General Trading Discussion Digest for Friday September 22, 2017

1 new thread and 9 replies from 7 authors in the "General Trading Discussion" community ... Hi  I've tried to follow the video that shows how to add the Breakout Indicator on the MT4 platform that I downloaded from Avatrade. I added the... [Complete Currency Trader]() [General Trading Discussion]( [Post New Message](mailto:COMPLETECURRENCYTRADER-generaltradingdiscussion@ConnectedCommunity.org) [] Sep 22, 2017 started 15 hours ago, [Russell Candfield]( (1 reply) [Unable to add Breakout to MT4]( [external link to thread view]( 1. [Hi  I've tried to follow the video that shows...](#m0) Russell Candfield 2. [Please ignore - user error. Put it in the...](#m1) Russell Candfield started yesterday, [Michael King]( (11 replies) [Predictive or Indicative?]( [external link to thread view]( 3. [It is NEITHER ! ; Market decides ! / It could be...](#m2) Elias Saravanja 4. [Really, very helpful Elias, thank you.](#m3) Anush Mohafez 5. [Some great insights from all and thought...](#m4) Michael King 6. [It's not just the retail forex industry that's...](#m5) James Edward 7. [Great discussion. James, I thought your...](#m6) Nigel Tuck 8. [Yes there's a reason trend trading has stood the...](#m7) James Edward started 3 days ago, [Robert]( (4 replies) [pips vs points]( [external link to thread view]( 9. [​Betty, You are correct and the reference...](#m8) Jim - started 11 days ago, [Anush Mohafez]( (5 replies) [central banks positioned behind prime brokerages taking off volatility?]( [external link to thread view]( 10. [Although FX manipulation was touched in this...](#m9) Anush Mohafez [] [top](#toca) [next](#m1) 1. [Unable to add Breakout to MT4]( [Reply to Group](mailto:COMPLETECURRENCYTRADER_generaltradingdiscussion_e6db643e-2a65-4300-aadb-d241d8082f1e@ConnectedCommunity.org?subject=Re: Unable to add Breakout to MT4) [Reply to Sender]( [Russell Candfield]( Sep 22, 2017 8:53 AM [Russell Candfield]( Hi I've tried to follow the video that shows how to add the Breakout Indicator on the MT4 platform that I downloaded from Avatrade. I added the file to a slightly different folder than the one demonstrated in the video as that folder didn't exist - maybe the version of MT4 is different. I stopped and started the MT4 exe and clicked on the Show All that James mentioned in the video but still couldn't see it. Has anyone else had this problem? Is there a search facility within the website for things like this that might have happened to other people. Any help appreciated. thanks Russ ------------------------------ Russell Candfield ------------------------------ [Reply to Group Online]( [View Thread]( [Recommend]( [Forward]( [] [top](#toca) [previous](#m0) [next](#m2) 2. [Re: Unable to add Breakout to MT4]( [Reply to Group](mailto:COMPLETECURRENCYTRADER_generaltradingdiscussion_6940f8dd-fd9d-435b-80b0-4c6994b3536b@ConnectedCommunity.org?subject=Re: Unable to add Breakout to MT4) [Reply to Sender]( [Russell Candfield]( Sep 22, 2017 9:13 AM [Russell Candfield]( Please ignore - user error. Put it in the wrong folder. Russ ------------------------------ Russell Candfield ------------------------------ [Reply to Group Online]( [View Thread]( [Recommend]( [Forward]( ------------------------------------------- Original Message: Sent: 09-22-2017 08:53 From: Russell Candfield Subject: Unable to add Breakout to MT4 Hi I've tried to follow the video that shows how to add the Breakout Indicator on the MT4 platform that I downloaded from Avatrade. I added the file to a slightly different folder than the one demonstrated in the video as that folder didn't exist - maybe the version of MT4 is different. I stopped and started the MT4 exe and clicked on the Show All that James mentioned in the video but still couldn't see it. Has anyone else had this problem? Is there a search facility within the website for things like this that might have happened to other people. Any help appreciated. thanks Russ ------------------------------ Russell Candfield ------------------------------ [] [top](#toca) [previous](#m1) [next](#m3) 3. [Re: Predictive or Indicative?]( [Reply to Group](mailto:COMPLETECURRENCYTRADER_generaltradingdiscussion_0f20d053-29e8-4bed-85ff-b1c803581883@ConnectedCommunity.org?subject=Re: Predictive or Indicative) [Reply to Sender]( [Elias Saravanja]( Sep 22, 2017 1:28 AM [Elias Saravanja]( It is NEITHER ! ; Market decides ! / It could be BOTH ! and at the same time , if proper money management is use ; Shakespeare's OTHELLO, spend a ton of time thinking on the peripheral of his question , before he concluded , asking , " BE or NOT to BE ? , yet another ? ! . Cheers ------------------------------ [elias []saravanja] [trader] eliassaravanja@gmail.com [yellowknife] [NT] [1 867 873 8634] [CANADA] ------------------------------ [Reply to Group Online]( [View Thread]( [Recommend]( [Forward]( ------------------------------------------- Original Message: Sent: 09-21-2017 05:48 From: James Edward Subject: Predictive or Indicative? Great questions and discussion Michael. I think there can be confusion about semantics. Are certain conditions/patterns predictive or indicative? For me personally, I try to avoid talking about prediction because to most amateur traders, prediction often means certainty. They mistake the idea of being able to predict something with 60% probability as meaning it is certain to happen. Look at the Trump election... Experts were suggesting Trump had only a 30% chance of wining and 70% chance of failing. Most people took that to mean he had no chance of winning and that the experts got it wrong. No they didn't, they got it right. The prediction was probabilistic not certain. So that's why I avoid the term as much as I can. Indicative for me makes much more sense and I think helps more people accept what is really happening. Now are some indicators predictive/indicative in a probabilistic way? Yes. However, most people are not using indicators of any value, and those who are achieving success with an indicator, may be (usually are) attributing their success incorrectly to the indicator and ignoring the other factors. I'll use your example of divergence. You said it works 70% of the time and only has a couple of other minor factors involved. But is it actually the combination of all factors that really provide the edge, rather than the divergence itself? My style for example relies on strength v weakness. Is that my edge? No. I also rely on momentum. Is that my edge? No. I also rely on liquidity. Is that my edge? No I also rely on Volume. Is that my edge? No. Strength v weakness is perhaps 90% of where my edge lays