Probably the best instantaneous rewarding "why?", of manual trading is the joy and satisfaction in perceiving, among the situations of higher or lower uncertainty of what will happen in the global economy and markets, so as to plan and conduct a strategy that lets you know, on occasions, through data information , mathematical, and economic principles, what will happen with acceptable low uncertainty. In this way the local goal of the game is to maximize the success rate of the (groups of) trades. And probably the best cause for this why as both local and global goal of the game of trading is so as to reduce economic inequalities in the world.
Probably the most important psychological virtue of a trader, is an anti-Machiavellian virtue: his disregard and contempt of fear of future failure, of fear of temporary failure and memory of past failure. The success is founded on a successful system of beliefs about you your tactics and the market behavior as inherited from a social and natural structure.
Probably the most important psychological virtue of a trader, is an anti-Machiavellian virtue: his disregard and contempt of fear of future failure, of fear of temporary failure and memory of past failure. The success is founded on a successful system of beliefs about you your tactics and the market behavior as inherited from a social and natural structure.
We
discussed in the post 32, about the basic 4 price patterns , and how they
emerge from the 3 types of coupling of demand-supply. We also mentioned that
the way that these 4 price patterns appear and follow each other, and the way
they exist in various time and price scales are not random but are modulated by
the characteristic cycles of the markets are described in the post 5. We
furthermore discussed in the post 2,0 how this modulation can be formulated in various ways, and that I
have done it through the concept of rainbow walk, in a simulator defining a
class of mathematical stochastic processes called rainbow stochastic processes
.
In simple terms at any particulat characteristic time scale and peridicity, the time-lengths of the 4 patterns, are integral multiples of the half-period of the periodicity, and the duration of the runs of of them (for trends and stationarities) (runs=consecutive sequence of the same pattern) follows the pareto distribution.
What
is very interpreting is that as the 4 price patterns are binded and modulated
by the hidden periodicity, they shape support-resistance levels, and
furthermore, these support-resistance levels (at a particular periodicity) are
placed at equal price-distances. Such equally spaced support-resistance levels
(atributed to a single periodicity and time frame) have indeed been observed in real markets,
and are called Darvas-lines or Darvas-zones
The Darvas-lines if plotted, some how give the image like the pentagram in musical scores (in this case mot only 5 parallel lines) , upon which the market is playing its melodies.
The make a support-resistance grid of parallel lines.
The make a support-resistance grid of parallel lines.
The predictive value of this configuration regularity of the market is rather obvious. The simplest and most powerful type of trading is that which opens positions at a support-resistance level, and closing it and a different support resistance level.
The parallel grid of support-resistance levels (Darvas zones) xx50, xx00, together with the in-between repulsion levels xx75, xx25, admits a simple optimal trading
See e.g.
http://www.darvastrader.com/
http://www.boxcharts.com/fx-forex-strategies-darvas-box-theory.html
http://astockpicker.com/DARVAS%20BOX.htm
http://breakoutreport.com/articles/strategies/darvasapplied.htm
The parallel grid of support-resistance levels (Darvas zones) xx50, xx00, together with the in-between repulsion levels xx75, xx25, admits a simple optimal trading
system, with minimal mathematical assumptions about the stochastic process of the prices. E.g. We may assume that we have a random walk, with reflecting parallel levels, for some limited time interval. That is, no Demand-Supply dynamic equations of domination, competition and cooperation (as in post 22) that lead to the 4 patterns of spike, trend, waves, and stationarity (post 32). And even with so unfavourable simplistic mathematical assumptions, there is mathematically valid systematic profitable trading: That of, buying at a support-resistance Darvas level, of the stationarity-zone and pattern and selling, at the opposite parallel support-resistance Darvas level. Furthermore we assume time-varying shaping of transition probabilities for adjacent Darvas zones in the above random walk. But what is more important is that we have also an "a priori" (prior) shaping of transition probabilities (not posterior) for the adjacent next Darvas zone: At the one of the two parallel support-resistance level, that we observe a skew triangle pattern formation, we also have the incubation and shaping by accumulation of transition probability >50% of crossing the particular support-resistance level for the next Darvas zone. Now this is very important and efficient forecasting tool, equivalent to the forecasting tool of acceleration or divergence, which is also prior to reversals, not posterior. In the more comprehensive stochastic process models of the prices with the 4 patterns, the above Darvas-zones trading system, covers essentially all 4 price patterns, as at the realization of the incubating transition probability, we have a breakout which is either the start, of a spike or the start of a trend. The wave patterns are included and are occurring within the stationarity pattern of the parallel Darvas levels.
Because of the simplicity of the parallel support-resistance levels trading, and the prior, not posterior shaping of the transition probabilities, it constitutes probably one of the simplest and most powerful and successful trading systems, that trades essentially only flat channels.
See e.g.
http://www.darvastrader.com/
http://www.boxcharts.com/fx-forex-strategies-darvas-box-theory.html
http://astockpicker.com/DARVAS%20BOX.htm
http://breakoutreport.com/articles/strategies/darvasapplied.htm
In the case of EURUSD, and the daily periodicity, the Darvas lines coincide with the classical psychological levels. In other words the major level xx00,and the minor level xx50.
E.g. a major support resistance level is the 1.2300, or 1.2400 while a minor is the 1.2350, or 1.2450 etc.
When the price reaches the major level xx00, as if when reaching an "attractor" of the dynamics of the market , statistically it will stay there longer, spending higher volumes of transactions, and statistically it will oscillate in the average between xx20 and xx80. Similarly for the minor level xx50, where statistically it will oscillate between xx40 and xx60.
The fan principle is a different configuration
regularity of the markets, and states that the various trend-patterns of the
market, do not have all kinds of different slopes or speeds. On the contrary,
the trend-speeds or trend-slopes, are "quantized" in the sense that
only 3 values appear. The value 0 (a case of a flat stationary patterns or a flat wave
pattern , expanding or contracting or neither) , the value x which is the
statistically average slope of a trend-pattern,
and a very high value which is statistically the slope of spikes. No intermediate values
are so probable as these 3 values.
Again the predictive values of this regularity is quite important.
Probably the best instantaneous rewarding "why?", of manual trading is the joy and satisfaction in perceiving, among the situations of higher or lower uncertainty of what will happen in the global economy and markets, so as to plan and conduct a strategy that lets you know, on occasions, through data information , mathematical, and economic principles, what will happen with acceptable low uncertainty. In this way the local goal of the game is to maximize the success rate of the (groups of) trades. And probably the best cause for this why as both local and global goal of the game of trading is so as to reduce economic inequalities in the world.
Probably the most important psychological virtue of a trader, is an anti-Machiavellian virtue: his disregard and contempt of fear of future failure, of fear of temporary failure and memory of past failure. The success is founded on a successful system of beliefs about you your tactics and the market behavior as inherited from a social and natural structure.
Probably the most important psychological virtue of a trader, is an anti-Machiavellian virtue: his disregard and contempt of fear of future failure, of fear of temporary failure and memory of past failure. The success is founded on a successful system of beliefs about you your tactics and the market behavior as inherited from a social and natural structure.
(And from a macroscopic point of view, probably the stronger reason for studying scientifically the capital and money markets, is that among all civilizations in the galaxy, this earthly civilization, is the only one with extremely complicated , massive alienating and evil economics. The more advanced civilizations do not even use money inside them, but only for simple commerce with different civilizations. For a mind therefore perceiving all reality, it is challenging to go through the underlying mathematical and scientific laws of such a rare economic phenomenon.)
