Jump to content
Sign in to follow this  

Technical Trading is not Trend Following

Recommended Posts

I have started this post for the likes of @Mercury and @Caseynotes, though all are most welcome to participate and contribute. 

One could argue that 'Trend Following' is a form of Technical Analysis. However, it is important to note that 'Trend Following' is reactive technical analysis rather than predictive technical analysis. Things like Elliott wave theory, Gann and RSI are types of indicators that try and predict the markets. None of us have crystal **** and none of us can predict the markets. Trend Following allows you to merely react to price behaviour.

More important than technical analysis is a solid and sound trading system. I am just wondering if @Mercury you have read Market Wizards and New Market Wizards? These are real trend followers who have been very successful and they simply do not rely on Elliott wave, fibonacci and resistance. 

Technical Analysis including Elliott wave, Fibonanni retracements, support and resistance are all predictive indicators. Trend Following is reactive. There is a difference. I would encourage anyone who has not read the books I have mentioned to do so with an open mind. Trend following totally changed my way of thinking about trading. One must have a solid and sound trading system. This must have rules and they must be followed with discipline. This is key to successful trading and you only have to read how the real trend followers made their millions to understand this. 

  • Like 1

Share this post


Link to post

Very happy to discuss various methods that are out there @TrendFollowerbut let's see if we can agree one thing up front, or there is really no point in continuing this thread topic.  There are very many methods out there and they can all work in the hands of the right trader (that is a trader who has the experience and has practiced his/her craft to the point where they really know their method in the context of any particular market they may be trading).  I am not seeking to advocate my method over anyone else's, I am only seeking to offer up trading ideas for comment, perhaps especially if people see it different.  I am not asking for a critique of my method, if you don't like it then don't read the posts, NP.  Your post seems to suggest that Trend-following is the only credible method, that other techniques are spurious or worse.  This may be the case for you but I for one could not opine on a method I had not used.  I could only say, it is not for me.

To answer your question, I do have a copy of Market Wizards.  I also have Trading for a living, diary of a professional commodities trader and have read Robert Prechter, James Rickards, Daniel Kahneman, John Burford and various financial markets history books and economics texts.  I do not know how anyone can purport to call themselves a trader if they have not researched the topic well and then picked a method and, as Caseynotes says, practiced it thoroughly.  It will cost time and losses to learn, there is no short cut.

A few thought on your post then:

  • Trend following is absolutely technical to my view, the only different method is fundamentals based (and or news based) trading but even with this most traders still use some technical indicators, be it MA, Price action or what ever (and yes I see price action as technical, the candle types and formations are technical indicators)
  • You seem to think TF and the kind of TA I do are mutually exclusive but nothing could be further from the truth.  The whole point of my method is to get in early on a long move and stay in, this is why I do so much analysis around scenarios, road maps and turning points.  This is trend following, the only difference is I use road map projections AND price action not RATHER THAN price action.
  • You seem to see a difference between TA and trading methodology (or system) but for me they are two sides of the same coin.  My analytical techniques identify trading trigger point, appropriate stops levels and exit points and form part of my rules set for entering a trade.  Therefore my TA IS part of my trading system, along with money management, in flight trade management and risk management.
  • A wise maxim in trading circles is " the trend is you friend..."
  • "Until the bend in the end..."

 

 

  • Like 1

Share this post


Link to post

@Mercury, I agree with your first paragraph so yes we can agree that upfront. I also agree with your second paragraph and could not have worded it better.

The point I was trying to make but maybe not made it well is that Trend Following is 'reactive' and Technical Analysis using the indicators you use are 'predictive'. That was the key point I was trying to put across. 

I must admit I do not understand your 'Road Map Projections'.  Is this predictive analysis? How can one predict the future possible road maps? There could be several potential scenarios that play out or even one that we do not even consider or think of. None of us know what is going to happen in the future so how can one implement that into the trading strategy to make it effective?

I accept many will see flaws in 'Trend Following' and may disagree with my thread on that subject matter which is fine. There may be better strategies to adopt.

You state you get in early on a long move and stay in. I do not get in early on as I wait for a trend confirmation using moving averages. You stay in, well I do too until that trend reverses and my stop loss triggers in or if the position is in profit then my trailing stop executes. I remember you stating you set tight stop losses then how would you be able to stay in? Do you switch like me into a trailing stop or do you manually keep moving your stop losses as the trade moves in your favour?

