Oy: leave stocks and commodities out of this!!! LOL!!!
I just had a thought on this (another one). Maybe it’s RETAIL trading of ANY type that’s ‘close’ to gambling and not trading per se. Why do I say this??? Think Floor Trading. In theory, and the way that the pits are ogranised, a Floor Trader should know at any time that there are bids on one side an offers on the other at different prices and they gain (well that’s the idea anyway) by matching selller and buyer or buyer and seller. In other words: all the factors are ‘known’ at any given time. It’s really just the speed of execution and ‘who you’re in bed with’ that makes the job easier or more difficult. I gues the same could be said for electronic futures and commodities trading (trading with market depth). But with retail FOREX trading this information is not readily at hand in the same form. Yes there are COT reports and the like but it’s not the same thing. Put it another way: I think of trading as an auction (be it a cattle auction or a vehicle auction or something like that) i.e. ‘Open Outcry’. That’s ‘trading’ and I don’t see where ‘gambling’ or ‘chance’ can come into play other than the fact that somebody may outbid you or be ‘quicker’ than you That’s not gambling i.e. that’s just skill and experience. With retail trading of any kind: at best you’re trying to ‘antcipate’ what’s going to happen next??? Maybe???
Not sure. I’m enjoying the debate but every day I wake up with an opposing ‘take’ on the subject. There is ONE thing that does make me wonder and that is the fact that apparantely the one poster on here is able to simply place random trades in any direction and be profitable. That in and of itself woud not be convincing excepting for one thing: Chuck Le Beau (well known for his own ‘obession’ with Wilder’s work such as ADX) does mention that somebody (I forget who it was now but details are in one of the archives on his website) did a test and was profitable taking random trades but using one of his versions of a trailing stop that was based on Wilder’s ATR. OK: the reason for the test was to prove the effectivenes of the trailing stop method it inadvertantely proved that simply placing random trades with a decent exit method was profitable. Then of course one of my other ‘legends’ i.e. Larry Williams has done a lot of work on this (well when it comes to the S&P 500 anyway) and using various methods demonstrated that the markets (well the S&P 500) are NOT random e.g. there is a definite ‘day-of-week’ bias (again I forget the exact details) but essentially there is a bias of selling on certain days and buying on other certain days. I wrote an ‘indicator’ once to prove (or disprove) this and ‘lo and behold’ this did hold true for a good number of years BUT the caveat being that over time this bias changed (very gradually but change it did).
I suppose if you REALLY analyse everything said here on this thread: I would say that it’s fair to say that the we attempt to ‘swing’ the ‘odds’ or ‘probability’ of our trades in our favour which is something that you cannot do in a casino (not honestly and ‘above board’ anyway) but the mere fact that the word ‘odds’ is used in both contexts logically follows that we are gambling to a greater or lesser degree. I DO remember two Floor Trader (twin brothers as a matter of fact) being interviewed in ‘Floored’ and they both agreed that there is (and I think I quote correctly) ‘a certain gambling mentality in trading. There has to be’. Something like that.
Not sure again. I personally like to think it’s a profession and one that I’ve worked hard at. I can tell you that everybody else I know perceives this as nothing short of gambling. Put another way and in my personal experience: when I’ve done some stellar trades and made money and can ‘live like a king’ for a few days then, according to everyone around me, I’m a trader. When I’ve lost money: I’m then perceived as a gambler!!! LOL!!! I’m not sure WHAT to make of that!!! LOL!!!
Regards,
Dale.
PHEW: that’s quite a post for so early in the morning (didn’t sleep well last night so decided to get up early)!!!
Aside from my above ‘offering’ I was just wondering about something:
What about Fibonacci??? What I mean by that is that for a long time now I’ve been drawing what many would call (or I call them myself anyway) Fibonacci Clusters (essentially just drawing Fibs between different high and low swing points on different timeframes until finding a confluence of lines). I’m no expert on this but there is no doubt in my mind that price almost always bounces at these ‘clusters’. Is this just because of that ‘self fulfilling prophecy’ thing or is there something more to this. And if there is: how come this ould not be applied to gambling (or could it)??? In other words: by simply having a (what I would call an ‘extremely reliable’) tool is that not all but eliminating the ‘gamble’??? And this is just one tool i.e. I’m sure there are many more e.g. pivots???
That sounds like a very good trading strategy it could be self fulling prophecy it would make a lot of sense if it was, the more confluence you find, the more people using different fibs are going to be trading at your points of confluence.
On the gambling point, I don’t think that we will all ever agree. I will never be persuaded that Forex is gambling, for many of the reasons listed in this thread, but some people on the other side of the discussion are equally convinced that their side is right. Given that neither side can ever prove their point, it is too subjective for that, so this is just one of those debates that is fun to kick around from time to time.
And Dale/SDC: I use a similar approach to Fib. You will get some traders who argue that Fib works because of some mystic significance, others who argue that it works because so many people use it, and shades of opinion in between, but personally I think that any strategy that trades on a confluence of factors is moving in the right direction.
