If you want to fail as a trader, study TA

[jon1971]

Jon - if S/R is a fundamentally flawed concept, then it doesn't matter what you add to it, a bit like building a house on sand. S/R is just an example. So if you aren't trading purely on S/R but are including it in your toolbox, then the system would still be flawed.

I would be more than happy to discuss another aspect of TA and why TA proponents think it should work. The problem is no-one seems to want to make a case in favour of any part of textbook TA, other that saying "it just works".

I have shown a case where S/R could work (albeit short term) and cases where it should be treated with suspicion.

In the spirit of having a reasoned debate can't anyone come up with solid reasons for all this stuff to work ?

DT, it's not fundamentally flawed, not sure how you've read that. what I'm saying is that it is of limited value, if used on it's own, in isolation.

Why does TA work? A very puerile explanation (and as I said to Mike yesterday, this is not my forté), would be because the market has a memory. And because what moves price? Conviction, which is fuelled by three things and three things ONLY, fear, greed and uncertainty. What we're measuring and seeing on price charts is human emotion, the only TRUE driver of price. How many times has a news item come out and the market has done the exact opposite of what you expected it to. The market is cyclical and these cycles are quantifiable. We can get into the whole Efficient Market Hypothesis thing if you want, but I'd really rather not.

Let me ask you something, why can't TA complement a predominantly FA based approach and why can't FA complement a predominantly TA based approach? What's all the "YOU'VE GOT TO BE IN ONE CAMP OR THE OTHER" nonsense all about?

To be honest mate, whilst I find the whole TA vs. FA debate a whole heap of fun, it's been raging for years and will rage for many more. What I actually came on here to try and discuss was the concept of viewing the market from a "probabilistic" perspective as opposed to one of "expectancy", I seem to have gotten majorly side-tracked, if you could help me out with that, I'll buy you a cyber pint. (sorry that's cyber, not cider )...

 

[weakpunter]

well said Jon Iam fed up with this in one camp or the other nonsense, trading is about adapting to specific conditions you cannot have any 100% beleifs about any form of strategy there are times that TA bears fruit and there are moments when price action is the way forward, knowing and understanding more than one facet of trading adds strings to your bow, and what remains is for you the trader to desipher when you should apply one of the above in order to make a pfofit and when to put one on the back burner when you see a change in conditions, people on this forum are too convinced one way or the other, and that lack of flexibility of mind is a trading loss waiting to happen in itself.

 

[jon1971]

well said Jon Iam fed up with this in one camp or the other nonsense, trading is about adapting to specific conditions you cannot have any 100% beleifs about any form of strategy there are times that TA bears fruit and there are moments when price action is the way forward, knowing and understanding more than one facet of trading adds strings to your bow, and what remains is for you the trader to desipher when you should apply one of the above in order to make a pfofit and when to put one on the back burner when you see a change in conditions, people on this forum are too convinced one way or the other, and that lack of flexibility of mind is a trading loss waiting to happen in itself.

I hear ya WP, I don't think Darwin ever said, "survival of the fittest," what he actually said (needs verifying) is, "survival of the most adaptable."

 

[barjon]

DT

Well, for the sake of argument, let's say that the trading world is made up only of people trading on fundamentals. they have sorted out their stable of strong stocks which they will buy when they reckon they are good value and sell when they reckon they have become too expensive.

Since the basic fundamentals don't change during the year (forgetting news for the moment) the only variable relates to the price. So. let's say that they make their "value" judgement informed by the PE ratio - they decide to buy when PE is 10 and sell when it gets to 15. They continually work the stock in this fashion.

Some new kids on the block arrive - technicians. They draw some charts and see the price continually bouncing up at the same level and continually falling back at the same level. They call these levels support and resistance.

Now we've got an army of fundamentalists and technicians all wanting to trade in the same direction at the same price - mmm, guess what.

Behind this army, of course, is and even bigger army of people who are buying and selling for all sorts of reasons and who's activity means a rocky road for both fundamentalists and technicians who can never be sure that the road ahead is not going to wiggle like mad or turn back on itself.

good trading

jon

 

[dcraig1]

I have never seen an argument for why textbook TA should work that stands up to any scrutiny. It all seems to boil down to faith.

