Are you good at price action and technical analysis?

[deaddog]

finally, in regards to the market wizards series — they are a fun read but don’t really tell the truth about how those traders actually make money. Tom DeMarks indicator is $500/mo lol, that’s not a “pretty penny” when Point72 has hundreds of analysts (all getting paid 200k-1mm — and guess what, they’re doing fundamental equity research).

Price action on a chart shows what decisions point72 makes as a result of spending all that money. (Not point72 specifically but institutions in general) You can't hide volume.
A retail trader cannot compete with the big boys for research. The researchers you mention make more money in salary than most retail accounts. The retail trader just has to figure out what the big money is doing and follow along.
Watching price tells what the big boys are doing.

 

[SunTrader]

Sees fundamental, has a wet dream ignoring all else that is used.

Likely has PhDgudfanuthin' in real world trading.

Done with the pointless topic.

 

[longandshort]

Price action on a chart shows what decisions point72 makes as a result of spending all that money. (Not point72 specifically but institutions in general) You can't hide volume.
A retail trader cannot compete with the big boys for research. The researchers you mention make more money in salary than most retail accounts. The retail trader just has to figure out what the big money is doing and follow along.
Watching price tells what the big boys are doing.

You don’t know it’s p72, you don’t know if it’s a buy or sell, and you also don’t know if it’s a big trade or millions of hft. Big block trades occur much less frequently than you’d expect, and unless you know the sales-trader who managed it, you have no idea what side it’s on just by looking at the chart.

Traders must build a mosaic based upon the aggregate of all the info they can gather in order to develop a view. Price and charts is not enough.

Say a big fund with a 10yr time horizon invests in a co that needs money to build out a new factory (which will take another 2-3 years to build). The big investor will expect getting capital called over the “investment period” of the firm (firm needs to raise 2-4bb for that factory). If the big investor does a block trade and you see the volume print, and the price breakout you might buy… however, the stock would then be down again (you were compensation for the liquidity the broker provided to the large investor lol), and probably trade negative/flat until more visibility around production from their factory picks up (which will be close to when the construction is done).

So a signal you might use from the charts would result in a terrible pnl due to the time horizon mismatch. Because you choose to be ignorant about what’s happening with the company, you are accepting these risks without any sort of filter. Don’t you think that’s a little silly?

 

[MACD]

What I described are all components of price action. Price Action isn't just looking at bars build on a single TF, it's much more holistic than that - at least to form the distinctions and awareness of high probability vs low probability trade timing and locations.

Concise & Brilliant

 

[SimpleMeLike]

What I described are all components of price action. Price Action isn't just looking at bars build on a single TF, it's much more holistic than that - at least to form the distinctions and awareness of high probability vs low probability trade timing and locations.

Hello Sprout,

Well stated.

 

[Sprout]

Why are you spending time arguing over a hypothetical I presented as an example of the detail I’d need to make a fair test?

The current version focuses on the very short term to answer a very simple question — is price action useful to assess whether the price is going to move higher or lower at the next interval. I understand that this is not a comprehensive test lol. What I don’t get is why you and others are so butthurt and are whining about how unfair the test is, instead of giving me the parameters of what a fair test would look like.

if you tell me what you look at to make a trade, and what your average time horizon is, I’m happy to put together another test based upon that.

finally, in regards to the market wizards series — they are a fun read but don’t really tell the truth about how those traders actually make money. Tom DeMarks indicator is $500/mo lol, that’s not a “pretty penny” when Point72 has hundreds of analysts (all getting paid 200k-1mm — and guess what, they’re doing fundamental equity research).

I don't think you can create a fair test, for the element of time is not arbitrary. Your screenshot chart could be at a moment in time where there is no signal. So at the vary least, having an option of "no-idea"

Traders trade various timeframes and have different trading styles under different market conditions. Even though it is PA, some use intermarket analysis and compare & contrast other instrument's PA before making a trading decision on the one they are trading.

In addition, there are those of us whom use volume and include that in our analysis, others have alternative views of the market offered by Volume Profiles and Footprint charts.

In any case, having RTH of an Index, a time axis, and having multi-timeframes would be a better "test" since including those would allow for better assessment of where price is likely to go in the instrument being traded.

Thinking one can just look at a single TF chart of a random instrument and derive any meaningful conclusion is a beginner's mentality of PA.

 

[trismes]

Hells bells L&S you're making heavy weather of this... do you really want to test this properly? Seems like a foregone conclusion for you right?

But ok, a fair test. Not all TA traders do it by simply gawping at a single screenshot, so the only way I can think of is to rally up the whole of ET, use live calls with SL and TPs (or time of exit), sift by sharpe and sortino, analyse... but then you'd argue that the winners are statistical outliers that you'd expect in any monte carlo distribution, and we've all wasted a biblical amount of time.

There are great fundamental analysts and absolutely useless ones, great quants and useless ones, great chart readers and ... you get the idea.

 

[themickey]

Watching price tells what the big boys are doing.

Not true.
Every trade has a seller and buyer, they balance each other.
A PA trader never knows the reason for a trade, they only assume.
Many a trade, repeating; Many a trade, is like a dummy trade, it heads one way only to reverse.
So which is the true direction, the first push or the reversal?

I'll go on and say this; if any trader (person/human) were to dedicate much time to TA/PA, they will become skilled, but it takes lots of time and experience.
Therefore TA/PA can become valid as a form of making money.

However considering the investment in time and risk, I believe there are better ways of making a buck than pure TA/PA.

 

[deaddog]

You don’t know it’s p72, you don’t know if it’s a buy or sell, and you also don’t know if it’s a big trade or millions of hft. Big block trades occur much less frequently than you’d expect, and unless you know the sales-trader who managed it, you have no idea what side it’s on just by looking at the chart.

I don't know who is trading but I can get a pretty good idea where the price is going. If price is rising on volume it tells me that there is demand.

Traders must build a mosaic based upon the aggregate of all the info they can gather in order to develop a view. Price and charts is not enough.

Why isn't the price chart enough? It tells you how investors are interpreting the information available.

Say a big fund with a 10yr time horizon invests in a co that needs money to build out a new factory (which will take another 2-3 years to build). The big investor will expect getting capital called over the “investment period” of the firm (firm needs to raise 2-4bb for that factory). If the big investor does a block trade and you see the volume print, and the price breakout you might buy… however, the stock would then be down again (you were compensation for the liquidity the broker provided to the large investor lol), and probably trade negative/flat until more visibility around production from their factory picks up (which will be close to when the construction is done).

If what the big investor does is enough to move the market then I follow. If it goes down again I'll get stopped out.

So a signal you might use from the charts would result in a terrible pnl due to the time horizon mismatch. Because you choose to be ignorant about what’s happening with the company, you are accepting these risks without any sort of filter. Don’t you think that’s a little silly?

The problem I have (could be just me) is that the more I know about the company the more biased my trading becomes. All the fundy's suggest that the company will be very sucessful yet the price drops.
As a speculator I'm better off trading what I see rather than what I think will happen.

 

[longandshort]

I don't know who is trading but I can get a pretty good idea where the price is going. If price is rising on volume it tells me that there is demand.


Why isn't the price chart enough? It tells you how investors are interpreting the information available.

If what the big investor does is enough to move the market then I follow. If it goes down again I'll get stopped out.

The problem I have (could be just me) is that the more I know about the company the more biased my trading becomes. All the fundy's suggest that the company will be very sucessful yet the price drops.
As a speculator I'm better off trading what I see rather than what I think will happen.

how do you know that your approach is better than random? iirc you mentioned a 40% hit rate which means your process is actually worse than random... beating random is the benchmark for skill...