I think we agree on quite a few points but it is clear that we both have differences too. I am not suggesting I am right or you are wrong and it is fine to challenge one another and have such differences. It can actually be quite healthy and improve both of us. If I don't understand something then I will ask like for example your road map projections. It is not something I use in my trend following trading strategy as I am not concerned about events in the future. I am concerned about the live price action now. I keep things very simple and there is nothing complicated in my trading strategy.

I have learnt over the years to short as well as go long as in my experience there is an opportunity to profit in a quicker timescale when a trend is identified and a short position is executed. Lumber is the most recent example. Winning percentages over losing percentages are not important. It is the value of your profit over the value of your losses that is the important metric. When I enter a position then I want to stay in as long as possible. There is no fixed timescale. Of course I will have an exit plan before I enter but the longer the trend the better. Lumber was an excellent example of that in recent times. The beauty of trend following is that it can be applied to any asset such as shares, FX, commodities, cryptocurrencies, etc. One must be prepared to sit on the sidelines on sideways trending markets. One must be prepared to go long and short as that way in does not matter if markets are going down or correcting as one can simply short those opportunities should the trends emerge.

I totally agree with the trend is your friend bit. However the bend in the end is quite positive as that would mean a profitable exit and without profitable exits no trader can be profitable!

  • Like 1

Share this post


Link to post

Trend following is something near all traders try to perform in order to capture as much of a move as possible, even day traders and even outright scalpers will try and stay in a directional move for as long as possible. Trend following needs remarkably little actual TA, you need some sort of indication as to there being a trend and a selective indicator to use to mark an entry point (such as simple price action), after that you are trailing a stop until stopped out.

If you are looking at a chart you are already using TA. One of the reasons I have less TA on my charts now is because having used indicators for so long I know where that are anyway. I also found out when they got in the way and when not to use them, they all have their faults and can mislead frequently, and they can't give pin point precision except by chance because the market just doesn't work that way.

As was my assertion that started this conversation in the Oil wti thread, most new traders think indicators and TA are the be all and end all but in fact they are further down on a list. I have found over time that reading the basic flow of the changing chart structure, gauging the rhythm of the auction and keeping an eye out for new market drivers is more reliable but a skill that needs to be learnt.

 

 

 

  • Like 1

Share this post


Link to post

I find a moving average / Bollinger Band middle the best way to see the trend. It also assists in entries & exits

Capture ma.PNG

  • Like 1

Share this post


Link to post

Fully agree @Caseynotes on the indicator point.  I don't really use them at all except as "comfort" for a set up.  That is to say I like to see oscillators aligned to my road map projections (let's agree that they are projections @TrendFollowerof possible ways the market might go rather than predictions.).  So if all the technical indicators in the world cannot act as a trigger for a trade (I'm sure there are some who would disagree and that is fine but all the successful guys I know don't really use them) then what can?

With Caseynotes, Trendfollower and myself there are already 3 quite different styles and methods on the table here.  I am not sure what type/style @elleis using but I agree your example on trend recognition.

So rather than making any comment on what others are doing I will attempt to walk you through what I do@TrendFollower and more importantly why.  As you say there are probably more similarities that apparent at first glance.  And just as a preface I would mention that I have tried several methods before fixing on the one I use.  I use it because it suits my natural mentality and how I want to operate, "know thyself!".

First off I need a marco view premise on what is going on in the market I want to trade, what I call the key drivers, and how it relates to other markets.  This I get in 2 parts: basic high level fundamental market factors (e.g. why I think stocks are about to hit the buffers and how they rocketed so much, say, since the Credit Crunch); and Charting techniques on large time-frames.  The former we can argue til the cows come home and have many threads on it so let's focus on the latter.

I start with the Monthly or weekly charts. Let's look at Gold as we have been discussing that elsewhere.  In this case I will start with the 3 monthly chart to fit the entire history available:

  • Trend-lines show a possible long term channel, very wide
  • EW theory shows the market is in a potential wave 4 correction, which wound indicate another strong rally up to come
  • However this is so big picture that at this point in my analysis method I can't make any fixed determinations (I want to avoid biases) so I see 3 possible scenarios:
    1. As suggested above, a major rally to come
    2. A further drop, maybe down to the LT trend-line to complete a Wave 4 and then LT rally
    3. A break through LT support into a Bearish move (to where I have no idea at this point)
  1. XAUUSD-3-months_eg.thumb.png.892550bf4ab4354ad2e4c63002b7a8ee.png
 
