If you want to fail as a trader, study TA

[weakpunter]

DT,

I´d say 90% of people fail in whatever they do, how many traders dont make money period compared to how many do? wether technical or not, how many sports players make pro grade?
how many attorneys end up with their own practice, the bottom line is that most people
dont achieve large scale financial success in anything they set to do as a career, most people are wrong in just about anything the take on in order to make substancial financial gain ...so why would trading be any different , that dosent mean you shouldnt trade technically or fundamentally or price action , why are there so many well academically educated poor people in this world, tis because the bottom line is 90% is the failure rate for anything. The only chance anyone has got is thinking against the grain whatever analysis they use, everything is open for your own interpretation or perception , take support and resistance a very understandable concept , I may use it in a very different way to the standard TA user ..does that mean Iam using TA or not example, I will buy into resistance or sell into support based on the fact if I beleive the majority of traders beleive that those levels are good support or resistance are usually falling into the 90% of failures, so what am I using then TA or not , I still think Iam using TA just in a different fashion to most people, on the other hand I may bid unobvious support levels or offer unobvious resistance levels that others would say are not going to hold because they havent been historically well proven yet, I still think Iam using TA but in a different way and I may chop and change my methods ,strategies indicators accordingly to what I see.....bottom line is the need to adapt and have belief in the fact that you dont have to have conclusive belief.

 

[kimo'sabby]

This thread is still going, unbelievable!

For all those who might actually think all TA is nonsense I recommend a book called "Pitbull: Lessons From Wallstreets Champion Trader" By Martin Schwartz who was featured in the Market Wizards.
http://www.amazon.co.uk/Pit-Bull-Lessons-Streets-Champion/dp/0887309569
Don't take my word for it, read the reviews on this book ....

The author is an ex-US Marine who then did an MBA at Columbia. He started out on Wall Street as a Securities Analyst and struggled for 8 years, trading fundamentally and not making any money. Then he left to become an independent trader in 1979 and learned TA. After a long hard battle he was finally profitable.
He entered the US Trading Championships run by a Princeton professor, a competition which is run over a full year. He wiped the floor with the competition returning 781% over the year, hence his title "Champion Trader"

This is one of the most inspiring books I have read. Instead of reading the nonsense on this thread I recommend new traders learn from a real expert, and this guy is one of them.

Nicola

Wot a thread this is!

Elitejets, that's the best post ever...."TA does work, i'll prove it, here's a book about it"

Truly amazing!

Fantastic comedy!

 

[Traduk]

So - if I understand your argument - you can't explain why traditional TA should work, correct ?

The points I made are multi faceted and you have chosen to abstract some understanding which is not there.

Which one of the various types of TA do you mean by traditional TA?. Candlesticks have been used ad infinitum, P&F goes back to the earliest pit days etc etc etc.

The newer kids on the block are the plethora of indicators that came with the mass use of computers, Market profile is relatively new with perhaps the newest being the Delta created from bid\ask trades off the order flow.

As you have back tested and tweaked what you used I think you probably mean indicators and of course I can explain why they work but more importantly I can explain when they don't work. I think this is the fourth time I have needed to point out to you that they do not work on stocks that do not correlate with the index they are part of. If you are trading stocks on which TA doesn't work, test TA to death on them and conclude that TA doesn't work then wherein lies the failure?.

The entire range of TA is nothing more than a massive box of tools and you can either use them appropriately or not. Used inappropriately the will fall way short of their designed expectations.

I still have course notes from a TA course I took 20 years ago and what was said by the instructor and is on the first page "If you do not know exactly how an indicator is constructed, how it is appropriately applied and its limitations then do not use it until you do". Programs with hundreds of indicators plus back testing are a recipe for lazy try and see but the shortcut they create are often a short sharp trip to a busted account.

 

[Splitlink]

just to add to this, how many people have been stopped out in spread betting by a point or to, only for the market to rally back up? happens ALL the time. if you were watching order flow and could see that a few points below your stop there was some serious interest on the bid/offer..you wouldn't be getting stopped out so much would u

I've got to admit that I don't use tick charts but, worse, I don't really know how to. I have not paid for a chart service since I came off broker trading 7-8 years ago so, is there a free one around that I could look at? I don't mind looking at Forex, although I trade indices mostly.

