BPNN Predictor with JJMA smoothing

Hi today I uplodaded some new BPNN Neural net mods in the the trader's social network site beathespread.com

The innovation is to use the JJMA smoothing in order to smooth the time series before we apply the neural net.
The second new thing is to make a hybrid neural net cycle indicator. This is achieved when I combined the the cycle analysis with JJMA jurik smoothing and neural net prediction.

Elliotware: How it works?

This is how Elliotware works:

1. I identify an Elliot Wave structure. This is MANUAL we do not use software. And this is the fundamental difference between this approach and the other approaches. They try to use a machine to force an Elliott Wave analysis.

2. I set the training range to the Elliot wave structure.

3. I apply my machine learning algorithm:  And I have a prediction.

Beat the Odds in Forex Trading: How to Identify and Profit from High Percentage Market Patterns

I really appreciate this book, that is why I decided to write a review in my blog.  This is a book from the so called russian school of technical analysis.  No you cannot find this term, I call this like that.
The first question that comes to my mind is:

Is it just another book of technical analisis?

-This is a book about Forex

This is something very important. In fact the forex market is different from the stocks and the commodities. There are some specifics. It is 24 h market. And I think that all the stuff written about the stock market does not apply authomatically in the Forex market.

There are some volatility patterns that are typical about the Forex markets and those matters are not adressed in the technical analysis books written about the stock market. For example the increase of volatility in the beginning of the European and London cession are typical for the Forex market. If you read a book about the stock market and you are not awared about that you would learn this market knowledge on the hard way.

It is very important to know that there are not many good technical books written specifically about Forex.

-The patterns are explained in a very interesting way

This is something very important. The author brings his own experience about the pattern trading. This is very valuable and he shares his proprietary way of managing pattern trading.

This is the most important thing in the book. The author prepares different strategies based on specific patterns. In those strategies he prepares a Trading plan. Every technical analyse sheet is linked with a concrete trading plan.

The bad thing if I compare it with a traditionnal book abouk patterns The Encyclopedia of Chart Patterns by Thomas N. Bulkowski there is not any evaluation of the success for every different strategy.
In fact I cannot vblame the author because everything is very dynamic in the market however, the author does not offer a methodology for backtesting of every single strategy on the current market conditions.

-There is a big public thread based on the information from the book Beat the Odds in Forex Trading

That is an important question because we are submerged by information about technical analysis. Everybody knows: Head and Shoulders, Triangles, Pennants etc.

One of the most important things is that his author I. R. Toshchakov also known as igrok has a thread in the forex factory forum. There are discussed a lot of things about his book. And this is very important because I think that the public discussions are part of the value of the book.

You can find the thread on this link: Igrok Method. Q's & A's. Comments, thoughts and ideas
http://www.forexfactory.com/showthread.php?t=21887

Today this thread has 468 pages and is very popular and it is very active.


Some ideas
I really like the intellectual approach of the author of the book Beat the Odds in Forex Trading: How to Identify and Profit from High Percentage Market Patterns.

It is very important to back test every strategy on the current hystory. Do not trade blindly. Do not take anything for granted. Test everything.

It is a good idea to use this book together with artificial technical analys patterns software.
The pattern recognition software is a good choise. Here you have a statistical evaluation of every pattern. That is a very good complement.

http://www.ibfx.com/Tools/PRS

Read the book and do not hesitate to join the technical analysis communities.
As far as I know the autor has a private community.However I do not know him personnaly so I cannot give any credentials

http://www.igrokforex.com/index.php?page=chif

The ordres at 1.37 have been ativated

Here I add the picture to show how this level has been activated.

Stop major level: 1.3700

Here on this shot I want to show the use of Oanda open orders. The hypothesis is that:

1. These orders are statistically significative for the whole retail market

2. Even if not significative 300 millions in one second are able to move the market. 

OK here the idea is that the market in EUR/USD has a structure. There is an accumulation of orders every 100 pips. 

New Forum

Hi here is my new network. You are welcome to join.
beathespread.com

New Forum coming

I am thinking with some friend to open a new  Forex forum. It is just a project by now.
Why a new forum there are plenty of it?

Well I reveal the idea only in private communications because it is too early for public disclosure. It will be not exactly only a forum but more a community of retail traders protecting their interests.

The philosophy will be first things first. And the first thing is to beat the spread. That is the first and the most important thing a retail trader has to do. It is to beat the spread.