If your approach to markets is via argument, then it's not going to go very far. We can all run around like headless chickens performing thought experiments in what are frequently fairly small laboratories, but it leads nowhere.

I'd prefer to actually examine markets and the footprints left by traders in the available data and form hypotheses about the behavior of market participants. That is where my assertions about important S/R on DAX come from - not from any book. I really don't give a fig for abstract arguments no matter how allegedly "well reasoned" if they are at odds with my own observations.

Again, DAX chart attached - it's early up move finishes at R1 and it promptly moves down to VWAP. Order flow tells the rest of the story. Why? Because many traders look at these price levels - why else could it be?

I nearly always post charts of the current session lest I be accused of cherry picking historical stuff.

 

[Traduk]

DT,

Every time you use stocks to prove a point in your argument against TA you reinforce the fact that you cannot or will not grasp that TA does not work on stocks other than those that have a strong correlation with an index. TA needs mass participants fighting over every price point to work properly and as many participants are technically driven it may be self fulfilling prophesy but who cares because if it works and makes consistent money that's fine by me.

Quite obviously, in the past, you have spent an inordinate amount of time using inappropriate tools for the job you wish to accomplish and have concluded that the tools are useless. In the area that is my speciality (e-mini S&P) your approach would last no longer than your bank balance could stand it and has been stated over and over its horses for courses.

I also have had these debates for as long as the internet has been going but formerly with buy and holders. They were over the moon back in the late 90's and would hear nothing of bubbles and I guess are still hanging on after seeing their wealth cut in half twice in a decade. They were similarly dismissive of squiggly lines.

Of course what you say about stocks is totally valid and it is the almost random walk behaviour of them that makes them of no interest to me but to use their behaviour to prove to try to prove a point is ludicrous.

 

[kimo'sabby]

Historical TA shows up areas of liquidity, matched orders (volume), but that's all. So from a technical aspect, if a trader gets it right, it's more by chance. Plus, something like volume is basically absolute, it can't be curve fitted into a system or rearranged to suit a traders perspective, it has to be read as it is. Indicators can be fiddled with and changed so that they look nice on a screen, but this is fundamentally wrong, it's almost like forcing an opinion on the market.

I think this is what DT is probably trying to get at.

 

[temporarilylight]

For many years I was a believer and ended up giving the markets my hard earned money. After i abandoned TA i stated making money. And that money is now consistant money. Also no longer sit up late at night scrutinizing
chart patterns.

Do you swing trade stocks and use P/E ratio's for trade decisions and suff?
thx

In the area that is my speciality (e-mini S&P) your approach would last no longer than your bank balance could stand it and has been stated over and over its horses for courses.

But you dont know exactly what his approach is, do you?
Or are you referring to his use of time+sales/tape reading etc...?
Either way I suppose if he's looking for stocks in the news etc to play, then the ES would only qualify every now and again, around NFP announcements etc. (if at all)

 

[Traduk]

Historical TA shows up areas of liquidity, matched orders (volume), but that's all. So from a technical aspect, if a trader gets it right, it's more by chance. Plus, something like volume is basically absolute, it can't be curve fitted into a system or rearranged to suit a traders perspective, it has to be read as it is. Indicators can be fiddled with and changed so that they look nice on a screen, but this is fundamentally wrong, it's almost like forcing an opinion on the market.

I think this is what DT is probably trying to get at.

He has stated that he back tested and used variables on indicator values which IMO is an attempt to curve fit albeit on historical data. Back testing is to me a pointless pursuit because markets are dynamic and I only use and test anything in real time but with the knowledge of current dynamics.

Volatility, swing range, daily high\lows and traded volume are all that interest me and from them any indicators used are tuned. Back testing is a hope that one size fits all which of course it cannot.

I suspect that DT is yet another of the people who tried and failed with TA and feel the need to preach it's failure. If his attitude is that he cannot make it work then the concept is flawed then that is what I dislike because countless people can make it work and work very well.