The free daily forex charts that I have, at present, says 200/500 at the top and they are line charts. So what does that mean?

If you wanted to start a thread on this, I'm sure that you would get a following, but you'd need to start off with first steps.

Split

 

[Trader333]

This is one of the most inspiring books I have read

Has it allowed you to make greater profits than was the case before ?


Paul

 

[jon1971]

To the expert, once again you are demonstrating your predisposition to misinterpreting information, to support your own distorted view of how things actually are.

I don't know the first thing about woodie so couldn't possibly comment.

Woodie was merely the facilitator of the interview.

Personally I find mark's psychological insights to be invaluable, they make more sense than you do.

Also, how do you know I use oscillators for exits? Where have I said that? Again putting a subjective & INCORRECT slant on your interpretation of things.

 

[Waterfield]

Damodaran - Chapter 7 - Smoke and Mirrors - Charting & Technical Analysis:

Covers:

1. Basics
2. Some Correlations (Mostly Negative)
3. January Effect and Weekend Effect
4. Bubbles
5. The Foundations of Technical Analysis (Below)

You can buy it from amazon, I'll do a full review of the book once I'm finished. However I've got a lot on my plate and reading other ones too (the snowball [buffett] + My Life as a Quant [Emanuel Derman] not to mention 4 textbooks:smart.

I was highly recommended by a friend to read this so trying to do it asap .

Tempted to contribute my view on this "TA is a load of BS" but too tired at the moment, maybe tomorrow.

Question for The Expert:
Not trying to get wise but many times you have said "I am here to make money, not friends". Elaborate. I mean, why bother saying anything if you don't want to make friends!

Time for a nap.

Phil

PS. Moderator, could you remove the pictures on Sunday Evening please .

 

[jon1971]

This thread is still going, unbelievable!

For all those who might actually think all TA is nonsense I recommend a book called "Pitbull: Lessons From Wallstreets Champion Trader" By Martin Schwartz who was featured in the Market Wizards.
http://www.amazon.co.uk/Pit-Bull-Lessons-Streets-Champion/dp/0887309569
Don't take my word for it, read the reviews on this book ....

The author is an ex-US Marine who then did an MBA at Columbia. He started out on Wall Street as a Securities Analyst and struggled for 8 years, trading fundamentally and not making any money. Then he left to become an independent trader in 1979 and learned TA. After a long hard battle he was finally profitable.
He entered the US Trading Championships run by a Princeton professor, a competition which is run over a full year. He wiped the floor with the competition returning 781% over the year, hence his title "Champion Trader"

This is one of the most inspiring books I have read. Instead of reading the nonsense on this thread I recommend new traders learn from a real expert, and this guy is one of them.

Nicola

Thanks for the recommendation. I think Market Wizards is a great series of books and I particularly liked the Marty Schwartz section.

I will keep an open mind, there is a great deal of dross on amazon admittedly, which is why recommending good titles is so helpful.

Just ordered it, a tenner on eBay.

 

[DionysusToast]

The points I made are multi faceted and you have chosen to abstract some understanding which is not there.

Which one of the various types of TA do you mean by traditional TA?. Candlesticks have been used ad infinitum, P&F goes back to the earliest pit days etc etc etc.

The newer kids on the block are the plethora of indicators that came with the mass use of computers, Market profile is relatively new with perhaps the newest being the Delta created from bid\ask trades off the order flow.

As you have back tested and tweaked what you used I think you probably mean indicators and of course I can explain why they work but more importantly I can explain when they don't work. I think this is the fourth time I have needed to point out to you that they do not work on stocks that do not correlate with the index they are part of. If you are trading stocks on which TA doesn't work, test TA to death on them and conclude that TA doesn't work then wherein lies the failure?.

The entire range of TA is nothing more than a massive box of tools and you can either use them appropriately or not. Used inappropriately the will fall way short of their designed expectations.