Well: I think you’re right SimonTemplar (as I noted previously). I don’t like to ‘think’ I’m a gambler simply because I don’t ‘perceive’ ‘gambling’ as a ‘real’ job but then again: I’m sure professional poker players will disagree (as a matter of fact I used to enjoy watching those international poker tournaments on TV). But, I guess, ‘gambling’ or not, it’s what I do and can think of nothing else that I’d want to do given ANY choice of ‘profession’. My only ‘step up’ from this that I’d accept with ‘open arms’ would be a place (member) on the floor of the NYSE or the CME and given that that’s not going to happen: ‘this is it’!!! LOL!!!
As I’ve noted too: UNLIKE the other thread on this subject there’s been some great debate and opinions shared. Thanks for that.
The above being said I’m afraid I don’t agree with your last statement ElectricSavant i.e. about drawing enough lines and they’re bound to work. So far as I can tell there’s just a little bit more to it than that and as SimonTemplar and SDC note: WHY they work is neither here nor there really i.e. they just do work.
This is off the topic really (as it’s TRADING related) but the only reason I started using Fibs and then seeing their merit was because of that 20-day high / low system I was talking about (and they don’t neessarily have to be 20-day highs / lows they can be 20-period highs / lows too i.e. shorter timeframes). The point is that those new highs / lows occur many times per day on various instruments but when they occur near a Fib and / or Pivot level the ‘probability’ of the bounce is increased at least threefold.
I hope the two of you don’t mind but I’m going to send to a PM ‘inviting’ you to take a look at my new site. NOT to ‘solicit’ you I assure you (I know for sure you guys don’t need MY input on trading) but it’s difficult to ‘critique’ your own work really so it’s opinions I’m looking for really is all (NEEDLESS to say it’s because nobody wanted to hear my ‘equities and commodities’ ‘stories’ is the reason for the site)!!! LOL!!!
But as far as the ‘gambling vs. trading’ debate I’m afraid I’ve contributed as much as I can.
Indeed, I know traders who prefer to look at the previous 21 day high rather than the 20 purely because it is a Fib number. I myself now have the 21ema (I used to use the 20) on my charts for the same reason. It does seem to give me stronger indications than the 20 did, although that worked well enough. Now is the 21 working better because it is a Fib number, or because enough people read significance into it being a Fib number?!
When an irresistible force meets an immoveable object it reflects. It becomes an irresistible force in the opposite direction. It happens many time near pivots. Knowing that, you could close all opened orders near pivots and take the whole energy (profit).
Indeed, I know traders who prefer to look at the previous 21 day high rather than the 20 purely because it is a Fib
Now that’s interesting SimonTemplar (and I know it’s off-topic TaldonD: sorry)!!! LOL!!!
The reason why I say it’s interesting is because a spent many months paper-trading, amongst others, the Turtle Trading System. Their ‘System 1’ as it was called used 20-day highs and lows. When paper-trading on FOREX pairs I didn’t get such great results but when paper-trading on equities and commodities the results were totally different (although as you probably know the inherent flaw of the system is the huge drawdowns which happen no matter what you’re trading). But I remember wondering at the time if the very reason for this was because of the Sunday (or ‘extra’) price bar in FOREX. Basically, and if you’re trading with a broker that gives you a Sunday price bar, you ACTUALLY have an ‘extra’ TWO days (bars) that you don’t have with equities and commodities. And then, interestingly enough, one of the systems that I ‘present’ (detail) is the Turtle Trading System ‘on its head’ i.e. the EXACT OPPOSITE of the Turtle Trading System and, the reason I say it’s interesting, especially in light of what you’ve mentioned, is that the system will have you monitor new 20-day highs / lows and have you re-enter the trade on day 21 if stopped out and this improves the profitability (as is indeed noted by the designers). I think these types of systems work purely because so many traders watch those levels. I’m not entirely sure that the same applies to Fibonacci Lines though i.e. ever since I’ve started using them it really is almost as though there really is something to this ‘Golden Ratio’ (a little more than them simply being a self-fulfilling prophecy is what I’m saying). I’m certainly no expert on Fibonacci Lines and thus use them ‘loosely’ as I noted. But I have to admit that I marvel at the fact that even on ONE timeframe: drawing Fibs let’s say from the same high to a lot of different low swing points (or even using three or five bar Fractals) the different lines do overlap or cluster even although they may represent different retracement / Fib Levels. Co-incidence??? Self-fulfilling prophecy??? Who knows. Pivot points I believe work because of the self-fulfiling prophecy i.e. it’s a Floor Trader ‘thing’. But Fibonacci??? Not sure. There just seems to be a bit more to it than that. And believe me when I say that I spent a LONG time trying to stay totally away from things that I THOUGHT were ‘pie in the sky’ but there is now no doubt in my mind about this. Strangely enough: EVEN NOW with the markets in such turmoil price has stopped / paused at one or the other Fib Level. Given the unfortunate events in Japan: one would just assume that selling was totally emotional, random, and frenzied (only this morning or ‘my last night’ they apparantely suspended short selling until the Topix had settled down) and yet price (on the Nikkei 225) has stopped / paused at some or the Fib Level (whether they be Fib Levels drawn on the daily, weekly, or monthly chart of the Nikkei 225). Yes: price has gone through them but has inevitably bounced right back to one or the other Fib Level. For the system(s) that I’m talking about it’s ideal because that’s EXACTLY what you’re looking for i.e. an ‘overshoot’ of a previous 20-day high / low combined with an ‘overshoot’ of a Fib Level. Dunno but it sure is working for me surprisingly better that I ever expected (because as I say I spent a long time trying to stay away from stuf that I perceived to be ‘mumbo jumbo’ but, I’m not afraid to admit, that I was wrong)!!! But let me state ‘for the record’ that I’m not trading the Nikkei 225 at the moment i.e. huge movements like this and the ‘state of affairs’ make me nervous (but, again, interestingly enough, the other major indices are not falling as much and, believe it or not, they are ‘obeying’ the Fib Levels that I’m ‘banging on about’ above).