 

[kimo'sabby]

It's not about pretty charts, it's about obtaining usable data.

Are you now saying that unless you trade futures and options your opinion on TA is meaningless?

This type of thread goes down the line of wether or not something is market fact or fiction, volume is fact, a self constructed indicator is fiction.

No method has exclusive rights to being the best, put me in an F1 car and the car will not perform, put Schumaker in it and it is taken to it's performing extreme.

 

[jon1971]

He has stated that he back tested and used variables on indicator values which IMO is an attempt to curve fit albeit on historical data. Back testing is to me a pointless pursuit because markets are dynamic and I only use and test anything in real time but with the knowledge of current dynamics.

Volatility, swing range, daily high\lows and traded volume are all that interest me and from them any indicators used are tuned. Back testing is a hope that one size fits all which of course it cannot.

I suspect that DT is yet another of the people who tried and failed with TA and feel the need to preach it's failure. If his attitude is that he cannot make it work then the concept is flawed then that is what I dislike because countless people can make it work and work very well.

Which ties into attitude, so actually trading is 100% psychology, no matter what you're method of analysis, you will interpret that analysis based on your psychological traits and how your mind is attuned to perceiving data. You will either put your own spin on it or you will perceive it as what it really is, ie. non-biased price action or information, the market will react to it in one of three ways.

Are you operating out of an "expectancy" mind set (in my opinion, a dysfunctional mind set when it comes to trading) ie. you expect the market to follow your analysis, or are you operating out of a mind set in which you realise that your analysis may well be flawed and has no 100% guarantees. This distinction to me is pivotal in determining a professional as opposed to an amateurish attitude.

 

[jon1971]

This type of thread goes down the line of wether or not something is market fact or fiction, volume is fact, a self constructed indicator is fiction.

No method has exclusive rights to being the best, put me in an F1 car and the car will not perform, put Schumaker in it and it is taken to it's performing extreme.

A demonstrable (albeit historical) performance record of an indicator is a fact. It's historical, which is why you keep a record and make regular performance reviews.

We are so lucky these days to have the type of technology that we do. On platforms such as Tradestation, these types of tests can be conducted in seconds with a few mouse clicks. Also with high-speed fibre optics, our information is so fast that we are not actually that disadvantaged trading from a screen as opposed to trading on the exchange floor. If you've read the Jesse Livermore book, in his day they used to have a boy hanging wooden plaques on a board as their quote system, it boggles the mind.

 

[Traduk]

Which ties into attitude, so actually trading is 100% psychology, no matter what you're method of analysis, you will interpret that analysis based on your psychological traits and how your mind is attuned to perceiving data. You will either put your own spin on it or you will perceive it as what it really is, ie. non-biased price action or information, the market will react to it in one of three ways.

Are you operating out of an "expectancy" mind set (in my opinion, a dysfunctional mind set when it comes to trading) ie. you expect the market to follow your analysis, or are you operating out of a mind set in which you realise that your analysis may well be flawed and has no 100% guarantees. This distinction to me is pivotal in determining a professional as opposed to an amateurish attitude.

I do not know if you would classify me as amateurish or professional in my approach but I haven't done too badly over more than two decades with 18 years of them full-time.

Of course the markets do not follow my analysis and the best I can do is determine what "may" happen from which I may profit. I used to keep track of my performance and as far as I can recall it was around 83% correct calls but when the numbers of trades started to produce loads of decimal points it became pointless and I now never analyse anything other than myself and my behaviour in the market.

In later years when trading has become an indulgence of a passion rather than need to win I guess that my expectation is to get it right via analysis about 70% of the time with stops taking care of the 30%. Let me clarify being right..... Traders never get it right and the best they can do make the most out of an imperfect scenario. Yesterday for me was an example when I traded the E-mini S&P and got a pretty good entry and held a fairly chunky long position for 5 points. On closing the overnight gap I took the exit door but not really based on TA (or was It gut). It trudged on up the hill for a few more points which made me a failure or did it?.