Next step is to zoom in a bit to the Monthly (often I start with the Monthly then zoom to the Weekly).  Here I am looking at price movement since about 2000 (the big wave 3 [red label] and current retrace).  I have annotated the relationships with other markets, as I see them.  I note that Gold fell during the Credit Crunch and then rallied hard along with everything else until 2011 when it topped out with other commodities like copper and Oil and went into a Bear period while stocks continued in Bull market.  I ask myself is Gold acting like a commodity or a store of value?  I think the former at present but that could change if there was either a major recession (whether in a deflationary or inflationary fashion - both these economic forecast are out there...).  This is an interesting aspect for me because whether the next cycle turns out to be inflationary or deflationary could have distinctly different impacts on commodities in general but for Gold I think under either scenario a Bull phase is most likely as Gold returns to its age old utility as a store of value, especially in uncertain times.  From a technical perspective the wave 3 (red) contains a 1-5 (purple) count, which fits Elliot Wave Theory (EWT).  The bearish move to Dec 15 retraced to just below the Fib 50% and turned on a nice LT zone of support and very strong Positive Momentum Divergence (PMD).  The retrace was in an A-B-C form with the final wave C being a 1-5, again consistent with EWT.  However the A-B-C is similar to the 1-3 phase of a longer 1-5 sequence so I can't yet rule out a further bearish phase.  I need other criteria.  After the Dec 15 turn we have seen a sharp rally to Fib 38% off the 2011 highs then a retrace, rally, retrace in an effective consolidation phase.  The second retrace hit the secondary LT trend-line, which has a lot of touches and is consequently a strong supporting trend-line.
 
XAUUSD-Monthly_eg.thumb.png.d3b3262b1fc8ace2193b082c50161616.png
 
  • Like 1

Share this post


Link to post

Next up is the Weekly chart and a further zoom in.  Here things are getting more interesting from a technical analysis perspective.  Price has been contained in a consolidation phase between the LT trend-line and an upper, almost horizontal line forming a Triangle.  In addition there is a possible Head & Shoulders formation with that upper Triangle line also being the Neckline.  This is a Bullish set up if the neckline is broken in a rally.  After the Nov/Dec 15 turn there was a strong breakout of a Triangle formation and a rally up to the Fib 38% in a 1-5 wave form to July 16.  This fits more with a Wave 1 than a Wave 4 so the Nov/Dec 15 turn is more likely to be a Wave C than a Wave 3.  The market then retraced all the way to retest the previous Triangle line at the Fib 76% (very precise and a great Long opportunity).  The retrace was in an A-B-C, which fits a wave 2 retrace.  The next rally was not clear in EW terms so no real further insight there but this is common inside a Triangle formation so fits that at least.  The Jan 18 - Aug 18 retrace was in an A-B-C from so supports a wave 1-2 structure (pink labels) and is consistent with the LT rally scenario.  The wave 2 (pink) turn point occurred on the LT trend-line with a pin bar spike through the Fib 62% level and then there was a small additional 1-2 move, also turning on the LT Trend-line.  Note: Stochastic and RSI indicators were over sold at  Purple 2 and Pink 2.  That's all I have on the Weekly for now so I have to zoom in again to the Daily.XAUUSD-Weekly_eg.thumb.png.41595de336d59a00771e28bb399954b8.png

Share this post


Link to post

On the Daily Chart I am looking at the Pink 1-2 retrace where I can see an early A-B and then a strong bear move in wave C to Pink 2.  There were 2 great Shorting opportunities on this move, one on the small 1-2 retrace after the double top and the other on a breakout of the Pennant formation.  The move down was contained within a Triangle formation (Blue lines and terminated with a pin bar at the Fib 50% and LT trend-line with PMD and Stochastic & RSI coming out of over sold (very accurate trend termination criteria).  Now I was looking for a breakout of the Triangle into a rally.  After a short period of consolidation in EW 1-2 format, with another turn on the LT Trend-line and then another small 1-2 retrace, again turning on the LT Trend-line, we got a fast break through the Triangle (Long opportunity).  There was also inside bar price action off the Wave 2 (green) turn, also bullish.  But markets don't move in straight lines, as we all know, and there is a lot of retrace action before a major rally gets going.  In fact if there wasn't I'd believe the rally less.  Sure enough we got another retrace recently after a pin bar failure to penetrate overhead resistance (Brown 1).  This occurred with NMD so I was fairly sure we would get a retrace.  So what happens next?  Either the 1-2 retrace is done, in which case we should see a break through resistance levels and higher highs OR the retrace is not yet done and we will see a fall back to test the Daily Triangle breakout support zone.  Of course the further drops scenario from longer term charts remains a possibility.

