Pre-open prep notes: We are at the top of a channel starting 2 days ago. Possible long up to the long term (LT) channel top, but would have to go thru all the LT channel mean. We may DT here, and reverse. Shorts have places of interest at the bottom of the longer term trend channel, which is loosely near the bottom of the smaller 2 day channel. Of interest that we are staying in the bottom half of the LT channel, while the overall trend is up. ___________________________________ Review: Don't know that the 2 day channel down was that significant. Perhaps it just happened to line up with the mean of the ON channel down (at 3692). There was a lower high about 11 min after the open that cued a possible short at the ON low 5 min later. After the fast drop to near the LT channel limit, SLA gave a mechanical long 5 min later. I am at a stage where I was looking to exit any trades when it retraced to the ON low. It did go up further to 92, the ON channel mean. It then formed a hinge which BO up and went to the ON high. I was done trading after 35 min. I see possibilities to keep working on understanding and simplifying what I pay attention to, so that I can pay attention longer.
In chat we mentioned a difference between âtrading probabilitiesâ and statistical probabilities. When I started trading I imagined that there were patterns or indicators or events in trading that were like flipping a coin. There was a certain statistical probability that went with it. If I could identify such a thing (perhaps as a âholy grailâ?) then I could use statistical probability to work my way into success. I see that concept now as giving my control away. Due to statistical probability I assumed I should lose a percent of the time. I would also widen my stop because of a belief that probabilities would eventually work in my favor. When a trade was clearly not working, Iâd put a stop near where price was and give control to the market to stop me out, hoping at the last it might move in my favor, rather than just exiting a failed trade, hoping probability eventually would have to kick in. Learning to scratch a trade that wasnât doing what I expected had something to do with control issues and letting go of concepts of the market and statistical probability.
What is the market? One person described it as random movement within predictable boundaries. If this is true... and you are trading the random part, you might have random wins and losses. You might attribute those to whatever indicator or concept of trading or mathematical formula you are using at the moment. But would you ever become consistent? Statistical probabilities do not apply to random movement. The predictable boundaries are described in any number of ways. Elliot wave theory, auction market theory, countless indicators. I like the simplicity of AMT, and that is my focus. If you have questions about predictable boundaries, just look at Db's posts over the last week. Boundaries called in advance. I am choosing to be a trader in that way. 'Traders probability' has to do with anticipation in the AMT sense (at least in the way I'm thinking about it), and how you manage a trade. At this time I don't need or even want to know statistically what the market will do at a predictable boundary. I trade mechanically at those times and places and pay attention in a pretty much mechanical way. I like it.
Still dont understand you Hooti. I am gonna write it as I see it. People who trade without a plan, have to rely on VaR, they buy or sell at any given level (no matter what) and think that they have a x% probability or not being negative in more than X ammount of dollars in a defined number of days or seconds or minutes. That VaR is calculated with the periodic volatility of the asset and is intended to reflect how wide moves are. When you trade with a plan, the objective of the plan is to move the odds in your favor, as entering on a extreme, and not only on a extreme, but on a REV or a RET after a REV once the previous trend is proved to be over (the stride is broken or the line is gone). Or to enter on a RET after a BO, once buyers or sellers have been rejected off a previous value area. Now, that doesnt mean that there is no probability there, as your plan will end up telling you what is the probability of a scratch being hit depending on how the rest of the parameters are set. That is the probability of failure of your entries. Once you get that number, and you consider you have a significant number of observations (Guess there is no consensus there) that will provide you with confidence. If your stats say that you have a 50% chance of getting scratched on any given day, and you make 10 trades a day, then you expect at least 5 scratches to occur, and if they occur you wont freak out. If you get confident enough not to freak out, then you will trade more relaxed and your brain will be able to focus longer. I am not sure if that is what Db refers to as Trader´s probability, perhaps not. But that is the way I see it, as always in the market, perhaps I am wrong and I will have to scratch .
I think you are saying exactly what I'm saying not to do. Or it may be the same thing but with a different POV. Let me think on this a bit we may not be talking about the same thing. Let me draw a diagram... Give me a min.
Ok... I will edit this in a min, but here is the diagram. What I'm saying is that if the market is unpredictable randomness moving in between predictable boundaries... I don't want to spend my trading life in the random part thinking that probabilities will apply. Or that any model will apply. I'll only get random results that seem just positive enough that I'm sure I'm on to the holy grail. I have a trading plan. Db shows us over and over, along with many other traders, how to call ahead of time 'predictable boundaries'. You might call them support or resistance or whatever. My plan is to wait for those areas, and place trades via PA there. BUT, Db once said something I took to mean... in the diagram... you don't need to know any statistical probability of what the mrkt will do at a predictable boundary. It's simpler than that. It will just bounce off, break out through, or go sideways for awhile. I just mechanically put in the line, take the retrace, etc. I do better if I don't look for probabilities there. I don't need or even want to think that way. What you don't think of as a trader is perhaps more important than what you do pay attention to. --- I need to be gone for a half hour or so. Hope to hear if we are communicating here!
Ok, now I understand you. The sketch was very clear. But i dont agree, the market is not random, price trends and goes into congestion. Every congestion ends in a trend every trend ends in a congestion. Even in the tick chart this happens over and over again. Now, that our limited human ability doesnt allow us to act upon each nanotrend doesnt mean it doesnt happen. I agree with you regarding that as you move away from the extremes, the odds of hitting chop tend to increase. But chop is not random either, just zoom in.
'random' might not be the right word. 'unpredictable' is better. Or you might come up with the "random walk theory" which is impractical! That diagram is a thought experiment based on several "if's". I may not want to hang my hat on them. but When I doodled it out and saw it... that's what it feels like when at the end of the trading day my monitor tells me I took 10 trades for every 1 that Db took. Or it's what it feels like when I just start surfing with SLA and while I don't lose money, I really don't make any either. Then I made some connection between trying to apply statistical probability to something unpredictable... apart from that being logically impossible, the significant thing was that I was giving my control away... to something that would never work. And there was fear and greed. When I stopped giving my control away is when I became able to scratch a trade that was going against me. Probabilities be damned. ____________ and everything changed that day.