General Trading Discussion Digest for Sunday September 24, 2017

2 new threads and 7 replies from 8 authors in the "General Trading Discussion" community ... My name is Verne Battig and I starting the CCT home study course in January of 2017 and hope to be trading a real forex account by January of 2018... [Complete Currency Trader]() [General Trading Discussion]( [Post New Message](mailto:COMPLETECURRENCYTRADER-generaltradingdiscussion@ConnectedCommunity.org) [] Sep 24, 2017 started 7 hours ago, [Verne Battig]( (0 replies) [Introduction and comment on Indicators]( [external link to thread view]( 1. [My name is Verne Battig and I starting the CCT...](#m0) Verne Battig started 17 hours ago, [Roderick Burdon]( (1 reply) [Record keeping]( [external link to thread view]( 2. [Please can anyone help me with details of a...](#m1) Roderick Burdon 3. [Roderick, pls send me a contact request on on...](#m2) Anush Mohafez started 3 days ago, [Michael King]( (18 replies) [Predictive or Indicative?]( [external link to thread view]( 4. [Hi Michael I  agree with you and I've been...](#m3) Maryna MURRAY 5. [No one has yet brought up the algorithmic...](#m4) John Page 6. [It sounds to me that author is talking about...](#m5) James Edward 7. [James At the start of your post you say that...](#m6) Steve Woods 8. [Hi Steve, It's a good question because it...](#m7) James Edward 9. [I really appreciated the tick/volume...](#m8) Michael King [] [top](#toca) [next](#m1) 1. [Introduction and comment on Indicators]( [Reply to Group](mailto:COMPLETECURRENCYTRADER_generaltradingdiscussion_e6b6e583-eac3-42fa-a02b-3f8fd2548f9b@ConnectedCommunity.org?subject=Re: Introduction and comment on Indicators) [Reply to Sender]( [Verne Battig]( Sep 24, 2017 5:02 PM [Verne Battig]( My name is Verne Battig and I starting the CCT home study course in January of 2017 and hope to be trading a real forex account by January of 2018. I live on the road in the western states of the US selling area rugs and trade a few stocks and options part time. I'd like to chime in on the conversation regarding indicators. Putting on a trade is somewhat analogous to taking a road trip. Sometimes we use a map to help us travel to a destination we've never been to and if we interpret the map properly we arrive there. And we also know that the map is not the territory. When navigating the markets which is one dynamic energetic conglomeration of buying and selling motion, traders put the markets into symbolic language of symbols as in candlesticks, bars, etc. within time frames or snapshots of the market. Then indicators are added for reasons a trader decides are useful. It is my belief that when traders add indicators to their charts; that action and use reflects their useful or non useful beliefs regarding their map of the markets. But the map is not the territory (market). One of many explanations I believe is useful for traders to know regarding why most traders allow themselves to go thru a gauntlet of indicators and systems comes from a quote from Carlos Castaneda, where 'warriors' are those who are attempting to eliminate their demons and such and 'your inventory' is all the data in your mind and how that composes your maps of the world based on your useful and non useful beliefs. "Warriors know that when an average person's inventory fails, the person either enlarges his inventory or his world of self-reflection collapses. The average person is able to incorporate new items into his inventory if the new items don't contradict the inventory's underlying order. But if the items contradict that order, the person's mind collapses. The inventory is the mind. Warriors count on this when they attempt to break the mirror of self-reflection." - Carlos Castaneda Dancing with the market where the market leads and we're in high heels is not my idea of a walk in the park and use of indicators becomes a crutch or navigating device depending on one's viewpoint. I still use some moving averages knowing that the market is not paying attention to them but they are useful because whether its true or not, a useful belief for me at this time is that a flat 200sma or flat 800sma acts as strong sup/res when a trend bumps into them. Perhaps when my consciousness grows a bit more, I'll shake that belief. There's a book called "Steps to an Ecology of Mind" by Gregory Bateson where he observed that human thinking is organized into logical levels where each level must be supported by the underlying structure which purpose is to organize the level below it. From Van Tharp's book "Trading Beyond the Matrix" which you can get for free by contacting his office quotes a guy named Robert Dilts who has proposed the following hierarchy for all beliefs diagramed in a pyramid where you have: 1)Environment beliefs on top which are about what is and are attempts to organize observations about the world. His examples: "Markets tend to trend." 