and that is my "big" thing, but it is only when ALL the factors come together and are aligned, that I have a reliable edge. And actually, as I will post further down this, the real edge behind all of it, actually comes down to liquidity imbalance. Strength and weakness is the best indicator or where the liquidity imbalance is, and so I rely on strength and weakness more than anything else as my primary indicator, but the true edge that triggers everything is liquidity imbalance at the depth of market. Now to support and resistance. In forex, it is a myth. Completely and utterly in all forms. This, and everything else has to come down to what is actually going on in the market at a mechanical level. Forget charts. Charts display price changes. They say nothing about how the market works, or why a price changed, how, who changed it, or why. If anything is predictive or indicative, or has any meaning, it has to be relevant to the market mechanics. So what is support or resistance? I mean what is happening in the market...not what does it look like on a chart. What orders have to exist for support or resistance to exist and who has placed those orders and why? You should ask the same question for everything you see in the market. I'm going to copy some text taken from a video I put out this week as part of the cybernetics course. Hopefully this will put some of this in to perspective: Fundamentally, all markets are the same. There's a product, and there are people buying and selling that product. However, despite that fundamental sameness, every market is different. They each have their own rules, characteristics, etiquette's, and structures. Different people participate in each market, and people have very different reasons for participating in each market. A farmer's livestock market and Southeby's are both auction market places, but they are very different in the way they operate and why they exist. In trading, most people confuse markets with charts. But a chart just shows you changes to the price of the underlying product. That's all. It tells you absolutely nothing about why the price changed, or who caused it to change, or whether it is likely to change again in the future. My wife went to a livestock market last year with a farmer neighbour of ours, and she nearly bought a cow by mistake. She rubbed her nose without realising at that market, that was a gesture to signal a bid. When the auctioneer pointed to her to confirm her bid, she panicked and raised her hand to say that she wasn't participating, and that was considered a gesture to increase the bid increment by a factor of 5. Her friend had to quickly tell her to stand perfectly still and not do another thing. The friend on the other hand, was an expert. They bid on certain cattle and not others tactically depending on who else was trying to buy, how many people were competing, what time of day it was and how many cattle were left, who was selling and how much had already been sold, and so on. Our friend understood the market dynamics and operated like a pro. The same thing happens in financial markets, and most traders are totally clueless. They don't even realise what mistakes they're making, because they have no idea about the unique and intricate mechanics of the particular market they're involved in. A system is basically a framework that gives you a methodical strategy for tactically participating in the market. Let's just call it a set of rules or instructions for how to behave. For a system to be of any use, it has to be relevant to the market. If my wife's friend wrote down a set of instructions on how to buy a cow at the local cattle market, and I tried to use that to buy a Ming vase at Sotheby's auction house in Manhattan, it's not going to work. If a highly successful and famous trader has developed a system (a set of rules or instructions) to help him tactically participate in the pork bellies futures market, that has got absolutely no relevance to the spot forex market. None at all. The same as a system designed for use in the Dow Jones has no relevance to the copper market. The charts from all those markets will look the same because all charts display price changes; but why the price changed and how, will be different from one market to the next depending on why that market exists and who's participating in it and what their objectives are. And don't forget Apophenia and memory recall. We see patterns where none exist and give meaning to meaningless data. All humans do this. And then to reinforce how things "appear" we remember all the times it worked as we expect and forget all the times it didn't. If anything is predictive/indicative, it has to be relevant to the market mechanics and be nothing to do with a chart. What orders are in the market and why or how can those orders influence the future? In an auction market like forex, liquidity imbalances can predict the future price movement with up to 80% accuracy over a distance of 10 pips or so, or a time frame 7 to 10 seconds. Stanford university proved this. That's all down to market mechanics. No one has ever proved anything like that with patterns on a chart....because charts are not markets. I'm in danger of sounding confrontational.... I'm just rushing to get you a reply and add to the discussion before I head out in the next 10 minutes. Please come back to me with more questions, or challenge me on anything you disagree with or don't understand my point on. You've brought up a really valuable topic here. ------------------------------ James Edward London ------------------------------ Original Message: Sent: 09-21-2017 05:00 From: Michael King Subject: Predictive or Indicative? I have been a little bemused by some of James' recent clarifications: Studies have shown that popular tools are not predictive. They may have value but they are not predictive. Would it be true to say that such tools and indicators may 'indicate'  where price is more likely to go but technically they are not predictive by definition? Perhaps I can give an example - Although I don't believe Divergence was alluded to, I will hazard a guess and assume 'studies' have proven that Divergence is not predictive. I trade a strategy however, that relies heavily on Divergence and is 70% successful, and in the 30% of cases where price completely ignores the Divergence, the next instance of Divergence is invariably successful. There are one or two other factors involved in the strategy but Divergence is the main factor. Many traders have been trading this system with very similar results over many years. I don't know if any studies have been conducted on