XAUUSD-Daily_eg.thumb.png.91c0f2c2e84605f5285006478fdb03f0.png

To assess the near term price action I look at the 4 hourly and 1 hourly charts (not always both).  I rarely use anything lower than 1 hour but sometimes use 15mins to test small retrace form from an EWT perspective.  Here I will just show the 4 hourly for illustrative purposes.  The recent rally that broke through the Daily Triangle was in a 1-5 form, which support a Wave 1 labeling for the recent top and turn.  The drop down was in one wave, which is possible for a retrace but not classic so my preferred scenario is for a second drop to complete an A-B-C retrace.  If this is wrong then any breakout through over head resistance is a Long opportunity and I am already Long from the Triangle Breakout so either way I am fine.  On the 4 hour chart an additional chart formation is apparent, another Triangle (Pink lines).  This cannot be ignored but holds less weight than the proven Daily blue line and Monthly LT trend-line.  The drop down to Wed midday last week (Brown A) hit the Fib 50%, which is a common retrace turning point so could be that the next rally phase is on.  However the rally late last week has stalled at the Fib 76% and Silver is also stalling and apparently turning at resistance (looks like it might head back down for another consolidation cycle).  So another leg down is on the cards if this resistance zone holds.  If that plays out then I am looking at a drop to  retest the Triangle breakout zones (and apex of the 4 Hour Triangle (pink) around the Fib 62% as the most likely retrace termination point, but can't rule out another test of the LT trend-line).  At any turning point I would be looking for significant support zones, PMD, Oscillators over sold and then price action bounce away as confirmation to go Long.  I place stops just below the turn as any reversal negates my trading premise (scratch quickly and reassess).  In this way I might take Longs at several likely turning points until I hit the right one (or decide an alternative scenario is in operation.  This is fine for me as my losses are very small and when I hit the right one it more than covers.  Once I am in on a good trend I switch to a pyramiding strategy and manage the positions along the trend channel (effectively trend following).

XAUUSD-4-hours_eg.thumb.png.2f42dc647839d78fd1def93f868f2677.png

 

So in summary then, I use extensive chart analytical techniques (combining classic charting with EWT and Fibonacci retrace)  plus supply/demand type levels of support/resistance (which often seem to coincide with Fibonacci) plus big picture fundamentals to create plausible road map projections.  These are not predictions or forecasts as I don't say they will happen I say they might.  If I have analysed it well enough one of my road maps will be followed.  I remain open minded about which until I can be more definitive (e.g. if Gold breaks out of this consol and through the neckline and Fundamentals support the move then I will declare the big rally on, but we are not there yet.  I may even have contradictory trades at key trigger point until the market reveals itself.  I only use technical indicates as support for key turning points.  I use levels, Fibs and Geomertic pattern/trendline break through as triggers fo trading but only if price action conforms.  The only thing I have to watch out for is retesting of the trading zone, but EWT helps me here as it is all about assessing the rhythms of the market.

 

Share this post


Link to post

 @Mercury, thanks for this, there is a lot of interesting applied hard work here though it's all in a same vain, if it works for you fine but the thread is not about burying yourself deeper into TA but rather trying to extricate yourself from a contradictory debilitating  tar-pit of TA hell, especially as indicators are only an adjunct to chart reading and by no means the most important part.

Share this post


Link to post

If you are thinking that TA is a free 'all you can eat' smorgasbord and that more is better, you will fail. If you are thinking TA is the most important aspect of trading, you will fail.

For every level of TA you add to a chart you are adding yet another layer of contradiction and confusion.


Trading is not an intellectual problem, it cannot be solved by finding an intellectual solution. Issac Newton famously failed at trading and gave up precisely because of this. He could not envisage any problem as not being an intellectual problem, the solution must be found if he just kept digging. What he found was himself trapped deep in a tar-pit of hell. Not being able to think any other way he had no other choice but to give up.


Famously many great traders on the old LSE were ex street market barrow boys, they were not intellectuals but they knew how to trade. If you create a system so arduous you can never actually strictly adhere to it you will end up making constant mistakes. Barrow boys knew to keep things simple.


If you want to learn to trade buy a copy of 'TA for Dummies', find simple strategies to test, pay the 99 dollars for an MT4 simulator and practice.
 

Edited by Caseynotes

Share this post


Link to post

And yet these days the people who make money int he industry are the people who program and deploy computer trading.  Harvard and Yale grads with computer science backgrounds not the barrow boys of the 80s.  Well, well...  I guess we like to believe what fits our world view...