I see that you are re-building after a not so pleasant trading experience. Been there, done that (more times than I care to remember) and good luck to you. You woz having a little dig at me, LOL

 

[jon1971]

I do not know if you would classify me as amateurish or professional in my approach but I haven't done too badly over more than two decades with 18 years of them full-time.

Of course the markets do not follow my analysis and the best I can do is determine what "may" happen from which I may profit. I used to keep track of my performance and as far as I can recall it was around 83% correct calls but when the numbers of trades started to produce loads of decimal points it became pointless and I now never analyse anything other than myself and my behaviour in the market.

In later years when trading has become an indulgence of a passion rather than need to win I guess that my expectation is to get it right via analysis about 70% of the time with stops taking care of the 30%. Let me clarify being right..... Traders never get it right and the best they can do make the most out of an imperfect scenario. Yesterday for me was an example when I traded the E-mini S&P and got a pretty good entry and held a fairly chunky long position for 5 points. On closing the overnight gap I took the exit door but not really based on TA (or was It gut). It trudged on up the hill for a few more points which made me a failure or did it?.

I see that you are re-building after a not so pleasant trading experience. Been there, done that (more times than I care to remember) and good luck to you. You woz having a little dig at me, LOL

I absolutely was not having a dig at you:-0

"Are you operating out of an" sorry that comment wasn't directed specifically at you but rather at anyone, including myself. :innocent:

The way I see it, you go through stages in your development as a trader, by the sounds of things Traduk you have reached what could be described as an intuitive stage (I'm quoting someone else's work here by the way), whereby you have probably experienced certain circumstances tee-ing up that many times that when they tee up (although no moment in the market is unique) you know intuitively (or by gut feel as you put it) what the probable outcome will be, so in effect your intuition has become your probability model, your "edge."

A very desirable state for a trader indeed and certainly something that I aspire to, however, it will take many thousands of trades to achieve that level of intuition, and in the mean time I am going to have to rely on external methods of crunching the numbers.

 

[jon1971]

As I believe I've already said, your method of analysis is quite incidental, provided it is tailored to your personality and the personality of the instrument or market that you are trading. In my honest opinion with the right attitude and trade management skills (by which I mean pre defining risk and execution management - that means executing stops on losers also) you could quite literally train your pet chimp to throw darts & flip a coin, not too much emotional conflict there in getting out of losers! I am of course not advocating this as a methodology.

 

[Traduk]

I absolutely was not having a dig at you:-0

The way I see it, you go through stages in your development as a trader, by the sounds of things Traduk you have reached what could be described as an intuitive stage (I'm quoting someone else's work here by the way), whereby you have probably experienced certain circumstances tee-ing up that many times that when they tee up (although no moment in the market is unique) you know intuitively (or by gut feel as you put it) what the probable outcome will be, so in effect your intuition has become your probability model, your "edge."

A very desirable state for a trader indeed and certainly something that I aspire to, however, it will take many thousands of trades to achieve that level of intuition, and in the mean time I am going to have to rely on external methods of crunching the numbers.

You are right re: development.

Learning by reading or being taught is called explicit.

Learning by experience is called implicit and passes most of the functions to the subconscious part of the brain. I govern myself with the structural form the market creates (meaningful swing highs and lows) but work within that structure with freedom of expression.

I have tried mentoring (for free) three times in the past but as became evident on each occasion, I use variations on many themes all the time and others seek consistency of approach. Therein lies a problem with implicit learned operations inasmuch as they defy explanation. BTW it takes thousands of hours of screen time to acquire but everyone's time will vary.

BTW no need to justify yourself at all over anything. I thought your post was quite funny inasmuch as it gave me an (a) or (b) choice to be either a winner or loser. I thought about constructing a reply which answered neither and posed more questions but couldn't be bothered.

 

[jon1971]

You are right re: development.

Learning by reading or being taught is called explicit.

Learning by experience is called implicit and passes most of the functions to the subconscious part of the brain. I govern myself with the structural form the market creates (meaningful swing highs and lows) but work within that structure with freedom of expression.

