CL Redux
- Thread starter schizo
- Start date
When you enter (or try to enter) a position around news events like the Philly Fed (or NFP, FED meeting, etc) do you use limits, stop limits or market orders going in? Curious because I have been using bracketed stop limits above and below, and while sometimes I get burned, most of the time becomes a good directional trade, even if it is only for a few minutes.
On a related note, does anyone rely on a limit order to enter a trade rather than market?
Exactly, that's what my point is (although I did not make it clearly
). We develop a our trading system on clean charts. entry exit rules etc. But when it comes to the crunch you have everyone rationalizing the trade on fundamentals which leads to trading with the sheeple. Unless fundamental analysis is your thing.You see everyone thinks that they can learn technical analysis and when the fundamentals back up their ideas/trades, they will take the trade, which often leads to a failed trade imo as you need the contrarian psychological factor, for the best ones.
It was only when I said to myself - hey I dont mark up these charts with all the days events and news, for when I review them at a later date, did a light go on about how much fundamental bias was effecting my trading.
To answer Picaso's question - I have no idea, but your logic sounds correct
From the The New Market Wizards Jack Schwager : AL Weiss
==== Why have you chosen a purely technical approach in favor of one that also employs fundamentals?
====
Many economists have tried to trade the commodity markets fundamentally and have usually ended up
losing. The problem is that the markets operate more on psychology than on fundamentals. For example, you
may determine that silver should be priced at, say, $8, and that may well be an accurate evaluation.
However, under certain conditions-for example, a major inflationary environment-the price could temporarily
go much higher. In the commodity inflation boom that peaked in 1980, silver reached a high of $50-a price
level that was out of all proportion to any true fundamental value. Of course, eventually the market returned
to its base value-in fact, in the history of markets, I can't think of a single commodity that didn't eventually
move back to its base value-but in the interim, anyone trading purely on the fundamentals would have been
wiped out.
==== Do any particularly memorable trades come to mind? ====
Whenever I'm on vacation, I continue to chart the markets. In the summer of 1990, while on vacation in
the Bahamas, I was updating my charts on a picnic table beneath the palm trees. I noticed patterns that
indicated buy signals in all the energy markets. These signals seemed particularly odd because it's very
unusual to get a buy signal in heating oil during the summer. However, I didn't question the trade and simply
phoned in the orders. Three days later, Iraq invaded Kuwait and oil prices exploded.
==== Why have you chosen a purely technical approach in favor of one that also employs fundamentals?
====
Many economists have tried to trade the commodity markets fundamentally and have usually ended up
losing. The problem is that the markets operate more on psychology than on fundamentals. For example, you
may determine that silver should be priced at, say, $8, and that may well be an accurate evaluation.
However, under certain conditions-for example, a major inflationary environment-the price could temporarily
go much higher. In the commodity inflation boom that peaked in 1980, silver reached a high of $50-a price
level that was out of all proportion to any true fundamental value. Of course, eventually the market returned
to its base value-in fact, in the history of markets, I can't think of a single commodity that didn't eventually
move back to its base value-but in the interim, anyone trading purely on the fundamentals would have been
wiped out.
==== Do any particularly memorable trades come to mind? ====
Whenever I'm on vacation, I continue to chart the markets. In the summer of 1990, while on vacation in
the Bahamas, I was updating my charts on a picnic table beneath the palm trees. I noticed patterns that
indicated buy signals in all the energy markets. These signals seemed particularly odd because it's very
unusual to get a buy signal in heating oil during the summer. However, I didn't question the trade and simply
phoned in the orders. Three days later, Iraq invaded Kuwait and oil prices exploded.
But aren't fundamentals already priced in? It shows up instantly on the chart the moment the news gets released. But then again, the market doesn't always go along with the flow. How many times have you seen CL trade against the negative EIA forecasts? Too damn many.
Hence, it's always safer to see how the market reacts to the fundamentals rather than to jump the gun. By the way, the market reaction is THE technical analysis. You can see it right on the chart.
