How to avoid Knowledge Bias in Day Trading ?

Discussion in 'Trading' started by TurtleLearner, Nov 7, 2018.

  1. Hello ET , that's make a long time I haven't be there
    Hope you're fine and kick ass of this guy :D:D:D ........

    Ok I stop , as my title figure it would be very nice to know how you guy deal with knowledge Bias in active day trading , what I mean by knowledge bias is the identification of a particular pattern or some magic indicator that make sense for a trader X then all his focus in wether Bearish/Bullish according to his particular setup , that's seems strange cause if you aren't follow a Trading Plan/Game Plan you're gambling but what if this Game Plan is such a bias for you without noticing it ?

    This is 2 screenshot to illustrate better what I'm talking about
    Trap before.jpg
    A really Bearish Bias here due to the Knowledge use here in my case PA
    A reversal setup

    I know that with some conservative approach there would be no wager for continuation , Breakout without BuildUp , Round Number as a possible obstruction but that doesn't delete the Bearish implication still there , I hope that right now you have an idea of what I call Knowledge Bias

    And again this is not an illusion goal for get no loss , no matter how great you plan your trade there would still have loss , it's a part of the game so I assume it , but this knowledge bias can trigger this loss and have an idea about how avoid them would be great !!!
    BTW I don't use indicator so Price Action and Naked Forex advice would be great even TA Indicator advice too

    Thanks for your reading :) and sorry for all the confusion in the language (native french speaker here)
  2. maxinger


    I think your point is
    price breakdown, and we expect price to continue to go down and down.

    The 2nd chart shows price is being supported by rising trendline, and hence price is reversing to go up. How high the price will go up? No idea. It might just reverse to go up a little, then reverse to go down.

    So this is what I usually do. I will take all signals without hestitation because there is no way to predict what's going to happen next.
    when price breakdown, go short it.
    when price reverse to go up, go long it. We will never know how much the price will go up.
  3. tomorton


    What's the worst that can happen? - Price goes the way that you calculated was less probable and you lose 1% of your account. So now you can only trade with 99% of your capital. How bad is that?
  4. Doesn't it look like CHASING the market ? I'll certaonly END UP GIVING ALL MY MONEY IN COMISSION !!!

    My point wasn't particularly about Breakout Pattern it was just an ullustration for the Bias Knowledge , for example someone who identify this rising trendline as a bullish opportunity is a little bias by that and ignore other informations due to this bias , for TA it can just be a crossover of the MACD line in the rising area , and be biased also by that ...

    Otherwise Thanks for the reply
  5. Handle123


    I Would skip the TA for couple years as you are lacking patterns, you have other patterns on chart that either you not studied or discover. Not all patterns are for entry, some show when NOT to take signals, some will show when to take profit early, and why I prefer to day trade currency futures as they show volume. You also want to study "wicks", so like in an uptrend, long wick on red candle below close or like green candle in downtrend and above close-what does this mean, also pinwheels, head and shoulder tops act little different than H&S bottoms plus how it is formed matters, is shoulders tighter to the head or looser. Speed of market or sharp angles as in what falls or spikes up fast often reverses, not necessary reverses entries, but certainly forms tighter protective stops. Secondary highs/lows which are failures to push beyond last extremes as this forms A-B-C, many buy above "B", I prefer waiting for a close above "B" then wait for little pullback, double bottoms with 2nd bottom having more volume than first and can be few ticks lower showing they were running stops and price held. And get probabilities to give where you have better edge.

    Volman is ok, but learn patterns in general more and design your own patterns that are not in books.

    Good trading.
    birdman, Sprout and Simples like this.
  6. volpri


    In your first chart i don’t see a bearish bias. True there was a BO south (big bear bars) but the last three bars were smaller and buying enters on last two small bear bars followed by bull bar with good buying indicated as tail on bottom and closed near it’s high. And a gap between it’s (bull reversal bar) close and the the close of the last bear bar. Then a retracement of the bearish BO that actually, basically, almost entirely reversed the big BO south. That is bullish. Plus higher lows ..higher highs..up to your white box. That too is bullish. And more and larger bull bars closing near their highs with gaps between closes of bars and shallow pb’s in the retracement with the exception of the last pb where your white blocked out box begins. These gaps and shallow pb’s too are bullish.

    In addition, since the reversal from the bottom UP to THE WHITE BOX....well a rather tight bull channel has formed. That too is bullish. Granted the last two bear bars before the white box broke south of the tight channel but understanding that 80% of BO attempts fail and the fact of higher lows in the channel with larger bull bars and gaps between closes...well ...the odds increase that this will be a failed BO of the bottom of the tight channel.

    Also, by the time PA reaches your box a triangle has formed for a triangle BO mode all at the bottom of a tight bull channel.

    Bottom line: going strictly by PA by the time PA (even way before) reaches your white box I would be thinking bullish especially given the fact that the retracement from the large BO south was in the form of a multi bar tight bull channel ( higher lows higher highs) and it retraced nearly 100% ...well i would not be bearish by time price reached your box but I would be bullish or at min sideways range for several bars. This is how I would read this price action. Of course I could be wrong. I don’t know what happened after your box but whatever happened I would adapt on the fly. Probability: bullish channel would continue some more or at min morph into some sort of sideways range trading. Least probability is a break south. Nevertheless, it can happen. But I am talking probabilities or likely possibilities given the context of the PA.
    Sprout likes this.
  7. Sprout


    Knowledge is not a bad thing when it is based on facts. Also part of what you call bias is an element when the bias is no longer accurate based on facts.

    You have a fear based on a notion of chasing the market. What differentiates this from entering the market when it’s sentiment has in fact actually changed?

    If you find yourself suffering losses by ‘chasing the market’ that can only mean one thing. That you have not done enough due diligence to see the difference between price oscillating on a faster timeframe and sentiment change on a larger timeframe.

    To begin to see the difference, it would help if you include 1/2 of the market’s granularity of information than not.

    By choosing not to include it you get the results that you get.

    From your chart and interpretation, you have not differentiated what is a Dominant move nor a non-Dominant move.

    Traders trade what they see. If you want better results, you’ll have to do the work to ‘see’ better. Doing drills accelerates this process.

    Candles are pretty to look at with emphasis on the inside spread between groupings but bars show trending better and support a more relaxed mode of monitoring and analysis.

    Candles and bars although can be traded with the same, support different trading methodologies.
    TurtleLearner likes this.
  8. cvds16


    Trading 5M charts is for suckers ...
    schweiz and fordewind like this.
  9. Sprout


    ...that cannot adapt on the fly.
  10. volpri



    Ross Perot said: Listen for a giant sucking sound. It is the sound of jobs being sucked right out of the USA with the NAFTA agreement.
    #10     Nov 7, 2018