2)Behavioral beliefs which are about your behaviors. "I trade trending markets." 3)Capability beliefs which are about what you can or cannot do. "I can make 100%/year trading trends." 4)Value beliefs which are about what's most important to you. "It's important to catch the trend." 5)Identity beliefs which are about who you are and usually begin with the words 'I am.' "I am a trend follower." 6)Spiritual beliefs at the base of the pyramid which are or could be beyond your reality and imply how the universe is organized. "God loves trend followers." Here's some concepts on beliefs I've come across that you may or may not choose to believe in: 1)Truth exists regardless of whether or not you believe it, while a belief only exists for as long as you believe in it. - Don Miguel Ruiz Jr. 2)Shamans don't live so much on belief, they don't have to form a belief about something. For shamans they simply experience and know, experience and know. That's it, they don't need the rickety framework of belief that many modern people are tied to. 3)Belief for modern people is; I believe this is right or I believe this is wrong. Belief is very much a crutch. 4)Whatever you tell yourself you believe. 5)Westerners usually fall prey to the misunderstanding that indigenous people base their views of the world on beliefs. The word itself, 'belief', has come to imply something not necessarily founded in fact, perhaps a bit fantastical, but certainly based on personal mental assessment. However, we westerners are the ones who are pinned under the weight of beliefs. 6)If we live in the material world, bound by literal consensus, we are prone to the consequences of limited belief systems. 7)In our ordinary lives we become bound to the fears and belief systems of others and this creates the illusion of external constraints that seem to limit our possibilities and create fear within us. So it seems to be a good thing to examine our useful and non useful beliefs for the purpose of evaluating which indicators actually are of any value in our travels to become consistently profitable traders. That's my 2 pips worth. Verne Battig [Reply to Group Online]( [View Thread]( [Recommend]( [Forward]( [] [top](#toca) [previous](#m0) [next](#m2) 2. [Record keeping]( [Reply to Group](mailto:COMPLETECURRENCYTRADER_generaltradingdiscussion_7a8001d6-8f88-4870-8497-ddee8bb58b3a@ConnectedCommunity.org?subject=Re: Record keeping) [Reply to Sender]( [Roderick Burdon]( Sep 24, 2017 6:25 AM [Roderick Burdon]( Please can anyone help me with details of a comprehensive record-keeping system for logging trades? It seems to me that it needs: a trade numbering system time date and pair involved a way of displaying screen shots for comparison or of linking to a screen shot file a section for noting the reasons you took the trade entry, exit and stoploss points gain or loss (as green win or red loss, perhaps) a section for post-trade analysis and notes on what could have been executed better Anything else I've missed I'm not familiar with spreadsheet packages so I don't know if this sort of set up can be achieved with the standard Windows/Open Office facilities. Anybody got a magic solution? Roderick Burdon ------------------------------ Roderick Burdon ------------------------------ [Reply to Group Online]( [View Thread]( [Recommend]( [Forward]( [] [top](#toca) [previous](#m1) [next](#m3) 3. [Re: Record keeping]( [Reply to Group](mailto:COMPLETECURRENCYTRADER_generaltradingdiscussion_b1fa6170-255b-4df6-859d-6f4f8980d771@ConnectedCommunity.org?subject=Re: Record keeping) [Reply to Sender]( [Anush Mohafez]( Sep 24, 2017 7:21 AM [Anush Mohafez]( Roderick, pls send me a contact request on on the community so we can exchange emails privately. I have extended the CCT xls file a bit Other than that there is the original CCT file in the old forum to be downloaded... Cheers, Anush ------------------------------ Anush Mohafez Retail FX Cherry Picker Switzerland ------------------------------ [Reply to Group Online]( [View Thread]( [Recommend]( [Forward]( ------------------------------------------- Original Message: Sent: 09-24-2017 06:24 From: Roderick Burdon Subject: Record keeping Please can anyone help me with details of a comprehensive record-keeping system for logging trades? It seems to me that it needs: a trade numbering system time date and pair involved a way of displaying screen shots for comparison or of linking to a screen shot file a section for noting the reasons you took the trade entry, exit and stoploss points gain or loss (as green win or red loss, perhaps) a section for post-trade analysis and notes on what could have been executed better Anything else I've missed I'm not familiar with spreadsheet packages so I don't know if this sort of set up can be achieved with the standard Windows/Open Office facilities. Anybody got a magic solution? Roderick Burdon ------------------------------ Roderick Burdon ------------------------------ [] [top](#toca) [previous](#m2) [next](#m4) 4. [Re: Predictive or Indicative?]