If by subjective you mean insights and intuition developed and honed from experience, sound advice from others, experiential and empirical knowledge and hours of trading time, then I’d be happy with 100% subjectivity if it did the job. At my current level of experience and knowledge, I’d be more comfortable with 0% subjectivity. I even need a moving average to tell me the price has a slope to it. Objective techniques with an empirical basis for triggering trading events such as entry, exit, scale in, scale out would seem the most logical and sensible approach to adopt as a beginner. The balance perhaps gradually allowing grater input from the subjective side depending on those factors I mention to above as my experience increases.
I think everyone comes into trading wanting it to be objective. A lot of people from engineering backgrounds approach the market this way and some go to great extremes to 'solve' the markets using objective analysis.
I have yet to meet a profitable trader that is 100% objective. I think the issue people have with subjective analysis is that they associate it with randomness and with having no rules. I don't think this is the case.
I don't personally think 100% objective trading is possible for a retail trader. If I did, I'd be trying to write a computer program to trade whilst I sat on the beach.
You do raise an interesting point about learning though. It would of course be ideal to have a 100% objective method whilst you honed your skills. I just don't think 100% mechanical methods exist in the retail world.
What I think you need to do is to take leap of faith with something that has a very large subjective element and then just stick with it until you get good. This is what prop traders generally do, although their leap of faith isn't so big because they are in a professional environment.
Many retailers just jump from one thing to another and give each thing a very short amount of time. You can't blame them, they don't generally have a good source of knowledge. It's a bit like someone saying "I'm going to be an athlete" then trying javelin for a fortnight, then running for a month, then swimming for a week and still thinking they are progressing.
None of the factors such as technical levels or indicators are ever cause, they are always the effect of actions taken in the market. When I have used terms such as ‘reaction to’ and ‘bounce off’ the moving average or pivot levels, I have made clear there are teleological in nature and convenient models of what is occurring than there being any physical reality between them. The only cause that there can be, especially in the forex market, is the price being pushed up or pulled down by large volumes of transactions either from individual institutions attempting to work a single or aggregate customer orders, Institutions acting on concert to news or scheduled data release events, or the aggregate of large numbers of smaller players in that market acting either randomly – which will if it is genuinely random cluster and therefore appear to be less than random, or in tandem to technical levels which are co-located coincidentally or otherwise across a number of trading timeframes.
I don’t even see how the normal economic factors such as supply and demand can apply theoretically specifically with regard to forex. For most purposes, surely any individual currency can be considered as effectively having unlimited supply, so the movement across currency pairs must I believe be purely a function of the buying/selling pressure (volume of transactions) inherent in the process of moving large client orders or the equivalent large orders as an aggregate of smaller players. If bank A is aware bank B needs to buy £100m and sell the equivalent US dollars they will each be working against each other to make the spread: Bank A trying to make Bank B pay as many US dollars as possible for each £ and Bank B trying to as quietly as possible do the opposite. I understand there is also significant commission over large volumes and banks have been known to work in concert to push the price around simply to trigger buy/sell levels and generate commissions off their own client orders. If these are the genuine causes of fluctuations in currency pairs, then this activity and knowledge is well protected from the profane i.e. retail players. I am sure there are many factors involved in the ‘cause’ and look forward to learning them all.
I appreciate price is the fundamental entity on the chart and all other indicators and levels are derived from it (and possibly also time and even volume at a pinch) and even the price is not the cause. Price can’t cause price, it just is.
You have said it yourself. You are studying cause looking for effect. You are almost there but could spend a long time still not seeing it. You are putting things on the screen and expecting these things to become effect, even though they are generated by previous cause.
I'm not even talking about fundamentals to be honest. I tend to stay away from that stuff entirely. The futures markets I trade ARE used by long term players establishing positions. On the whole though, the majority of trading is done by short term speculators who are doing exactly the same thing that you are doing - trying to guess what everyone else is doing.
The problem though - is that there's different levels of directional speculator. Consider the ES
There's the bottom rung - a guy that doesn't even know there's a game being played.
Then there's the more savvy traders that know the dance and how the game is played.
Then there's the savvy traders that know the dance and how the game is played and who make money from it.
Then there's the larger traders who push the market around at opportune times gaming the market and who generally speaking won't take each other on. Not sure if it's myth or not but for the ES, there's said to be just 5 or 6 guys responsible for most of the volume.
And I am sure there's a whole bunch of other types too...
Different markets move in different ways. The ES and a couple of Eurex markets suit me because they get played in the same way. Other markets - well to be honest, I really find it hard to get motivated.
The "Game" is the cause in the short term. Not knowing there's a game being played is problematic.
And the "Game" is not manipulation either. No-one is in control of it but certain things are expected to happen at certain points. When it does - lots of people jump in. It's more like knowing when not to fight it.
And BTW - none of this needs any indicators!
