All you need is... a chart

[Trader333]

firewalker,

A stock that is basing, is exhibiting patterns of accumulation because a select number of people (with "a bigger stick") perceive it to be lower then the real value

I am not sure that this is always the case and by this I mean that it is not necessary to perceive that a stock is lower in value as a reason to start accumulating it. The whole process of accumulation is about withdrawing available supply which can happen at any price even if over valued. Once sufficient supply has been withdrawn then there is the deliberate markup, euphoria and distribution phases that I know you will be familiar with. In my view it is more about engineering supply and demand to make profit rather than a fundamental belief that something is undervalued.


Paul

 

[trader_dante]

ABove my desk at my firm I have a list of 11 rules / observations about the market.

Here are the first two:

1: Ignore the news

2: Obey the levels

Whilst I appreciate that there are both sides to a coin and some of the traders I look up to most are pure fundamentalists (e.g. Jim Rogers), I wholeheartedly agree with FW that a study of price is all one needs to foretell the future direction of any market.

As such, I only use the price action to trade.

The important point to make is not that this is THE WAY to trade but rather this is the way to trade FOR ME.

 

[chump]

Does Jim Rogers actually TRADE in the sense that you do and in the sense underlying how FW has commenced this thread..LOL I don't think so mate ..when a guy tells me he's got a big stake in the market and he'd like to see that market sell off 40% so that he can build his stake further then he is not trading and certainly not from a chart. I refer to the much publicised comments made by Rogers.I refer to the leaverage normally utililised with trading and suggest that 40% volatility would be an extraordinary occurence to ride through were one to be leaveraged.

 

[trader_dante]

Does Jim Rogers actually TRADE in the sense that you do and in the sense underlying how FW has commenced this thread..LOL I don't think so mate ..when a guy tells me he's got a big stake in the market and he'd like to see that market sell off 40% so that he can build his stake further then he is not trading and certainly not from a chart. I refer to the much publicised comments made by Rogers.I refer to the leaverage normally utililised with trading and suggest that 40% volatility would be an extraordinary occurence to ride through were one to be leaveraged.

It might be extraordinary for you.

I've been leveraged in several markets over the last year that have risen much more than 40%...

 

[chump]

It might be extraordinary for you.

I've been leveraged in several markets over the last year that have risen much more than 40%...

TD,
Were you 'big staked' ,maybe 25% of your asset value on the table ? was that "stake" highly leaveraged ? ...how much the market rose is not the issue..the issue was could you have withstood a 40% drawdown with the aforementioned in force...let's not argue about this because the answer is obviously not ..in other words what you do trading and what Jim Rogers does investing in fundamentals are not the same animal . That's the only point I was making.


Interestingly ,long before I even knew what charting was I bought properties. In recent years I have seen a chart which displayed the ROC y-o-y for the UK property market median value...and LOL I bought the batch during the second uptick from the dip that had formed from the prior housing crash ...coincidence ,well in this case yes, but I have to admit in that specific occurence the fundamentals I used to buy were no different in terms of entry than if I had actually used a chart. Big difference is on a fundamental basis I had the confidence to enter large immediately. Had I just been looking a chart without any reference to the underlying fundamentals I would only have been willing to poke my toe in the water to test it.

 

[firewalker99]

I am not sure that this is always the case and by this I mean that it is not necessary to perceive that a stock is lower in value as a reason to start accumulating it. The whole process of accumulation is about withdrawing available supply which can happen at any price even if over valued. Once sufficient supply has been withdrawn then there is the deliberate markup, euphoria and distribution phases that I know you will be familiar with. In my view it is more about engineering supply and demand to make profit rather than a fundamental belief that something is undervalued.

Paul

Thanks for contributing Paul. It's a fair point, but... to be honest, I don't as much care about the reasons behind why a stock is accumulated. Who are we to tell what they might be? Perhaps some insiders know something about the business that will attract foreign investors, or perhaps an interesting take-over bid will take place in a couple of months,... there could be so many reasons.

More important (for a technical trader) is that it's taking place and accumulation usually occurs at a favourable price. If the price is too high, there probably wouldn't be enough float left and with too much supply, there won't be enough demand left to start the mark-up phase. Over- or undervalued in itself doesn't mean a lot, unless we start comparing it to whatever we use as a measurement of value.

 

[firewalker99]

...well in this case yes, but I have to admit in that specific occurence the fundamentals I used to buy were no different in terms of entry than if I had actually used a chart.

I see no reason why a fundamentalist and a technician can't arrive at the same conclusion around the same time. However, most of the time, he who follows fundamental indicators will also be a step behind, in the same way that a technical trader who uses lagging indicators will also be behind the markets. Which is not to say, that both can't make a decent profit of it.

Big difference is on a fundamental basis I had the confidence to enter large immediately. Had I just been looking a chart without any reference to the underlying fundamentals I would only have been willing to poke my toe in the water to test it.

The longer you wait, the more confirmation you get. But this is within yourself, not in the chart. I haven't seen the chart you are referring to, but I'll illustrate with a very straightforward example.