I have tried mentoring (for free) three times in the past but as became evident on each occasion, I use variations on many themes all the time and others seek consistency of approach. Therein lies a problem with implicit learned operations inasmuch as they defy explanation. BTW it takes thousands of hours of screen time to acquire but everyone's time will vary.

BTW no need to justify yourself at all over anything. I thought your post was quite funny inasmuch as it gave me an (a) or (b) choice to be either a winner or loser. I thought about constructing a reply which answered neither and posed more questions but couldn't be bothered.

I am perhaps being a little selfish in trying to steer the discussion along my own agenda, or maybe not, perhaps it is all relevant.

The work on development I referenced actually includes two more stages prior to intuitive:

1. Mechanical - in which the individual learns the psychological skills required to think probabilistically and to cultivate the learned skill of trading without emotion.

2. Subjective - once you are ready to move on from mechanical, you can start incorporating other elements of analysis into your decision making process.

When I first started trading I had some pretty impressive results, more by luck than judgement, the worst thing that could have happened as it reinforced some inappropriate beliefs, and these beliefs inevitably led to me blowing my entire account.

I've taken a step back and have done some hardcore research and I don't mean reading John J Murphy which was my initial mistake, ie. just reading TA textbooks and thinking I knew it all.

I've not given up on TA, I've just come to the realisation that I was missing a certain ingredient, and that ingredient was me, or rather my psychological perspective, so I have started with a clean mental outlook and I have a very good TA tool-kit and am taking a systematic approach to learning the business, I'm trading because I want to improve my trading skills, I am not focussed on profit, if I get it right, the big money will come later as a by-product of trading well.

The problems you describe with mentoring sounds to me like you were teaching in stage 2, without the pupil first having completed stage 1. I am very conscious that this sounds text-bookish, it actually comes from a Mark Douglas workshop, I don't think it's in his books.

 

[jon1971]

http://www.woodiescciclub.com/Lectures/mark-douglas/august-2005.htm

http://www.woodiescciclub.com/Lectures/mark-douglas/index.htm

If my sad little story rings any bells, the above links might give you a small taste of Mark's work. You will have to persevere as the interviewer was having technical difficulties. Nicked from Tenbobtrader on another psychology thread.

 

[The Expert]

http://www.woodiescciclub.com/Lectures/mark-douglas/august-2005.htm

http://www.woodiescciclub.com/Lectures/mark-douglas/index.htm

If my sad little story rings any bells, the above links might give you a small taste of Mark's work. You will have to persevere as the interviewer was having technical difficulties. Nicked from Tenbobtrader on another psychology thread.

I hope you are not trying to tell people that woodie's cci rubbish is something to look into

This is one perfect example of RTA and how people can waste a vast amount of time trying to perfect a combination of mathematical numbers to make some good money

They should have called it the woddie woodpecker club, for they keep pecking away at the ES & NQ with little splinters of wood falling to the ground

What a waste of time = waste of money:whistling

The Expert

 

[The Expert]

You are right re: development.

Learning by reading or being taught is called explicit.

Learning by experience is called implicit and passes most of the functions to the subconscious part of the brain. I govern myself with the structural form the market creates (meaningful swing highs and lows) but work within that structure with freedom of expression.

I have tried mentoring (for free) three times in the past but as became evident on each occasion, I use variations on many themes all the time and others seek consistency of approach. Therein lies a problem with implicit learned operations inasmuch as they defy explanation. BTW it takes thousands of hours of screen time to acquire but everyone's time will vary.

BTW no need to justify yourself at all over anything. I thought your post was quite funny inasmuch as it gave me an (a) or (b) choice to be either a winner or loser. I thought about constructing a reply which answered neither and posed more questions but couldn't be bothered.

HELLO!

We are in the world of reality here, you know

That subconscious crap is exactly that, crap

Now, let me clarify a few things for those who are trying to learn how to make some money in the markets

1. One man's GAIN is another man's LOSS

2. He who sees LITTLE sees MUCH

3. Trade what YOU see, not what OTHERS see:smart:

As for Mark Douglas and the other so called experts, well, lets just say that they are not real experts, like The Expert