Share this post


Link to post

@Caseynotes,

You do make some important points, in fact crucial points. I know many people who rely so heavily on technical analysis that when their trades do not succeed and they just cannot comprehend why as they think they have a given right to a profit when using all the technical analysis tools they have learnt. I make no bones about my trading plan and strategy which is that it is very simple. Having a more complicated trading plan and strategy does not necessarily lead to more successful trades and bigger profits. I think for new traders it is important to test and practice several different trading styles with different rules and finding one that you can execute with a good success rate. You can always then tweak it and adapt it as necessary. Trading plans should not be fixed. They should evolve depending on market conditions and your own conditions. 

I have been investing and trading for many years now and experience plays a vital role which you can only gain by actually investing and trading your own capital. I have made errors in the past and I think I mentioned it in a previous post my Natural Gas trade many years ago and the losses I made on that trade. It taught me some very valuable lessons. One of them was never to trade against the trend no matter how strong the fundamental story is for that asset.  Ignoring the media 'market noise' as I call it is crucial. I read investing and trading news daily and learn a lot information daily. However, I never use it to make an entry or exit in a trade. Price action alone determines this.

I follow price action almost 'religiously' yet I do not give too much emphasis to technical analysis. Road maps of the future are of no interest to me and should absolutely not influence me in my trading decisions. They may have a role in my investment portfolio but to me that is all about creating long term wealth and buying regular, holding and investing more on any dips/corrections. I can see a place for road maps in my investment portfolio but for trading absolutely not. Price behaviour alone is the key metric. I use moving averages and keeps things very simple. My decision making is kept very simple and my rules are based on trend following principles that I have slightly tweaked to suit my personality and psychology.

I have stated this in previous posts but it does not matter if out of 10 trades you make losses on 7 of them and profit on only 3 of them. Yes it may give you a trade success rate of 30% and trade loss rate of 70% but if the profits you make on the 3 winning trades is far greater than the losses you make on the 7 losing trades then that is the key. Cutting losses quickly using effective risk management (stop losses) and letting your winners run and only selling when the trend reverses (trailing stop) is crucial in trend following. I appreciate it is not for everyone but for me I am still here and still trading after many years using such a philosophy. I have seen many traders come and go trying to be very clever with technical analysis and they could barely last a year. 

Edited by TrendFollower

Share this post


Link to post

So @TrendFollower, I was minded by your posts to take out my well thumbed copy of Market Wizards and check a few facts.  Now before I share these with anyone else who might be persuaded by you tirade against technical analysis let me say I don't mind at all that you do what you do the way you do it, so I'm not trying to win an argument here, merely to point, using your own resource reference, that there are many ways to be successful and indeed that to be successful long term a trader may need to adapt his/her method as market dynamics shift.  I would say to not be open to this is to risk a Darwinian extinction event.  That said, "if it ain't broke, don't fix it".

Quoted from Market Wizards:

"In my conversation with Kovner [Bruce], I was struck by the immense complexity and scope of his analysis... ...Clearly, Kovner's unique synthesis of worldwide fundamentals and technical analysis is hardly translatable to the average trader." - JD Scheager (author of Market Wizards)

Question: Do you think that the trend-following system approach will eventually self-destruct..."

"I think that is true.  The only thing that will save [it] is a period of high inflation", Bruce Kovner.

"Systems don't need to be changed. The "trick" is for a trader to develop a system with which he is compatible...  Eventually, as I became more confident of trading with the trend, and more able to ignore the news, I became more comfortable with the approach.  Also, as I continued to incorporate more expert trader rules, my system system became more compatible with my trading style"  - Ed Seykota

"There is no single path to trading success. On the contrary, the trading methodologies employed by the Market Wizards are extraordinarily varied.  The trading approaches used are not merely different but...  ...may even be closer to being a mirror opposite of what other traders do...  Aspiring traders need to understand that it is not a matter of finding that one approach that unlocks the secrets of market success, but rather of finding an approach that works for them because it fits their personality.  The approach of any given trader, even a Market Wizard, can be disastrous for other traders who have different comfort levels and trading styles." -  JD Scheager (author of Market Wizards - what I believe 22 years later).

You can find quotes that support your ways @TrendFollower, I'm sure other can do likewise.  My point is that unlike you I do not say people should read the materials I read and follow my approach.  I do reject the notion that any method is better than another and that Technical trading analytics have not place in successful trading (Market Wizards prove this and as you are an advocate of Market Wizard you must be bound by your own text.  It is all about finding an approach that is compatible and practicing it ruthlessly BUT being open minded enough to adjust when such is indicated and evolve.

If you have found one in the way you identify and chose to enter a trend, and are comfortable with the risk you take, fantastic.  Why must you suggest that my approach is not right for me (or others) just because it is not right for you?

