Hi Forker,
I am more interested to hear your thoughts. If I can not find it in chart then where should I find it? Are you suggesting volume related market sentiment, any kind of liquidity data? Fundamental area?
I saw your profile suggesting momentum. I always liked it.
Regards
S.
hi Sun
Trading technically without any other input requires compensation for the limitations that comes with technical analysis. So what are the limitations? well for starters you have no way of knowing when price changes direction if that change is the start of a new trend. All technical studies of trends requires historical prints in price to measure highs, lows, and closes. As you know you don't need to get in from the start to make money, however the point i am trying to convey here is that the missing information that you can't obtain technically is important to how you approach the trend until its completion.
So being without context when a trend starts you have to wait until price prints enough history to determine technically that a trend may have started. So lets say you have enough technical information to determine a trade and you enter a trade. Now that you in a trade how do you stay in and know when it's time to get out? There are all sorts of technical approaches here and all of them will have merit however all of them lack the most critical piece of information and that is why the trend exists in the first place.
There are 2 ways to trade a trend. The first is to get in and stay in until circumstances change. The second is to get in and take profits multiple times to maximize the opportunity to get in at a better price for another leg. Both approaches work with the second having a better profit profile along with more complexity. The main issue technical studies of trends has is to determine when the trend has priced in the underlying reason for its move. How can you measure this technically? The answer is you can only apply probability based on historical price points. While this does work it is ultimately the compensation you have to pay for lack of a better term. The outcome will nearly always be early or late exit from a trend. This is a crucial point to keep in mind because trends have the ability to make the biggest impact to your account growth.
Now i know there are going to be dozens of traders that are of the belief that its not important and that their technical strategy maximizes opportunity. Don't listen to them or me for that matter but ask yourself this when thinking about it. How can you maximize opportunity when you get in late and the only means of deriving an exit is through historical price. Consider that the historical price reference points at their time of formation were under difference circumstances. Now there is always going to be reactionary behavior at these areas by technical traders. The thing to keep in mind here is that its nothing more than a reaction to previous price levels after which the market will continue pricing in the underlying reason for the trend.
So what are your options to minimize the compensation and lagging nature of technical analysis. For starters you should allow for understanding of the reasons behind the trend. This information gives you the ability to better estimate when you should think about getting out. So for example if the underlying trend is busy pricing in a rate hike then go back measure the % change in price when this last happened and average that out. Lets assume 5% change in price as a hypothetical example. So now instead of trying to compensate through technical strategies you have a good idea to expect where price is headed.
The other important aspect to this is to keep an eye on the data because it is not enough to just have a target area because the circumstance can change. Markets get things wrong often enough to pay attention to this. So perhaps inflation data or jobs data is released that softens expectations of a rate hike. I mention these because you trade currencies so it applies to the market you trade. If you traded commodities then this is important but there are additional factors that you need to consider.
In summary, to better judge the scope of price change and the maintenance of that change you need to have an eye on the drivers of price. You can of course trade successfully without it but you are limiting your potential in the market.
A kind note to technical traders who disagree with me. Unless you have experience trading fundamentally and technically then you cannot possibly have an educated opinion on the subject - only a biased assumption. I know technical works i have done it so keep your pants on i am NOT saying your way is rubbish. If you can't have an open mind to this discussion then its best you just keep your opinions to yourself. I have been around long enough and have experience in both areas to have some insight into whats being discussed here. I am happy to have an adult discussion about this but i am not interested in talking to people who assume any opinion that it different to their own is somehow ego or being narrow minded.
