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Proof that charts don`t work????

Chart Forum » Does Technical Analysis Really Work? » Proof that charts don`t work????

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Guru trading records, whats the real deal?2ndsniper25-May-11  05:07 am
Using statistical and mathematical sciences stoian30-May-05  06:50 pm
         

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stoian
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Hi forumers,

Charts are doing a good work, but not a very good one. Why?
Because when You are picking up values for Your charts, You are picking up (only some time with a greater, and every time with a smaller treshold/limit of certitude) A NONSIGNIFICANT VOLUME of for Your research needed values. If You want to be able to predict/foresight/forecast the future evolution of the values of the phaenomena You need to pick up A SIGNIFICANT VOLUME for Your research.
Do You do this? Are You every time consciously that EVERY KIND OF CHART MEANS ALSO A PROBABILITY FIELD,since when K.F.Gauss, Laplace, R.A Fisher have defined to be every chart, and NOT only as a commonplace/trite/simple grafical representation?
All the scientist of the world together with them of the Massachussets Institute of Technology are preserving this matter as a secret=freemasonry.
When charts are treated from You, only in the simple way i have mentioned and not AS A PROBABILITY FIELD, than charts are functioning literally like an human eye that can not see very, very well what happend in the past, and what is happening yet=curently, and therefore have only a very, very little chance to see any TRUTH about the future evolution.
Kind regards,
Your Doru Stoian


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hilarius
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Stoian

Due you use statistics predictively?

Hilarius







I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

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redbellie
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Doru,

Could you please explain this again for me and the laymen among us please?

Cheers RB


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david_louisson
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Hi Stoian

I am trying to understand your post. When you talk about volume, I assume that you are referring to the fact that you need to run tests over a large sample of trades, in order to attain statistical significance. Correct? If so, I certainly agree.

I don't understand the reference to freemasonry, or exactly what is being kept secret. Can you explain further?

In your other post
https://forum.incrediblecharts.com/messages/191443/188197.html#POST66734
you talk about SMAs (statistical/mathematical analyze) and probability fields. Do these refer to an approach like Steidlmeyer's Market Profile, i.e. creating a probability distribution of recent price behavior, in order to forecast likely future direction, or are you referring to a statistical analysis of your actual trading test results (i.e. number of wins, losses, expectancy, etc)?

You also say that "very accurate forecasts" are necessary, in order to make profits. Can you explain in more detail how you obtain these?

Many thanks
David


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stoian
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To Redbellie and David-Louisson especially, but also for all forumers,

Yes, i am researching in a LIKELIHOOD MANNER an not creating creating a probability distribution of a price evolution. You can called it also, a research of the investor`s=speculator`s behavior regarding the very different price levels, in order to forecast likely=the most probable future direction, and not only, so as i said already many times before in my postings, i estimate in a likelihood manner the MOST PROBABLE LEVEL of the risk of increase/decrease(+/-)=volatility of any evolution for titles from the Stock Markets, from the Foregin Exchange Market, or from any other markets.

Kind Regards,
Doru Stoian


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stoian
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Also to redbellie and david_louisson,

I am never referring to a statistical analysis of any actual trading test results (i.e. number of wins, losses, expectancy, etc), because ONLY FROM THIS SINGLE REASON, RESEARCHERS ARE SAYING THAT "HISTORY=WINS MADE IN/FROM THE PAST CANNOT JUSTIFY=SET UP A CONFIDENT BASE FOR FUTURE WINS".
But a am strongly sustain that idea:" that only SIGNIFICANT VOLUME OF HISTORY VALUES is making the future values", or that "the future was build almost completely in the past, as ideas linked to other ideas mentioned also today, about the FEATURE, THAT PRICE EVOLUTIONS ARE NOT EVERY CASES A DUMB STRING OF VALUES, BUT INTELLIGENT=ORDERED STATISTICAL SERIES OF VALUES, which are posessing AN OWN MEMORY AND CAN BE ABLE TO TRANSFER AN INHERITANCE TO THE FUTURE EVOLUTION (they don`t forget=never forget the levels reached in the past when they curentlly describe an evolution). That also refferes too and describes in my words THE THEORY OF EFFICIENT MARKETS, where FUTURE INFLUENCES THE PAST AND VICE VERSA.

Regards,
Doru Stoian


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david_louisson
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To Mr Stoian: Thank you for your reply. I have just located another thread where you provide examples (XLS spreadsheets analyzing EUR/USD) of what I assume is your SMA method of analysis. This has given me a much improved idea as to how this works. It has certainly answered some of my earlier questions.

To those wishing to understand this further: load Mr Stoian's examples from this thread:
https://forum.incrediblecharts.com/messages/23/210494.html

As best as I can understand, this is what is being attempted: a best-fit regression line, using either a polynomial (as used in the EUR/USD example) or exponential formula, is being drawn through the price data points. The assumption that is being made is that the polynomial function can be extrapolated to predict future price direction.