Divergence or what the criteria of the analysis would be. But if you back tested  every instance of Divergence it is very likely that the results would indicate that Divergence alone is of no practical use at all in predicting direction. Would the Study however, take into account that you need to wait for a break of trendline after Divergence, in which case  there is a very high probability that price will move in the direction of  that break. I would consider that to be predictive but perhaps I should use the word 'indicative'? James did definitely refer to Support and Resistance as being non predictive and that really caught my attention. But he didn't say they were insignificant The usual belief which may be considered a 'myth' is that 'Support becomes Resistance' and vice versa. I have found this to be true more often than not and  whenever I have traded into nearby major support or resistance it has not usually worked out well. So would I be right in thinking that even if not predictive, major levels of support and resistance are highly significant and are best not ignored? or do studies show that they can be ignored with impunity? Sorry if I appear somewhat obtuse on this.  I would just appreciate a little clarification and am certainly not courting controversy. ------------------------------ Michael King ------------------------------ [] [top](#toca) [previous](#m2) [next](#m4) 4. [Re: Predictive or Indicative?]( [Reply to Group](mailto:COMPLETECURRENCYTRADER_generaltradingdiscussion_1ebc2be1-351c-4b19-ad24-9fae1465a2a0@ConnectedCommunity.org?subject=Re: Predictive or Indicative) [Reply to Sender]( [Anush Mohafez]( Sep 22, 2017 2:16 AM [Anush Mohafez]( Really, very helpful Elias, thank you. ------------------------------ Anush Mohafez Retail FX Cherry Picker Switzerland ------------------------------ [Reply to Group Online]( [View Thread]( [Recommend]( [Forward]( ------------------------------------------- Original Message: Sent: 09-22-2017 01:27 From: Elias Saravanja Subject: Predictive or Indicative? It is NEITHER ! ; Market decides ! / It could be BOTH ! and at the same time , if proper money management is use ; Shakespeare's OTHELLO, spend a ton of time thinking on the peripheral of his question , before he concluded , asking , " BE or NOT to BE ? , yet another ? ! . Cheers ------------------------------ [elias []saravanja] [trader] eliassaravanja@gmail.com [yellowknife] [NT] [1 867 873 8634] [CANADA] ------------------------------ Original Message: Sent: 09-21-2017 05:48 From: James Edward Subject: Predictive or Indicative? Great questions and discussion Michael. I think there can be confusion about semantics. Are certain conditions/patterns predictive or indicative? For me personally, I try to avoid talking about prediction because to most amateur traders, prediction often means certainty. They mistake the idea of being able to predict something with 60% probability as meaning it is certain to happen. Look at the Trump election... Experts were suggesting Trump had only a 30% chance of wining and 70% chance of failing. Most people took that to mean he had no chance of winning and that the experts got it wrong. No they didn't, they got it right. The prediction was probabilistic not certain. So that's why I avoid the term as much as I can. Indicative for me makes much more sense and I think helps more people accept what is really happening. Now are some indicators predictive/indicative in a probabilistic way? Yes. However, most people are not using indicators of any value, and those who are achieving success with an indicator, may be (usually are) attributing their success incorrectly to the indicator and ignoring the other factors. I'll use your example of divergence. You said it works 70% of the time and only has a couple of other minor factors involved. But is it actually the combination of all factors that really provide the edge, rather than the divergence itself? My style for example relies on strength v weakness. Is that my edge? No. I also rely on momentum. Is that my edge? No. I also rely on liquidity. Is that my edge? No I also rely on Volume. Is that my edge? No. Strength v weakness is perhaps 90% of where my edge lays and that is my "big" thing, but it is only when ALL the factors come together and are aligned, that I have a reliable edge. And actually, as I will post further down this, the real edge behind all of it, actually comes down to liquidity imbalance. Strength and weakness is the best indicator or where the liquidity imbalance is, and so I rely on strength and weakness more than anything else as my primary indicator, but the true edge that triggers everything is liquidity imbalance at the depth of market. Now to support and resistance. In forex, it is a myth. Completely and utterly in all forms. This, and everything else has to come down to what is actually going on in the market at a mechanical level. Forget charts. Charts display price changes. They say nothing about how the market works, or why a price changed, how, who changed it, or why. If anything is predictive or indicative, or has any meaning, it has to be relevant to the market mechanics. So what is support or resistance? I mean what is happening in the market...not what does it look like on a chart. What orders have to exist for support or resistance to exist and who has placed those orders and why? You should ask the same question for everything you see in the market. I'm going to copy some text taken from a video I put out this week as part of the cybernetics course. Hopefully this will put some of this in to perspective: Fundamentally, all markets are the same. There's a product, and there are people buying and selling that product. However, despite that fundamental sameness, every market is different. They each have their own rules, characteristics, etiquette's, and structures. Different people participate in each market, and people have very different reasons for participating in each market. A farmer's livestock market and Southeby's are both auction market places, but they are very different in the way they operate and why they exist. In trading, most people confuse markets with charts. But a chart just shows you changes to the price of the underlying product. That's all. It tells you absolutely nothing about why the price changed, or who caused it to change, or whether it is likely to change again in the future. My wife went to a livestock market last year with a farmer neighbour of ours, and she nearly bought a cow by mistake. She rubbed her nose without realising at that market, that was a gesture to signal a bid. When the auctioneer pointed to her to confirm