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Bias

Inverting the chart to avoid bias in trade selectionHave you ever taken a chart and looked at it from the flip-side? Why would you do that? To avoid bias. There is a long bias and a short bias. We all have biases, but just need to confirm it by a simple test. Plot a chart of SYM and then plot the inverse of the chart next to it by using 100/SYM. You can make the numerator any size you want to get the price scale you want. In the example above I used 10,000/DIA to plot the inverse of the DIA as a $59 stock instead of a $168.23 stock. If you see a difference in the charts then you have a bias and it would be good to take any of your charts and flip them over first to see before you take a trade. Look at the chart of the DIA on the top left. It looks more bullish to me than bearish and my eye sees the resistance as more likely to be overcome to my eye than the chart on the top right. I see the base as more supportive and the area above as a zone to retest and work through the resistance. Therefore, I have a long bias. I see the chart on the right as bullish (bearish in reality, the inverse). See what you find in yourself. We are all different and we also see different parts of the chart stand out to our eye when we flip it over. Check it out for yourself. Tim 11:58AM EST 10/7/2015
NASDAQ:AAPL
by timwest
6
DOW JONES OVERVIEW: BOEING HOLDS 10-YEAR TRENDDuring the recent selloff, Boeing on long term basis failed the 5-year uptrend by falling below 1st upper standard deviation from 5-year (260-week) mean @ 137, however held the test of 10-year uptrend by bouncing up from 1st upper standard deviation from 10-year (520-week) mean @ 121. On short term basis, the price managed to hold 1-year ascending channel (marked by 1st standard deviation from 1-year (264-day) mean, but the risk remains on quarterly basis - the price is below 1st standard deviation from quarterly (66-day) mean (also close to 137), reflecting probability of more downside here. Thus we can conclude that while price is trading above upper 1st standard deviation from 10-year mean @ 121, the overall bias remains positive. It will be confirmed by price getting back into 5-year uptrend by breaking above upper 1st standard deviation from 5-year mean @ 137
NYSE:BALong
by Killy_Mel
Key Heuristics and Biases in Trading - Educational PieceThere is an extremely famous psychology paper written by Daniel Kahneman and Amos Tversky named ‘Judgement Under Uncertainty: Heuristics and Biases’ (psiexp.ss.uci.edu) (Kahneman won a Nobel Peace Prize in 1992 for his work in the field, specifically on prospect theory) which explores the decision making process. As trading requires decisions to be made constantly – stop loss adding, lot size, whether a trade is right to take etc – I think a quick write up would be highly applicable. Essentially, there are several ‘heuristics’ or ‘biases’ which I will attempt to put into a trading context. 1) Reliability . Making sense of data on the spot is a difficult task to undertake. When you look at a chart, you are looking at a representation of the market and not the actual market. Adding more and more indicators causes the reliability of this data to further decrease, possibly leading to a distorted view (however, if you are profitable with indicators then that is all that matters). 2) Representation . We normally feel that if a pattern is forming that it will play out in the way we expect. When back testing, you may look for data to represent the notion you have about a certain set up and ignore the set ups that have failed, therefore leading to a skewed view of that strategy. Indicators represent a potential set up and not what is actually occurring – indicators are used to fit a concept in your head. The fact that something is more representative does not make it more likely to occur. 3) Anchoring . Do you remember that month when you did fantastically and the next month you lost 5% of your account under the belief you could continue your run and then possibly ditched your strategy to start from scratch? This is called anchoring – you place some meaning on a certain set of results with the thought that the initial point is meaningful. You will face losses. Maybe even a quarter where you make no money. On the flipside, you may triple your account. The market is impartial to you, your strategy and your money. 4) The Gambler's Fallacy . When an event occurs more or less is a short time period, you may believe that it will happen less or more in the future. As said before, the market is impartial. Past events do not change the probability of future events occurring. 5) Hindsight bias . ‘I knew that was going to happen’. This is reasonably self explanatory and I think everyone has faced this once or twice (maybe nearer 1000) times in their trading career! Automated traders do not have the problem of biases as the emotion is taken out of the trade, which is why possibly developing an algorithm can be hugely beneficial if you have a stringent set of rules that you can programme into a computer. There are many more biases. Which have you noticed in your trading?
