What are your favorite trading myths?
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Thread: What are your favorite trading myths?

  1. #1
    Hey dear Pipmakers!

    The purpose of this thread is to discuss some of our favourite trading myths.

    Ever felt irritated that some old-fashioned piece of trading information remains being touted even after being thoroughly debunked on your private discussions with yourself? Ever felt furious that more people don't know what's happening inside your head and are therefore still providing a safe breeding ground to propagating-loving memes (from the Susan Blackmore feel )? This is the place!

    Debating is permitted, so long as it's kept civil! When I say civil, I don't mean North vs. South, that's a civil war, it's the specific reverse of what we want. I don't mean East Coast vs. West Coast either; I don't know of any rapper called Civil. Also, I don't mean Overton vs. Anheuser-Busch Co., that's a civil litigation. I also don't mean Sid Meier's Civilization (unless you're seeking a diplomatic victory), and I don't mean Captain America vs. Iron Man. Those are precisely the kinds of scenarios we would like to avoid!

    Okay, now that that's clear, let us get on with all the myths!

    The following is my weak attempt at a Table of Contents for this particular thread. It is incomplete, inaccurate, along with my own posts feature prominently in it:

    Favorable Risk Reward Ratio:

    I exchange pure Price Action:

    Markets are fractal / Lower timeframes have more noise:

    You can make a living trading Foreign Exchange:

    Transferring your SL to BE:

    Pros teaching Amateurs:

    Banks/Big Dogs/Big Players/Market Makers are not out for you, they are not manipulating the market, stop being paranoid and just admit you're a lousy trader:


    Price Action is a major indior:


    90-99% of Foreign Exchange traders don't make cash:


  2. #2
    I'll set the ball rolling! Myth no 1:

    Favorable Risk Reward Ratio

    I.e. the concept that if your TP is twice (or thrice etc.) your SL, which somehow you are advantaged, which somehow this is a good RR, as opposed to, say, neutral.

    That is touted in every professional trading instruction course.

    Well, if it had been true, you could just open a random position daily, place your TP at 60 pips, place your SL at 30 pips, and simply sit back and watch the money roll in.

    Newsflash: it will not work. I know, I tried it! Well, in fact, it does provide an advantage during quite volatile times, in other words during newsdays. You pick, say, 12 pairs, open positions randomly (use a coin flip or anything ) (this will mean than actually you will be opening positions which will contradict some other places, because of pair correlation), prices will shoot up and down, and take out your 60 and 30 stops in a heartbeat. So optimistic RR does work, but only in those circumstances (though sometimes you might unluckily select more wrong places than right ones), however it's a very slow process, it just works once or twice a month.

    The negative Nancies out there may say that the egy of favorable RR will work if you have a egy that's got an advantage.

    I say when you have a egy that's got an edge, that edge will increasingly disappear the further away you put your TP. It's just math! In case your TP is double your SL, then it is going to take twice as large a drive for price to achieve your TP. And when you have an advantage, it's only an advantage if RR is equivalent, and will become less of a border the further away you put your TP, since it's going to be that much tougher for PA to achieve it.

    I could elaborate but I'm certain you have the point!

  3. #3
    Myth no Two:

    I Exchange pure Price Action

    Really? Do you? Do you trade Renko charts? No? That is exactly what I thought!

    Most of us utilize indiors. There is no shame in admitting it. Everyone's doing it. It's being done by your mother's. Your sister's doing it. Your grandma used to do it.

    In case there is any doubt about this, let me mention some of the most frequent indiors that Price Action traders utilize.

    By far the most popular indiors are M1, M5, M15, M30, H1, H4, D1, W, M.

    What these indiors do is divide price into chunks of time. The only true situations the market recognizes are the close and open of the week, but then the actual market doesn't stop (folks still buy things during weekends, you understand ), which is why gaps occur. So even the Weekly Open and Close are inventions created so that traders can find a decent night's sleep at least 2 nights per week!

    To reiterate, price doesn't recognize time. Time is an indior levied on price, dividing it into neat little balls. D1 isn't better than H1 any greater than a 100 Moving Average is better compared to a 50 Moving Average. It's just another way we elect to group things.

    Pure Price action is Renko charts.

    Ironically, Renko traders customarily fill their charts with indiors, I guess that the rationale being that the only reason their indiors do not operate on normal charts is because normal charts do not show actual Price Action. So. . .even the men who trade pure price action do not trade pure price action!

    Another popular indior most Price Action traders utilize is that the Moving Average. No, I'm not talking about the conspicuous MA you see on their charts (the 20 MA you see on Al Brooks' charts, for instance). No, what I'm talking about is much less conspicuous.

    I'm speaking about the 60 SMA all Daily chart traders utilize. Yes, all of these, because what is a Daily chart, besides a 60 SMA of the H1 chart?

    Granted, a 60 SMA merely shows the final prices, whereas Daily charts reveal that the high, low, close and open. Well, that just means 4 MAs rather than 1! That is 4 indiors on a single chart!

    Since one never is enough! Elderly Price Action traders will recall that the simple good old days of trading using line charts, before all these new children full their charts with Candlestick indiors, thereby quadrupling the number of indiors and the time required to interpret them.

    Today, I'm not saying Price Action trading doesn't exist. They have got a distinct methodology that is instantly recognizable. But they can just as well call themselves Support and Resistance Traders or Trendline Traders or Greater High and Greater Low Traders. Etc.. They prefer to call themselves Price Action traders, and that is fine with me, provided that they do not bash the usage of indiors! Cause we're doing it in our private moments! Just admit it!

  4. #4
    I despise this one specifically: markets are fractal. It doesn't matter if I trade off the 1m or w1.

  5. #5
    Quote Originally Posted by ;
    I despise this one specifically: markets are fractal. It doesn't matter if I exchange off the 1m or w1.
    Hey Myo!

    Actually I tend to agree with this! That's one of those myths I wanted to handle, the concept that lower timeframes have more noise than greater timeframes!

    But I am not totally sure that I am right about that one. And there's no reason it should or should not be that way.

    We are all entitled to our own opinion (although not our own truth!) , the purpose of the thread is to edue one yet, or sow some seeds of doubt in our'opponents' minds!

  6. #6
    Now a days I am trading with Price Action system it's quiet good. I follow http://www.theforexguy.com you man's also can take a look.

  7. #7
    Quote Originally Posted by ;
    Now a days I am trading with Price Action system it's quiet good. I follow http://www.theforexguy.com you man's can also take a look.
    Well, from what I can see it is nothing you can't learn online at no cost.

  8. #8
    Quote Originally Posted by ;
    quote Well, from what I can see it is nothing you can not learn online for free.
    That's not true.... I heard Kama Sutra online for free.

  9. #9
    Quote Originally Posted by ;
    quote That's not true.... I heard Kama Sutra online at no cost.
    Can be harmful...

    Inserted Video

  10. #10
    Quote Originally Posted by ;
    Hey dear Pipmakers! This thread's objective is to discuss some of our favorite trading myths. Ever felt annoyed that some old-fashioned parcel of trading information is still being touted even after being so thoroughly debunked on your private discussions along with your self? Ever felt outraged that more folks don't understand what's happening inside your head and are consequently still giving a safe breeding ground for propagating-loving memes (in the Susan Blackmore sense)? This is the place to express your ire! Debating is allowed, so Long as it's kept...
    This is the only trading myth that I respect:

    The Market Can Stay Irrational Longer Than You Can Stay Solvent

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