Psychological mechanisms of manipulation: freezing and escalation of commitment effects in Forex

Here I give the sources of my reasoning. This is a little book, in fact very interesting about manipulation (well there is a plethora of books on that but this is different). The book is intitulated: Petit traité de manipulation à l'usage des honnetes gens, and is written by Robert-Vincent Joule and Jean-Léon Beauvois.

In a nutshell there are some psychological mechanisms that work without any form of persuasion and that give results that cannot be achieved without them. The interesting point is that there is a statistical evaluation of all this.

Unfortunately this book is in french and I do not know if there is an English version.

You can check also this wikipedia. link http://fr.wikipedia.org/wiki/Petit_trait%C3%A9_de_manipulation_%C3%A0_l'usage_des_honn%C3%AAtes_gens

Ok let get started with the basics. This is the first example.

There have been an experiment by Moniarty (1975) Crime, Commitment, and responsive bystander in two field experiments", Journal of Personnality and Social Psychology, 31, 370-376.

One man places himself close to a group of people at the beach in New York (I was surprised to know that there are beaches in New York). There are two groups. At one of the groups he asks for fire for his cigarette to the other group he ask that he will leave for a while asking them to have a look at his radio. Then a fictive thief intervenes the group with the fire reacts at 20 % of the cases. The other group reacts at 95 % of the cases.

The same experiment was conducted in a restaurant with an elegant and expensive bag. The control group reacted 12.5 % of the time the group asked to take a look reacted 100 % of the time.

The interpretation of the those results is very interesting in the book for manipulation. The authors believe and in both cases to the group was made a demand, this demand is a kind of demand they cannot refuse. And this causes a reaction response that can lead to very different experimentally verified results. This is an effect of commitment, people tend to follow what looks like their own decision. This leads to a freezing. It is called a freezing effect. People get blocked in a certain behavior. Lewin K. 1947. "Group decision and social change" in T. Newcomb, E. Hartley (Eds.), readings in social psychology, New York, Holt.

Those kind of experiments are repeated (of course) making financial world simulations. There has been an experiment. One group of finance students are asked to take a decision. A student has to take the role of managing director and make very important decision in order to finance a branch of the company showing outstanding results. There have been a lot of fundamental data showing extreme profit possibilities. After that intervenes the second stage of the experiment the same directors are given the responsibility to relocate resources between the branches of the company, this time the fundamental data showing a complete disaster of the the first choice and showing very bad expectations for the future for the same branch. However the Managers took a decisions favoring the branch that they have favored at the past.

The other control group in the experiment were asked to replace the boss of the company. This time the first decision for financing was taken by their boss based on the first data. Now they are at the second stage trying to relocate resources within the company. In this group they do not felt bounded by the decision of the manager and made an allocation of resources based on the new date.

This effect is called an escalation of commitment.

Now let see things from trader's perspective. I am simply extrapolating.

There are two groups if traders. To the first group they tell them that they have just an amount of money to gamble with, to the other group they tell them that they have to sign a contract.

Do you think that the people who signed a contract will feel more frozen and will keep and keep playing (trading) than the people who were not bound by an engagement and a contract?

http://ddata.over-blog.com/xxxyyy/3/09/91/24/Petit-trait--de-manipulation---l-usage-des-honn-tes-gens.pdf

Continue reading with Part 2

The biggest problem in the industry

The biggest problem in the industry for the retail traders, we can call them also home traders is that they are not profitable at their majority.

This is a fact. Most of the people who are trading Forex are not profitable. There is some kind of mantra saying that 90 % actually loose money.

http://mechanicalforex.com/2011/04/they-say-90-95-of-retail-traders-lose-all-their-money-any-evidence.html

So the question arises why we do trade. Why we keep doing that knowing that there is a big probability that this would be a great loss of efforts, time, self esteem, and money that can eventually lead to disastrous situations.

Is there some psychological reason for which we keep doing that and that reason is completely below the radar?

I think that there is such a reason. I will elaborate more on that later. There are psychological studies (of course not in the domain of finance, but the results are really meaningful ) showing that there is a very strong hidden psychological process that keep traders to trade and trade again. Even if they know that there is 90 % chance of loosing in the long term that does not change anything. I will not reveal exactly right now the mechanism. Let holds a little suspense!

Fractal geometry adaptive Volume Weighted Moving Average

I am thinking about the Volume weighted moving average. I am going to make a new mod. This time we would have a hybrid adaptive moving average. The idea is to use a fractal adaptive moving average into the formula of the volume weighted moving average.

I am curious what that would give. Is it going to be a nice input into a predictive model?

Until then refer to this portfolio of fractal adaptive moving averages.