TheRumpledOne
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According to history, man was trading long before there were charts.
No B.S. Day Trading
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According to history, man was trading long before there were charts.
TheRumpledOne
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Wouldn't it be more accurate to say that you have not been successful trading technical analysis based methods?
trendmaker
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True, but I wasn't around, then. I need them and I think that most people do, even if it is just to get some idea of what is happening.
DionysusToast
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The use of TA is somewhat an emotive issue.
I personally think that TA cannot be used in isolation but perhaps can be used in context. For instance, at options expiration times, the price of a stock often clusters around the strike price with the most open interest. A TA expert looking at the chart will see support or resistance on the chart depending on the prior action.
Furthermore, the TA person, seeing this support/resistance usually assigns an emotive or supply/demand 'cause' to this price action. In reality what is happening is that a derivative of the stock has actually become the prime force behind the price action.
Without knowing about this, assumptions about that price action are fundamentally flawed.
Some of the 'emotional' reasons for support and resistance are also fundamentally flawed. During the initial stages of the Iraq war, there were some big swings in the US market which appear to be a result of the progress of the war. These swings, when looking at the chart without considering the context, will be seen as support & resistance. I think we could all agree that the emotions in play at that specific time were unique and that those same emotions are no longer at play. So, the 'psychological' explanation for TA working can be shown to not always be relevant. Someone looking at that area on weekly/monthly charts would make some invalid assumptions about those price levels if they think TA is some sort of emotional guage.
Markets are different - Forex has a much larger volume of commercial action than speculative action. People change money on holiday, withdraw foreign currency in ATMs, company to company forex transactions account for a huge amount. In most of these cases, the individuals involved are not transacting to take advantage of future price moves (or lack thereof), they are making transactions to facilitate trade/fun.
The stock market is a finite supply market, derivatives markets are generally infinite supply. I am not sure how this can't change the way a specific market works and how the exact same TA will work across all markets.
So - I think context is the key and most commercial TA systems/books do not consider this at all. Reading the posts of WallStreet1928, it is clear he understands the market, what is happening and what could happen.
It makes me wonder if you could just draw ANY line on the chart, say that this is your technical level and trade that. Perhaps this would create just as much profit to someone that knows the market as a TA based system. Perhaps it's not actually the TA that makes these people succesful.
Proving or disproving that is very difficult though.
I personally think that TA cannot be used in isolation but perhaps can be used in context. For instance, at options expiration times, the price of a stock often clusters around the strike price with the most open interest. A TA expert looking at the chart will see support or resistance on the chart depending on the prior action.
Furthermore, the TA person, seeing this support/resistance usually assigns an emotive or supply/demand 'cause' to this price action. In reality what is happening is that a derivative of the stock has actually become the prime force behind the price action.
Without knowing about this, assumptions about that price action are fundamentally flawed.
Some of the 'emotional' reasons for support and resistance are also fundamentally flawed. During the initial stages of the Iraq war, there were some big swings in the US market which appear to be a result of the progress of the war. These swings, when looking at the chart without considering the context, will be seen as support & resistance. I think we could all agree that the emotions in play at that specific time were unique and that those same emotions are no longer at play. So, the 'psychological' explanation for TA working can be shown to not always be relevant. Someone looking at that area on weekly/monthly charts would make some invalid assumptions about those price levels if they think TA is some sort of emotional guage.
Markets are different - Forex has a much larger volume of commercial action than speculative action. People change money on holiday, withdraw foreign currency in ATMs, company to company forex transactions account for a huge amount. In most of these cases, the individuals involved are not transacting to take advantage of future price moves (or lack thereof), they are making transactions to facilitate trade/fun.
The stock market is a finite supply market, derivatives markets are generally infinite supply. I am not sure how this can't change the way a specific market works and how the exact same TA will work across all markets.
So - I think context is the key and most commercial TA systems/books do not consider this at all. Reading the posts of WallStreet1928, it is clear he understands the market, what is happening and what could happen.
It makes me wonder if you could just draw ANY line on the chart, say that this is your technical level and trade that. Perhaps this would create just as much profit to someone that knows the market as a TA based system. Perhaps it's not actually the TA that makes these people succesful.
Proving or disproving that is very difficult though.
Draw any line on a chart and you must know the direction. Direction is the only important thing you need to know to make money. Seems easy, doesn't it? But some get it right and some don't. TRO uses a line that is cut by price bars several times. He may remember that I supported him many moons ago but, in all honesty, I've never got the hang of much else that he does, although I've tried. Sorry, TRO.