I still have course notes from a TA course I took 20 years ago and what was said by the instructor and is on the first page "If you do not know exactly how an indicator is constructed, how it is appropriately applied and its limitations then do not use it until you do". Programs with hundreds of indicators plus back testing are a recipe for lazy try and see but the shortcut they create are often a short sharp trip to a busted account.

Most of the presumptions you make about me and the depth of the research I have done are flawed.

The fact that I trade stocks now has no relationship with what I did before. You presume that I tried something, failed and then tried something else which is also wrong. When I saw the obvious flaws in being a TA purist, I did a lot of digging. It turns out there is a fair amount of academic research on TA which points out its flaws which can also be observed.

Note that I have not said that TA is without merit. What I do say is the following.

Traditional TA is useless if you don't know the market, who plays that market, what factors impact that market, what derivatives push and pull that market.

If you want to actually debate this, why not tell us which TA works in abscence of the above, on which market and WHY it works.

I am more than happy to discuss something other than S/R in stocks. Not many people want to put any meat on the bone of this argument. Discussing S/R and stocks clearly shows how we can find exceptions outside the domain of TA that would improve your trading. I am more than willing to discuss outside of this domain.

So please - you have the floor. Let's get into the details.

Perhaps you can take on the role of telling us what parts of

Perhaps then - another tack. Please tell us which TA works and why -

 

[kimo'sabby]

If TA worked thier would surely be more professional traders on this site, traders actually making a living from the markets.

This site has all the evidence in the case of TA not working, read the profiles.

Non-professional traders can bang on all day about how they trade, but what they have to say is surely meaningless, they are non-professionals.....end of story.

 

[jon1971]

Biggest barrier to learning is thinking you know it all already.
Un-subbed.

 

[elitejets]

Has it allowed you to make greater profits than was the case before ?
Paul

Well until I got to grips with the psychology of trading I wasn't really making any profits!
This book was one of many books and things that helped with that. let's say discipline is much more difficult to master than a trading method.

I mentioned the book here because this is in the psychology section and this book is probably much more useful as a psychology book than a "this is exactly how I do it" book.

 

[Traduk]

Most of the presumptions you make about me and the depth of the research I have done are flawed.

The fact that I trade stocks now has no relationship with what I did before. You presume that I tried something, failed and then tried something else which is also wrong. When I saw the obvious flaws in being a TA purist, I did a lot of digging. It turns out there is a fair amount of academic research on TA which points out its flaws which can also be observed.

Note that I have not said that TA is without merit. What I do say is the following.

Traditional TA is useless if you don't know the market, who plays that market, what factors impact that market, what derivatives push and pull that market.

If you want to actually debate this, why not tell us which TA works in abscence of the above, on which market and WHY it works.

I am more than happy to discuss something other than S/R in stocks. Not many people want to put any meat on the bone of this argument. Discussing S/R and stocks clearly shows how we can find exceptions outside the domain of TA that would improve your trading. I am more than willing to discuss outside of this domain.

So please - you have the floor. Let's get into the details.

Perhaps you can take on the role of telling us what parts of

Perhaps then - another tack. Please tell us which TA works and why -

My presumptions as you put it are based on your many posts regarding back testing and tweaking. Your stance against TA must have a basis in something and there is little else that you have said to go on I have only assumptions to go on.

It would be easier to tell you how to fly a light aircraft or a helicopter because there are a limited number of variables and if you get it wrong the questions stop

If you understand the fractal nature of market structure and accept that the component development from ticks upwards affects different players in different ways then you may appreciate that in order for anything to work properly both a trader and whatever they use must be tuned to the players beneath and those above. In essence a trader must view and place themselves within the market structure that suits there requirements and with knowledge of the forces around them. I use five charts and a DOM running over two screens to see what's below and above. Trading is done off three other computers and screens.

Market structure does not fit computer friendly time frames but tick aggregation, constant volume bars (based on trades or ticks) can overcome time based charts. P&F does similar as does Renko. In other words data can be displayed as suits the user and the market dynamics and is not the stereotypical time bars\candlesticks or whatever. An innovation exists with the order book whereby much can be done with trades to create delta's off the bid\asks traded and these can display any look back period of positive or minus order flow which can in turn show where the only players that matter entered the market. If movers and shakers are long and are not selling then the fire they lit just needs a little more fuel from them if the little guys push price down. The fuel is the little guy's money as they are squeezed out.

