This post is about what I consider to be ‘trading facts’. I expect many or most will disagree with me, but I don’t have a problem with that. Please challenge my assertions and tell me why I am wrong, or even why you agree.
A little background about how I formed these opinions. By now you could call me an experienced and knowledgeable trader since I’ve been trading fulltime for 2 years, spent thousands of hours watching and analysing price charts, have read widely, and tried dozens of indicators and expert advisors. My main conclusion is that whilst the market (FTSE & Forex) are NOT random, they MIGHT AS WELL BE RANDOM as perfectly explained by Benoit B. Mandelbrot in his book ‘The (Mis)Behaviour of Markets’. I also reject Fibonacci as being so much wishful thinking and self deception and for good reason. I developed a system of diagonal lines which produce more uncanny results than Fibonacci retracement. I so wanted my creation to work, but like Fibonacci it has no predictive power only retrospective annotation.
So here are my facts. Challenge them if you can.
1 ) The price goes up, the price goes down, and on different timescales – you can’t deny that.
2) Price movements do not go directly up or down, but are punctuated with pullbacks that look like ripples.
3) Chart patterns, like wedges, support and resistance lines etc, can be found in randomly generated data and are therefore most likely just fanciful creations of the mind. I know of no study that has proved that the price is more likely to go up or down following any chart pattern – until proof is provided they are of no value to me.
4) Price movements might as well be random.
5) Most trading is done automatically by computers in large institutions, for how else could the FTSE, DOW, S&P follow each other so very closely on short timescales? It can’t be down to crowd behaviour – it’s too quick.
6) Thousands of individuals, like me, sit at screens all day hoping to become consistently successful.
7) Mass psychology (crowd behaviour) might have some effect, but talking about bulls or bears being in control is only a rational fiction which may help certain traders to think about price action.
8) It is more likely that a trend will continue than reverse.
9) Bollinger Bands are another pseudo-statistical-scientific self-deception, although an expert advisor based on bands will produce a profit if one can tolerate a horrendous drawdown for little profit.
10) I believe the oft quoted (and probably made up statistic) that 95% of people who begin trading fail.
There is one genuine, indisputable price pattern, which is the ‘Pullback’. Likewise, the ‘Head & Shoulders’ pattern is one which is traced by the price rather than imposed by the mind and which I find to be a good predictor of major price movements (continuation or reverse). Given these two pieces of information I wonder if an even bigger and similar extension would be an Elliot Wave? Although I would need some convincing.
A little background about how I formed these opinions. By now you could call me an experienced and knowledgeable trader since I’ve been trading fulltime for 2 years, spent thousands of hours watching and analysing price charts, have read widely, and tried dozens of indicators and expert advisors. My main conclusion is that whilst the market (FTSE & Forex) are NOT random, they MIGHT AS WELL BE RANDOM as perfectly explained by Benoit B. Mandelbrot in his book ‘The (Mis)Behaviour of Markets’. I also reject Fibonacci as being so much wishful thinking and self deception and for good reason. I developed a system of diagonal lines which produce more uncanny results than Fibonacci retracement. I so wanted my creation to work, but like Fibonacci it has no predictive power only retrospective annotation.
So here are my facts. Challenge them if you can.
1 ) The price goes up, the price goes down, and on different timescales – you can’t deny that.
2) Price movements do not go directly up or down, but are punctuated with pullbacks that look like ripples.
3) Chart patterns, like wedges, support and resistance lines etc, can be found in randomly generated data and are therefore most likely just fanciful creations of the mind. I know of no study that has proved that the price is more likely to go up or down following any chart pattern – until proof is provided they are of no value to me.
4) Price movements might as well be random.
5) Most trading is done automatically by computers in large institutions, for how else could the FTSE, DOW, S&P follow each other so very closely on short timescales? It can’t be down to crowd behaviour – it’s too quick.
6) Thousands of individuals, like me, sit at screens all day hoping to become consistently successful.
7) Mass psychology (crowd behaviour) might have some effect, but talking about bulls or bears being in control is only a rational fiction which may help certain traders to think about price action.
8) It is more likely that a trend will continue than reverse.
9) Bollinger Bands are another pseudo-statistical-scientific self-deception, although an expert advisor based on bands will produce a profit if one can tolerate a horrendous drawdown for little profit.
10) I believe the oft quoted (and probably made up statistic) that 95% of people who begin trading fail.
There is one genuine, indisputable price pattern, which is the ‘Pullback’. Likewise, the ‘Head & Shoulders’ pattern is one which is traced by the price rather than imposed by the mind and which I find to be a good predictor of major price movements (continuation or reverse). Given these two pieces of information I wonder if an even bigger and similar extension would be an Elliot Wave? Although I would need some convincing.