The Expert
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I am some bit confused with your opening line. Are you talking about the direction of the line or the direction of the price? Surely the most important thing you need to make money is the ability to place winning trades regardless of the direction.
I meant the direction of the price and, also, that the lines were horizontal. Sorry if I confused. I assume that if one knows whether the price is going down , he will open a short trade, and vice versa, therefore he must know, or think that he knows, the direction. Doesn't happen, though, not 100% .
The horizontal line is, normally, at a resistance/support level. I've heard, so many times, how good they are that I don't think it matters a damn where you draw it 🙂 The thing is to have your own rules about them.
The horizontal line is, normally, at a resistance/support level. I've heard, so many times, how good they are that I don't think it matters a damn where you draw it 🙂 The thing is to have your own rules about them.
The Expert
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A valid reply indeed. I am looking forward to discussing this very important topic with you further.
DionysusToast
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Have to agree with Splitlink.
Now - for our experiment - we need 1 TA trader who also understands the markets.
We'll give him a 'doctored' chart but allow him access to his newspaper, internet, TC etc.
Would the TA trader still make money if our doctored chart gave TA signals that were false but drew a line in the sand for them ?
Now - for our experiment - we need 1 TA trader who also understands the markets.
We'll give him a 'doctored' chart but allow him access to his newspaper, internet, TC etc.
Would the TA trader still make money if our doctored chart gave TA signals that were false but drew a line in the sand for them ?
Mr Flibble
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Hello all my first post on this forum so please be kind.
This thread is simply fantastic and I'd like to suggest a couple of things. Any of you that followed MTC or HOME on the LSE or AMD on the NYSE, and these are just 3 recent examples of countless more, after earnings these stocks dived.
AMD posted its first profits for 3 years and the following day it sank like the titanic. Now are you suggesting that these very positive fundamentals drove this stock?
MTC and HOME again posted better than expected results and still went down. I put it you all that in these cases the technicals drove the PPS. Now some may suggest the old addage buy on rumour sell on news but they continued to sink for many days and indeed are still sinking almost a month later.
I'll take the middle road. Fundamentals and technicals both matter. I think Grey would agree with me as he mentioned when and when not to trade based on fundamentals mucking his technicals up.
This thread is simply fantastic and I'd like to suggest a couple of things. Any of you that followed MTC or HOME on the LSE or AMD on the NYSE, and these are just 3 recent examples of countless more, after earnings these stocks dived.
AMD posted its first profits for 3 years and the following day it sank like the titanic. Now are you suggesting that these very positive fundamentals drove this stock?
MTC and HOME again posted better than expected results and still went down. I put it you all that in these cases the technicals drove the PPS. Now some may suggest the old addage buy on rumour sell on news but they continued to sink for many days and indeed are still sinking almost a month later.
I'll take the middle road. Fundamentals and technicals both matter. I think Grey would agree with me as he mentioned when and when not to trade based on fundamentals mucking his technicals up.
DionysusToast
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Welcome to the board !
Are you saying that a few example of positive earning stocks going down proves anything about FA or TA?
Neither technicals nor fundamentals drove this stock. Selling drove the stock. The question is - what drove the selling ?
AMD had more than doubled in price from Nov 2009 until the start of 2010 when it started to move down, along with the rest of the market. The reason for people pulling money out of the markets is not TA, it's more than likely (can't prove cause & effect) profit taking & jitters about a US economy that is really showing no signs of recovery. I welcome a TA explanation for this pullback (drumroll for an overbrought stochastic).
AMD, along with most stocks was in decline when they announced their non GAAP earnings on Jan 22nd. The results were better than earnings estimates. The estimates were that the company would lose 18c per share and it actually lost 5c per share. By no measure should continued losses be considered 'good'. Don't be fooled by earnings & earnings estimates. They are all products of Wall St - a machine designed to part you from your cash.
AMD wasn't the only tech company announcing earnings on this day and the whole tech sector took a big hit that day. Looking at the stock and not the overall market/sector is a big no-no in any method - TA or FA.
Trading earnings is not as simple as good results=price rise, bad results=price falls. This has no bearing whatsoever on the merits of TA vs FA. If only the world and human beings were so predictable.
I would be interested to hear what you think drove the AMD selling and how it somehow proves something about TA.