On the subject of Japan though (and I know people are going to think I’m being a bit crazy here) but I cannot help but wonder if somehow these events are all intertwined (for want of a better word). The reason I’m pondering this is because if you look at the Nikkei 225 for example: it started moving down a few days before the tragic events in Japan and not from any key level. OK: there was a lot of ‘lousy’ news data in the preceding days which caused the other indices to appear ‘undecided’ as to which direction to go and then all of a sudden ‘wham bam’ and here we are with the Nikkei 225 losing humungous percentages after starting a gradual downturn. Seeing too much into this??? Maybe. Just wondering is all. I DO know that much work was done and a few ‘low lifes’ involved in, or had prior knowledge of, the events of 911 were tracked down due to their placing an inordinate amount of short orders on the Dow for no APPARANT good reason in the days just prior to 911. But then that was a ‘man made’ ‘event’. But who knows??? I’m not talking ‘conspiracy theory’ here. Just ‘thinking (typing) aloud’ and ‘wondering’ I guess.
Why Fib works is a fascinating subject for some, myself included, but in case this exchange is scaring off some rookies, I think we need to make clear that actually understanding everything behind Fib lines is not essential for applying them to trading. I know traders who actively don’t want to clutter their heads with background, they just want the essential bullet points. So the Fib executive summary is that price does consistently react to Fib lines, opinion can divide on why that is but in terms of trading is is important to note that they just work. The 50 Fib is always on my charts as a key S&R level and has served me well. So whether it works because the stars are in alignment or because the major institutional traders all have the same level on their charts is only of secondary importantance here. Just wanted to make that point… but great post, Dale, and also served to make me look to-the-point and punchy, so thank you for that, too!
Anyway, sorry, back to gambling, hope this diversion is okay given that this is a somewhat lighthearted thread…
I thought that given our conversation above I’d just give you details of a ‘technical analysis breakthrough’ of mine!!!
My main system (Wilder’s Swing Index System) uses a figure of +/- 60 ASI points to generate a ‘Trailing Index SAR’ (stop and reverse) signal if no HSP or LSP has formed i.e. if the ASI has moved back on itself by 60 points or more and no HSP or LSP has formed then it’s time to place your stop and reverse order. It’s not so much the detail of the system that’s important here in this post to you. What IS important is the fact that I’ve always wondered ‘WHY 60 ASI points and not any other number’’??? At first I figured it was simpy because it was 10 more ASI points that 50 (50 points or 50 pips) (you know: that ‘round number phenomenon’ which it probably WAS based on). Furthermore and even although it’s my ‘main’ ‘money maker’ it’s very prone to false Trailing Index SAR signals especially on shorter timeframes (when I’m bored) i.e. sometimes price will JUST cause the Trailing Index SAR to be triggered and price will then reverse which he quite correctly states will happen most times in his book. What I’ve found in practice though is that had you waited just ONE MORE bar i.e. if the signal was just ONE MORE bar later the false signal would have been eliminated. AND THEN LIKE A ‘LIGHTBULB MOMENT’ the solution dawned on me!!! Use a Fibonacci Number instead of the ‘artibtrary’ 60 ASI points. The first and only Fibonacci Number greater than Wilder’s 60 is 89. I’ve just modified my Swing Index System code to test and all I can say is ‘WOW’!!! It appears to eliminate just about every false Trailing Index SAR signal from the system!!! It never really ocurred to me until today and because of our discussion above from the other day. And then, sometime this week, I got this email message (I get them every day from TraderPlanet), and all of a sudden ‘the penny dropped’!!! Here’s the article if you’re interested: Synergistic Trading (you should subscribe to TraderPlanet i.e. there’s really only GOOD stuff that I get from them every day i.e. no spam, ads, or ‘garbage’ and it’s free OF COURSE)!!! LOL!!!
I’m tellin’ ya: there’s more to these Fibonacci Numbers than ‘meets the eye’!!!
regardless if you good or bad surely if you playing with odds and trying to stack them in your favour, then thats gambling - you may be better at it, but your still gambling as noone for sure can 100% predict the outcome - no matter how good