her bid, she panicked and raised her hand to say that she wasn't participating, and that was considered a gesture to increase the bid increment by a factor of 5. Her friend had to quickly tell her to stand perfectly still and not do another thing. The friend on the other hand, was an expert. They bid on certain cattle and not others tactically depending on who else was trying to buy, how many people were competing, what time of day it was and how many cattle were left, who was selling and how much had already been sold, and so on. Our friend understood the market dynamics and operated like a pro. The same thing happens in financial markets, and most traders are totally clueless. They don't even realise what mistakes they're making, because they have no idea about the unique and intricate mechanics of the particular market they're involved in. A system is basically a framework that gives you a methodical strategy for tactically participating in the market. Let's just call it a set of rules or instructions for how to behave. For a system to be of any use, it has to be relevant to the market. If my wife's friend wrote down a set of instructions on how to buy a cow at the local cattle market, and I tried to use that to buy a Ming vase at Sotheby's auction house in Manhattan, it's not going to work. If a highly successful and famous trader has developed a system (a set of rules or instructions) to help him tactically participate in the pork bellies futures market, that has got absolutely no relevance to the spot forex market. None at all. The same as a system designed for use in the Dow Jones has no relevance to the copper market. The charts from all those markets will look the same because all charts display price changes; but why the price changed and how, will be different from one market to the next depending on why that market exists and who's participating in it and what their objectives are. And don't forget Apophenia and memory recall. We see patterns where none exist and give meaning to meaningless data. All humans do this. And then to reinforce how things "appear" we remember all the times it worked as we expect and forget all the times it didn't. If anything is predictive/indicative, it has to be relevant to the market mechanics and be nothing to do with a chart. What orders are in the market and why or how can those orders influence the future? In an auction market like forex, liquidity imbalances can predict the future price movement with up to 80% accuracy over a distance of 10 pips or so, or a time frame 7 to 10 seconds. Stanford university proved this. That's all down to market mechanics. No one has ever proved anything like that with patterns on a chart....because charts are not markets. I'm in danger of sounding confrontational.... I'm just rushing to get you a reply and add to the discussion before I head out in the next 10 minutes. Please come back to me with more questions, or challenge me on anything you disagree with or don't understand my point on. You've brought up a really valuable topic here. ------------------------------ James Edward London Original Message: Sent: 09-21-2017 05:00 From: Michael King Subject: Predictive or Indicative? I have been a little bemused by some of James' recent clarifications: Studies have shown that popular tools are not predictive. They may have value but they are not predictive. Would it be true to say that such tools and indicators may 'indicate'  where price is more likely to go but technically they are not predictive by definition? Perhaps I can give an example - Although I don't believe Divergence was alluded to, I will hazard a guess and assume 'studies' have proven that Divergence is not predictive. I trade a strategy however, that relies heavily on Divergence and is 70% successful, and in the 30% of cases where price completely ignores the Divergence, the next instance of Divergence is invariably successful. There are one or two other factors involved in the strategy but Divergence is the main factor. Many traders have been trading this system with very similar results over many years. I don't know if any studies have been conducted on Divergence or what the criteria of the analysis would be. But if you back tested  every instance of Divergence it is very likely that the results would indicate that Divergence alone is of no practical use at all in predicting direction. Would the Study however, take into account that you need to wait for a break of trendline after Divergence, in which case  there is a very high probability that price will move in the direction of  that break. I would consider that to be predictive but perhaps I should use the word 'indicative'? James did definitely refer to Support and Resistance as being non predictive and that really caught my attention. But he didn't say they were insignificant The usual belief which may be considered a 'myth' is that 'Support becomes Resistance' and vice versa. I have found this to be true more often than not and  whenever I have traded into nearby major support or resistance it has not usually worked out well. So would I be right in thinking that even if not predictive, major levels of support and resistance are highly significant and are best not ignored? or do studies show that they can be ignored with impunity? Sorry if I appear somewhat obtuse on this.  I would just appreciate a little clarification and am certainly not courting controversy. ------------------------------ Michael King ------------------------------ [] [top](#toca) [previous](#m3) [next](#m5) 5. [Re: Predictive or Indicative?]( [Reply to Group](mailto:COMPLETECURRENCYTRADER_generaltradingdiscussion_b4728675-30b8-4ef0-9e83-1c2dbca88419@ConnectedCommunity.org?subject=Re: Predictive or Indicative) [Reply to Sender]( [Michael King]( Sep 22, 2017 5:35 AM [Michael King]( Some great insights from all and thought provoking Yes the hardest obstacle to overcome is the 'evidence' that your strategy works when it's based on myth and, dare I say it - superstition The strategy I learnt seems to work, but I wouldn't pretend I know why, I don't even fully understand divergence but it's worse than that, the second major rule is  that divergence must be accompanied by 'missed weekly pivots' because as we surely all know :)  'price is naturally drawn toward missed pivots' I believe the explanation for this is that all weekly pivots are eventually hit, therefore we must 'logically' conclude that every time price catches sight of a missed pivot it will try to hit it. I'm told it will often fail but at least it might get half way to pivot, the point is it will always try. but I have never