There is an excellent piece of software called 'Curve Expert' (which can be downloaded from http://curveexpert.webhop.biz/) that allows over 30 different curve fitting models (polynomial, exponential, power law, yield density, growth, sigmoidal, hyperbolic, sinusoidal, gaussian, and numerous others, including user-defined) to be applied to any series of X-Y data points. Curve Expert allows data to be imported directly from Excel. By using an iterative process, it will then fit the best curve (i.e. lowest standard error) to any model that you specify, and even compare fits between all of the different models.

Once the formula has been established, it is then possible to extrapolate the function to obtain future values of Y (price) given any value of X (time).

In the early stages of my study of TA, I trialled this product in an attempt to see how well these models were able to predict future price action. What I did was take a historical section of prices, apply the fitting, extrapolate the curve, and compare the result with what actually occurred. I soon gave up, as I found that each model gave a completely different result, in the context of the required level of accuracy (i.e. to produce workable buy/sell signals). It also raised the critical question: how to determine which model was most applicable for any given stock.

I also discovered that, when attempting to fit a polynomial, it was obvious that its ability to forecast the 'medium to distant' future was severely limited, simply because of the very nature of the function itself. An 'n'th degree polynomial always has n-1 turning points. After the final turning point is passed, it proceeds indefinitely in one direction to either positive infinity or negative infinity. Obviously price will never do this :-)

Also, many of the models, if extrapolated forward far enough, gave negative values (i.e. dipped below the x-axis). All of the above gave me the impression that such a study would be useful, if at all, only for very short term forecasting.

I could have (and possibly should have) researched this more extensively, but my knowledge of statistics (and therefore the ability to judge the usefulness of statistical curve fitting) is not sufficiently good. However, my intuition told me that I had seen enough to suggest that this was not a particularly viable option.

A couple of other reasons:

1. The markets are driven largely by emotion, and are buffeted severely by news (esp in the short term), and it is impossible to measure emotion statistically. There are also severe effects caused by 'sector rotation' as applied 'heavyweight' market funds, effects on price of ex-dividend announcements, sudden changes in economic outlook, and (potentially) a number of other events whose effect, I would suggest, defies any kind of precise mathematical analysis.

2. If least-squares-regression-curve-fitting gave a significantly better forecasting result than 'conventional' TA techniques, then I'm sure that it would be gospel by now, and would have made a significant impact on all of the Trading Systems and literature that is available to us today. In other words, the 'Market Wizards' of today would be using it, and advocating it, over conventional TA. Plenty of brilliant minds have already had many years worth of opportunity to evaluate it.

Like Elliott Wave theory, this kind of statistical analysis is attractive in that it doesn't only purport to forecast price direction, but also future turning points, i.e. how far the price is likely to move.

Another interesting type of statistical analysis method is 'Market Profile', developed by Peter Steidlmayer. I'm afraid that I never evaluated it fully. Anybody interested might like to 'do a Google' and study it further.

Mr Stoian, I do not wish to denigrate your work in any way. Perhaps I have misunderstood what you are saying. If that is so, I apologize.

Finally, I fail to see how a reference to Freemasonry or the Illuminati should add evidence as to why a 'statistical' method should warrant consideration over any other method. Again, the 'secular' academic world has had ample opportunity to evaluate such a method, and would surely be applying and recommending it, if it really was the optimum approach. There is really not that much mystery about it (assuming that one's knowledge of statistics is a lot better than mine :-) However, again I apologize if I have missed the point.

David


(Message edited by david_louisson on May 31, 2005)


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hilarius
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David

I am one who is fascinated (as you appear to be) by the use of statistics to make predictions ... if such a thing is possible

I have a couple of questions :-

(1)
I routinely use moving averages as a means of eliminating noise from data series to focus on the "underlying trend"

Using Guppy Multiple Moving Averages one frequently discovers instances where the short and long term moving averages are in conformity ... and other instances where they are in conflict

Contraction of these averages and movement after crossovers appear to offer interesting predictive opportunities

Have you used GMMA's and what is your view of them?

(2)
A distinguished member of this forum has frequently referred to the rubber band effect ... that is the tendency of the actual price to overshoot or undershoot and in due course respect a selected (preferred) moving average before embarking on another overshooting or undershooting move in the same direction

As I understand it he recommends use of this phenomenon as a tool for timing entries and exits in company with other selection criteria

A problem with this is that some crossovers occur without denoting the end of the major trend while other crossovers are seen with hindsight to be genuine precursors of a major trend change

So my question is how is an insignificant crossover distinguished from a significant one ... presumably the answer lies in the subsequent price action, but what are the subsequent signals we can use to find that the crossover failed to be predictive, and at what specific point should the signals be acted upon?