When do people buy a stock? During it's accumulation phase or after it has already moved up a decent amount? When did people get back into stocks after the bear market in the early 2000-years? The technicals gave a signal at a time the economy was still weak. Waiting for the fundamentals to come in line because you lack confidence in taking a position is the fault of the trader, not the fault of the chart. If the signal is there, you take it.

To cut to the chase, if you're going to wait for fundamentals to back up your technical position, you'll be standing aside long after the train has left the station.

"Most people look at the state of the economy and believe that the stock market should mirror the current situation. They believe that a strong economy should correspond with rising stock prices. Unfortunately, the relationship is not that simple. The stock market discounts the future, not the present. It discounted the present 6-12 months ago. [...] In fact, the stock market is one component of the Index of Leading Economic Indicators, the government's main economic forecasting gauge. In other words, the stock market leads the economy, not the other way around."

PS: the above is written by Jack Schwager in a book called 'Fundamental Analysis'...

 

[black bear]

Acted with authority

TD,
Were you 'big staked' ,maybe 25% of your asset value on the table ? was that "stake" highly leaveraged ? ...how much the market rose is not the issue..the issue was could you have withstood a 40% drawdown with the aforementioned in force...let's not argue about this because the answer is obviously not ..in other words what you do trading and what Jim Rogers does investing in fundamentals are not the same animal . That's the only point I was making.


Interestingly ,long before I even knew what charting was I bought properties. In recent years I have seen a chart which displayed the ROC y-o-y for the UK property market median value...and LOL I bought the batch during the second uptick from the dip that had formed from the prior housing crash ...coincidence ,well in this case yes, but I have to admit in that specific occurence the fundamentals I used to buy were no different in terms of entry than if I had actually used a chart. Big difference is on a fundamental basis I had the confidence to enter large immediately. Had I just been looking a chart without any reference to the underlying fundamentals I would only have been willing to poke my toe in the water to test it.

good post chump


Acted with authority

Everything in place

good everything I think

you cherry pick that one chump :?:

latter, I am about to dip my little toe in again.........................

 

[chump]

FW,
Working off a chart to TRADE works on the premise of recency..that is recency of behaviour in price action will if you are good enough to exploit it bring you a profit from the immediacy of prices to come in the near future. You match this with an entry and confidence level appropriate to the volatility seen and expected.
What I was referring to investing using fundamentals is a confidence level that takes no notice whatsoever of recency and immediacy. It has no timeframe perse ,it is actioned only upon the rewards currently offered and the prospect of their continuing. And, I would say to you I was out of the station in full kit ,positioned in size , before a chartist trader who at best would have been sized to take the next couple of upticks.On this you will struggle to make a case because any trading action would have had to follow price action whereas I did not ,I invested prempting same in any volume sense.LOL...I've just realised if you wnat proof of that it's clear enough ,just look at the property market and when the real volumes came in..years later.

 

[firewalker99]

And, I would say to you I was out of the station in full kit ,positioned in size , before a chartist trader who at best would have been sized to take the next couple of upticks.

Your investment might well have been a very good one, in terms to timing and all that, but unless I see a chart of where you entered, I find it hard to believe the chart would not have shown signals earlier. I could give plenty of examples where this is the case. Just look at any bear market that turns into a bull and compare this with the time the fundamentals start to look strong.

On this you will struggle to make a case because any trading action would have had to follow price action whereas I did not ,I invested prempting same in any volume sense.LOL...I've just realised if you wnat proof of that it's clear enough ,just look at the property market and when the real volumes came in..years later.

If you're waiting for the volume to come in, you're by definition late. By the time high volumes come in, the professional money is already starting to unload. Perhaps your technical entry signal is different from mine, but I'm sure you'd have a hard time finding examples of people who are buying based on fundamental reasons, at the time when a capitulation/selling climax is printed on the charts. For example, technicians will be buying because of this SC, while those who wait for business conditions to improve, will be buying long after the run up has began.

 

[mp6140]

mp6140,



Was this an intended double negative that really means that it is still your fathers market ?


Paul

==============================================

your language first paul -- we just stole it and screwed it up a lot !

mp

 

[chump]

Your investment might well have been a very good one, in terms to timing and all that, but unless I see a chart of where you entered, I find it hard to believe the chart would not have shown signals earlier. I could give plenty of examples where this is the case. Just look at any bear market that turns into a bull and compare this with the time the fundamentals start to look strong.



If you're waiting for the volume to come in, you're by definition late. By the time high volumes come in, the professional money is already starting to unload. Perhaps your technical entry signal is different from mine, but I'm sure you'd have a hard time finding examples of people who are buying based on fundamental reasons, at the time when a capitulation/selling climax is printed on the charts. For example, technicians will be buying because of this SC, while those who wait for business conditions to improve, will be buying long after the run up has began.