tried  this strategy without the missed pivot rule,  I suspect price may equally be drawn to hit pivots as well as missed pivots, in other words the price moves in a certain direction due to various market forces and there will often be pivot lines down there somewhere The reality may well be that any level will be hit eventually So distant pivot levels are not predictive, not even indicative, in fact on very many trades there are missed pivots above and below - so price cannot fail to be drawn to one or the other! Candlestick patterns seem to be the most telling, and ironically often do seem to work, but when you have two screens of different brokers, you see that perfect set up doesn't even exist on the second broker. Not surprisingly, highly rated indicators with buy and sell signals will routinely show an arrow on one screen but not the other and yet still manage to be highly rated on respected review sites and speaking of which, isn't it fascinating  how so many traders, sometimes hundreds, will rave about how their trading has been transformed by a certain system or indicator, while a significant number of reviewers report nothing but losers.  Unfortunately, all such positive 'evidence' does have it's effect, along with all the usual cautions 'Never trade in March' ( can't remember why not ) 'never trade in July or August due low volatility'.  'Never trade Mondays or Fridays due manipulation'  - I have personally had plenty of great trading Mondays and Fridays. It seems the entire Retail Forex industry is based more on myth, magic and superstition than reality, but I'm not convinced that this is the sole reason for failure, as some do remarkably well with  their wizardry. We can't really get away from the Turtle trading experiment.  The organizers had made millions - they knew their 'stuff', but that stuff as memory serves revolved around a break of a moving average, or something like that. Some trainees went on to succeed and many failed. But failure or success was almost certainly not due to whether moving averages are predictive or not, but almost entirely due to the individual psychology of the trainees. I believe Anush alluded to this connundrum,  - when something seems to be working why fix it?  If I still get presents in my Christmas stocking, why would I want to listen to the rest of you telling me there is no obese guy climbing down my chimney every year? But regarding reality, I watched some of the Foundation course this week which I have had for a long time It seemed like new content! Am I really so forgetful or has it been updated? ------------------------------ Michael King ------------------------------ [Reply to Group Online]( [View Thread]( [Recommend]( [Forward]( ------------------------------------------- Original Message: Sent: 09-22-2017 02:16 From: Anush Mohafez Subject: Predictive or Indicative? Really, very helpful Elias, thank you. ------------------------------ Anush Mohafez Retail FX Cherry Picker Switzerland ------------------------------ Original Message: Sent: 09-22-2017 01:27 From: Elias Saravanja Subject: Predictive or Indicative? It is NEITHER ! ; Market decides ! / It could be BOTH ! and at the same time , if proper money management is use ; Shakespeare's OTHELLO, spend a ton of time thinking on the peripheral of his question , before he concluded , asking , " BE or NOT to BE ? , yet another ? ! . Cheers ------------------------------ [elias []saravanja] [trader] eliassaravanja@gmail.com [yellowknife] [NT] [1 867 873 8634] [CANADA] Original Message: Sent: 09-21-2017 05:48 From: James Edward Subject: Predictive or Indicative? Great questions and discussion Michael. I think there can be confusion about semantics. Are certain conditions/patterns predictive or indicative? For me personally, I try to avoid talking about prediction because to most amateur traders, prediction often means certainty. They mistake the idea of being able to predict something with 60% probability as meaning it is certain to happen. Look at the Trump election... Experts were suggesting Trump had only a 30% chance of wining and 70% chance of failing. Most people took that to mean he had no chance of winning and that the experts got it wrong. No they didn't, they got it right. The prediction was probabilistic not certain. So that's why I avoid the term as much as I can. Indicative for me makes much more sense and I think helps more people accept what is really happening. Now are some indicators predictive/indicative in a probabilistic way? Yes. However, most people are not using indicators of any value, and those who are achieving success with an indicator, may be (usually are) attributing their success incorrectly to the indicator and ignoring the other factors. I'll use your example of divergence. You said it works 70% of the time and only has a couple of other minor factors involved. But is it actually the combination of all factors that really provide the edge, rather than the divergence itself? My style for example relies on strength v weakness. Is that my edge? No. I also rely on momentum. Is that my edge? No. I also rely on liquidity. Is that my edge? No I also rely on Volume. Is that my edge? No. Strength v weakness is perhaps 90% of where my edge lays and that is my "big" thing, but it is only when ALL the factors come together and are aligned, that I have a reliable edge. And actually, as I will post further down this, the real edge behind all of it, actually comes down to liquidity imbalance. Strength and weakness is the best indicator or where the liquidity imbalance is, and so I rely on strength and weakness more than anything else as my primary indicator, but the true edge that triggers everything is liquidity imbalance at the depth of market. Now to support and resistance. In forex, it is a myth. Completely and utterly in all forms. This, and everything else has to come down to what is actually going on in the market at a mechanical level. Forget charts. Charts display price changes. They say nothing about how the market works, or why a price changed, how, who changed it, or why. If anything is predictive or indicative, or has any meaning, it has to be relevant to the market mechanics. So what is support or resistance? I mean what is happening in the market...not what does it look like on a chart. What orders have to exist for support or resistance to exist and who has placed those orders and why? You should ask the same question for everything you see in the market. I'm going to copy some text taken from a video I put out this week as part of the cybernetics course. Hopefully this will put some of this in to perspective: Fundamentally, all