Current price 28 pips above the current daily low. <--------------------------------------------------------------------> The important part is to enter WITHIN 20 pips of the daily low. The RAT REVERSAL is only one entry method. <--------------------------------------------------------------------> Trading is GUESSING. If it wasn't, you wouldn't need a STOP LOSS. THINK ABOUT IT!! <--------------------------------------------------------------------> MAXIMUM RISK = 2% * ACCOUNT BALANCE. STOP LOSS = 10 PIPS. (INCLUDING SPREAD) POSITION SIZE = RISK / STOP LOSS. <--------------------------------------------------------------------> 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. <--------------------------------------------------------------------> PLEASE DO NOT PM ME WITH QUESTIONS ABOUT TRADING, INDICATORS, CODING, ETC... Post your questions in the forum. Thank you.
"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 ============================================= "The technique is so simple that just several lessons (or a few pages of explanations) cover it all. Now what? Now the student has to practice, practice and practice again to understand what he had been taught. The teacher DOES know much more than the student, but his understanding can't be "passed", "transferred" or taught in any way -- not even by reading books." ============================================ PLEASE DO NOT PM ME WITH QUESTIONS ABOUT TRADING, INDICATORS, CODING, ETC... Post your questions in the forum. Thank you.
Hello TRO, I have a question: You previously mentioned to pick a direction (long or short) and then only trade in that direction. Why is this? I've been swapping directions during a trading session, depending upon what the price action is showing. For example I might see a new low, then trade long from the high of the next bull candle. Some time later I might see a new high, and so trade short from the low the the next bear candle (ie reversals). This 'swapping' of direction still seems profitable to me. Why would trading in only one direction be important? Am I missing something? Thanks, Thaum
The RAT only went left. The YALE STUDENTS went left sometimes and right sometimes. The RAT beat the YALE STUDENTS. Understand?
http://itre.cis.upenn.edu/~myl/languagelog/archives/002700.html Rats beat Yales: Doing better by getting less information.
So let's for example give a 50% probability of going long at low or going short at a high, so according to this probability doing both makes no difference. However, the probabilities in reality are not 50/50. So choosing to always go long or always go short will be different. One will be better than the other, and when one is able to determine which is better in a certain time frame, then he or she advances to a higher state of being. Being profitable that is.
"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.
Probability deals with the future. Statistics deal with the past. There is no probability in trading, only statistics.
Hello TRO, So it seems to me that choosing to trade in only one direction can be separated into component factors; 1) technical reasons (such as trading in the direction of the perceived longer term price action, or away from a significant semafor signal reversal, and: 2) Psychological factors - a rat is more profitable than a brainy human who thinks he can see patterns and concepts he has deduced. I suppose, what I was really asking for TRO is a reason why the rat wins. Aside from the Yale student experiment, have you got statistics that suggest one-direction trading has been more profitable in the past? btw, today I have made five trades using your approach, and I am up by 5.4% (although I traded in both directions). I've just completed this trade (see attached pic), and won 3 pips going long with GBP/USD. Notice that I left lots and lots of pips on the table. I exited when price stalled. I'm not bothered because my account is up by over 5 % for the day. Thank you. Thaum
<--------------------------------------------------------------------> 1) Price within 20 pips of the daily low (ClLo < 20) - that is OPPORTUNITY <--------------------------------------------------------------------> PLEASE DO NOT PM ME WITH QUESTIONS ABOUT TRADING, INDICATORS, CODING, ETC... Post your questions in the forum. Thank you.