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Thread: Logical thinking or observation?

  1. #1
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    Logical thinking or observation?

    There are basically two types of getting knowledge – observation and logical conclusion. Both ways are applicable.
    To develop ongoing success, we have to apply both types of research.

    Analysis is very important for creating hypothesis, trading system, to have solid fundamental reasons for applying any approach. Many people (on this forum too) say – knowledge is very important to become successful Forex trader (or trader in whole).
    But I would say, observation is also as important as making logical conclusions.
    Many years ago, famous trader Jesse Livermore has earned a lot of money discovering what he called «market conditions».
    What was he doing?

    Before making any trade, he was doing small trades and discovered – how market was reacting on his orders? Was market aggressive and greedy enough to purchase quickly small portions of his position or was leaving it alone for some time?
    So, Jesse Livermore was not only good at reading charts. He put significant effort in exploring market conditions or sentiment of the market. That would have straight impact on his financial profits.

    Why not to follow his example and pay more attention to market conditions?
    Market can ignore your trend lines or analysis if market is too frightened or neutral about security you are trading.
    So, I would suggest everyone to not forget that market is a sphere where human beings with all their biases can improve probability of some setups and screw probability of others.

    Every trader, that survived previous several years, knows that market conditions were quickly shifting from trending to balancing, volatility was also changing very quickly.

    If you will give a little research for that, you would probably understand that most of your setups are «state-oriented». One works fine when market hysterically squeezes from one side to another (you can work with fast momentum trades), other works fine when savvy dominates among traders (level-based pullback trading).

    And I think, if you will be able to recognize that «state of mind» that dominates the market right now, you will be able to select proper trading system/method that would benefit you.

    Every research on the market starts with proper questions.
    What makes traders tick right now? What is the «weather» of the market, what are market conditions?


    Good luck!


    P.S. And guys, please don't type something like "Agree, it's very important". I'm great believer that you can be clever and interesting collocutors.

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  2. #11
    Trader Azis Muslim's Avatar
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    Some said that observation is better than logical thinking and some said the contrary. So it depends on each trader which one that suits with him and we can not blame each other because we surely have different way in understanding. Personally, I prefer to logical thinking first than observation because both of them are good. Logical thinking will not gives us good result before we do some observation.

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  3. #12
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    Am one of those who trade based on my observation of market conditions (which involves-trend,momentum,candlestick patterns and fundamentals)its all in the price movement,my advice take your time to observe the price movement and understand the short term trend and you'll discover a lot.

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  4. #13
    Trader Nizar's Avatar
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    does logical thinking really work in this random market,sometimes i believe it doesn't,sometimes all indicators and signs show that a market is bullish and also all news are good for a certain currency and the logical thinking is telling you to buy and you do and suddenly it falls down unexpectedly and illogically without any reason.

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    Bend your view to the charts, not the charts to your view

  5. #14
    Trader maly's Avatar
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    Quote Originally Posted by Azis Muslim View Post
    Some said that observation is better than logical thinking and some said the contrary. So it depends on each trader which one that suits with him and we can not blame each other because we surely have different way in understanding. Personally, I prefer to logical thinking first than observation because both of them are good. Logical thinking will not gives us good result before we do some observation.
    often there are many differences between each trader to make a profit on forex, we should be able to address all of it wisely, though different from the way we generate profit by other traders, for how we can generate a profit then it does not become a problem

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  6. #15
    Trader Azis Muslim's Avatar
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    Quote Originally Posted by maly View Post
    often there are many differences between each trader to make a profit on forex, we should be able to address all of it wisely, though different from the way we generate profit by other traders, for how we can generate a profit then it does not become a problem
    Yes sir, absolutely. Since every trader have different understanding in techniques, strategies, trading plan, and money management, but we all here have same goal. It is to get profit consistently. We may have different thoughts about logical thinking and observation but each of knows how to use it well so we can get same good result at last.

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  7. #16
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    to make good income both are needed,the obeservation of the market is always payful because it give us the chance to have good entry levels;and the logic think is the heart f analyze,because when we analyze well the market we are able to make more constant profit,both of observation and logic thinking are needed

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  8. #17
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    I like your concept if one consider it seriously then he can stay logical and realistic with his trading. If one stay realistic witih his trading then trading and profit making both become easy. A trader must know the strength and weaknesses of his trading then he can make better decision two things here really matter the first one is skills that a trader have for trading and secondly his capital that he invest for trading, if he consider both then he can make profits with ease because he can stay realistic in trading.

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  9. #18
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    i prefer to think logical premises, although sometimes think logically be abandened, but all i can rely on my logical thinking to be used in everyday life even in world trade, with the logical thinking that i also found some indications to be able to withstand in the peace of the soul or emotional level a trader in the word trade.

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  10. #19
    Trader martyn's Avatar
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    Observations seem to me the proper way to learn forex, because the observation gives us the experience and knowledge as well. By direct observation we learn the actual market, the market is operating, so the knowledge that we learn about forex we can get the results directly.

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  11. #20
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    You should know the two as the experince of you are increase with them both. You need tp be doing observation when you are entering into the new thing in the market, you need to make adjustments to what you think that is right as you are doing the trading, this is the way of the both of them.

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