markets are the same. There's a product, and there are people buying and selling that product. However, despite that fundamental sameness, every market is different. They each have their own rules, characteristics, etiquette's, and structures. Different people participate in each market, and people have very different reasons for participating in each market. A farmer's livestock market and Southeby's are both auction market places, but they are very different in the way they operate and why they exist. In trading, most people confuse markets with charts. But a chart just shows you changes to the price of the underlying product. That's all. It tells you absolutely nothing about why the price changed, or who caused it to change, or whether it is likely to change again in the future. My wife went to a livestock market last year with a farmer neighbour of ours, and she nearly bought a cow by mistake. She rubbed her nose without realising at that market, that was a gesture to signal a bid. When the auctioneer pointed to her to confirm her bid, she panicked and raised her hand to say that she wasn't participating, and that was considered a gesture to increase the bid increment by a factor of 5. Her friend had to quickly tell her to stand perfectly still and not do another thing. The friend on the other hand, was an expert. They bid on certain cattle and not others tactically depending on who else was trying to buy, how many people were competing, what time of day it was and how many cattle were left, who was selling and how much had already been sold, and so on. Our friend understood the market dynamics and operated like a pro. The same thing happens in financial markets, and most traders are totally clueless. They don't even realise what mistakes they're making, because they have no idea about the unique and intricate mechanics of the particular market they're involved in. A system is basically a framework that gives you a methodical strategy for tactically participating in the market. Let's just call it a set of rules or instructions for how to behave. For a system to be of any use, it has to be relevant to the market. If my wife's friend wrote down a set of instructions on how to buy a cow at the local cattle market, and I tried to use that to buy a Ming vase at Sotheby's auction house in Manhattan, it's not going to work. If a highly successful and famous trader has developed a system (a set of rules or instructions) to help him tactically participate in the pork bellies futures market, that has got absolutely no relevance to the spot forex market. None at all. The same as a system designed for use in the Dow Jones has no relevance to the copper market. The charts from all those markets will look the same because all charts display price changes; but why the price changed and how, will be different from one market to the next depending on why that market exists and who's participating in it and what their objectives are. And don't forget Apophenia and memory recall. We see patterns where none exist and give meaning to meaningless data. All humans do this. And then to reinforce how things "appear" we remember all the times it worked as we expect and forget all the times it didn't. If anything is predictive/indicative, it has to be relevant to the market mechanics and be nothing to do with a chart. What orders are in the market and why or how can those orders influence the future? In an auction market like forex, liquidity imbalances can predict the future price movement with up to 80% accuracy over a distance of 10 pips or so, or a time frame 7 to 10 seconds. Stanford university proved this. That's all down to market mechanics. No one has ever proved anything like that with patterns on a chart....because charts are not markets. I'm in danger of sounding confrontational.... I'm just rushing to get you a reply and add to the discussion before I head out in the next 10 minutes. Please come back to me with more questions, or challenge me on anything you disagree with or don't understand my point on. You've brought up a really valuable topic here. ------------------------------ James Edward London Original Message: Sent: 09-21-2017 05:00 From: Michael King Subject: Predictive or Indicative? I have been a little bemused by some of James' recent clarifications: Studies have shown that popular tools are not predictive. They may have value but they are not predictive. Would it be true to say that such tools and indicators may 'indicate'  where price is more likely to go but technically they are not predictive by definition? Perhaps I can give an example - Although I don't believe Divergence was alluded to, I will hazard a guess and assume 'studies' have proven that Divergence is not predictive. I trade a strategy however, that relies heavily on Divergence and is 70% successful, and in the 30% of cases where price completely ignores the Divergence, the next instance of Divergence is invariably successful. There are one or two other factors involved in the strategy but Divergence is the main factor. Many traders have been trading this system with very similar results over many years. I don't know if any studies have been conducted on Divergence or what the criteria of the analysis would be. But if you back tested  every instance of Divergence it is very likely that the results would indicate that Divergence alone is of no practical use at all in predicting direction. Would the Study however, take into account that you need to wait for a break of trendline after Divergence, in which case  there is a very high probability that price will move in the direction of  that break. I would consider that to be predictive but perhaps I should use the word 'indicative'? James did definitely refer to Support and Resistance as being non predictive and that really caught my attention. But he didn't say they were insignificant The usual belief which may be considered a 'myth' is that 'Support becomes Resistance' and vice versa. I have found this to be true more often than not and  whenever I have traded into nearby major support or resistance it has not usually worked out well. So would I be right in thinking that even if not predictive, major levels of support and resistance are highly significant and are best not ignored? or do studies show that they can be ignored with impunity? Sorry if I appear somewhat obtuse on this.  I would just appreciate a little clarification and am certainly not courting controversy. ------------------------------ Michael King ------------------------------ [] [top](#toca) [previous](#m4) [next](#m6) 6. [Re: Predictive or Indicative?]