVER, I would rather Goldmember to the likes of resistance, babyblush and all the other clowns popping up all over the place
now if you dont mind, I have to kerb my posting habit or else noone will take me seriously!!
What about his myfxbook account?
bismillahwd
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300% profit, 11k real live account since 2011,
This goldenmember is real golden trader.
Consistent profit,
Dont know what system he use
http://www.myfxbook.com/members/goldenmember/euprates/569536
Sent from my iPad using Tapatalk HD
Sorry for any typo
Precisely. In addition, I've found his musings thoroughly enjoyable (and even educational!) thus far.
To goldenmember: Please keep the posts up! I'm compiling them into a PDF.
M
malaguti
I'm not taking anything away from what Goldenmember wants to contribute its his time I guess, I just haven't seen anything practical yet. As for 300% profit on myfxbook..guys you can just keep a trade open and never post a loss if thats what you want, 300% doesn't mean anything really does it? if it did, follow the 1000% myfx'ers see how far your money goes then.
Anyway, its not my thread and I keep on hijacking Goldmember so I apologise and shall promise not to post on this topic again until something really needs commenting on, and it will be constructive..
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