Finally can we make use of a combination of TA and FA in order to determine overbought and undersold situations where market perception has departed radically from underlying value?

For example at $ 2.50 the Australian stock One Tel was miles away from its underlying true value, as was HIH for many months ... so is there a statistical way to measure predictively the difference between current perception and underlying reality ... and is such use of statistics limited to TA or FA alone, or can both be combined?

If we could agree on the answers to these questions we could write a book together and make our fortune :-)

With Best Wishes

Hilarius


I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

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stoian
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To david_louisson and to hilarious,

I am very sure You do not wish to denigrate my work in any way. It is also very sure You have misunderstood what i am saying. But despite this situation You have not to apologize. I explain myself in two steps. The first step will be partly with your words/ideas, and the second step with a question to all of You from me:

1.Only the curve-best-fitting it`s truly and only giving a significantly result but only a partly result, THAT WILL PROVIDE HELP FOR THE NEXT STEP FOR THE FORECASTING METHOD=technique, and is not giving results for a better forecasting itself.
Another interests for the statistical analyse, is to determine the MOST EXACT PROFILE=BEHAVIOUR IN TIME OF THE MARKET OR MARKET PARTICIPANTS (investors and speculators).
If the market has a profile of "NORMALY-RISKED MARKET" where the risk=volatility=variability for every short interval of time is NOT GREATER than +/-15% (it has every short time a risk between 0% and maximum +/-15%), or if we have to do WITH AN "OUT OF NORMAL-RISKED MARKET" where the same indicator called risk=volatility=variability for short intervals of time is GREATER THEN +/-15%.

2.I am repeating for You, THAT EVERY CHART MUST BE TREATED AS A PROBABILITY FIELD (where each daily event in part, HAD NOT ONLY FOR THE PAST BUT WILL ALSO HAVE FOR THE FUTURE, a certain level of probability FOR HIS APPEARANCE=IN PRODUCING ITSELF) and when you are treating a chart without this FEATURE, than YOU WILL HAVE AN IMPERFECT EYE=INSTRUMENT TO SEE AND TO UNDERSTAND REASON OR EMOTIONS WHICH ARE CONDUCTING TO PRODUCE ALL THE MARKET MOVEMENTS ON HER DIFFERENT PRICE-LEVELS, and which is not allowing you also TO FORESEE THE NEXT EVOLUTION FOR THE PRICE-LEVELS.
Where, to whom and why have You leaved this feature?


Kind Regards,
Doru Stoian


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stoian
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To david-louisson,

All the questions i have posted for You are related eachother. So You have to pay great attention and discover all the links between this ideas.
1) Why do You have nothing mentioned about R.A Fisher with his two extremly important types of differences, called also dipersion (to be calculated through the Least-Squares- Method):
a) The dispersion that exists between each INDIVIDUAL=LOCAL EMPIRYCAL AND HISTORYCAL VALUE and EACH THEORETICAL MEAN VALUE, OF THE STRING OF MEAN VALUES, CALCULATED AS A STRING OF AVERAGE=MEAN VALUES (string of values, which are given through the BEST-FITTING-REGRESSION-CURVE which is calculated on the basis of the already mentioned individual=local empirical values);
b) The dispersion that exists between each of the THEORETICAL MEAN VALUES FROM THE THEORETICAL STRING=SERIES OF VALUES and THE STATISTICALLY (in a likelihood manner) ESTIMATED REAL MEAN.

2) Why do You don`t mentioned nothing about THE GALTON`S OGIVE AND HER REASON OF EXISTENCE?
Do You see that on the vertical axis are represented the probability levels and on the orizontal axis are represented the levels of the GAUSSIAN COEFFICIENT OF GUARANTEE for each level of probablity in part?
Do You understand the meaning of this instrument which the Galton`s Ogive is?
Do You understand that the Galton`s Ogive is showing us the GENERAL LAW OF GAUSS, ABOUT THE GENERAL MODEL OF THE REPARTITION-DISTRIBUTION IN PROBABILITY FOR THE APPEARANCE-PRODUCING OF THE EVENTS OF EACH PHAENOMENA FROM THE UNIVERSE?
Do You understand that LAPLACE HAS DISCOVERED - ON THE BASE OF THE GAUSS`S GENERAL LAW OF REPARTITION - WHAT ARE NORMAL-RISKED PHAENOMENS (like the human behaviour on the financial markets is) AND HOW THEY ARE LOOKING FROM THE SIGHT/ANGLE/ OF THE PROBABILITY LEVELS IN COMPARISON WITH THE GENERAL LAW OF REPARTITION IN PROBABLITY OF GAUSS?