( [Reply to Group](mailto:COMPLETECURRENCYTRADER_generaltradingdiscussion_d1e076a0-cc73-43a3-8c67-4333f77f0952@ConnectedCommunity.org?subject=Re: Predictive or Indicative) [Reply to Sender]( [Maryna MURRAY]( Sep 24, 2017 2:57 AM [Maryna MURRAY]( Hi Michael I  agree with you and I've been using support/resistance with Price Action since I've started trading, with great success. I've also experimented with Pivots/Missed Pivots and Fibs and they all work using them in the correct context of the market. Also, I have great success with "seasonality" trades and JPY has been a great currency to trade since the 3rd week in  August, as I've mentioned in the forum and once again I will be trading USDMXN from the end/beginning of this month as I do every month. Understanding seasonality is of great benefit in Forex trading. The current political situation in North Korea is obviously something I watch and the impact thereof on JPY and also CHF as another risk aversion currency. Just out of interest, I'm also trading Crypto currencies using Price action, although I've only started trading them at the beginning of this year.  Congratulations with your success over the past 2 weeks and sharing this in the forum! ------------------------------ Maryna MURRAY ------------------------------ [Reply to Group Online]( [View Thread]( [Recommend]( [Forward]( ------------------------------------------- Original Message: Sent: 09-23-2017 06:30 From: Michael King Subject: Predictive or Indicative? I think the broader implications are fascinating! My ears really pricked up on the Cybernetics course when James stated that what you think you see has little to do with your eyes, it is all in your mind and the way the mind interprets the light on the retina. Like the picture of the guy with the menacing glare could so easily be the most gentle soul with a headache. It truly is one big psychologist's inkblot, and if there is one factor usually missing from trading it is objectivity. For my own peace of mind, I selected a chart at random and drew up several of the usual Moving Average standards and sure enough you could plainly see how price always reacted to them so then I replaced all those MAs with random unheard of periods 29, 42, 63, 89,173 and sure enough you can see how price reacts to all of them in much the same way, so I had to test for S/R as well. I opened another random chart on weekly time frame and fully scrolled out so you really couldn't make out the individual bars. I placed a few horizontal lines completely at random then I switched to H4 time frame and zoomed in. It didn't matter how far I scrolled back, those lines always acted as support and resistance! I think everyone should try this experiment. I'm under no illusions, I've been living in a fool's paradise for years! This experiment clinched it for me - an absolute eye opener!  just look at the screenshot at how resistance becomes support - absolute 'proof'  that S and R is predictive! but they are just random lines! So draw a few random S and R lines, preferably blindfolded, hire a local chimp to throw a few darts at stock sheets and you could well be on your way to your first million! I also reconfigured my Fib levels to be random non Fib levels ie 0, 17, 31, 40, 55, 67, 85 As you can see from the second screenshot price also respects these levels and any other levels you might randomly pick! Coincidentally I've had the best  two weeks trading I've ever had. One loser and I'm not going to say how many winners but a lot! Divergence and Fibonacci levels mainly, and zero awareness of what is really going on in the market. Logically this really shouldn't be sustainable. and I'm not suggesting it will be.  