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Guest Bodhi Dharma Zen

HELLO Market Scientists, I'm Tired Too About "get Rich Quick" Magic Indicators

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Guest Bodhi Dharma Zen

By now I know a little bit about technical analysis and I'm working towards having my own 100% automated trading system using Tradestation. I asume that most of us have arrived here after spending time reading about some "magical" indicators that are proven ways to make you rich fast.

 

You know, those indicators that can accurately predict the future and won't let you lose a penny... yeah, right.

 

I have a scientific background and so this appears to be the right forum for me. I will read a little here and there and I hope I can ask some good questions to the experts in the forum.

 

See you around!

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ALL the "indicators" analyze ONE tiny aspect of the market...

 

it is ONLY a tool...

 

you still have to know what you are doing.

 

 

Welcome, and enjoy the journey

 

;-)

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Guest Bodhi Dharma Zen

Tams, thanks, yes, I agree, an indicator is a tool, but there are countless of tools. I'm taking TA as a first approach to get some entry and exit points, but knowing also that you have to have good money management techniques, do extensive backtesting and other kind of analysis (like Montecarlo Simulations).

 

I'm still developing my own methodologies and hope to get some nice info and interesting discussions in the forum.

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there are countless tools...

 

there are also countless situations... (i.e. CONTEXT)

 

 

If you understand the context, then you will know which "category" of tools are applicable in what situations...

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Guest Bodhi Dharma Zen

agreed, but first you need to define "context" and this requires more than just assuming that there are "trendy markets" and "shoppy markets" (to name two that come to my mind). this because it is easy to see that something is "trending" when you see the historical chart, this is called "confirmation bias" in which you believe you can recognize something as clearly evident and forget that the problem is to identify the trend fast enough in order to profit from it.

 

or.. what do you have in mind?

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Identifying trend or chop (as broad categories) might not be a bad place to start. Many automated systems either trade one or the other though some 'flip a switch' and essentially use a different approach for those different market conditions.

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Guest Bodhi Dharma Zen
Identifying trend or chop (as broad categories) might not be a bad place to start. Many automated systems either trade one or the other though some 'flip a switch' and essentially use a different approach for those different market conditions.

 

yes, agreed, you would need two different approaches.. still, the question remains, (at least for me) how to properly (and timely) identify a trend or a chop market???

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Hi there,

 

I have been trading Forex for a while, but i was looking at trading Stocks, Options and Futures. Can anyone help me as i'm not sure how to get started trading these on a day trade basis. Is it the same as trading Forex and can anyone suggest a platform I can use to trade Stocks, Options and Futures. i'm in Australia.

 

Thanks in advance...

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Guest Bodhi Dharma Zen
There are several ideas here http://www.traderslaboratory.com/forums/f229/how-do-i-avoid-chop-chop-6104.html

 

You might find Ehlers books interesting, he comes from an engineering background and is looking to isolate the cyclical component using signal processing techniques.

 

Sorry for the late answer. Thanks for the link, I read it all. I'm still with mixed feelings about all this stuff about what is a trendy and what is a shoppy market. I mean, it is obvious to spot them on an historical graph, but that doesn't help at all with the current price of some stock.. will it continue to behave as it has been behaving?

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Guest Bodhi Dharma Zen
May I just ask two questions (if it is ok to be curious):

 

- Which is the science you are familiar with?

- What's the reason for heading towards 100% automation?

 

Yes of course.

 

1) I have worked with in the field of neural correlates of consciousness, performing EEG analysis, some statistics, fourier, and research methodologies.

 

2) In order to get about 30 stocks trading continuously, which would be impossible if you are trying to follow them all.

 

Why so many stocks? because I like to diversify (if a particular stock falls, say, 90% it won't hurt the portfolio).

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Yes of course.

 

1) I have worked with in the field of neural correlates of consciousness, performing EEG analysis, some statistics, fourier, and research methodologies.

 

2) In order to get about 30 stocks trading continuously, which would be impossible if you are trying to follow them all.

 

Why so many stocks? because I like to diversify (if a particular stock falls, say, 90% it won't hurt the portfolio).

For diversify, you can trade ETF instead of single stock.

 

But another reason for automation I think is that it can avoid the effect caused by emotion (fear & greed), i.e. it can work in a purely logical way.

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Guest Bodhi Dharma Zen
For diversify, you can trade ETF instead of single stock.

 

But another reason for automation I think is that it can avoid the effect caused by emotion (fear & greed), i.e. it can work in a purely logical way.

 

Exchange traded funds? how do they work? and regarding automatization, my portfolios is already fully automated, a robot does the transactions for me (TradeStation), but my methodology only works in a trendy environment, so now I'm thinking in a second approach that would allow me to stop trading when there is no trend.

 

Now, as attractive as this sounds, I believe it is impossible, because trends appear to come from nowhere and you can only spot them when they have been running for a time. IOW, it is easy to spot a trend in historical data, but my guess is that it is impossible to spot it when it is just starting.

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Its not impossible to identify when a trend starts. there are a couple cycles one should familiarize themselves with that is the balance imbalance cycle. balance is the range market like the last four days, imbalance will be the vertical move out of balance. which direction nobody knows (probably up just to piss all the tech guys off who are calling a top here), but either way I will trade in the direction of the move away from balance. It is usually a substancial move after balancing for a long time. That is the simplistic nature of the market and all one needs to be sucsessful to trade the markets. HA HA it takes a litttle more than that but thats the nuts and bolts of it.

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See this morning is a perfect example. normaly you wouldnt buy a market that is gaped up 10 points but leaving the balance area I was confident in the longside and bought . Good times.