Education
by DavidBelleFX
GBP/CHF LONG BIASAS THE GBP CONTINUES ITS BULLISH MOMENTUM ACROSS THE BOARD IT COULD PROVIDE A NICE LONG OPPORTUNITY ON THIS PAIR. WE HAVE MADE 2 HIGHER LOWS AND RECENTLY SNEAKED IN A HIGHER HIGH. ALTHOUGH WE WASNT ABLE TO GET A CLEAN BREAK ABOVE THAT RESISTANCE IT COULD BE A GOOD SIGN OF THINGS TO COME. I AM NOW MONITORING P.A CLOSELY FOR A LONG SETUP. I HAVE HIGHLIGHTED THE AREA AROUND 1.4470 WHERE WE FIND THE 50% FIB LEVEL ALONG WITH THE ASCENDING TRENDLINE. IF PRICE HIT THIS ZONE WE COULD ALSO TAKE IT AS A RETEST OF THE DESCENDING TRENDLINE THAT WAS RECENTLY BROKEN MEANING SOME GREAT CONFLUENCES TO TAKE THE LONG IF WE GET THE RIGHT P.A. IF EVERYTHING LINES UP WE WILL BE LOOKING AT A POTENTIAL HIGHER HIGH TO BE MADE AT AROUND 1.4960. ONE TO WATCH HERE
Long
by UnknownUnicorn185710
EURGBP The Bias Of The DayThe GBP had a 1.5%-1.8% rally today and it needs to retrace if it want's to keep up this upmove. Euro on the other hand has been going down (fx eurusd) and is looking like a potential long especially if the us unemployment is worse than expected. Currently I am expecting just a pullback to 0.236 fib level. Technically: The price is at a support level. And if you would squeeze the chart you could see that it is also a multiple fib confluence zone. The position: I haven't yet entered but if it the price reaches 0.7233 before retracing to approximately my target I will probably buy. Event risk: Economic calendar www.forextime.com
Long
by Wizard
AUDUSD The Bias Of The Day[i ]EURAUD didn't let the audusd to rally as it went up a lot but now idepreciate nowt wiat-leastciate now or at-least not rally much more. That would let audusd to continue its rally and potentially to make those double bottom patterns complete. So yes, generally I think that DXY (USDOLLAR INDEX) will pullback some more and that commodities are likely to do the same for now, so audusd looks pritty good . ps( I personally will look for a buy but i need to see some consolidation and some divergence to be more sure.) (If you like my ideas please remember to like and perhaps follow, thanks, good day to you all !)
Long
by Wizard
EURUSD The Bias Of The DayEURUSD short term outlook remains bullish. Today at 14:00 UTC there will be ISM Non-Manufacturing PMI (Mar), which could move the eurusd pair up to ~ 60 pips or maybe more if the data is very surprising. There are no reasons, cut in stone, for my bias, but some of the core ones are : 1. eurusd pullback still has momentum and it seems like eurusds downside pressure is low at the moment. 2. The fed has become more dovish (recently). 3. US still has mixed economic data that in my opinion will be a negative factor for the dollar and will disallow it to continue its strong downtrend in the short term. (I'm not makeing any predictions about the pair. What I am doing at the moment is managing eurusd.) 4. If the eurusd rallies traders will look more positively on buying the s&p 500, that may be a reason for the FED to allow the usd to depreciate a bit till s&p 500 and others again make traction.. 5. And technically it makes sens at the moment there is a clear trend and a clear resistance later. If the price breaks the recent highs (resistance) at approx 1.010** ikt would open to itself a lot more of the upside. *. Sellers are likely to short at 1.010** and for that reason for small to medium cap traders it won't be a good place to go long as their selling is likely to push the price lower first and later I think it will go up but no bias for that for now so we'll see.
by Wizard
4
AUDUSD The Bias Of The Next 24hAUDUSD Bias At the turning point 1. If A double bottom with a bullish divergence forms. When going up 2. If the eurusd isn't falling while audusd is rising. The eurusd and audusd pullback's trends is still going strong and have proved themselves many times. Before shorting I'll look for this trend to be broken but for now it's still on. I rather loosing one or two times when trading the trend continuation trend than many trying to predict the top of the whole trend. Also Danske Bank agrees as according to fxstreet it has a bullish position on with a tp order at ~0.800.
Long
by Wizard
2
EUR/USD Bullish BIAS On Double Bttom +RSI Massive Divegence I've formed a new bias on eur/usd - in my opinion it's likely eur/usd is going to retrace after all it has been plummeting since 2014-05-08 and we are also a at a pretty big resistance level (to see that you can squeeze this chart or take a look at the weekly), we now how a possible double bottom with bullish divergence, massive one. So now may be the time eur/usd could finally retrace. Possible targets or end of this retracement in my opinion will probably, but this could depend immensely on fundamentals, be at the structure and fib .382 (of the the big move) level confluence. Now this is a bias and I will look for opportunities and good setups, I won't just buy now, because of it all. To enter a long position on double bottom i would first look at volume if it there a lot of volume this double bottom trade could be very risky and take out stop loss orders quickly and it could also rally, but i think that it would be smarter to wait for volume to get small and maybe then buy a lite bit, but remember as treider our own opinion is the most important to us AND THIS ALL IS OPINION NOT ADVICE NOT A CRYSTAL BALL PREDICTION I'M SAYING WHAT I THINK IS LIKELY TO HAPPEN. p.s. + additional indecision candles would be a good sign BEWARE OF THE NEWS and economic calendar events. Written by : Wizard, whit --> NO CRYSTAL BALL. US Dollar going down --> This would also be a catalyst for natural gas you may want to check out my idea about it can be found in the Related Link's Is Below.
Long
by Wizard
2