At the moment its working like magic but if it does continue to show a profit there must be a reason but almost certainly nothing to do with indicators. There is just one other factor which is crucial - price must have plenty of breathing space, the thinking being that price will always revert to mean At it's basic level in all trading - price moves up and down and levels will always be hit but in the process it seems there is a lot of vivid imagination at work ------------------------------ Michael King ------------------------------ Original Message: Sent: 09-22-2017 12:58 From: James Edward Subject: Predictive or Indicative? Yes there's a reason trend trading has stood the test of time and been incredibly profitable in every market; it doesn't try to predict anything, it merely follows the price. Buy when the price goes up and sell when the price goes down. It works! ------------------------------ James Edward London Original Message: Sent: 09-22-2017 10:36 From: Nigel Tuck Subject: Predictive or Indicative? Great discussion. James, I thought your example of S&R lines lacking integrity in Vegas where you took charts of varying timeframes and then put lines on them arbitrarily to then find S&R levels debunked this thinking for me once and for all. Add to that the fact the largest orders and volumes going through the FX market are utilitarian in nature made me reflect on the behaviour of prop traders I have known in days past. I know that traders would often trade on the back of large customer orders placed with the sales desk. This practice has been stamped out (along with the prop trader!) but made for some very successful trades and big bonuses. One slightly different angle is that of trend trading over the longer time frames. Many successful traders have just traded with the trend and made a fortune. I think it is market wizards where JS refers to one such trader that pinned the paper copy of a chart to the wall, looked at the trend from a distance, and positioned accordingly. S&R didn't feature in the thought process. Good weekend all. ------------------------------ Nigel Tuck Original Message: Sent: 09-22-2017 06:28 From: James Edward Subject: Predictive or Indicative? 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 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. 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_707999fa-55e2-41da-b4b7-1f4a9f579559@ConnectedCommunity.org?subject=Re: Predictive or Indicative) [Reply to Sender]( [John Page]( Sep 24, 2017 6:57 AM [John Page]( No one has yet brought up the algorithmic approach to S/R, though, to be fair, there are very few algorithms for calculating S/R levels. The following website shows a method that uses the tick history. [jon.io/...]( The basic idea is to sort all the ticks in the history by price, then find the denser parts, then draw lines through the clusters. The author says "it looks like it NAILS it", but as we know, random lines could look just as good. Maybe there are good levels at which to draw S/R lines from historical data, but that doesn't mean they will be helpful for future trading. So there are two questions that need to be answered in order to know whether this method is any good. The first question is how significant the price clusters are. If the denser parts of the sorted history price list are barely denser than the rest, then the lines have little significance. If the clusters do turn out to be significant, then we can ask whether the presence of such clusters affects future prices at all. In other words, do those S/R lines have any indicative/predictive power? Caveats: - tick history can vary quite a lot from one broker to another, so the S/R lines drawn from one data source could be very different from those drawn from another source. Another option would be to use M5 bars which are subject to less variation. - this is only one method of drawing S/R lines, so if it turns out to be useless, then we cannot conclude that all other methods of drawing S/R lines are also useless. If I have some time to spare in the near future I'll run some tests. ------------------------------ John Page ------------------------------ [Reply to Group Online]( [View Thread]( [Recommend]( [Forward]( ------------------------------------------- Original Message: Sent: 09-24-2017 02:56 From: Maryna MURRAY Subject: Predictive or Indicative? Hi Michael I  agree with you and I've been using support/resistance with Price Action since I've started trading, with great success. I've also experimented with Pivots/Missed Pivots and Fibs and they all work using them in the correct context of the market. Also, I have great success with "seasonality" trades and JPY has been a great currency to trade since the 3rd week in  August, as I've mentioned in the forum and once again I will be trading USDMXN from the end/beginning of this month as I do every month. Understanding seasonality is of great benefit in Forex trading. The current political situation in North Korea is obviously something I watch and the impact thereof on JPY and also CHF as another risk aversion currency. Just out of interest, I'm also trading Crypto currencies using Price action, although I've only started trading them at the beginning of this year.  