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Strategies & Market Trends : Trade What You See, Not What You Think -- Ignore unavailable to you. Want to Upgrade?

To: Dominick who wrote (323)	1/21/2001 1:04:40 PM
From: Threei	Respond to of 867

Speaking of analogies, here is the one you reminded me of... Mostly for fun but who knows, traders tend to find something useful in unexpected areas. This analogy was used in our chat room a while ago to describe the difference between range and trend trading. One leaves his home every morning driving to his office. After working day is finished he returns home. Observer bets on the outcome like this: he left home, thus he goes to the office; he left office, thus he goes home. This is typical range trading: bouncing between two points. Sometimes bet is losing because our subject goes sideways: he leaves home but his target is groccery store nearby and his trip is much shorter. Sometimes some event leads to somewhat longer trip: our subject attends the show or hockey game driving farther than to office. Next modification is: all of a sudden our subject buys air ticket and goes to Europe. Let's look at all this from observer point of view (observer has no idea about subject's initial intention every time subject leaves home). Routine trip home-office-home is a range. It's usual course of action, observer bets on going to office (long) and on return home (short). When subject goes sideways taking trip to the groccery store or visiting friend in the hospital after work, observer either loses his bet or takes smaller profit (scalp if he managed to notice in time that routine is broken. Observer has to monitor changes in subject's behaviour in order to spot the deviations. When subject goes for a longer trip, observer might lose if shorts at usual level (bets on return home at the distance from home to office). Observer has to evaluate news event impact to avoid the loss. When subject takes long trip going on vacation it's a trend. Obsrver would have sold his long position when subject went distance from home to office, taken small loss on shorting attempt... then if he managed to spot the trend he would go long on new highs (airport... bus stop... next airport... car rental...). If he is stubborn he would try to short on every pause betting on return home and losing times again because he would go against the trend. Going long he would have lost once when final destination is reached. From this moment downtrend starts and observer will win going short as distance to home shortens. He will lose trying to pick the bottom in downtrend. Analogy could be expanded, for example: if subject has moved to different state, stock formed new base level... or, flood or blizzard in the city (market crash) ruined routine trip to the office... Moral: buy low sell high in range; buy high sell higher in uptrend; sell low cover lower in downtrend; notice deviations that lead to unusual movements and correct your bets... etc... :) Vadym

To: Dominick who wrote (323)	1/21/2001 4:46:51 PM
From: chris-	Read Replies (1) \| Respond to of 867

Driving analogy, Many times I find myself at my destination without even realizing how I got there. Before I used to blame it on my car having taken that route so many times that it just knew it was going there. <g> Now I understand there is something within me that acts when I don't have to think about it. Trading has evolved for me distinctly in this same fashion as I've described previously in my "response to signals". Chris