probability: statistics & regression to the mean
Posted: Tue Jul 14, 2009 8:02 am
I've been doing a lot of reading (like Patch), especially the 'Never Lose Again' thread (babypips), and the embedded thread from jjrvat on price analysis. (If you haven't read these, do).
I have learned:
- that indicators are just an expression of price
- EVERYTHING in trading is built on price action
- many successful traders DON'T USE INDICATORS (eh?)
- testing strategies (e.g. EAs) is LESS IMPORTANT than understanding the market and price action
- an understanding the market and price action can be gained through analysis of STATISTICS and OBSERVATION of price action
I am slowly coming to the realisation that I have been approaching this arse-about. I have been coding/strategizing my little fingers off trying to get profitable results. I think now that this is the END RESULT and not the FIRST STEP.
The FIRST STEP is understanding basic price analysis and the market. Seems like a big ask for a relative newbie, to match the street smarts and experience of traders with 30+ years... "It's easy when you know how", or rather, it's easy when you have a good understanding of the market and price action.
TRO says over and again, 'anything can happen'. Yet he KNOWS what will PROBABLY happen next. The same for other successful traders. They know where price has to go next (probably). So it seems to me that indicators are just a GUIDE to determining the PROBABILITY of what will happen next.
Statement: an understanding of what will PROBABLY happen next is key to trading successfully.
WHAT DO YOU THINK?
What's my grade? Have I just been appointed 'Minister for Stating the Bleeding Obvious'?
More to follow...
bazmo
I have learned:
- that indicators are just an expression of price
- EVERYTHING in trading is built on price action
- many successful traders DON'T USE INDICATORS (eh?)
- testing strategies (e.g. EAs) is LESS IMPORTANT than understanding the market and price action
- an understanding the market and price action can be gained through analysis of STATISTICS and OBSERVATION of price action
I am slowly coming to the realisation that I have been approaching this arse-about. I have been coding/strategizing my little fingers off trying to get profitable results. I think now that this is the END RESULT and not the FIRST STEP.
The FIRST STEP is understanding basic price analysis and the market. Seems like a big ask for a relative newbie, to match the street smarts and experience of traders with 30+ years... "It's easy when you know how", or rather, it's easy when you have a good understanding of the market and price action.
TRO says over and again, 'anything can happen'. Yet he KNOWS what will PROBABLY happen next. The same for other successful traders. They know where price has to go next (probably). So it seems to me that indicators are just a GUIDE to determining the PROBABILITY of what will happen next.
Statement: an understanding of what will PROBABLY happen next is key to trading successfully.
WHAT DO YOU THINK?
What's my grade? Have I just been appointed 'Minister for Stating the Bleeding Obvious'?
More to follow...
bazmo