Congratulations with your success over the past 2 weeks and sharing this in the forum! ------------------------------ Maryna MURRAY ------------------------------ Original Message: Sent: 09-23-2017 06:30 From: Michael King Subject: Predictive or Indicative? I think the broader implications are fascinating! My ears really pricked up on the Cybernetics course when James stated that what you think you see has little to do with your eyes, it is all in your mind and the way the mind interprets the light on the retina. Like the picture of the guy with the menacing glare could so easily be the most gentle soul with a headache. It truly is one big psychologist's inkblot, and if there is one factor usually missing from trading it is objectivity. For my own peace of mind, I selected a chart at random and drew up several of the usual Moving Average standards and sure enough you could plainly see how price always reacted to them so then I replaced all those MAs with random unheard of periods 29, 42, 63, 89,173 and sure enough you can see how price reacts to all of them in much the same way, so I had to test for S/R as well. I opened another random chart on weekly time frame and fully scrolled out so you really couldn't make out the individual bars. I placed a few horizontal lines completely at random then I switched to H4 time frame and zoomed in. It didn't matter how far I scrolled back, those lines always acted as support and resistance! I think everyone should try this experiment. I'm under no illusions, I've been living in a fool's paradise for years! This experiment clinched it for me - an absolute eye opener!  just look at the screenshot at how resistance becomes support - absolute 'proof'  that S and R is predictive! but they are just random lines! So draw a few random S and R lines, preferably blindfolded, hire a local chimp to throw a few darts at stock sheets and you could well be on your way to your first million! I also reconfigured my Fib levels to be random non Fib levels ie 0, 17, 31, 40, 55, 67, 85 As you can see from the second screenshot price also respects these levels and any other levels you might randomly pick! Coincidentally I've had the best  two weeks trading I've ever had. One loser and I'm not going to say how many winners but a lot! Divergence and Fibonacci levels mainly, and zero awareness of what is really going on in the market. Logically this really shouldn't be sustainable. and I'm not suggesting it will be.  At the moment its working like magic but if it does continue to show a profit there must be a reason but almost certainly nothing to do with indicators. There is just one other factor which is crucial - price must have plenty of breathing space, the thinking being that price will always revert to mean At it's basic level in all trading - price moves up and down and levels will always be hit but in the process it seems there is a lot of vivid imagination at work ------------------------------ Michael King Original Message: Sent: 09-22-2017 12:58 From: James Edward Subject: Predictive or Indicative? Yes there's a reason trend trading has stood the test of time and been incredibly profitable in every market; it doesn't try to predict anything, it merely follows the price. Buy when the price goes up and sell when the price goes down. It works! ------------------------------ James Edward London Original Message: Sent: 09-22-2017 10:36 From: Nigel Tuck Subject: Predictive or Indicative? Great discussion. James, I thought your example of S&R lines lacking integrity in Vegas where you took charts of varying timeframes and then put lines on them arbitrarily to then find S&R levels debunked this thinking for me once and for all. Add to that the fact the largest orders and volumes going through the FX market are utilitarian in nature made me reflect on the behaviour of prop traders I have known in days past. I know that traders would often trade on the back of large customer orders placed with the sales desk. This practice has been stamped out (along with the prop trader!) but made for some very successful trades and big bonuses. One slightly different angle is that of trend trading over the longer time frames. Many successful traders have just traded with the trend and made a fortune. I think it is market wizards where JS refers to one such trader that pinned the paper copy of a chart to the wall, looked at the trend from a distance, and positioned accordingly. S&R didn't feature in the thought process. Good weekend all. ------------------------------ Nigel Tuck Original Message: Sent: 09-22-2017 06:28 From: James Edward Subject: Predictive or Indicative? 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 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. 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 pric