Magic Numbers or Just a God Damn Clusterf**k!

I’ve just been reading three kindle forex ebooks by Richard Martineau of forexpublications.com. Also downloaded a couple of free pdfs off the website and have been temporarily interrupted from downloading the last book on trends, (don’t trade trends myself). Having been informed by Roguetraderette, that Mike Bellafiores book, ‘The Playbook,’ was available for free on kindle download at amazon. Well I just had to. Just got up to the part where the Rogue Traderette has got a mention herself. That made me smile.

Anyway back to the Martineau books. Really they could all be put together as one book, but alas I had to pay for each one. Refreshing stuff though. Nothing about indicators, nothing about psychology, nothing about the basics of forex, how it’s evolved, the pairs, the candles, the market size etc, that seems to be copied and pasted from one forex book to the next, for the opening chapter. They are all based around where stop loss orders of the weak traders are placed or where they get out when they don’t use stops. Reminded me a bit of Commander Rob Wilson’s lingo. Each book and the pdfs have introduced to me some ideas and stuff I’ve not seen written about much, if at all. How Icebergs are broken down, how to use the algorithmic trading average ”mu” for pullbacks rather than fibonacci, how to form trendlines betwen session openings rather than across peaks and troughs. One section is about how to band trades into 25 pip bands, with the levels at 00, 50 and 25 being significant.

Also just read ”The Secret to Trading Forex, Futures and ETFs” by Teresa Bell and Jay Norris, where the big secret is the, ”61.8% fib level.” Well I would have never have thought of that!  How do they come up with such original ideas for a book? Ok, to be fair, they do add the 50% level. In the preface to the book, there is a quote by Dr Bill Williams, author of ”Trading Chaos,”(No I haven’t read it.)That isn’t the quote by the way, here it is, ” In this early part of the twenty-first century, we have a choice to either be part of the last generation of traders and investors using linear (ineffective) techniques, or the first generation using effective nonlinear (chaotic) techniques.” I take that the 61.8% fib is presumed to be chaotic and non-linear and that no one in the twentieth century had ever used it!

These significant numbers or percentages made me think about other people that use numbers to define where to enter and exit trades. Steve Rising my present tutor, scalps at the significant numbers 00 and 50, but also adds what he calls speed bumps, 20 pips away but only moving in the direction away from the significant number. Craig Harris utilise what he calls Big numbers, 00, 20, 50, 80, and also Midway numbers 10, 35, 65, 90, to time entries and exits. In Rob Wilsons ebook, ”5Bullets,” he mentions Craig Harris, ”being a very nice man,” so it is presumably where his love for 65 and 35 came from, which he often use to refer to on the now ended TFLTV. In his excellent book ‘Forex Price Action Scalping,’ Bob Volman, notes the very peculiar  vacuum effect of prices being sucked into round numbers because there are not too many traders standing in the path of them, but trading just beyond them isn’t so bad as that is where the stops are placed. Bob sets out his charts in 20 pip segments but adds the 50 which can make the area between the 40 to 50, and 50 to 60 pretty volatile. If we add the fib levels, and clusters of fib levels to our charts, the ”mu” levels, the visual S and R levels of trendlines ( which are diagrammatic visualizations of numbers) , in the end we get a matrix type situation where nothing is what it seems, a bit like the chart Matt LaCoco put up on his blog recently.

So how should I deal with this?

It seems in the spirit of Malcolm Gladwell’s, ‘Thinslicing,’ it must be to specialise and stick to Steve Rising’s Thinslice methodology that I’m focusing on now, other wise my trading could all end as Gunny Highway would say, as ” A God Damn ClusterF**k”. ”Fubar!””

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