I would also recommend novice traders read Market Wizards but not because it advocates trend following, because it doesn't as such.  Trend-following is only common sense, surely every trader wants to get in on a long profitable run..?  What it does do is outline key concepts and aspects of trading that one must develop and that takes broad research of various methodologies, testing and practice over many years and adjustment as you find new things to add that enhances your ability to develop and edge that fits your style and psychology.

Here endeth (yes it is a real word IG spell checker...) the lesson...

 

Share this post


Link to post

@Mercury,

I have never stated that trend following is the only way and everyone must follow it. It is a system that I follow and yes advocate but I too have tweaked it to suit my own personality and psychology. I am merely pointing out the key principles of trend following and why they make sense to me. It is up to others whether they wish to adopt any of my points or ignore them. They may even wish to tweak them to suit their trading style. 

On the other hand you are demonstrating your 'technical mastery' to the rest of us with chart after chart and the usual - what happens next scenario. I am merely challenging this in a professional manner. It is for you to then demonstrate to the rest of us the benefits of your methodology and how some us including myself may be able to improve our own trading systems to become even more successful and even more profitable. Otherwise what is the point of all these posts from all of us? With the knowledge and experience on IG Community we could all improve and learn from each other and that certainly includes myself. For example, I find a lot of posts from @Caseynotes very useful and interesting. They make me think and challenge my own thought process. 

I have nothing against technical analysis. Some great and successful traders use it. I just could not understand your reasoning based on the information you provided to us all as to why you would not consider a short on Brent Oil based on your own posts and what you were stating. I was not suggesting a short on Oil but your posts and analysis were suggesting it. There was a current downtrend in the price action and your own analysis was predicting a bearish outlook for Oil. Moving averages were also indicating a short trade. I am not suggesting a short on Oil would be a good trade or even a profitable trade but your analysis was pointing in this direction. 

We both have different methodologies and that there is nothing wrong with that. Your system may be far more superior and profitable than mine. I am not suggesting it cannot be or is not. I am not suggesting your way is not right for you. I am suggesting that I myself do not understand the effectiveness and that may be simply just down to me. 

@Mercury, your system does have one big advantage over mine. If your selection of trades is effective then you will get in at lower prices than me on long trades and higher prices than me on short trades. If you are able to execute such trades then you have the potential to catch more of the trend than me as I will only catch the middle part of the trend. However to get in early on a trend there is going to be some predictive and assumption based analysis. Where as I wait for the moving averages to tell me when to enter a trade based on confirmed price action using 'reactive analysis'. 

This is actually good as we are both challenging each other and this is very healthy if used in the correct manner. IG Community is all about learning from one another so that we can all improve and that certainly includes myself. 

Share this post


Link to post

OK I'll take you at your word @TrendFollowerbut it certainly didn't read like that to me.  Many of your comments regarding technical analysis were pejorative in my view, especially as you do not use the techniques yourself.  I do follow trends and what I was trying to convey is that some of your comments in relation to TA are not correct, although they may be valid reasons why you personally are not comfortable with TA (totally fair enough!), but I have nothing more to say on this topic.

Regarding the Oil Short question.  I did answer that in the Oil thread.  The original point raised was whether to go Long at the date it was raised, to which I answered that I didn't think so because I saw Oil going down further before a rally or one sort or another, but I didn't know which yet.  (so far that is exactly what has happened).  I suggested a Long at one of 2 turning point might work (and stated why) and also a breakout of the channel top line was a chance to go Long (leas risk option), but only short term as I felt the longer term direction was down.  The answer then to why not go Short now is because I would only go when all my criteria are met, and one of them is a rally pull back or higher high to set up the Bearish move.  This is based on my analytical methods and my trading trigger system, which are interrelated (which is also why I take issue with your statements about TA being predictive only and not part of a trading system).  If you want to know more about them I can direct you to some literature and website but note I have crafted my own methodology by amalgamating aspects of several others including: Elliot Wave Theory, Classic Charting techniques; Channel (trend) identification; Fibonacci retracement levels; Supply/Demand levels; Judicious confirmation usage of certain oscillator indicators; Commitment of Traders data and Contrarian MSM indicators.  I put all of this into road map scenario analysis at several different time frames and have a set of rules for triggering a trade; stop placement and exit that must be met before I will enter.

Share this post


Link to post

@Mercury,

It is fine to have different views and that is perfectly normal. I am a more simplistic trader using price action and moving averages to identify trends to trade within Commodities and Cryptocurrencies. I follow strict rules and apply discipline. You are a more detailed analytical trader who uses all those many technical analysis tools listed above. I am sure you have strict rules and apply discipline. 

