My new chaos findings implemented in forex trading

forex live trades, setups, charts

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Paul&Paul
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Switching from one task to another is effortful

Postby Paul&Paul » Tue Feb 07, 2012 11:50 am

especially under time pressure.
Switching from one currency pair to another is effortful.
A forex analyst and trader alike work under time pressure. It goes without saying. It is not an easy piece of bread, whatever you are told about doing forex.
You are required to switch repeatedly between two or more demanding tasks at the same time, retaining the results of one while performing the other(s). Here you test your ability to control attention. It is beyond the effects of intelligence. It is very near a test pilot, an air traffic controller or a Formula 1 driver.

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Paul&Paul
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We normally avoid mental overload

Postby Paul&Paul » Tue Feb 07, 2012 12:04 pm

dividing our tasks into several easy steps.
However, the moment we lose concentration, the moment we return to the real market, the first thing that comes to our mind is the work of subconsciousness. If we allow ourselves to be lured by it (remember it is effortless) we are doomed.

Paul&Paul
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EURUSD has returned to prices prior to the US data on Friday

Postby Paul&Paul » Tue Feb 07, 2012 2:23 pm

EURUSD has returned to the conditions prior to the release of the US data on Friday.
Its nearest target 5/.8664=1.2193.
The reaction to 4/699 border is evident.
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Paul&Paul
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Natural and unnatural

Postby Paul&Paul » Tue Feb 07, 2012 8:26 pm

When I wrote about EURUSD in relation to Friday's events I wanted to compare what was natural and what was contrary to nature.
You would agree that a release of important US data is an event for which lots of traders were waiting for in anxiety.
You would also agree that the moment it was disclosed to the public was not the time the computers engaged to compute the numbers just spat out the results.
The numbers released had been computed earlier.
I indicated that it was unnatural for EURUSD to have been going down on the numbers. The chaotic system showed an opposite bias. In some sense, those who had sensed the numbers with the sixth sense, put bets on a rise of EURUSD. Big names need a lot of time to open hundreds or thousands of their positions. The market reacted "correctly" to the fundamental but please remember that any statistical data is just one of multiple simple and complex factors which drive the market.
From the point of view of chaos there is no such thing like trading fundamentals. All we can say is that we can expect a more volatile market and good forex gods should be able to sniff out a dead body.
The recent events belong to the classics of modern forex.
Today you see that not the public was right, though some must have profited from the slump of EURUSD.
Imagine big names buying low all the way EURUSD was going lower. They profited some 200 pips.

We will repeatedly find efforts of big names forcing us to do the contrary to the nature of the system.
We will feel a strong grip of theirs in many events in the future to come.

This story can be told as if the public were a one person and studied with the tools of modern psychology.

Such a Friday phenomenon is called ego depletion.

The list of ego depletion is highly diverse but very accurate on observations
of forex traders:


overspending on impulsive purchases
reacting aggressively to provocation
persisting less time in a handgrip task
performing poorly in cognitive tasks and logical decision making


The problem is well documented in literature of psychology.

A funny thing is that the effects of ego depletion could be undone by ingesting glucose, confirmed in experiments.

Nevertheless, let us face the reality. And the reality is that traders take most suicidal steps when they are ego-depleted.

Where has the EURUSD gone today?
It expanded exactly to 9.1299 of the trigger up.

This is a story linking psychology and chaos, behaviorism and chaos.

The public is engaged in difficult cognitive reasoning while vultures engage their blood suction pumps run on high frequency trading.
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Paul&Paul
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Many people are overconfident

Postby Paul&Paul » Wed Feb 08, 2012 6:36 pm

They place too much faith into their intuitions.
They find cognitive effort unpleasant and avoid it as much as possible.

Instead they buy trading robots or even less than that.

If intuitions are employed in trading, the conclusion come first and the arguments follow.

Sometimes we end up with some bizzarre arguments which can never support what we believe in.

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Facts that we know do not always come to mind

Postby Paul&Paul » Wed Feb 08, 2012 6:41 pm

when we need them.
In order to retrieve some information from memory we need an effort to find it and to deploy it. It takes time. It is slow. The market is fast.

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We see EURUSD heading towards 1.3250

Postby Paul&Paul » Fri Feb 10, 2012 3:59 am

EURUSD signaled once that 1.3250 was vulnarable. It is a UPO and when the prices get there, more losses will take place.
On the way up, EURUSD used more offensive weapons which supported recent gains. Crucial are 1.3214 and 1.3208. The latter is UPO.
UPOs are levels to which the market are bound to return some time in the future.
We also see that the line representing 9.1299 causes some distinct price reactions. EURUSD has spent more than three days near it. A lot of time for a lot transactions.
It is a region where some positions must have been closed.

A few more words about the past. It was December 13. Have a look at 1.3208, a heavy selling took place there.
Now the same UPO is an offensive weapon upwards. What a magnificent coincidence.
It is not a coincidence. It simply looks that the same forces dictate the conditions now and dictated them then.
On further scrutiny you can see that 1.3293, a UPO from December 12, has been taken this week. And that there are two more UPOs
@ 1.3365
and 1.3402.
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Paul&Paul
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Individuals who uncritically follow their intuitions

Postby Paul&Paul » Fri Feb 10, 2012 5:17 am

about markets are impulsive, impatient and keen to receive immediate
gratification. In forex they are called scalpers.
They score low in IQ tests.

Paul&Paul
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Priming effect

Postby Paul&Paul » Fri Feb 10, 2012 5:41 am

When someone talks about some supports he/she sees on the chart it tallies in your mind with a rising market.

This is called a priming effect.

A similar situation is when someone talks about a bullish market and uses the word bullish, bullishness etc. Then your mind tallies it with some supports.
You will usually look for support lines.

Chaotic determinants cause a different priming effect.

to be continued

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continued

Postby Paul&Paul » Fri Feb 10, 2012 1:29 pm

UPOs, Unstable Periodic Orbits are where the market is b ound to return some time in the future.

The return to a UPO can be a harbinger of a major change but it is not a rule.

The return to a UPO may be a movement not easily linked to any distinct factor
of non-chaotic nature.

Such is the behavior of short-period UPOs for example.

In a rising market a UPO which showed somewhere lower than now will be
always situated above the level considered iome support in TA. It is obvious because a UPO will be the close of a white candle with a body in this case.

Sometimes it is very near the TA support, sometimes quite far away at a glance from that.

Therefore the return to a UPO is our earliest signal that something is wrong with the local trend and perhaps it is time to rethink the level at which one needs to close opened position(s).

Again take on the glamourous shoes of a big player who needs time to do something when conditions become unfavourable for his positions.

What is a matter of one click to an amateur, can be a big problem to someone holding hundreds of positions if not more.

An amateur may be waiting till one particular price occurs while a big player is already unwinding his positions and he started doing it higher, sometimes much higher. Cases of such unwinding begun a day before or earlier are seen pretty often.

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