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cjb
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Hey Sto,

After having a read am I correct in saying you are calculating Pivot points / support-resistance levels? Or have I missed it??

CB


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ricardon
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stoin, afraid your post make no sense to me at all. Perhaps I need a dinglehopper to comb out the tangles or a babelfish. Perhaps if all the values in the probalistic eigenmatrix were rotated around the number 42 I would see the connection to the gravimetric index.


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david_louisson
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Hilarius, my friend

I trust that all is running smoothly at the friary.

(1) Re GMMAs:
"I routinely use moving averages as a means of eliminating noise from data series to focus on the underlying trend"
Yes, I believe that this is sound.

"Using Guppy Multiple Moving Averages one frequently discovers instances where the short and long term moving averages are in conformity ... and other instances where they are in conflict"
Must confess I've never seriously looked at GMMAs. To remedy this a little, I used Google and found the following articles helpful:
http://www.chartfilter.com/articles/movingaverage.htm
http://www.market-analyst.com/kb/article.php/Guppy_Multiple_Moving_Average/

Here are my (hastily assembled) conclusions:
Very simply, the larger the MA, the greater the lag.
1. When a short term reversal occurs (a deceleration, or "noise", to a long term trader), the short GMMAs will react first (tighten), because of the lower lag. This is the most likely cause of the "conflict" you describe, because the price has not moved far enough to allow the long term MAs to "catch up".
2. If the reversal persists, this will eventually cause the longer GMMAs to react, starting with the outermost. A longer term trader could read this as the start of a profitable trend (any trend is profitable if it ultimately lasts long enough :-). Now the "conformity" you describe reigns once again.

To a (would be) short-term trader like myself, none of this is really that helpful. I don't want to denigrate Daryl Guppy's work, because (just for starters) he is much more experienced and successful than I am, but even in the case of a longer term trader I don't see why one can't deduce how "mature" a potentially emerging trend is simply by looking at the price action itself.

I've always been of the opinion that indicators are really only useful when they highlight phenomena that is not visually apparent in OHLC. So if GMMAs, or any other indicator, creates visual patterns and signals that are meaningful ("a picture paints a thousand words") to you, then by all means use them. Indicators can also be useful in mechanical "black box" systems, where they provide a simpler means of coding something that would otherwise be nightmarish. For example, "when the close crosses a 5 day SMA" is a simple mathematical representation of describing what is really a complex graphical picture of "when a trend has reached a certain shortish term maturity".

"Contraction of these averages and movement after crossovers appear to offer interesting predictive opportunities"
Because of the nature of the math behind MAs, contraction is caused by deceleration (and then reversal) in price movement, expansion by acceleration (i.e. increasingly sharp trending). Oscillator divergences are also caused by the same kind of decelerations, and could therefore be used as an alternative. How early these decelerations are picked up, depends not so much on which indicators are being used, but how sensitively the indicators are calibrated.

"Predictive opportunities": the short MAs (representing "traders") turn, move toward and then crossover the long MAs as the reversal gathers momentum. Either you make an early entry here, or wait until the long MAs themselves (representing "investors") turn.

Early entry = higher risk that reversal has not yet occurred, but entry at more favorable price. In theory will result in higher size of average winning trade to size of average losing trade, but a significantly lower number of wins to number of losses ratio.
Later entry = the converse of all this.

I haven't made a study of GMMAs. There may be much more that can be read than what I'm aware of, but that's my commonsense take based on the mathematical principles involved, for whatever it's worth.

(2) Rubber band effect and crossovers:
Not sure exactly how the "distinguished member" uses this. Prices tend to move from extreme to extreme across all time frames. Resistance and support is respected more frequently in a non-trending market, because in a trending market, the prices breakthrough R & S, simply because that is the nature of trending. Not sure exactly what you mean by the rubber band effect, but the "ping back" suggests a kind of non-trending behavior.

"...in due course respect a selected (preferred) moving average..."
I expect a likely problem would be selecting the optimum calibration for the MA. Easy to do in hindsight, but then of course everything is easy in hindsight.

"A problem with this is that some crossovers..."
I assume you're referring to the price crossing over the selected MA?

"...occur without denoting the end of the major trend while other crossovers are seen with hindsight to be genuine precursors of a major trend change"
Assuming I understand correctly, this is the crux of the same dilemma being discussed in the GMMAs. Early entry gives a more favorable price, but is less reliable, because it could just represent a minor deceleration/reversal ("noise") in a longer term trend. If we could establish a system that combines an earlier entry without compromising reliability, and we're a giant leap closer to the "grail". Seriously though, I think that if that were possible, somebody would already have discovered and published it.

That leaves us with the unsatisfying conclusion that "sometimes (for no apparent technically-based reason) prices will trend far enough to overcome costs, sometimes they will not". Hence the focus must move to what we can control: managing the exit, and the level of capital commitment.

