Confirmation: Fact or Fiction

L

LivToTrade

You always hear, no matter whether its in a book, seminar, or in a forum such as this one, "get confirmation". The more confirmation the better. I mean, it sounds logical, right? If all roads lead to Rome, get on any one of them, and you're going to be in Rome.

The problem that I have is that I've been trading for years, and that just hasn't worked for me. Now when I see an obvious situation to get long, like for instance the MACD signals a buy at the same time the ma's signal, the rsi is below 20 and its breaking out of a perfect reverse head and shoulders neckline, I want to get short. That's right, short. My contrarian impulses tell me that if a bunch of technical indicators, which are based on past history and not present supply and demand (like for instance, an actual block of orders supporting a price level) I don't want to be in with the crowd of technicians that the mm's are about to rape.

If its obvious, its obviously wrong. The market's not that cheap. But I do agree that confirmation with actual real time supply and demand factors is important(and reading the specialist), however this is not stressed by most books and seminars. But I would like to hear your opinion.

By the way, does anyone know what happened to Cormac, a sage and frequent contributer to this forum. I'm sure he could shed some light on this. Cormac, come down from the mountain. At least send me an e-mail.
 
I find that as I get a feel for trading, I less and less use (or trust) the normal basket of technical indicators (RSI, MACD, Stochastics, etc).

I have come to like, respect and profitably use moving averages, LVL2 and T&S. Combine that with the very simple common sense reading of support and resistence and I'm pretty darn happy.

Show me a Naz stock that's trending (I define that as several failed attempts to break the MA)and let me watch the LVL2 and T&S at the next point of conflict. If I like the way the participants are behaving and I've got some head room, I'm in. I give it a very short leash...it either does the job it's been hired to do or it get's fired.

I haven't had any better success by waiting until all the stars, planets and technical indicators align to provide "confirmation".

There are no shortcuts. There is no magic.

JB
 
this is overanalysis

there are hundreds of indicators and thousands if not millions of 'types' of traders. What are the chances that they are looking at the same thing AND draw the same conclusion?

if this were the case, why is there anyone taking the other side of the trade?

you must decide what is a valid signal for YOU. And what is a failed signal for YOU.

nothing else matters.

and then have the discipline to execute your plan.

Regarding the second part of your thesis: Apparently everyone is a contrarian !! simply going against what the crowd is doing is NOT being contrarian.

If that were the definition you would have been shorting internut stocks from 96-99 and bleeding your account.

A real contrarian is one who can take the pulse of the market and realize that it is reaching a crescendo, a final climax, if you will.

And that is why it is a true art done by only a few profitably.
 
I use all those indicators in combination and have been very happy with the long term results. It doesn't work all the time but i'm getting better in realizing those times where the signals say buy or short but with higher risk......so i will still trade the signal but do less size. I keep my trading system very simple and try not get into mental games with what the specialist or mm's are doing.Most of my orders are market orders and i don't even look at bid or ask size most of the time. I just think its a waste of mental energy and time watching every move the specialist or mm's make.
Just my humble opinion.
 
Turok,
I'm with you on this one. I agree that the feel is there. IMO, the "feel" comes from a lot of experience and looking at a lot of charts. All the indicators are just formulas that speak to what the stock is or isn't doing and may be good indicators for those who have faith in them.

Three guys fishing in three boats with three completely different boats on the same big lake and all of them catching fish all day long. Which lure is better? Three answers to that question. It comes down to the one that the guy has faith in. Nothing more, nothing less...and his faith comes from a feeling based on the weather and conditions. He could check the temp and the humidity...and that works for some people but when you've got "the feel", you've got all you need.

Be water my friend.
 
Hi LivToTrade,

You've presented an interesting point of view. I tend to hold the opposite point of view for the most part, leaning towards giving technical formations and oscillator patterns their due. Whenever it's in accordance with the next larger time frame.

The first part of your discussion concerning logic I can appreciate, providing I marry it to the following: The larger the time frame, the better the logic (confirmation) works. The smaller the time frame the less it appears to work. Logic appears to work handily in my longer term trades, not so well in my daytrades.

An indicators current position is a reflection of past reality and a probability of an expected outcome, this expected outcome is subject to interpretation. But, at any point in time an indicators current direction, speed, position and relative position are not subject to interpretation. Only it's forecast is open to interpretation. The forecast is what I trade off of. This is never more true than when on the longer time frame. 120 minute bars are a favorite.

Kudos to you Turok, L2 & TOS do work well alone. I use the same tools on all time frames, they react the same across the board just faster -- they are my edge or crutch if you will. Rarely will I do the contrarian thing.
The aforementioned represents my opinions and experience.

-Hoyler
 
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