Interesting thread guys and well done for reaching 17 pages without resulting in constant bickering! Its nice to see you adults actually debating like adults!
Unfortunately I am not qualified enough to argue either side here but I guess I'd like to believe some sort of technical analysis can work as that's what I've been learning so far - albeit not all textbook stuff. I'd like to ask Mr.Toast if he has shared any info on how he trades either here or elsewhere on the forum? I'm not asking for particular methods/strategies (I'm not that cheeky or lazy), just curious as to what sort of tools/information do you use to trade? I've heard people mention 'DOM' and 'Ladder'.....What are these and how would I go about learning more? And before anyone says anything... I know I can google the terms and find out that way... But, this is a forum I like discussing these things with like minded people who have experience in such fields! Oh and may I apologise in advance if this post is incoherent. I am rather drunk x
For short term trading, the easiest way to explain it is this:
If you wanted to go long 20,000 ES contracts would you:
a) Just stick in a market buy order and watch the prices slip 10 levels ?
b) stick in a limit buy order for 20,000 and watch everyone else jump in front of you ?
c) Make the market look weak so that people start sending in market sell orders that you take the other side of ?
If you answered "C", you would be correct.
Now - who are the people that would easily be convinced to sell when you are buying
a) Other professional traders
b) Amateur traders trading on TA
c) People that read DOM/T&S incorrectly
If you answered "B" and "C" you would be correct. The big guys know how the little guys trade & they exploit that. Fortunately, there is a steady flow of new little guys coming into the markets (because of the aforementioned indudtry selling crap trading methods) so there are always suckers around.
The DOM and Level 2 are basically books of unfilled limit orders. The tape is the list of actual trades. The tape will show printing off at the "Bid" (best buy limit) when someone enters a market sell order. A limit order is a fairly passive order, you wait for price to come to you. A market order is more aggressive - you want to jump in front of the passive orders and make a trade.
This DOM/T&S helps you discern actual buying and selling pressure at any particular time. You may not want to watch it all of the time, rather you will watch how a market behaces and then be ready to watch it at key areas/times.
In my humble :whistling opinion, the equivalent of this in longer term trading is news, derivative trades and the overall 'story' of your stock/future.
You have to avoid any simplistic interpretations of the pictures painted though. Remember - if someone is short a few hundred million, they'll be on CNBC telling you how **** things are at the point in time they want to get out. The news comes out, suckers go short as the pro's unwind their shorts.
There's a lot of short positions on education stocks right now and they have had a bloody good run dow. Go look at APOL/COCO or one of their peers - look at what Eismann is doing in the news. Look at the amount of law companies claiming they will sue on behalf of shareholders. Look how little impact any of this is now having on the prices. Watch this for the next few months and draw your own conclusions about how much charts would have helped you.
Of course, you could also believe "It's all in the chart"