For Commodities I will try and establish why the price is behaving the way it is using fundamental analysis but my decision will still only be solely based on price action. The fundamental helps me to understand why the price may moving in the particular direction. For Cryptocurrencies I also do plenty of reading and research on a daily basis so that I am more or less in tune with the latest news in this arena. News release is key when trading Cryptocurrencies but again my trading decisions are solely based on price action.

Share this post


Link to post

It's not a case of being pejorative about technical analysis in general or it's use, it really comes down to a question of 'how' you might use technical analysis, TA is not automatically a force for good, more TA is not automatically better, applying TA to a chart will not necessarily make the price action any easier to understand. In fact many will tie themselves up in knots and be totally mislead by an excess of TA.

Some will find a simple moving average and simple chart patterns are all they need, some may add more but there comes a point where too much information becomes contradictory and confuses the issue and does not do what was originally intended, to provide confluence.

Most will discover what is right for them through perseverance and they will be able to persevere by firstly adhering to the number 1 goal, protect your account.

   

  • Like 1
  • Great! 1

Share this post


Link to post

Which is precisely what I have been saying @Caseynotes but statements are pejorative if they project a prejudiced point of view, especially if they represent that view as truth to others who may not be able to discern the nuances.  For instance, I don't pay attention to news releases or Trump tweets because they at best only produce short term moves and at worst the kind of assessment made as to what has moved the market that are not provable but can get inside your mind and create unconscious biases.  I don't day trade so I don't care about such short term moves BUT I don't deny that they are important to you because you trade very short time horizons.  If someone hasn't ever practiced a thing how can that person opine on it with any credibility?   At most all they can say is that it isn't for them.  No problem.  Even if someone has practiced a thing and hasn't been able to make it work doesn't mean it doesn't work.  For instance I tried day trading in the beginning and if asked for my advice I would say it is the fasted way to lose you money.  But that doesn't mean all day traders will lose, just because I couldn't make it work.  As I have always said, and Market Wizards concludes likewise, trading is about finding the right fit and practicing relentlessly.  I don't promote either TA or my personal method as a silver bullet, there is no such thing.  But many of the claims made recently are just plain wrong.

Never mind, it doesn't bother me.  I post to see if people agree with my trade ideas not my methods.  I do note that there is a distinct lack of discussion about trade ideas (or even directions markets are taking - dare I say trends...) on the Forum, which is a disappointment.

Share this post


Link to post

There is a lack of trading ideas or comments on direction in the community. I only trade based on what I see on the daily chart and my trade could last two or three days or could be lucky and have it run for two weeks. Would anyone trading using any other time frame be interested?

  • Like 1

Share this post


Link to post

@Caseynotes,

Totally agree with your comments. I could not have worded it any better.

At times there are a lot of charts being posted with:

Arrows here

Arrows there

Predictions here, there and everywhere

Apologies that was the poet in me.?

It would be interesting to know how much technical analysis algorithmic 'black box' traders use. They use 'speed' as they're 'edge' and can enter positions microseconds before others. I would be interested to know if their computerised system uses many of the technical analysis theories and whether it is programmed within their computer system?

Would anyone know? How much technical analysis would such traders use?

 

  • Like 1

Share this post


Link to post

We are getting closer to home, I can just feel it. Yes, there are hardly any charts posted anymore, I wonder why that is? It may have something to do with the fact they will automatically be seized upon and compared and critiqued against other charts, * looks down at own chart with it's single sma *, hmm- post this, perhaps not. I realise it's 'each to his own' when it comes to charting and there is no single 'right' way and interaction is just meant to stimulate debate on charts and price action but for some reason it's not, for some reason it's just stimulating defensive debate on methodology. 


I happily keep posting charts and they don't even have an sma on them, oh dear. But then I know and am signaling what's important, two things regardless of time frame. Are there any important levels ahead or behind and the basic fact that price just keeps grinding on until it doesn't. When it comes to looking to the future we all have blindfolds on. Remember those funny experiments with chimps picking stocks, same could be done with charts. That would be an interesting experiment, match a chartist's projections (even with multiple ones) with a dart thrower and see which chart plots come out closer. 


Elliott Wave is an interesting study here, there are of course 50 euro a month subscription services that provide professional drawn up EW charts, but wait a minute, why are these people stuck in an office churning out charts, surely they could be making millions trading off them - curious.


It may be because trading is not a technical exercise nor an intellectual one, charting is not trading, TA is not trading. Charts and TA are an adjunct that may be of some use or none. Not prejudicial nor meant to be pejorative, just plan fact.
 

