technical Analysis - anyone follow it?

[Trader333]

Mombasa,

I am sorry I dont have a link. I have nothing to sell and the spreadsheet was just an example of how TA can work. To be honest I wouldnt be able to remember the exact parameters without going back and checking over the work I did as it was over 2 years ago. The other issue here is the intra-day drawdown which is very high and for that reason I wouldnt trade it.


Paul

 

[Bigbusiness]

Thanks Paul,

I will have a look at the spread sheet.

BB

 

[reactor]

the investment banks are market makers. they make a risk free profit from the spread of the bid-ask as they are obligated to buy and sell. normal people can only do one side of a trade at a time. they don't need to know where the market is going as they will always make a risk free profit no matter what happens. that's why they don't need TA.

 

[Glenn]

My explanation of TA, which I use without FA, is like a 50 year old car that frequently breaks down and can never be improved to stop that happening.
When everything is going fine it gets me to my destination.
Most of the time it doesn't - something goes wrong. A lead comes loose, there's dirt in the carb, the dynamo isn't charging the battery, the voltage regulator is sticking etc etc. So I cut the journey.
It doesn't matter a bit.
I have used TA and nothing else for years and firmly believe that it only works less than 50% of the time. More like 30-40% as a generalisation.
TA is an old car which you have to nurse. It can start a journey ok and then let you down more often that not.
So what's the key to success ?
First accept that you will be stopped out more often than not and learn to live with that forever. It must become part of the routine.
It's not a failure in you or the TA, it's just the way it is.
You have to accept that and learn how to deal with it.
Every time you are stopped out is a success, a positive thing.
Applaud yourself for doing it and move on to the next trade.
If you can't do that, forget the whole thing and do something else.
When you get into a good trade you have to learn how to manage it. It's a moving feast. You must learn how to get a high ratio of reward/risk in your favour regarding initial stoploss and exit point. The TA helps you do this, not just by getting you in in the first place, but by giving you an unfolding scenario which you have to manage as it goes along.
Be patient. Bigger wins take longer to happen. Charts don't move in a straight line. You need to play them out, otherwise your small wins will disappear under a pile of small losses simply because of the low reliability.
If you can't find and operate a system which gives you 2, 3 or 4 10-point losses for every 100 point gain, then in my opinion you are doomed to fail. There may be a few exceptions to this, but if so, I think they just got into a strong market for a while.

If TA was as reliable as many would prefer, then these internet Boards would be empty because everyone would be raking in the lolly and not bothering to chat.
Life is just not that simple.
Can you imagine yourself saying "Yeah I get stopped out maybe 3 times for every good winner. Just bought a McClaren F1" ?
Way to go, bro, imo.
Glenn

 

[cassiopeia]

A lot of the confusion in TA is due to the definition. For example perhaps you identified a break in a downtrend using TA (say by drawing a trend line and confirming the break with a double bottom), then you went long and followed the trend up until a break in the uptrend. Could you then say you have used TA succesfully to make a profit?

Most people would say yes of course. However closer examination would probably show that using a simple moving stop of a similar size to the double bottom would have yielded an equivalent or even better result.

Further examination still may show that drawing similar trends with confirmation points would yield a lot of false entry signals elsewhere on the chart whilst using a basic money management technique of running profits and cutting losses may yield similar or even better results. Have you never noticed nearly every time you have simply run profits there is a trend there even though you may not have used it!

So it is difficult to seperate the techniques of TA, money management and other similar methods. The methodologies overlap and we may well be attributing one thing to something else. However, whatever method you choose the markets do not follow a random path and profits can be extracted from examination of the price action alone.