Another way of looking at decelerations is that they are in fact a reversal, but one that failed to reach any kind of maturity. That being the case, entry/exit considerations reduce themselves to two criteria:

1. How early or late one enters. (Bottom line is that one enters on a price bar, and that any indicator can be calibrated to provide a signal earlier, or later, e.g. a 5 day MA will give an earlier signal than a 10 day MA).
2. How early or late one exits, i.e. how tight one's stoploss and/or trailing stops are.
I've posted some much more detailed thoughts on all of this elsewhere rather than my using copy/paste, see my post labeled "Post Number: 51" in the left margin of the thread: https://forum.incrediblecharts.com/messages/12/477782.html

"Finally can we make use of a combination of TA and FA in order to determine overbought and undersold situations where market perception has departed radically from underlying value?"
I'm sorry, I have absolutely zero knowledge when it comes to FA. If FA can tell us something about who the participants are (e.g. large fund managers, small day traders), and WHY they are buying or selling, then it is bringing additional "external" variables (i.e. outside of OHLCV; all indicators are somehow derived from OHLCV) into the mix, whose independence could be genuinely "confirming", and therefore valuable.

"If we could agree on the answers to these questions we could write a book together and make our fortune"
I suggest that, if we had these answers, we could trade the markets, and make an even bigger fortune :-)

Cheers
David

(Message edited by david_louisson on June 01, 2005)


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david_louisson
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Mr Stoian

Thank you for your replies.

Re your first post (labeled "Post number 22" in the left margin).

Point #2 : can you provide a graphical example of what is meant by a "probability field"? I looked at your two spreadsheets on the EUR/USD analysis. In terms of forecasting, what I saw was a best-fit polynomial regression curve. I have no formal knowledge of statistics. I do not understand exactly how this gives us "an instrument to see and to understand reason or emotions which are conducting to produce all the market movements on her different price-levels". However, I also saw a table that looked similar to a "Market Profile" as popularized by Steidlmayer (and possibly also others?). I have a vague understanding of what this represents, but no knowledge of how to use it to make trading decisions.

Re your second post (labeled "Post number 23" in the left margin).

Point #1: I've never seen anything about RA Fisher in all of the books I have read, relating to trading. I will do a Google search and see what I can find.

Point #2: My knowledge of statistics is poor. I've heard of Gauss, but have never studied Galton's Ogive, repartition-distribution models, or normal-risked phaenomens. I'm not saying that you are wrong, just that I lack the knowledge to understand these topics, let alone exactly how to use them to improve profitability in trading. Again, I will do a Google search.

Presumably the person who gave Mr Stoian's posts 5 stars understands the topics he is discussing, and would be kind enough to provide a viewpoint?

Thanks
David

(P.S. Ricardon You make no mention of the Jordan block to eigenvalue (lambda), or its algebraic multiplicity. Is your proof based on the representation of the resolvent of Schwerdtfeger's formula, or do you simply apply the Cauchy-Binet coefficient to the Laurent expansions in the resolvent set? :-)


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hilarius
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David

I believe that GMMAs do indeed offer visual cues that are not so evident from the raw data bars

An example is PIF which I added to my watchlist just prior to Christmas on the basis of the acceleration of the short term moving averages following an uncertainty phase depicted by a concentration of all the averages

I entered at $ 1.22 ... riding it to $ 1.62 with no hitting of my long term stop and 2 hits of my short term stops followed by re-entry

My typical purchase is 50% for long term holding with a 10% stop and 50% for short term trading with a 5% stop

It does appear to me that GMMAs offer clear guidance on the majority of occasions when the short averages AND long averages accelerate following a "squeeze" where all have concentrated together

I am not sure which is harder ... the discipline to trade well consistently or the discipline to write a best selling book

With Best Wishes

Hilarius

pif


I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

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hilarius
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David

Have you devised a method to resolve the conflict between early entry with higher risk and later entry with lower risk, using OHLCV data?

An example would be interesting as long as it doesn't involve too much algebra :-)

With Best Wishes

Hilarius


I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

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hilarius
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David

Come to think of it your low risk solution is all I need for the time being :-)

Unless you can guarantee your high risk solution :-)

With Best Wishes

Hilarius


I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

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beaver
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Is this a trading forum or a self-gratification forum for theoretical BS artists that don't trade and have no idea of what it's like in the real world.


