2009.09.10 DRAIN THE BANKS - LIKE A RAT

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TheRumpledOne
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Postby TheRumpledOne » Mon Dec 05, 2011 12:22 pm

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"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.
IT'S NOT WHAT YOU TRADE, IT'S HOW YOU TRADE IT!

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TheRumpledOne
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Postby TheRumpledOne » Mon Dec 05, 2011 12:33 pm

slingblade wrote:
TheRumpledOne wrote: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?
IT'S NOT WHAT YOU TRADE, IT'S HOW YOU TRADE IT!



Please do NOT PM me with trading or coding questions, post them in a thread.

unreconciled
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Postby unreconciled » Mon Dec 05, 2011 3:36 pm

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.
Last edited by unreconciled on Mon Dec 05, 2011 8:49 pm, edited 1 time in total.

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TheRumpledOne
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Postby TheRumpledOne » Mon Dec 05, 2011 8:11 pm

Image

<-------------------------------------------------------------------->

The important part is to enter WITHIN 20 pips of the daily low. The RAT REVERSAL is only one entry method.

<-------------------------------------------------------------------->

PLEASE DO NOT PM ME WITH QUESTIONS ABOUT TRADING, INDICATORS, CODING, ETC... Post your questions in the forum. Thank you.
IT'S NOT WHAT YOU TRADE, IT'S HOW YOU TRADE IT!



Please do NOT PM me with trading or coding questions, post them in a thread.

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TheRumpledOne
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Postby TheRumpledOne » Mon Dec 05, 2011 8:22 pm

unreconciled wrote: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).
'BREAKOUT CAUTIONS REVERSAL- - let RED RATS have their turn.

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


No, not quite what I had in mind.

Keep looking!!
IT'S NOT WHAT YOU TRADE, IT'S HOW YOU TRADE IT!



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Postby TheRumpledOne » Mon Dec 05, 2011 8:31 pm

Image

Working on a new indicator... TRO_HOLO

HO = Highest Open

LO = Lowest Open

Remember the 3 Level ZZ Semafor indicator? Lots of people didn't like it because they thought it "repainted".

TRO_HOLO determines the highest and lowest OPEN PRICE over the last 34 bars (User Input) and plots a line there. I use 34 because the 3 of the 3 Level ZZ Semafor is the 34 period High/low. TRO_HOLO also determines the highest and lowest OPEN PRICE over the last 34 bars starting with the bar that precedes the bar it just found and plots a line there.

So you have 2 low opens and 2 high opens.

Q1) What do you see?

Q2) How can you use that to be profitable?

HINT: The OPEN PRICE is the ONLY price of a bar/candle that DOES NOT MOVE once it has been plotted!!
IT'S NOT WHAT YOU TRADE, IT'S HOW YOU TRADE IT!



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TheRumpledOne
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Postby TheRumpledOne » Mon Dec 05, 2011 9:31 pm

Image

Does this help you see?
IT'S NOT WHAT YOU TRADE, IT'S HOW YOU TRADE IT!



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TheRumpledOne
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Postby TheRumpledOne » Mon Dec 05, 2011 9:44 pm

Image

Now what do you see?
IT'S NOT WHAT YOU TRADE, IT'S HOW YOU TRADE IT!



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slingblade
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Postby slingblade » Mon Dec 05, 2011 11:19 pm

TheRumpledOne wrote:
slingblade wrote:
TheRumpledOne wrote: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?


I'm a green rat.

No, I have not limited my entries to within 20 pips of the daily low. I have the hobbling necessity of a day job which means that I can only trade for about 1.5 hours each morning beginning at the NY open. I have tried to limit myself to 2 pairs: GBP/USD and the EUR/JPY as I didn't want to overwhelm myself with too much to watch.

Would you advise me to use the Navigator GPS indicator so that there is more likelihood of a "best" trade opportunity?

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TheRumpledOne
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Postby TheRumpledOne » Mon Dec 05, 2011 11:27 pm

You can use any indicator that tells you how far price has moved from the current daily low.
IT'S NOT WHAT YOU TRADE, IT'S HOW YOU TRADE IT!



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