( [Reply to Group](mailto:COMPLETECURRENCYTRADER_generaltradingdiscussion_950a5edb-a9d7-4680-8305-09f3c6f7b420@ConnectedCommunity.org?subject=Re: Predictive or Indicative) [Reply to Sender]( [James Edward]( Sep 22, 2017 6:28 AM [James Edward]( It's not just the retail forex industry that's based on myths. It's all trading, even up to the highest level. Traders, both professional and amateur, perform worse than random. As a group, including hedge funds, we'd all get better results relying on coin flips. We do worse than random because of the decisions we make... we actively do the wrong thing, nearly all the time. And you're right (Anush) about it being psychologically hard to give up a belief. Part of that is because of how heavily invested we often are in both time and ego/reputation. To discover that something you have spent many years believing in, turns out to be meaningless or false, creates huge discomfort and most people will simply ignore the evidence and prefer to continue in their belief. It's easier. Pivots are an interesting in this thread Michael. They were first designed for use in the commodities markets (I think it was commodities) and specifically used by the floor traders in the pit. So there was a market with finite participants, all in the same room and actually talking to each other. If they were all using pivot points and all collectively believed in them, they could have been a real phenomenon in that market. But put it in a decentralised digital market and ask yourself if they are relevant. A pivot point is just he high + low + close of the previous day divided by 3. Why would that influence the change of a price on a currency? And which pivot do you use (I mean from which chart). If the GBP is going to change direction, is doing so because of the pivot on the GBPUSD or EURGBP, or GBPNZD and so on (they will all be in different places). You can draw any random line on any chart, and find a story to explain why the price did or didn't do something near it, before it, or after it. When I was learning to trade and was reading advice from respected sources on all the usual trading "facts", it made sense, and appeared to work - partly because of the cherry picked examples, and partly because our eyes are drawn to the times it worked and don't see the times it didn't. I wanted to believe. But I would always ask, what would have to happen behind the scenes for the price to change at this line or another. As soon as I asked about what was happening in the market in terms of orders and participant activity, the "facts" became obviously nonsense. ------------------------------ James Edward London ------------------------------ [Reply to Group Online]( [View Thread]( [Recommend]( [Forward]( ------------------------------------------- Original Message: Sent: 09-22-2017 05:34 From: Michael King Subject: Predictive or Indicative? Some great insights from all and thought provoking Yes the hardest obstacle to overcome is the 'evidence' that your strategy works when it's based on myth and, dare I say it - superstition The strategy I learnt seems to work, but I wouldn't pretend I know why, I don't even fully understand divergence but it's worse than that, the second major rule is  that divergence must be accompanied by 'missed weekly pivots' because as we surely all know :)  'price is naturally drawn toward missed pivots' I believe the explanation for this is that all weekly pivots are eventually hit, therefore we must 'logically' conclude that every time price catches sight of a missed pivot it will try to hit it. I'm told it will often fail but at least it might get half way to pivot, the point is it will always try. but I have never tried  this strategy without the missed pivot rule,  I suspect price may equally be drawn to hit pivots as well as missed pivots, in other words the price moves in a certain direction due to various market forces and there will often be pivot lines down there somewhere The reality may well be that any level will be hit eventually So distant pivot levels are not predictive, not even indicative, in fact on very many trades there are missed pivots above and below - so price cannot fail to be drawn to one or the other! Candlestick patterns seem to be the most telling, and ironically often do seem to work, but when you have two screens of different brokers, you see that perfect set up doesn't even exist on the second broker. Not surprisingly, highly rated indicators with buy and sell signals will routinely show an arrow on one screen but not the other and yet still manage to be highly rated on respected review sites and speaking of which, isn't it fascinating  how so many traders, sometimes hundreds, will rave about how their trading has been transformed by a certain system or indicator, while a significant number of reviewers report nothing but losers. Unfortunately, all such positive 'evidence' does have it's effect, along with all the usual cautions 'Never trade in March' ( can't remember why not ) 'never trade in July or August due low volatility'.  'Never trade Mondays or Fridays due manipulation'  - I have personally had plenty of great trading Mondays and Fridays. It seems the entire Retail Forex industry is based more on myth, magic and superstition than reality, but I'm not convinced that this is the sole reason for failure, as some do remarkably well with  their wizardry. We can't really get away from the Turtle trading experiment.  The organizers had made millions - they knew their 'stuff', but that stuff as memory serves revolved around a break of a moving average, or something like that. Some trainees went on to succeed and many failed. But failure or success was almost certainly not due to whether moving averages are predictive or not, but almost entirely due to the individual psychology of the trainees. I believe Anush alluded to this connundrum,  - when something seems to be working why fix it?  