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hilarius
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Beaver

Your question implies a (possibly false) dichotomy between the two groups

Maybe some of us are in both your categories :-)

Have a great day

Hilarius


I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

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hilarius
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PS to Beaver

(1) I am not responsible for your single star ... your call for seriousness deserves 5 stars but sadly I can't be serious all the time

(2) It is not possible to be a trader and not a trader, but you imply a dichotomy between being a serious trader and a crazy ego driven BS artist

I make a proud claim to be both :-)

Hilarius (humble as always)

(Message edited by Hilarius on June 01, 2005)


I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

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dogalog
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Greetings beaver,
Could you possibly post something on your methods,stock pick technique,just your view on the state of the market,even instead of just bashing out 'you're a dill' [2 007] and why short[NAB long ago] cos,well,beaver i'm starting to think you may be a 'extra' identity for another forumer and if i think that?well BS comes to mind,so if you'd show the Forum what ya got and what ya want,well,that'd be progress.
Happy Trading,
jr


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007
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Hilarius,

I agree with your views, not to start another argument or debate with Beaver, which reminds me... I was supposed to have left the forum by now cause I was supposedly causing too much trouble. I was hoaxed!

Many friars of the old days would be familiar with the Latin saying, "Virtus in medio stat" which is translated "Virtue stands in the middle".

Quite simply all opinions whether BS or GS [sh*t made of gold], are of significance. It helps us to develop the most important of all skills, "discernment".

The ability to discern truth from fiction is a skill that we all need to learn. This cannot be done if we were all perfect and serious.

There are three things we all need in order to survive in this world: i) theory or textbook knowledge; ii) experience; and iii) play.

Perhaps we should add a 4th "self-gratification".

007


PS I too am not responsible for the star.

(Message edited by 007 on June 01, 2005)


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007
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Jr,

Geeezzzz! A split personality?

Found a picture of a bloke who I think is suffering from da "split personality". Kinda reminds me of da captain as well when he's in one of em grumpy moods (99.9% of the time).

image/x-jg
split personality.art (4.9 k)



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dogalog
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greetings 007,
you must remember that what i say,is not necessarily TRUE,as in it's just how i choose to believe,and you have to adapt anything and all of what's said to YOUR own circumstances,level of expertise.It is a terrible[like terrifying] thing to think that people are taking stock tips from this site and not just honing techniques or ,well,just going I reckon.

Some people wish to maintain an I'm right so you must be wrong Attitude,cos I'm serious and so you have to be a clown to be different from me.
Such people are truly sad especially when that attitude is so prevailing in the Real World and i thought web sites were to bring an anarchic sprinkle to Life,under cut experts,get away from that commentary of ,like,Institutions,that seems to be
'the stock market is a really wild,unpredictable,dangerous place,We're BIG ergo we KNOW so why not give us your Money/Super/Nest eggs and we'll do the best we can by you'

Ya know,007,i think that some of the experts who turn up here are 'fishing' for clients,like marks in con-merchant talk,but i believe that cos i know how that's done and how simple it is for 'respectability' to shield such action.

Anyhow 007,christians/espec catholics unlapsed are welcome in Back Pages,if ya do or even don't want to play d'Game.
cheers,
jr

ps-it wasn't me on the one star,neither,ya know i reckon it just may well be ,like,self-abuse?


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david_louisson
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Hilarius:

Nice trade with PIF well done! I think I can see where the two hits of your short term stop occurred :-) Agreed, the GMMAs further highlight these 'dips' in the price.

The chart you posted is, I believe, a good example. I note how the green GMMA bands squeeze during a minor reversal, then either crossover if the reversal becomes severe enough, or 'unravel themselves' if the trend resumes itself (see my earlier post). The little 'bubbles' appear when there is rapid (abnormal) acceleration, i.e. momentum is temporarily increased.

Acceleration following a squeeze I think this amounts to resumption of the prevailing trend following a pullback, an entry signal used by many traders. I notice how Snifter uses a similar technique, albeit using different indicators (CCI and ADX) see https://forum.incrediblecharts.com/messages/12/333776.html

"Have you devised a method to resolve the conflict between early entry with higher risk and later entry with lower risk, using OHLCV data?"
I see it as more of a trade-off than a conflict, i.e. either enter early and manage the added risk, or later with greater probability that the trend is established. I don't have a strictly mathematical method.

"An example would be interesting as long as it doesn't involve too much algebra"

Intel Corp

See the example (recent excerpt from Intel Corp). Bear in mind that this is short term trading, and using nothing more than OHLC. Notes refer to numbered points on the chart
(1) Early entries at these points, following a full-bodied unfilled (close > today's open) blue (close > yesterday's close) candle, cause losses when stop is triggered. This is what I mean by extremely high risk, the earliest possible entry, and in this case, trading against a significant downtrend, and with only a loss in downward momentum to vindicate our decision. More often than not (in this case, three times) we will be stopped out. A tight stop = small loss.
(2) An unfilled blue candle. In hindsight, this is entry very close to the trough, giving the best possible entry point. However, in real time, the fact is that this qualitatively not much different from (1), i.e. extremely risky.
(3) The upward trend is starting to mature. In reality, this is what I would call a "medium" risk entry.
(4) The safest entry, with the upward trend maturing, and surpassing all previous highs (see the horizontal black line) in the trough created by the prior downtrend

Trend turns out to be of sufficiently long duration to not only cover costs, but realize a handsome profit.

