how do you make sense of seasonal market trends?

[deaddog]

Im not a pro
My method is obviously not working.
I buy when i conclude that the price has bottomed out and the trend is on its way up. Sometimes it works
Usually i end up riding the dip for long ass time until a good uptrend starts and i make money.

Sounds like one of those strategies that always works until it doesn't.

The question is has this helped with your education. What could you have done different and why didn't you?

Doing the same thing over and over and expecting a different result actually works when you're trading. You just have to have a way to protect yourself when the results are not in your favor.

What leads you to conclude that price has bottomed out and the trend is on it's way up? Just my thinking but you don't have a trend until you have a higher high and a higher low. So I never get the bottom.

 

[tomorton]

Im not a pro
My method is obviously not working.
I buy when i conclude that the price has bottomed out and the trend is on its way up. Sometimes it works
Usually i end up riding the dip for long ass time until a good uptrend starts and i make money.

The purpose of TA is to show a percentage probability of what the market will do but an absolute certainty of what the trader will do. Its not possible to separate the chart pattern from the trader. It is facile of writers to express that a given chart pattern has a win rate of XX%: in reality, it depends on the trader.

It seems that most traders can only extract from most chart patterns about a 60% success rate. But as long as your loss from the 40% of losers is exceeded by the gain from your 60% of winners, that is more than adequate.

It follows that exit strategy outweighs entry conditions in importance to the trader's success.

 

[Agraphia]

Probably, we all do that. Sell when we think the price won’t go higher than this and buy when the price seems to be at its lowest. And when anything happens beyond what we thought, we find it easy to blame the market. Come on guys, the market is our competitor and it doesn’t want us to win because our wins are their losses.
Just give your strategy a close look. It might need changes.

 

[mute9003]

Based on my previous trades i get stuck in falling knife patterns rather often because i dont know how to tell the bottom or trend reversal or small pop on the way down yet.
And then also get stuck when the stock seems to be heading in the right direction but the entire market decides to be in downtrend like right now and takes me with it.

I didnt set the stop loss because im trading under ptd rule and couldnt sell same day because i was already at my limit so i got stuck in the dip

 

[longandshort]

Yeah TA/charting doesn't really work. Vast majority of folks here don't understand how trading works and so they just spout TA nonsense that discount brokers pitch to drive order flow.

Seasonality is a real phenomenon and it's driven by incremental changes in volume around recurring events. For example, major ETF rebalancing, index additions/deletions, time-of-year effects, etc. can all be pointed to marginal moves in volume.

Note that most top level stuff isn't actually tradeable, which means basing a strategy on it won't likely beat a buy & hold approach. In other words, your backtest is profitable, but live money trading is not -- this is the case for 80-90% of "strategies" people pitch.

This heatmap shows seasonality trends in SPX:

Here's a line chart showing pct change:

Now, there is also seasonality intraday for many stocks due to market microstructure. For example, small cap stocks are known to have a rally during the last 30 min of the trading day (on average vs. large cap index), which is likely due to end of day VWAP orders (the preferred trading style of bigger investors). For some time, traders who have known of this effect and traded it have made a decent amount of money. This trade has been losing its edge for the past 2 years though, so I don't mind sharing it now. But this would be an example of how "seasonality" intra or interday could be transformed into a profitable trading strategy.

 

[deaddog]

Based on my previous trades i get stuck in falling knife patterns rather often because i dont know how to tell the bottom or trend reversal or small pop on the way down yet.
And then also get stuck when the stock seems to be heading in the right direction but the entire market decides to be in downtrend like right now and takes me with it.

I didnt set the stop loss because im trading under ptd rule and couldnt sell same day because i was already at my limit so i got stuck in the dip

Maybe you should stop trading stocks that are falling?

You can always get out the next day if a trade goes against you.

 

[Bugsy]

Yeah charts are stupid.

Awesome argument for your perspective after all of the people who have given their analysis and input to the contrary.

 

[longandshort]

Awesome argument for your perspective after all of the people who have given their analysis and input to the contrary.

you mean "all the people" who literally have not studied to know if TA actually works and instead rely on the opinions of "wise hands"?

 

[Bugsy]

you mean "all the people" who literally have not studied to know if TA actually works and instead rely on the opinions of "wise hands"?

I know Technical Analysis works because I use it when I daytrade ES futures on a daily basis, as do many others here. Just because you cant doesn't make it stupid.

 

[easymon1]

For example, small cap stocks are known to have a rally during the last 30 min of the trading day (on average vs. large cap index), which is likely due to end of day VWAP orders (the preferred trading style of bigger investors). For some time, traders who have known of this effect and traded it have made a decent amount of money. This trade has been losing its edge for the past 2 years though,

What caused this trade loose its edge?