If I still get presents in my Christmas stocking, why would I want to listen to the rest of you telling me there is no obese guy climbing down my chimney every year? But regarding reality, I watched some of the Foundation course this week which I have had for a long time It seemed like new content! Am I really so forgetful or has it been updated? ------------------------------ Michael King ------------------------------ Original Message: Sent: 09-22-2017 02:16 From: Anush Mohafez Subject: Predictive or Indicative? Really, very helpful Elias, thank you. ------------------------------ Anush Mohafez Retail FX Cherry Picker Switzerland Original Message: Sent: 09-22-2017 01:27 From: Elias Saravanja Subject: Predictive or Indicative? It is NEITHER ! ; Market decides ! / It could be BOTH ! and at the same time , if proper money management is use ; Shakespeare's OTHELLO, spend a ton of time thinking on the peripheral of his question , before he concluded , asking , " BE or NOT to BE ? , yet another ? ! . Cheers ------------------------------ [elias []saravanja] [trader] eliassaravanja@gmail.com [yellowknife] [NT] [1 867 873 8634] [CANADA] Original Message: Sent: 09-21-2017 05:48 From: James Edward Subject: Predictive or Indicative? Great questions and discussion Michael. I think there can be confusion about semantics. Are certain conditions/patterns predictive or indicative? For me personally, I try to avoid talking about prediction because to most amateur traders, prediction often means certainty. They mistake the idea of being able to predict something with 60% probability as meaning it is certain to happen. Look at the Trump election... Experts were suggesting Trump had only a 30% chance of wining and 70% chance of failing. Most people took that to mean he had no chance of winning and that the experts got it wrong. No they didn't, they got it right. The prediction was probabilistic not certain. So that's why I avoid the term as much as I can. Indicative for me makes much more sense and I think helps more people accept what is really happening. Now are some indicators predictive/indicative in a probabilistic way? Yes. However, most people are not using indicators of any value, and those who are achieving success with an indicator, may be (usually are) attributing their success incorrectly to the indicator and ignoring the other factors. I'll use your example of divergence. You said it works 70% of the time and only has a couple of other minor factors involved. But is it actually the combination of all factors that really provide the edge, rather than the divergence itself? My style for example relies on strength v weakness. Is that my edge? No. I also rely on momentum. Is that my edge? No. I also rely on liquidity. Is that my edge? No I also rely on Volume. Is that my edge? No. Strength v weakness is perhaps 90% of where my edge lays and that is my "big" thing, but it is only when ALL the factors come together and are aligned, that I have a reliable edge. And actually, as I will post further down this, the real edge behind all of it, actually comes down to liquidity imbalance. Strength and weakness is the best indicator or where the liquidity imbalance is, and so I rely on strength and weakness more than anything else as my primary indicator, but the true edge that triggers everything is liquidity imbalance at the depth of market. Now to support and resistance. In forex, it is a myth. Completely and utterly in all forms. This, and everything else has to come down to what is actually going on in the market at a mechanical level. Forget charts. Charts display price changes. They say nothing about how the market works, or why a price changed, how, who changed it, or why. If anything is predictive or indicative, or has any meaning, it has to be relevant to the market mechanics. So what is support or resistance? I mean what is happening in the market...not what does it look like on a chart. What orders have to exist for support or resistance to exist and who has placed those orders and why? You should ask the same question for everything you see in the market. I'm going to copy some text taken from a video I put out this week as part of the cybernetics course. Hopefully this will put some of this in to perspective: Fundamentally, all markets are the same. There's a product, and there are people buying and selling that product. However, despite that fundamental sameness, every market is different. They each have their own rules, characteristics, etiquette's, and structures. Different people participate in each market, and people have very different reasons for participating in each market. A farmer's livestock market and Southeby's are both auction market places, but they are very different in the way they operate and why they exist. In trading, most people confuse markets with charts. But a chart just shows you changes to the price of the underlying product. That's all. It tells you absolutely nothing about why the price changed, or who caused it to change, or whether it is likely to change again in the future. My wife went to a livestock market last year with a farmer neighbour of ours, and she nearly bought a cow by mistake. She rubbed her nose without realising at that market, that was a gesture to signal a bid. When the auctioneer pointed to her to confirm her bid, she panicked and raised her hand to say that she wasn't participating, and that was considered a gesture to increase the bid increment by a factor of 5. Her friend had to quickly tell her to stand perfectly still and not do another thing. The friend on the other hand, was an expert. They bid on certain cattle and not others tactically depending on who else was trying to buy, how many people were competing, what time of day it was and how many cattle were left, who was selling and how much had already been sold, and so on. Our friend understood the market dynamics and operated like a pro. The same thing happens in financial markets, and most traders are totally clueless. They don't even realise what mistakes they're making, because they have no idea about the unique and intricate mechanics of the particular market they're involved in. A system is basically a framework that gives you a methodical strategy for tactically participating in the market. Let's just call it a set of rules or instructions for how to behave. For a system to be of any use, it has to be relevant to the market. If my wife's friend wrote down a set of instructions on how to buy a cow at the local cattle market, and I tried to use that to buy a Ming vase at Sotheby's auction house in Manhattan, it's not going to work. If a highly successful and famous trader has developed a system (a set of rules or instructions) to help him tactically participate in the pork bellies futures market, that has got absolutely no relevance to the spot forex market. None at all. The same as a system designed for use in the Dow Jones has no relevance to the copper market. The charts from all those markets will look the same because all charts display price changes; but why the price changed and how, will be different from one market to the next depending on why that market exists and who's participating in it and what their objectives are. And don't forget Apophenia and memory recall. We see patterns where none exist and give meaning to meaningless data. All humans do this.