No algebra, no indicators; only candles. Hope this illustrates.


Beaver:

For the record, I theorize often, and trade only occasionally. Agreed, the real world brings in a whole new dimension, much of it psychological.

If anybody believes that something is BS, then they have equal opportunity to submit a well-reasoned case to support their view.

David


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hilarius
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David

Your example, with helpful notes, is indeed interesting

I too like to wait for a conservative entry when the trend reversal has become clear

As you say, the length of a maturing trend will often compensate for any initial delay

Weinstein suggests that the longer the base the longer the breakout trend will last (in general)

Have you tested that concept?

With Best Wishes

Hilarius


I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

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david_louisson
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Addendum to my example in previous post:

Other considerations regarding entry:

a) What is the sector doing? (Should attempt to trade in harmony with the sector - to reduce "sector risk")

b) What is the overall market doing? (Should attempt to trade in harmony with the market, and international indices, where possible - to reduce "market risk")

c) (Most importantly) Is the downtrend simply a pullback in a longer term trend? (ALWAYS trade in harmony with the longer term trend)

And of course, if you advocate and understand FA, there's no harm in asking: what do recent news, director dealings, EPS, PE ratios, etc, for Intel tell us?

If most or all of the above are favorable, then the risk is lowered accordingly, hence an earlier entry becomes more viable.

David

P.S. 007 - nice post!


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ittrader
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On what criteria could the horizontal line be derived (mechanically)?


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slick007
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A very interesting read this thread.

Congratulations Mr Stoian as you seem to be the first member of this forum born in Romania who still lives over there. In terms of practical investing is there much action on the Bucharest stock exchange at the moment by the way?

slick - aka Vlad


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david_louisson
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IT Trader

The horizontal line is the highest high (or highest close, if you prefer) since the lowest point in the trough, which is the lowest low (or lowest close) during the last "cycle".

Defining the cycle (in mathematical terms) is perhaps a little more difficult what is obvious to the human eye is not necessarily easy to code. To simplify, I took a simple moving average of the closing prices, and cut the chart into sections wherever this intercepts the closing price. Then the peaks and troughs are simply the highest and lowest points in successive sections. Then all that is needed is to (arbitrarily) select the number of values that are being averaged; I simply used a visual, trial-and-error process.

Granted, that is a very primitive method. Of course, there are dozens of other possible ways of defining "local" peaks and troughs mathematically. The key word is local: what is local to a short term trader is totally different for a long term trader.

Best wishes
David


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hibikijoji
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I must say, i give my applause to david_louisson for that excellent post on some analysis on MA.

I've recently jumped onto share trading after I had developed a way to (relatively) secure some profits. By using a 21 day Exponential MA and WC, its given me some solid foundation to find buy/sell opportunities. Mind you I have only learnt the basics of basics of trade (and for most of the posts here, its breathtaking to read all of those acronyms), but to see some well founded traders to approve of MA's, I must be on the right track :-)

As you mentioned previously, It is hard to find a MA that could allow you to enter right at the start of the trend.. so true.


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steveaustin
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I cannot see logically how you can lose money by trading using only MACD, RSI and Volume as your indicators - with tight stop losses in place.

This year i have made many losing trades and only 4 significant winning trades. These winning trades have been awesome. I honestly believe this trading style will make money consistently.


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davkell
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Hey Steve;

I am curious to hear a little more about your approach, timeframe, setup, exits etc and what your success has been. I like hearing about the simple approach to trading, especially the successful ones.

Cheers.


"Trade Your Way To Financial Freedom" - Van K Tharp

"Manage the downside; the upside will take care of itself" - Donald Trump

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steveaustin
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Davkell, here is a basic summary of my trading style which is short term only.

I search for stocks which have the following favourable characteristics:

- they are trending upwards in the last year
- the MACD has crossed over positively
- volume has increased above average
- RSI has risen

Having these indicators stacked in my favour i then purchase the stock.

If it does climb i exit when RSI is above 80.
If it does not climb and indicators weaken i exit.

Emotion must be removed from the equation.


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victor_h
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Hi Steve,

Remember that the MACD and the RSI are both derived from the Closing Price. If you compare charts when the MACD Crosses the Zero Level and the RSI crosses the 50 Level, you will find these events occur at similar times. Also Divergence signals tend to occur in both at roughly the same times. Hence, you only have "1 signal" at most times and not 2.

