Markets are very statistically efficient. Which means it is difficult to find an edge from just looking at a chart. If a consistent pattern is found it is quickly removed from markets by people trading on the signal. The end result is a market that is difficult to distinguish from a random walk.

When confronted with this reality I often see traders react "well if that's true then why bother trading at all?" It is a sad state of affairs when traders cannot imagine anything beyond their charts.

For the same reason that markets are very statistically efficient, they are not very informationally efficient. Meaning that the current market price does not include all available information. Every trade has impact, and many of the largest trades have no informational content behind them. Instead of the volume being a vote on the state of the economy it could just be the fund rebalancing. Such volume is essentially random, but it still moves price far from fundamental value. In other words, there can still be information that predicts which direction markets will move that day that isn't fully priced into the markets.

The most abundant source of edge available to retail traders today is based on what they know about the markets. What affects supply and demand in that market? What is the current state of the economy? What are major research analysts projecting? What is the current market sentiment? Are there economic releases today? What breaking news might be lurking out there? How do large funds manage their investments? How do market makers hedging their options positions?

And yet such discussion is almost always completely absent from the popular trading discussion forums. Instead the trading community has become a cargo cult chasing after the past performance of technical analysis traders that for all we know just got lucky. Far too many words have been wasted on discussing the movement of a random line that could have been spent learning about the actual business of the market.

The minute I stopped reading news, sentiment indicators, closed zerohedge for 'ideas', etc... and I started measuring my OWN trading; that is when I made the turn from scratch or boom/bust to consistent.

This conversation is time frame dependent most importantly.

But, what I have been able to do, is to shorten the 'signal to noise' ratio, and really just do the exercise at the end of Trading in the zone. That was the gamechanger, to measure my own trading, and to adapt that way. Mark Douglas himself would talk about how only a small % of people actually wrote down their plan, and an even smaller % of them continued to do so.

I'd venture to say that with proper risk management, I could trade many systems successfully, given that I identified with the timeframe and style of how I put on and took risk off internally.

To me, this is why so many people can trade so many different indicators/systems and still see success. It all starts internally.

I have systems where the edge has worked for 10+ years, and some where it worked for a few months, max.

So for me, the smallest source of edge (as a retail trader) is what I know about the markets. I took random walk and random lines, and turned that into a statistically significant style of trading for myself. The largest source of edge is my psychology.

I don’t mean to intrude onto “your” Idea on how trading is supposed to be done. But what I cannot wrap my head around is that trading is not possible without knowing the weather around a particular instrument. How is that? Since my last post, I moved away from ES/NQ and now I simultaneously trade NG and CL. The only time I proceed with caution is during the EIA reports at 10:30AM on their respective days. The rest of “information” you speak about, well, it's just passing gas. For me at least. I don’t know about @kingoliver, but I haven’t watched one lick of news or information with regard to any instrument in 20 something years. But I do want to note that I would never tell others technical trading is the ONLY way because I respect other traders’ methods, as I do yours.

TWDsje 

It is a sad state of affairs when traders cannot imagine anything beyond their charts.

What is sad is the lack of object permanence in that statement.

Anyways, I always get a kick out of your posts. Thanks for the entertainment.

TWDsje 

Markets are very statistically efficient. Which means it is difficult to find an edge from just looking at a chart. If a consistent pattern is found it is quickly removed from markets by people trading on the signal. The end result is a market that is difficult to distinguish from a random walk. When confronted with this reality I often see traders react "well if that's true then why bother trading at all?" It is a sad state of affairs when traders cannot imagine anything beyond their charts. For the same reason that markets are very statistically efficient, they are not very informationally efficient. Meaning that the current market price does not include all available information. Every trade has impact, and many of the largest trades have no informational content behind them. Instead of the volume being a vote on the state of the economy it could just be the fund rebalancing. Such volume is essentially random, but it still moves price far from fundamental value. In other words, there can still be information that predicts which direction markets will move that day that isn't fully priced into the markets. The most abundant source of edge available to retail traders today is based on what they know about the markets. What affects supply and demand in that market? What is the current state of the economy? What are major research analysts projecting? What is the current market sentiment? Are there economic releases today? What breaking news might be lurking out there? How do large funds manage their investments? How do market makers hedging their options positions? And yet such discussion is almost always completely absent from the popular trading discussion forums. Instead the trading community has become a cargo cult chasing after the past performance of technical analysis traders that for all we know just got lucky. Far too many words have been wasted on discussing the movement of a random line that could have been spent learning about the actual business of the market.