In that case, why would Grey, in a live trading session, recommend buying an oil stock right after the 10:30 oil inventories announcement ?
Perhaps because he may be open to all things that move price ?
The thing is - Grey is of course 100% right - you can't ignore the fundamentals & that is my point. A lot of TA proponents say you can ignore everything but TA because everything is in the price. The thing is - if everything is in the price then SOMEONE must be looking outside of TA. If future events are known and that is shown in the price, then it follows that those in on the move EARLIEST are those trading on this information, which is fundamental. If future news is already known, then someone knew it & traded on it before the TA traders. It also follows that people that say this are relying on someone else to do the legwork.
In February, there were 5 listed companies who's supply of shares changed, without announcement or news. Suddenly, the float of shares had the potential to increase. Some people know about this event in advance but most do not. Knowing how the market works leads you to knowing about this type of event. If you traded pure TA on one of those stocks, you would not be taking into account the new supply, unless you are expecting everyone else to do that & you to follow their lead.
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The Expert
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I will try and move this discussion on by asking a simple question."What is a rule"?
You have to be kidding me.
The Expert
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Not at all. Why don't you post your understanding and we will see what we make of it.
LittleKnown
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Hahaha, seems this expert is a pi5s taking expert, what a hob nob, expert you tell me something useful that I can use if I want to be a day trader? I am a newbie so something understandable😉
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The Expert
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How about getting off your butt and doing some trading, for it is the only way you will learn how to trade.
The Expert
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I am very serious, but if you do not want to continue the conversation in relation to "rules" that is your choice.
Hey guys, came across this post and thought it might be helpful giving my 2 cents.
I currently trade for a prop house here in London. I also used to work for a large institution as a trader on their currency flow desk for a good stint. I should also add, i'm not keen to get into an argument- this is just my opinion based on a few years of trading professionally. Hope it helps.
There is no holy grail to trading- there is also no right or wrong way to approach the markets. People make money trading purely of Technicals, Fundamentals, reading the order flow. The most important thing to first establish is; what type of trading is best matched to your personality- their niche.
People who have played very intense sports at a high level, people who like to be actively involved are generally best suited to short term trading or scalping. For these people, technicals and fundamentals are not as important. They are in and out of the market looking for small differences in supply and demand and are therefore only really interested in the order book. Reading the ladder. They need not look further than X-trader from Trading technologies to make money. I will add though these guys will usually also have charts up just to see where the market has been in the short term in case their concentration has lapsed.
People who are more thoughtful and more passive are probably more suited to position trading. For these guys, Technicals and fundamentals are more important than the immediate order flow because they are looking to hold a position for a few hours, a day, a week etc.
So you basically need to do some work on both, experience both and establish which style suits you and is your niche.
I would also add that those starting out as scalpers will have a much steeper learning curve because they will be much more involved in the market. They will experience whats right or wrong 50-100 times in a day while a position trader may have to work for six months to get this kind of exposure to the market with the frequency he trades.
my advice is find your niche first, then find what tools are best suited to your style of making money.
I currently trade for a prop house here in London. I also used to work for a large institution as a trader on their currency flow desk for a good stint. I should also add, i'm not keen to get into an argument- this is just my opinion based on a few years of trading professionally. Hope it helps.
There is no holy grail to trading- there is also no right or wrong way to approach the markets. People make money trading purely of Technicals, Fundamentals, reading the order flow. The most important thing to first establish is; what type of trading is best matched to your personality- their niche.
People who have played very intense sports at a high level, people who like to be actively involved are generally best suited to short term trading or scalping. For these people, technicals and fundamentals are not as important. They are in and out of the market looking for small differences in supply and demand and are therefore only really interested in the order book. Reading the ladder. They need not look further than X-trader from Trading technologies to make money. I will add though these guys will usually also have charts up just to see where the market has been in the short term in case their concentration has lapsed.
People who are more thoughtful and more passive are probably more suited to position trading. For these guys, Technicals and fundamentals are more important than the immediate order flow because they are looking to hold a position for a few hours, a day, a week etc.
So you basically need to do some work on both, experience both and establish which style suits you and is your niche.
I would also add that those starting out as scalpers will have a much steeper learning curve because they will be much more involved in the market. They will experience whats right or wrong 50-100 times in a day while a position trader may have to work for six months to get this kind of exposure to the market with the frequency he trades.
my advice is find your niche first, then find what tools are best suited to your style of making money.
