2009.09.10 DRAIN THE BANKS - LIKE A RAT

[TheRumpledOne]

What do these charts have in common?









How can you profit from them?

HINT: The lines show the highest open and the lowest open price.

[TheRumpledOne]

HINT No. 2: Time frame does not matter:

[slingblade]

Homework for the weekend(Dec 3):

Q) What clue does the frequency distribution for the weekly candle wicks give you?

No one has an answer?

I'll just be able to guess without any certainty. This is a new paradigm for me.

Does it give us a potential target for how much retracement we can expect from a reversal at the rat zones?

New indicator/template coming?

[unreconciled]

Hi TRO,

As nobody else seems to want to share their homework... ;)

According to the frequency distribution for W1 candle wicks, as far as I understand, it shows
that after price retracing 10 - 19p. off the weakly LOWEST low (for the green rats) there is 50%
chance of it going up to 70p.+ and as high as 90% chance of 30p.+.

According to the charts with highest and lowest open prices that you have posted, all I see is:

PRICE WILL MOVE 'X' AMOUNT OF PIPS FROM HIGHEST HIGH TO LOWEST LOW,
AND FROM LOWEST LOW TO HIGHEST HIGH WITHIN 'Y' AMOUNT OF TIME.

(...what is by the way what 'MightyOne' always says).

Is importance of holding to winning trades what you want us to see?
Then still, I do not quite get how to profit from this :|

Or is it visual presentation of:

"Now, 2 patterns of market behavior happen on a regular basis:

1) the price breaks to new high's (or low's)

2) the price reverses from new high's (or low's)

They happen regardless of time frame (with the obvious limitations explained above)

They are phenomena that can be exploited without the fear if found out by others, that they might cease to exist." - H. Rearden

Well, what is common for all those charts is that the price closed lower than the lowest low
and higher than highest high NEVER after.

That may solve my problems with not being able to stay +10p. in profit for the day, giving me the exact,
higher probability zone to buy, and prevent me from overtrading
(MAINLY IN THE RED RAT TIMES, WHICH I PERCIEVED AS A 'TREND' FOLLOWING MUST).
I just do not know why have I refused to see this before.
WOW! I am really kind of like -> :O

I am grateful for making me rethink what I claimed to have known.
I will be pleased to see any comments on the above.

Have a nice day!

[TheRumpledOne]

Good observations so far but there is still something else to be seen in each case.

Anyone else??

[vincentws]

I see simply that regardless of time period, profit can be made in either direction by taking reversals off of the high or low. to use Rat terminology, there is cheese for everyone.

[slingblade]

Blue is NY, Yellow Asian, Maroon London. Look and SEE. Now you tell me if it matters.

Frankly, I'm beginning to see that I'm having difficulty seeing much at all. I'm seeing that I tend to gravitate towards a rule which means I don't have to understand, just follow the rule. But after "seeing" that simply taking a rat reversal anywhere on the chart doesn't seem to get me the cheese I need I'm left wondering if there isn't more nuance to being a rat. I'm suspicious that there is something else to look for in order to "know" that a good setup is at hand.
The GPS seems to be a good indicator of that as it highlights rat zones. But the idea of the broker's time not mattering is throwing me as daily highs/lows are suddenly perspective dependent. Time frame not mattering isn't as hard to swallow, I get that price is the same on all TF's.

What I see from your graphic is that price makes highs/lows and reverses in all market times. Am I missing something else? I might as well draw a line anywhere on the chart.

[TheRumpledOne]

"Look, for example, at this elegant little experiment. A rat was put in a T-shaped maze with a few morsels of food placed on either the far right or left side of the enclosure. The placement of the food is randomly determined, but the dice is rigged: over the long run, the food was placed on the left side sixty per cent of the time. How did the rat respond? It quickly realized that the left side was more rewarding. As a result, it always went to the left, which resulted in a sixty percent success rate. The rat didn't strive for perfection. It didn't search for a Unified Theory of the T-shaped maze, or try to decipher the disorder. Instead, it accepted the inherent uncertainty of the reward and learned to settle for the best possible alternative.

The experiment was then repeated with Yale undergraduates. Unlike the rat, their swollen brains stubbornly searched for the elusive pattern that determined the placement of the reward. They made predictions and then tried to learn from their prediction errors. The problem was that there was nothing to predict: the randomness was real. Because the students refused to settle for a 60 percent success rate, they ended up with a 52 percent success rate. Although most of the students were convinced they were making progress towards identifying the underlying algorithm, they were actually being outsmarted by a rat."

P64 HOW WE DECIDE (italics added)

========================= ====================

"Now, 2 patterns of market behavior happen on a regular basis:

1) the price breaks to new high's (or low's)

2) the price reverses from new high's (or low's)

They happen regardless of time frame (with the obvious limitations explained above)

They are phenomena that can be exploited without the fear if found out by others, that they might cease to exist." - H. Rearden

=============================================

1) Price within 20 pips of the daily low (ClLo < 20): This is OPPORTUNITY

============================================

WHY ISN'T EVERYBODY DOING IT?

Most of you know I catch a lot of flak on my forums because SOME PEOPLE don't like the way I post.

One worn out argument that is used repeatedly is, "If this is so (simple, great, profitable, ), then why isn't everybody doing it?"

Simple answer is because SOYLENT GREEN is people!

We all know exercise is great, but how many actually exercise?

We all know smoking is bad, but how many do it anyway?

We all know which foods are bad for our health, but how many eat those foods?

We all know that we should save for our future and spend less than we earn but who does that?

The list is almost endless.

As long as there are people, there will always be some STUPID people and some smart people making STUPID decisions, where STUPID is defined as knowing better but acting otherwise.

Meanwhile, the RATS are still beating the Yale students.

=============================================

PLEASE DO NOT PM ME WITH QUESTIONS ABOUT TRADING, INDICATORS, CODING, ETC... Post your questions in the forum. Thank you.

[TheRumpledOne]

Blue is NY, Yellow Asian, Maroon London. Look and SEE. Now you tell me if it matters.

Frankly, I'm beginning to see that I'm having difficulty seeing much at all. I'm seeing that I tend to gravitate towards a rule which means I don't have to understand, just follow the rule. But after "seeing" that simply taking a rat reversal anywhere on the chart doesn't seem to get me the cheese I need I'm left wondering if there isn't more nuance to being a rat. I'm suspicious that there is something else to look for in order to "know" that a good setup is at hand.
The GPS seems to be a good indicator of that as it highlights rat zones. But the idea of the broker's time not mattering is throwing me as daily highs/lows are suddenly perspective dependent. Time frame not mattering isn't as hard to swallow, I get that price is the same on all TF's.

What I see from your graphic is that price makes highs/lows and reverses in all market times. Am I missing something else? I might as well draw a line anywhere on the chart.

Let's clear things up:

1) To trade like a RAT is to ALWAYS trade in ONE DIRECTION - either LONG or SHORT. Once you pick a "team", you can't switch.

2) The "within 20 pips of the daily high/low" is the BEST possible entry to get the maximum run BUT the RAT REVERSAL entry works ANYWHERE on the chart.

Did you ride the first part of number 2?

[unreconciled]

I have been thinking for the whole day today, and all I have, not very breaking through though, is:

RAT REVERSAL ENTRY WORKS ANYWHERE ON THE CHART.
Knowing that price going off the bottom will most likely continue to move in upward direction I will take every (since there are no filters) next RAT REVERSAL ENTRY (not only in the 20p. off the extremes) to follow this movement, until the opposite extreme is reached (by which I do not mean I set TP over there) or new lowest low has been made.

Still I am not sure, if that is what I was supposed to see.