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Guest Bodhi Dharma Zen
Its not impossible to identify when a trend starts. there are a couple cycles one should familiarize themselves with that is the balance imbalance cycle. balance is the range market like the last four days, imbalance will be the vertical move out of balance. which direction nobody knows (probably up just to piss all the tech guys off who are calling a top here), but either way I will trade in the direction of the move away from balance. It is usually a substancial move after balancing for a long time. That is the simplistic nature of the market and all one needs to be sucsessful to trade the markets. HA HA it takes a litttle more than that but thats the nuts and bolts of it.

 

This sounds interesting, take a number of days and then see if something breaks their balance.. still.. statistically it doesn't mean anything, so I'm guessing that there is more than the numbers going on, maybe you have intuitively grasping something else, or maybe you are merely experimenting a confirmation bias.

 

Do you actively trade using this principle?

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yes I absolutley trade this method i got the morning trade than called it quits. today i shorted the balance area at 88.5 because it was the first test of the balance from the day before. i the morning it gave a nice reaction and i aws done by 7:00 pst today as well. These are MP principles I work off and jus follow along with the auction. dont try to fight it. And i had orders in to buy the 76's in the am but it didnt get that far.

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"Trend" is an artificial concept.

That is the reason why it cannot be quantified.

 

With a pretty simple experiment this can be proven:

Enter e.g. EUR/USD with 1,000,000 EUR or USD. You will get immediately the feeling that there is a "trend" because the account goes up or down numbers that will probably seem significant.

 

With other words: Trend is a function of account size, profit expectancy and risk tolerance.

 

If huge leverage is used there is no trend-less phase, "chop" or whatever people call it.

 

 

When strategies seem not to work in "choppy" times this is due to some other problem - probably bad entry point.

 

If the entry point is chosen correctly it's always possible to choose one of:

- increase leverage

- increase time frame = wait until the symbol moves far enough

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"Trend" is an artificial concept.

That is the reason why it cannot be quantified.

 

With a pretty simple experiment this can be proven:

Enter e.g. EUR/USD with 1,000,000 EUR or USD. You will get immediately the feeling that there is a "trend" because the account goes up or down numbers that will probably seem significant.

 

With other words: Trend is a function of account size, profit expectancy and risk tolerance.

 

If huge leverage is used there is no trend-less phase, "chop" or whatever people call it.

 

 

When strategies seem not to work in "choppy" times this is due to some other problem - probably bad entry point.

 

If the entry point is chosen correctly it's always possible to choose one of:

- increase leverage

- increase time frame = wait until the symbol moves far enough

 

I don't see how the market can be a fuction of account size, profit expectancy and risk tolerance as the market has no "knowledge" about any of those. An indivudual leverage has zero impact about the trendiness of the market.

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This sounds interesting, take a number of days and then see if something breaks their balance.. still.. statistically it doesn't mean anything, so I'm guessing that there is more than the numbers going on, maybe you have intuitively grasping something else, or maybe you are merely experimenting a confirmation bias.

 

Do you actively trade using this principle?

 

How do you know that statistically it doesn't mean anything? I would be interested to know what kind of testing you did to reach your conclusion?

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The definition of trend is making higher highs and higher lows. The problem most people have is they dont understand what time frame they are trading. And it varys from time frame to time frame. A 1 min trend may only last 5 minutes or it could last 20. has nothing to do with account values.

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Guest Bodhi Dharma Zen
yes I absolutley trade this method i got the morning trade than called it quits. today i shorted the balance area at 88.5 because it was the first test of the balance from the day before. i the morning it gave a nice reaction and i aws done by 7:00 pst today as well. These are MP principles I work off and jus follow along with the auction. dont try to fight it. And i had orders in to buy the 76's in the am but it didnt get that far.

 

Understood. Interesting. Let me get this better. You are talking about 5 periods and the trigger is that the fifth is significantly different from the previous four? And is there a specific window to apply it? You can use such a system for minute, hourly, daily or weekly charts (to put an example) and my guess is that everyone will report different results.

 

Furthermore, I believe that you should be following just one or two things which you have learned that respond to this pattern.

 

I'm not saying that it doesn't work, just that I believe that, statistically, you won't find that following such a system will work a significant number of times, as markets tend to behave erratically.

 

Of course, I can be misunderstanding you.

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Guest Bodhi Dharma Zen
"Trend" is an artificial concept.

That is the reason why it cannot be quantified.

 

I believe that trends are real, just impossible to spot BEFORE they happen. I mean, in an historical chart it is obvious when some instrument goes up or down in a mostly regular fashion. But spotting it before it happens is the tricky part.

 

My stance? You can't. No one can.

 

If I happen to believe that some price will go up and then it goes up I call my belief a prediction, and thus I confirm that "I know". But with the same eagerness that we remember the times we score we forget the times our "predictions" didn't work.

 

With a pretty simple experiment this can be proven:

Enter e.g. EUR/USD with 1,000,000 EUR or USD. You will get immediately the feeling that there is a "trend" because the account goes up or down numbers that will probably seem significant.

 

With other words: Trend is a function of account size, profit expectancy and risk tolerance.

 

If huge leverage is used there is no trend-less phase, "chop" or whatever people call it.

 

Ok, I do not understand where are you coming from in here. Care to explain it a bit more?

 

 

When strategies seem not to work in "choppy" times this is due to some other problem - probably bad entry point.

 

If the entry point is chosen correctly it's always possible to choose one of:

- increase leverage

- increase time frame = wait until the symbol moves far enough

 

But can we correctly "chose" it? Or is it more a matter of "luck"?

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