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Insights into Markets, Trading Systems and Profits

Something from AIMS Live Trading Room Today: 

What is the Market? 

The market is simple. Its represented as a number at a given time in space. Our brokers get these quotes from the market makers / banks etc. The brokers backend feed delivers data, sent at random intervals, our platforms , in the form of ticks. A tick is the smallest unit of change. It can happen a few times per second or can remain silent for a few seconds, if there is no change.  There can be  as little as no ticks or as many as 500 ticks per minute at times. But averages for each market remain different for different times of day depending on how close we are to open, news times and what we call the dead periods (when humans take a break or sleep  etc) Each tick is information about CHANGE and what is the quote at that instance.

What are Graphs/Charts and What are Patterns?

We then record it using time dimension. Our platform, for us i.e Metatrader, plots this data in a form of a graph , a chart. A chart has y axis and x axis. WE plot the chart on y axis, vertical measure and compare it with x axis, horizontal measure which is time based. Charts constantly roll to the left because TIME does not STOP. because the data on x axis , that is time, is continuous but not variable this bit is a constant. But the figures on y axis, are variable.

In short, its the story of, what was the price at what time. that's all. The platform then binds the data into open high low and close points. Becasue its a time period,  there is also an open, a close a high and low. But where would this be on the y axis keeps changing. that is what creates the interesting patterns.

Then we start taking averages and averages of averages, and start analysing momentum of averages, and acceleration of averages, divergences and what not etc etc.

Often, by the time we are done doing all this, the picture is distorted from a simple 1 point data to numerous forms. The purpose at times is defeated.


The question arises, Why do we do all this to the simpler for of data?


Because of one thing. We want to see patterns within Randomness. Market changes its quotes constantly and randomly. Its Chaos. It is mostly random.

Basically, the market is a natural phenomenon. It stays in the form of random noise almost 70-80% of the "the time".

Noise, or randomness is hard if not impossible to predict. The only way you can find an edge in the market is if there is order.

The Good News is that it does find Order from time to time. And it must do that because that is the structure of the universe. No form of energy remains completely out of order for a prolonged period of time. There is randomness but there is order within it.

Chaos is the name of Order within Randomness.

In the universe, if there was no order, there would be no mathematics.

Maths does not measure randomness effectively, at least not with Euclidean geometry, not with linear mathematics.
When you take averages, you take averages of Randomness to Create ORDER.

You do that to create patterns. Since our trading is mostly visual, we like to see patterns that are "visible to the human eye".

in doing so, you start to see patterns, (order) that repeats itself over multiple time frames. Because markets are chaotic in nature and have fractal geometry, it must be that any pattern that you see on one time frame, it must repeat itself on multiple time frames. If that is not the case, this pattern may not be reliable.

As soon as you've found one type of pattern that you can see in multiple charts over multiple time frames, you have confirmed some sort of statistical edge. There are several different types of patterns and edges in the market.

What is The Wave
But the one that is universal and shows itself on almost any chart you can find, is what is popular under the Nickname of Elliott Wave.  Now, the Elliotticians would tell you that it is 100% accurate. But we all know it only shows a probability of one thing happening over the other. thats all.

So, having created your charts and  patterns, now you can manipulate risk strategies using simple mathematical models. This would allow you to extract profit from the market by risking less and gaining more over the period of a batch of trades.

Profit can be extracted by trading a repeating pattern, even with as low as 15% win rate. However, 
The Setup1, gives us, (including BE trades) an overall 60% Plus Win rate. that is PHENOMENAL.

The win rate of Fruit method is low. But it does not matter. Why? Because we have learned to use a specially designed Risk Management that converts this pattern into a highly profitable strategy. By applying a specific risk method and position sizing technique the sum total of losses is way smaller compared to the sum total of winners. That is the name of the game.

The fruit method is pure Chaos Trading.

People often ignore the fact that Setup1, (1RSL move to BE at plus 1R exit at 2R TP) is designed ONLy for discipline training.

Its so designed so that you have a very objective method while you still learn about the market and may even make sprofit. keeping in view that profit is not the objective of the T20 Discipline Training. [b]Discipline is The Objective[/b]

Profit is a byproduct of Trading Correctly


ps:
I must add here, one thing is missing. If you'd like to increase profitability of your methods, first ensure 100% DS. once that is under your belt, there are Risk Managment methods that you can utilise to increase your profits. e.g. the second step of Setup 1 trading is to learn to let your trades run. and so when you start doing that you won't be using the 1RSL2RTP1RBE Trade management method.

Instead  you will apply a different method. e.g. you'll start tailing the box, or the green line, or you'll exit at TZ1. to let it run you have to be ready for some pullbacks too. so you won't move SL to BE at 1R. instead you can sell half at 1R and leave SL at original position and simply trail box.

once that is done, you'll now learn to add on to your trades one time, you can do that by using the next available boxes, s2 boxes.
so on and so forth. But the first question is DO I KNOW HOW TO TRADE CORRECTLY WITH 100% DISCIPLINE? 

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