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For me I believe overbought and oversold are constants in the market. When people always talk of the market changing it feels like their saying you can never be a consistently profitable trader because the market will eventually make your trading plan invalid.
How true is this for somebody who doesnt have a mechanical trading plan?
In any case, basing your profitability on static setups is asking for trouble. Need a more dynamic way to trade. Are you sure your mentor is a 'professional profitable' trader?
Ask yourself: how do I become consistently profitable in a market that does not behave consistently?
You are never in the wrong place... but sometimes you are in the right place looking at things in the wrong way.
I agree, static methods are a fools errand. If the market is a living, breathing organism with emotions, why would a single setup always work? I often reference the turtle traders method, and their modern results being somewhat flat.
I often ponder why certain setups work, then stop. Could it be that the reason we think they work, isn't actually the reason they work? You know the cliché, trader Jack makes huge returns making haphazard trades, writes book, gets interviewed by msnbc. Turns out it was just a bull market, and he's an idiot.
That's just it. It does not occur to most traders to ask whether their setups actually 'worked' in the first place. Could it be that the profitability of their static strategies was merely a function of randomness?? That they 'worked' as a side-effect of something else? That the profit targets being hit had nothing to do with their particular setup??
You are never in the wrong place... but sometimes you are in the right place looking at things in the wrong way.
1. Accepting that he found something that works, but doesn't know why, and being ok with that.
2. Found something that works, and he "knows" why it works (albeit pompously).
3....not sure if he's right on how it works, but will seek to prove himself wrong to see if he's right (which is faster to disprove something than proving something to be correct.)
I can only comment about my own path as a trader, after 10 years of on and off trading (including a stint at a prop firm).
1. stop looking for magical chart patterns that unlock the market and hand billions of dollars over effortlessly
2. focus on making GOOD trades, which essentially means buying low and selling high (this applies equally well in trends, relative to trend's progression), getting in at the right time (when the large operators are!), managing risk (for me personally that means taking a free position ASAP, even at the risk of being stopped out of a trade too early), and letting profits run without making excuses (too many traders look for chart patterns that give them reasons to exit their winners early).
Hope that helps.
You are never in the wrong place... but sometimes you are in the right place looking at things in the wrong way.
I recall (in an old notebook) that the goal shouldn't be to directly make money, but rather it should be to simply trade well. Oh I just remembered, it was that decision matrix thread. Basically, you either worked the plan, or you didn't.
You can't directly control exactly how many ticks/pips you made, but you CAN control EXACTLY how well you traded.
Put simply, support is the price at which those who have enough money to make a difference are willing to show their support by retarding, halting, and reversing the decline by buying. Resistance is the price at which those who have enough money to make a difference attempt to retard, halt, and reverse a rise by selling. Whether one calls this money professional or big or smart or institutional or crooked or manipulative or (fill in the blank) is irrelevant. If repeated attempts to sell below this support level are met by buying which is sufficient to turn price back, these little reversals will eventually form a line, or zone. Ditto with resistance.
A swing high or low represents a point at which traders are no longer able to find trades, i.e., either buyers are no longer willing to pay the ask or sellers are no longer willing to lower it. Whether that point represents important support or resistance will be seen the next time traders push price in that direction. But everyone knows this point, even if they aren't following a chart. It exists independently of the trader and his lines and charts and indicators and displays. It is the point beyond which price could not go. Hence its importance, both to those who want to see price move higher and those who don't.
Therefore, before coming to any conclusions about what “works” or “doesn’t work”, and thus does or does not provide an edge, one ought to keep in mind that a given event -- such as price seemingly finding support or resistance at a trendline (or moving average, candlestick, Pivot Point, Fib level or whatever) -- may be only incidental to what is truly providing that support or resistance.
A fundamental misunderstanding of how "indicators" are calculated and what they're supposed to do can lead to all sorts of off-task behavior. We think we see the indicators indicating something, or not, and believe we have made an important discovery. We then devote our efforts to improving the hit rate and the probability of whatever it is we think the indicator is indicating when our efforts ought to be focused on determining whether or not the indicator is actually indicating what we think it's indicating. In most if not all cases, it isn't.
Consider the virgin being tossed into the volcano: sometimes it results in a great crop, sometimes it doesn't. Maybe tossing her in earlier or later will change the probability of a healthy crop. Maybe two virgins are better than one. Maybe six. Maybe tall virgins are more effective than short ones. And surely age is important. But does the robustness of the crop really have anything to do with tossing the virgin into the volcano in the first place?
The money under the pillow is not evidence of the existence of the tooth fairy, and spring will arrive regardless of whether the virgin is tossed into the volcano or not.