Why Is The Obvious Not So Obvious?

Isn't directional trading - from a certain point of view - not caracterized by identifying entry 'points' (and exits) where the distribution area of MAE < distribution area of MFE?

 

Completely agree with low-risk entry. But I will be amazed if there are any truly riskless entries if we cannot predict the price

 

What, you want me to give you a crystal ball?

Anyway, here's a RTH chart of 5 minute ES. Where do you believe is a low risk entry for long (or short)?

 

Perhaps it is obvious to you but not obvious to me, especially in real time.

 

Take a look at the following chart with the "low risk" in mind.

1. A breakout from the previous S/R. Should you jump in long? What's the R/R?
2. A retest back to S/R. Should you jump in long? What's the R/R?
3. Another retest (but look at it closely). Should you jump in long? What's the R/R?
4. Another retest back to S/R. Should you jump in long? What's the R/R?

 

What are MAE and MFE?

 

short @4265 maybe

 

It is easy to understand and appreciate a painting after it is painted.

In real time when the artist (market) starts to paint the first candle on the left, I have no idea what he will be painting next.

And I am clueless what to do at 1, 2, 3, or 4 other than wait and watch.

 

You have a belief about the market concept wrong, imo ironchef.
The market is not an artist.
The market is a machine.
Once you understand that which I did years ago, it becomes easier.
The machine kicks in and out of gear, going forward, backwards and disengages.
But the machine is at times 'overwhelmed' by emotional and erratic retail which causes the machine to disengage.
Sometimes its difficult to differentiate between retail and machine as imo blowoffs could be the deliberate attempts by machine to pop the market up or down to a) escape, b) enter c) reverse.

The machine is clever, tireless, focused, repetitive, predictable.
The machine operates by rules.
The machine is not emotional or artistic, but because the machine disengages, noobs have the wrong impression and jump to wrong conclusions as emotional retail trading takes over.



Can you see the machine?

 

Mae = how much price moves against you, mfe how much price moves in your favor. Suppose your entry is fixed, you can examine the distributions of both return characteristics and dissect it with other variables, eg time. This is also where the old adagium let the winners run comes from. From trend trading perspective, time in 'winning trades' needs to be longer.