It should be made clear that looking at charts has utility; but I would be cautious about saying they’re “predictive." At the doctor's office, the nurse takes your temperature. Temp is not so much "predictive," as it is informational. In numerous ways, looking at charts is like taking a patient's temp. More often than not, charting simply becomes pattern driven guesswork; and, as a stand alone tool, it cannot predict or forecast the market's future direction. No matter what you are looking at, the process through which almost all of us arrive at our view of the future is reflective of our biases. One of the biggest mistakes a trader can make is ignoring or denying his or her biases.

That being said, there is plenty of information available to traders that is both relevant and utilitarian. But, the real skill may be may be the ability to filter information and determine what is relevant and what should be ignored. Most of what you read are narratives that are retro-fitted to the market, and are of little value. But, there is useful information, if you know where to look for it. Emphasis should be placed on flows, positioning, and sentiment, especially options flows and CTA positioning. Today and yesterday are perfect examples. An understanding of the aforementioned, easily explains what transpired, and almost spelled out the trade in advance.

Most importantly, understand the regime in which you trading. We are no longer in a BTFD, QE environment. Quite the contrary, the current regime is the polar opposite. The QE regime was marked by low vol, high skew, risk on, smaller ranges, negative correlation to bonds, weaker dollar, positive yield curve, good liquidity, negative real yields, and blooming convexity. The current QT regime, is marked by high vol, low skew, risk off, larger ranges, positive correlation to bonds, a strong dollar, inverted yield curve, an illiquid market, positive real yields, and underperforming convexity. The current regime dictates how you should trade the market. And, it's no longer BTFD; but, STFR!

Interesting, so how do you see the floor and ceilings (risk) without a chart?
risk a futures options standard deviation?

tigertrader 

The current regime dictates how you should trade the market. And, it's no longer BTFD; but, STFR!

So we need to develop a separate strategy for each regime ?

syswizard 

So we need to develop a separate strategy for each regime ?

Would you trade a "range day" the same way you would trade a "trend day"?

Cools81 

Interesting, so how do you see the floor and ceilings (risk) without a chart? risk a futures options standard deviation?

Whatever approach you take, it should provide quick feedback to alert you of failure as soon as possible.

My tools let me know relatively quickly, whether I'm wrong the market.

tigertrader 

Would you trade a "range day" the same way you would trade a "trend day"?

I do.

The trades are faster and obviously more one bias BUT the trades are the same for me. Im buying discount and squeezing liquidity. Also like to be ready at macro floor/ceilings to go the other way.

Personally, Ive used all kinds of bias’ - news (presictions/actuals), options close SDs, Risk, Bonds, Growth, you name it and I am yet to see a consistent tell at a floor or ceiling - marrying up environment to charts.
And why? because while there can be a bias divergence, BIAS itself can also be at a reversal point or priced in or whatever. Meaning the opposite. Confusing. Cant analyse 25 different things on the go. Lol Im defo not that quick.

But I know thats not how you are using that data. I cAnt comment on how you do things.
Completely different strategy.

My only bias is higher timeframes 1minute to weekly. but again the rules stay the same - strong finished liquidity vs weak liquidity targets vs distributions.

Obviously we trade very different. And thats great.
Its always fascinating to me how we all trade differently.
Whatever works for you is what you should do.

So trying to understand ... you watch a bunch of data that relates to the product you are trading and simply have buy, wait and sell conditions?
thats pretty cool. I like it as long as it doesnt change to quick on you and you get washed up in accumulation process.
If not, you have one amazing strategy.

tigertrader 

Whatever approach you take, it should provide quick feedback to alert you of failure as soon as possible. My tools let me know relatively quickly, whether I'm wrong the market.

Would you mind to share your tools here in this place?

Symple