My new chaos findings implemented in forex trading

forex live trades, setups, charts

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Paul&Paul
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Anyone who rejects a favorable gamble

Postby Paul&Paul » Mon Apr 16, 2012 7:16 pm

with small stakes is mathematically committed to a foolish level of risk aversion for some larger gamble.

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Paul&Paul
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Winning nothing sometimes will be experienced as a large

Postby Paul&Paul » Mon Apr 16, 2012 7:20 pm

loss when the alternative is very valuable.
Imagine you closed a position at no profit, no loss level when at some point of time the floating profit was 267 pips but the target was missed by 4 pips.
Disappointment and the anticipation of disappointment are real, yet difficult to translate into numbers.

Paul&Paul
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Prospect theory

Postby Paul&Paul » Mon Apr 16, 2012 7:43 pm

suggested that the willingness to buy or sell the EURUSD depends on the reference point - whether or not you have some EURUSD position now.
If you have a EURUSD position, you consider the pain of closong your position.
If you do not have a EURUSD position you consider the pleasure of opening the position. The values are unequal.
Giving up your EURUSD position is more painful than getting a new position is pleasurable.

Paul&Paul
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Brain recordings indicate that buying at especially

Postby Paul&Paul » Mon Apr 16, 2012 7:59 pm

low prices and selling at especially high prices is a pleasurable event.
Traders tend to increase their purchases when prices rise and the effect of price increases is about twice as large as the effect of gains.
In order to attract the public price makers must cause price rises.

Paul&Paul
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The brain of humans contains

Postby Paul&Paul » Mon Apr 16, 2012 8:54 pm

a mechanism that is designed to give priority to bad news.
To a certain extent it explains the asymmetry of trends.

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Paul&Paul
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No comparably rapid mechanism for

Postby Paul&Paul » Mon Apr 16, 2012 8:57 pm

recognizing good news has been detected.
The brain responds quickly even to purely symbolic threats like candlework.
Bad information is processed more thoroughly than good.

Paul&Paul
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AUDUSD touched 1.0304 yesterday

Postby Paul&Paul » Wed Apr 18, 2012 5:40 pm

and recovered just to 3.5699 of a trigger up.
There it failed to close above 1.0414 and again looks heavy despite a bounce off 1.0344.
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Paul&Paul
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Loss aversion

Postby Paul&Paul » Thu Apr 19, 2012 4:24 am

The risk aversion prompts not to add to a winning position at higher prices
when the trend is up.
A worse price is considered a loss because it is weighed against the best price, though it might be an immediate success (zero drawdown) after a while.

Paul&Paul
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Loss aversion

Postby Paul&Paul » Thu Apr 19, 2012 4:24 am

The risk aversion prompts not to add to a winning position at higher prices. It is also not pleasurable to add to a winning position at higher prices.
It is more pleasurable to take a contrarian trade than to go with an extended
trend.

Paul&Paul
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Efficient markets?

Postby Paul&Paul » Sat Apr 21, 2012 10:43 pm

An efficient market generates categories of events that eventually suggest that prices over-react to information. But in an efficient market, apparent underreaction will be about as frequent as overreaction. If anomalies split randomly between underreaction and overreaction, they are consistent with market efficiency.

However, "anomalies" do not split randomly but orderly in the observed scales.
Markets are not efficient, then.
An alternative model like behavioral model suggests biases in information processing that cause the same investors to under-react to some type of events and over-react to others.
Behavioral model emphasizes that the role of market participants is dominant,
crucial and unique. In simple words it is said that the market participants decide about everything, and all market developments are entirely caused
by people and nothing has any natural cause. The nature of the system
has seemingly no causal power independent from men.
This is a similar notion to claiming that climate changes are due to men.
The theory of chaos shows that behavioral model is a complete flaw.
No serious researcher in finance is likely to discard market efficiency, though. Instead, they will relax particular assumptions about individual behavior until they come to the point where nothing can be explained at all.
It is wrong to think that only men cause trends or zigzags.
Attributing causal power to the nature of (financial) systems will be objected by most liberal and neo-liberal economists because it fundamentally contradicts the existence of the so-called free market.
One look at the behavior of non-linear, chaotic financial markets proves that the time for liberal and neo-liberal economic schools has ended.
This is the era of their fall.
Finito pepito.

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