Just reading back to your first post I find I am not necessarily in disagreement with you.You set it out that there that there is nothing that a TRADER needs that is not on the chart and with the right skillset maybe so taking into account what we have already discussed earlier ,because what your technical chartist trader is seeing after the fact of course and before the media make a meal of it is what people like me are doing based upon fundamentals. LOL I think we got off track when TD brought Jim Rogers aboard. I can be corrected on this score if you find me a technical chartist TRADER who has been short GBP/AUD$ for 4 years.

 

[firewalker99]

Just reading back to your first post I find I am not necessarily in disagreement with you.You set it out that there that there is nothing that a TRADER needs that is not on the chart and with the right skillset maybe so taking into account what we have already discussed earlier ,because what your technical chartist trader is seeing after the fact of course and before the media make a meal of it is what people like me are doing based upon fundamentals. LOL I think we got off track when TD brought Jim Rogers aboard.

If by 'after the fact' you mean that the pattern technicians are looking for is created by fundamentalists, than yes. But not the kind of fundamentalists most people talk about. When discussing a fundamental approach to markets, most people will talk about the release of important economic figures, a corporate report, the intrinsic value or the company, etc. They'll consider those to be good information for evaluating a stock or a market.

Take a distribution pattern for example. It's not because technicians see distribution happening that price starts dropping off later on. It's because those responsible for creating the pattern in the first place have created the shift from strong hands to weak hands. What I'm trying to say is that when the public thinks of fundamentals, they are by definition looking at something which has happened in the past. I think we are probably more in agreement than we think

 

[chump]

If by 'after the fact' you mean that the pattern technicians are looking for is created by fundamentalists, than yes. But not the kind of fundamentalists most people talk about. When discussing a fundamental approach to markets, most people will talk about the release of important economic figures, a corporate report, the intrinsic value or the company, etc. They'll consider those to be good information for evaluating a stock or a market.

Take a distribution pattern for example. It's not because technicians see distribution happening that price starts dropping off later on. It's because those responsible for creating the pattern in the first place have created the shift from strong hands to weak hands. What I'm trying to say is that when the public thinks of fundamentals, they are by definition looking at something which has happened in the past. I think we are probably more in agreement than we think

"But not the kind of fundamentalists most people talk about." virtually like those "traders that most people talk about" and there's a moral in there somewhere trying to get out.

 

[postman]

To chart or not to chart that is the question.

Taking the opposite view of "I don't read the news I just look at a chart"

- Reading the news today (without looking at a chart) I think the Dow will tank down! Anyone got a chart that says different?

 

[firewalker99]

Taking the opposite view of "I don't read the news I just look at a chart"

Thanks postman, I'm glad people are taking the opposite view too. Although it's nice to know so many people agree with what I'm saying, if all noses point in the same direction there's not much of a discussion going on.

- Reading the news today (without looking at a chart) I think the Dow will tank down! Anyone got a chart that says different?

I see that right now (couple of minutes before the open) most of the US indices (ES, NQ) are hovering around support, the DOW could go to 860-870 but 12900 is the midpoint and value area, so this could support price as well. Anyway, if I were to pick a trade, I'd be long now from the NQ from 1972, looking for more upside or a ranging (consolidation) day. All prices are quoted from the futures contract.

 

[firewalker99]

I see that right now (couple of minutes before the open) most of the US indices (ES, NQ) are hovering around support, the DOW could go to 860-870 but 12900 is the midpoint and value area, so this could support price as well. Anyway, if I were to pick a trade, I'd be long now from the NQ from 1972, looking for more upside or a ranging (consolidation) day. All prices are quoted from the futures contract.

So far very predictable reacting, DOW at 860 like I said which was the next support, but more importantly NQ still around 1970. It's imperative this level holds now. Shake-outs aren't uncommon, but a decent stop placed below the support, either from the ES/NQ is - for the time being - still keeping you in a long.

 

[postman]

Thanks postman, I'm glad people are taking the opposite view too. Although it's nice to know so many people agree with what I'm saying, if all noses point in the same direction there's not much of a discussion going on.



I see that right now (couple of minutes before the open) most of the US indices (ES, NQ) are hovering around support, the DOW could go to 860-870 but 12900 is the midpoint and value area, so this could support price as well. Anyway, if I were to pick a trade, I'd be long now from the NQ from 1972, looking for more upside or a ranging (consolidation) day. All prices are quoted from the futures contract.

Lets hope all the people who make the market are reading your chart today. Just so they know what to do can you tell them if your using the 5 min or the daily chart, as they both say different things....

 

[firewalker99]

...but a decent stop placed below the support, either from the ES/NQ is - for the time being - still keeping you in a long.

"for the time being"... didn't last long!

Putting this trade aside, what 'bad' news was there to that signaled shorting, postman? I checked my calendars but I see no important releases today... So the market basically is going lower without any bad news?

 

[firewalker99]

Lets hope all the people who make the market are reading your chart today. Just so they know what to do can you tell them if your using the 5 min or the daily chart, as they both say different things....

I doubt they are looking at any chart at all
I look at 1 and 5min charts.

Anyway, I still have this as an upday or consolidation day. DOW still hanging on to 12860. The NQ is traveling towards the next level of support.