I would suggest exploring other indicators based on Highs and Lows for confirmation. (eg. ADX / DMI )

Regards Victor.


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steveaustin
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Victor_h, thanks for your input.

I will explore those indicators also, however in the meantime i will stick true to my strategy which has paid dividends so far. I have only been a share trader for approx 4 months.

regards


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canam
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Hi Steve

I feel that VH has a valid point.

Not having a go, but, if you started trading about 4 months ago then it would be pretty hard not to make money.

Long term traders have seen this period come and go on a regular basis - people flood into the market when everything is good, and then, when the market dynamics change many of those new people lose everything they made and often MORE.

My suggestion to you would be to go back to a sideways period or bearish period in the market and apply your exact same rules and measure the impact of your system on your trading float.

I also concur with the use of multiple oscillators - they do have different formulas but essentially read the same thing at or near the same time frame. Beware.



I'm not saying your system wont work - but make sure you know the effects of the market phases before you commit your life savings. All too often I have met people that got burnt and then swear black and blue that you can't make money in the market.

I would consider at 4 months you should have gone through the following phases in your trading history:
- Decide that I'd like to look at trading as a way to derive a second income with a view to it becoming a full time income (if that is your intention)
- Read books, forums, and attend various free seminars to look at all the different ways you can trade, not necessarily looking for who to follow, but to broaden my knowledge base of the various ways it can be done. This in turn gives me a better understanding of how the market works.
- Come to a decision, based on my float, risk profile, psychology, time availability to name a few, on what time frame and type of trader I want to - or more importantly, can be.
- Now look for the chart patterns (technical analysis) or fundamentals (fundamental analysis) that meet my profile.
- Test my system over a large sample basis, at least 7 years, to see what 'could have' happened (note, the past is no reflection of the future but at least you'll have a fair idea if you go broke, dog paddle, or profit)
- Paper trade my system so that I am comfortable that I really understand what I am doing, and, without the benefit of hindsight meet the obstacle that the market will throw at me in real time - financially and psychologically.
- If I'm still happy, then start to trade.
- And then...
- Continue reading, listening & learning - and sharing.

I have been trading for 8 years. I was one of those "got burned' people, but due to largely a logical mind realised that it was my fault for attempting to fly a jumbo jet having only driven a car.

Every day I learn something new, I may or may not use it, but it is knowledge and somewhere along the track it will benefit me as I don't know everything about the market and never will - but I know enough to stop the bears from dragging me out of the tree and devouring me.

My thoughts.

Cheers
Seth
:-)


Profits are the bi-product of your system - Following your system is the goal!!

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steveaustin
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Hi Canam, appreciate your thoughts.

I didn't explain my self well...

Let me just say that i began "share trading" in 1999 and i got caned in the 2000 crash. I then refrained for approx 5 years.

I have studied life and the markets for the last 2 years and I am content with my current level of knowledge. Continually learning of course.

I have pretty much been through all the scenarios you have stated.

At the moment I have no money in the stock market. I took the last of some losses today and until i find stocks which fit my requirements i will not trade.

As your footer states - Following your system is the goal - i have reached my goal.

regards


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furpo
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Hi people. Candles and indicators rsi,stochastics,vols are all good, though one needs an eye on trend. ATM try a 30 day line on many stocks, the trend is lower. The outside factors (europe, n korea loonies, unemploy in USA spain, BP oil in gulf, Krudd srpt) too much for a bloke who likes fishing - and earns his weeties on the bourse. Time to open stubby.


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canam
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Welcome furpo
Always great to see new contributors.
Use of a MA is a common way to determine trend - I do it myself - so long as you have a way to establish when the 'trend' is beginning - continuing - ending.
Yes, outside news all has an impact on markets.
Possibly more immediately on FOREX but yes having knowledge of what is happening around you is always an advantage.....much like driving a car really.
:-)


Profits are the bi-product of your system - Following your system is the goal!!

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furpo
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Hi Canam. Yes like Exp MA combined with bollinger (any indicator better than guess); but there is no hiding that this a difficult market to trade atm. Big money poured in this afternoon ASX. My watchlist incl FMG, BLy, BOW. My mild concern is AJO has a head and shoulder. Nearly pressed the buy button this Thurs pm; still mostly cash.
Thanks welcome Smiles and sleep soundly.







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canam
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Yes, I am short in the ASX but most of my money is in FOREX atm.
Trading is hard there too atm with all this Greekonomy LOL
Still....small steps forward now is good, when the markets move the profits are larger :-)


Profits are the bi-product of your system - Following your system is the goal!!

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Passive v. Active Selectionresillent117 31-Mar-10  11:11 am
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IT WORKS!maxboost25-Jun-07  12:10 am
OBV as a signal.colin_twiggs11 12-Jun-07  02:00 pm
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