This is rambling and probably not what you wanted. OK a bit of 101, is the market trending or ranging. If a clearly defined range is in place count the bars from top to bottom in a short time-frame. If the range provides enough points for a worthwhile risk\reward the use an oscillator with a setting that is slightly less than the bar amplitude of the range and surf away until it breaks out. Being within or close to the amplitude is essential. Early recognition of a range is also essential and most wait until its almost over before joining in. In small ranges it is best to sit it out because getting trampled in the carnage hurts.

If it breaks out and after a pullback shoots off into a trend then oscillators are no longer useful as they jam against top or bottom and give false signals. There are dozens of trend tools but one that will get a trader over minor pull backs should be chosen and if all else fails a well tuned SAR is often better than nothing. Of course a trend indicates following not feeding so contra trend is for the fleet of foot. Yet again in trends, picking timing is essential but even more essential is timing whatever is used to as an indicator within the timeframe. As a general rule 9 positive bars is in candlestick terms is a full belly so using a short fast indicator is preferable to something that starts back in the annals of history.

This is all fairly basic stuff and not even a microscopic view of what I use but I do operate within a total news vacuum and follow the money. The money moves markets and I suppose that my emphasis is on what they do far more than any indicator.

Pick holes in that In trading there is a correlation with squash. Looking upwards skill levels are incomprehensible to those below and each player must make transitions whether physical or tactical on their own. I used to coach but could never explain the inexplicable to those I trained, nor can anybody.

 

[jon1971]

A refreshing and informed post, do you not think that oscillators could possibly be employed to guage the limit of pull backs where price reverses back in the direction of a trend? But only for that purpose in a trending Market?

PS. can't find the notification off tab (my excuse).:whistling

 

[Traduk]

A refreshing and informed post, do you not think that oscillators could possibly be employed to guage the limit of pull backs where price reverses back in the direction of a trend? But only for that purpose in a trending Market?

PS. can't find the notification off tab (my excuse).:whistling

Although not truly time frames I use measures of lower (short) the one I trade (medium) and the one above (longer) measures.

If after the first pull back in what I perceive as a trend the short stochastic is turning up from the bottom, the medium is around halfway, having fallen from over-bought and the longer is approaching halfway, having risen from over-sold after the last down trend then there is a reasonable possibility that an acceleration phase is in prospect and providing that others start hitting the ask I load up.

It is not mechanical but adds to the equation if other factors look good. An example would be that I would like the pull back to have followed a break out above a reaction point in the prior down trend and ideally to represent a failed retest of the prior low. If the visual part looks good to me then it will to others and their buying will confirm that they see that the bears are weak and the bulls will squeeze them. Another advantage is that such a pattern is a classic with two structural stops (one near and another not far).

Its a bit of your "three ducks" lining up but only as part of a larger view.

 

[jon1971]

Although not truly time frames I use measures of lower (short) the one I trade (medium) and the one above (longer) measures.

If after the first pull back in what I perceive as a trend the short stochastic is turning up from the bottom, the medium is around halfway, having fallen from over-bought and the longer is approaching halfway, having risen from over-sold after the last down trend then there is a reasonable possibility that an acceleration phase is in prospect and providing that others start hitting the ask I load up.

It is not mechanical but adds to the equation if other factors look good. An example would be that I would like the pull back to have followed a break out above a reaction point in the prior down trend and ideally to represent a failed retest of the prior low. If the visual part looks good to me then it will to others and their buying will confirm that they see that the bears are weak and the bulls will squeeze them. Another advantage is that such a pattern is a classic with two structural stops (one near and another not far).

Its a bit of your "three ducks" lining up but only as part of a larger view.

Totally agree re. part of a larger view, this seems pivotal in defining an effective TA strategy, and it's what the anti TA crew is seeming not to acknowledge.