  • Like 1

Share this post


Link to post

No it is your opinion not fact, based on a lack of understanding or inability to do it yourself (you don't want to that's ok).  Well, well, after all this time you haven't change a bit, you like to be top dog...  And you are still here, not sipping cocktails on an exotic beach somewhere but stuck glued to your screens all day.  OK I tried to be live and let live about it but you don't want that.  You want it your way or your world view does stack in you mind.  I'm fine for you to do what you do, it doesn't make me feel like mind is invalid.  You seem unable to do likewise, I wonder why...

No don't bother answering, that was a rhetorically question.  Finally I have nothing more to say.  No point in "discussing" with people who have closed minds to the topic.  

Share this post


Link to post

Ha, actually I sit in front of the screen all day because I really enjoy it. As for wanting to be top dog that doesn't really fit as I'm not concerned with critiquing everyone else's input all the time, people can post what they like I really don't care, I just post what's of interest to me though occasionally wrong mindedness does draw my attention.

With regards to TA and charts there is not much I haven't seen and considered and I know it is a mistake to believe therein lies the answer, they are just tools. Price does not have to obey any rules whatsoever.

Of more importance is the need to become very good at risk aversion and risk taking and to be able to flip between the two at ease. It's not a natural talent as they are opposites so must be learnt.

That skill can't be learnt by using a purely technically driven approach, no matter how much they might 'practice' TA. Knowing this and trying to explain it to others I may well save them a lot of wasted time.

Share this post


Link to post

I try to keep it as simple as possible - you won't see a lot of "stuff" on my charts

Capture hs.PNG

Share this post


Link to post

New trends ( even short term ones) often start with a "head fake"

Capture fo.PNG

Share this post


Link to post

@elle, not heard of a 'head fake' before, any special attributes? or is an aka for stop run or long liquidation (opp of short squeeze).

Share this post


Link to post

Keeping it simple with break outs and levels and ma. You cannot predict the right hand side but you can use the last to "best guess" the immediate future.

 

FTSE 100_20181203_13.19.png

EUR_JPY_20181203_12.38.png

Wall Street_20181203_18.58.png

Share this post


Link to post

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
You are posting as a guest. If you have an account, please sign in.
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Sign in to follow this  

  • Our picks

    • Post in Indices
      "UK retail sales at 9:30 and US durable goods at 1:30. Strong bear day yesterday though only Nikkei tested key support levels." Stay up to date on how the indices are moving and have your say.
    • Post in Successful strategy?
      Analysis of 43 million trades by DailyFX showed that 61% of trades are actually profitable (when looking at EURUSD specifically). Read more about that and check out their Podcast here. Have any questions? Ask away.
        • Thanks
        • Like
    • Brent Crude rally ends, time for the big Bear!
      "Looks to me like my question as to whether the the 25 April turn was a rally end or a simple retrace may have been answered as Brent price dropped hard through the supporting lower channel line.  I would like to see the recent lows broken to confirm but odds are that this market is now heading down.  Could this mean that Stocks have also topped out?"
      • 8 replies
    • Post in Dax & Dow
      What are your long term opinions on market movements? "As for the Dow above 26k lets rock and roll long. Below 25k time to get more aggressively short in my eyes."
        • Like
    • Post in US 500 - Potential Shorting Opportunity
      What's your trigger for opening a trade? Discuss with others on the Community, specifically about the US500: "I think there's a potential possibility of shorting S&P 500 brewing.  I want to wait to see if the 20 MA does drop beneath the 50 MA."
  • Member Statistics

    • Total Topics
      6,746
    • Total Posts
      31,158
    • Total Members
      40,996
    Newest Member
    marcorosso13
    Joined 24/05/19 14:00
  • Posts

    • @TrendFollower, I've just spotted a mistake in your last post but don't worry, I've put my rubber boots on and gone in and fixed it for you. You're welcome.
    • A list of books on trading strategies with back test studies by reputable traders. Following the Trend – Andreas Clenow Unholy Grails – Nick Radge Dual Momentum – Gary Antonacci Mean Reversion Trading Systems – Howard Bandy Short-term trading strategies that work – Larry and Cesar Building Reliable Trading Systems – Keith F courtesy of Raynar Teo.   
    • 1 hour chart showing a bit of a nod to the downside.  Not conclusive yet but indicative.
    • @Mercury That's a very elaborate way to say, you agree with me. Your Elliot waves always look very cool and as ever great charts.
    • Brent looks to have put in a small rally and bounced back off my alternative channel line, a parallel line off the previous low turning point.  This coincides with support line, now resistance.  The market is now heading down to the 6600/6550 key support zone.  A break here is very bearish in my book.  I have started to pyramid his market.
×
×