Sounds fairly similar to my approach, 'cept I use only 2 TFs the set-up and the higher for confirmation, I am looking for %K hooking or a possible mini-divergence pattern, I use a slightly different approach with %D (both on short settings), I would consider stochastic to be only one of five components that I use for decisions and I would score the %K and %D patterns with a max possible score of 20% towards my overall trade probability.

Also, I would wait and possibly disregard the initial pull back as I want to see what I define as a trend being in place, before getting in (which basically involves angle of MA & MA crossovers).

I then only get two bites of the cherry as I would not enter what I define as an over extended trend (which means that I may sometimes miss super trends, but I don't care - like I said I only play the probabilities), I've cannibalised Elliott and use it JUST to gauge average trend structure, I'm not into third wave extensions and all that malarkey, I leave all that to the true Elliott Wave casualties.

 

[The Expert]

Smoke and Mirrors...

CONCLUSION
This work shows that by experimenting with subjects
familiar with perception and visual illusion issues it is
possible - by comparing visual reactions to known illusory
images and to their unknown variants - to highlight the
existence of a transition from an "unconscious" visual
exploration to a conscious exploration of the illusory image.
The duration of the first exploratory phase does not exceed
a few hundred milliseconds, and seems to vary according to
the familiarity one has with the image shown. The
occurrence of an aware explorative phase clearly shows
how it is in the very first moments that the subject has the
"physiological" perception of the illusion and proceeds to
its possible classification within already known visual and
cognitive patterns. These results seem consistent with the
hypothesis that identifies the reasons for the original
perception of the illusion in the probabilistic theory of
perception. Without such a perceptual stage, in fact, would
not be possible to make the transition to a fully conscious
exploration of the image, which itself is characterized by
the development of highly subjective strategies. It is during
the visual exploration of the already known images that this
behavior is more emphasized. In the other cases, discussed
in the previous paragraphs, it is well possible that, despite
having full knowledge of the illusion, one is captured by the
attraction of the graphic effects - as for unaware subjects.
This is, probably, an indication of the difficulty to "watch"
an image beyond its illusory content, so that, in practice, we
remain prisoners of the latter.
The transition from an "unconscious" visual exploration to
a conscious one was observed also when the subjects were
exposed to known illusions. The time of this transition,
appears to vary depending both on the degree of recognition
of the illusion and on the characteristics of the subject. The
acquisition of a full awareness of the illusory content of the
image changes depending on the image and subject, to the
point that in some cases, in the time allowed for
observation, it is not achieved. The latter situation is similar
to that observed in the case of subjects not familiar with
visual perception issues. With these subjects, in fact, does
not seem possible to carry out studies on the transition from
an "unconscious" visual exploration to a conscious one or
on the acquisition of the full control on the illusion. All the
unaware subjects that took part in the experiment not only
seems to remain "prisoner" of the graphic geometry of the
illusion, but it seems not unrealistic to conclude that they do
not ask themselves questions about the meaning of the
images.
Although the study presented here has been performed on a
limited number of subjects, the results seem to suggest
interesting lines of development concerning the human
communication that uses the visual channel - such as, for
example, the prevalence of one effect among multiple
illusory effects, the perceptions induced by very fast or
illusory advertising, the relationship between perceptionand
actuaction in very demanding environments (like flight
simulations, video games, etc..), the identification of the
most effective strategy to educate the "gaze".

 

[The Expert]

How long does it take you to work out what you must do to see the illusion?

 

[Traduk]

TE,

You are a fine one to be posting about illusions, perceptions and delusions. If your online persona is your real character you have real problems.

Nine days for $2K+ profit and a $500 stop over-ridden. Wow you really are an example of where Expertise can take people. I hope that you had loads of trades running concurrently because that sucks.

 

[jon1971]

TE,

You are a fine one to be posting about illusions, perceptions and delusions. If your online persona is your real character you have real problems.

Nine days for $2K+ profit and a $500 stop over-ridden. Wow you really are an example of where Expertise can take people. I hope that you had loads of trades running concurrently because that sucks.

Ha ha, he certainly has expertise in being a wind-up merchant, that much he's shown.