T/A won't make sense to me until I understand this:

[lilduckling]

Quote from jonbig04:

If thats true then when you see a common pattern you should know exactly what to do

but thats my point...... if everyone knows, then it cant work.

if everyone on earth had no possesions.... would there be any poor people?? no

you need a diffrence..... for there to be an advantange

 

[dtrader98]

Quote from jonbig04:

If thats true then when you see a common pattern you should know exactly what to do

Not true at all. If you flip a coin and see a common pattern, does that mean you know what to do? No.

It means if you've done your homework beyond looking at many visual Rorschach blots, and perusing the few cherry picked examples from the many books you'll encounter on your TA journey, you should have an expectation of what might happen, and you should plan on what you will do depending on what that outcome is.

How good is your expectation, well, when you are done with reading all the myriads of common subjective TA books, you can start adding backtesting, statistics, and most importantly, money management to your trading vernacular.

 

[jonbig04]

Quote from dtrader98:

Not true at all. If you flip a coin and see a common pattern, does that mean you know what to do? No.

It means if you've done your homework beyond looking at many visual Rorschach blots, and perusing the few cherry picked examples from the many books you'll encounter on your TA journey, you should have an expectation of what might happen, and you should plan on what you will do depending on what that outcome is.

How good is your expectation, well, when you are done with reading all the myriads of common subjective TA books, you can start adding backtesting, statistics, and most importantly, money management to your trading vernacular.

I look forward to getting to that point! If you know of any good books in particular please let me know...i know not all books are created equal. The post you quoted me saying though was meant to be satirical. He was implying that we are ALL following the same patterns and trendlines, thus making TA obsolete because everyone is doing it. What I meant was that if that were true then he would see the patterns, KNOW what everyone else is going to do and act accordingly. Not that that would work, but that was kind of my point. Thanks for the advice again.

 

[dtrader98]

Quote from jonbig04:

I look forward to getting to that point! If you know of any good books in particular please let me know...i know not all books are created equal. The post you quoted me saying though was meant to be satirical. He was implying that we are ALL following the same patterns and trendlines, thus making TA obsolete because everyone is doing it. What I meant was that if that were true then he would see the patterns, KNOW what everyone else is going to do and act accordingly. Not that that would work, but that was kind of my point. Thanks for the advice again.

A pretty good overview of the mechanical aspects of backtesting (a little light on stats and slightly outdated with respect to out of sample testing) is trading systems and money management by thomas stridsman.

Evaluation and optimization of trading systems by r. pardo, is a more modern intro to this area.

Dont' want to give away the good stuff just yet (there are some gems in the haystack). But, that's a good start IMO. Your goal is to find books that aren't loaded with anecdotal examples like, had you taken our advice and bought cisco (notice how they ignore the 10,000 other recs), you would have made a 10.000% Gain!!! Statistics and backtesting are short on bs, and strong on sobering reality IMO.

 

[jonbig04]

Quote from dtrader98:

A pretty good overview of the mechanical aspects of backtesting (a little light on stats and slightly outdated with respect to out of sample testing) is trading systems and money management by thomas stridsman.

Dont' want to give away the good stuff just yet (there are some gems in the haystack). But, that's a good start IMO. Your goal is to find books that aren't loaded with anecdotal examples like, had you taken our advice and bought cisco (notice how they ignore the 10,000 other recs), you would have made a 10.000% Gain!!! Statistics and backtesting are short on bs, and strong on sobering reality IMO.

Awesome I will pick up a copy tomorrow. Thanks

 

[dtrader98]

Quote from jonbig04:

Awesome I will pick up a copy tomorrow. Thanks

Good luck. And give some feedback, the good and the bad.

BTW. The examples are in trade station code for the stridsman book, but if you understand programming you should be able to replicate them.

If you are weak on programming, the book still explains the mechanics of backtesting well, regardless of the examples shown.

edit. Just checked amazon, and it looks out of publication. Don't pay the 200 for the backcopy. Much of it is online...
http://books.google.com/books?id=i3...=ACfU3U3Ekys-3Sb-CRDcyLijYT88FtnBmQ#PPA123,M1

get pardo's book instead, as it is more up to date. GL.

http://www.amazon.com/Evaluation-Op...=sr_1_1?ie=UTF8&s=books&qid=1214812236&sr=8-1

 

[jonbig04]

Quote from dtrader98:

Good luck. And give some feedback, the good and the bad.

BTW. The examples are in trade station code for the stridsman book, but if you understand programming you should be able to replicate them.

If you are weak on programming, the book still explains the mechanics of backtesting well, regardless of the examples shown.

edit. Just checked amazon, and it looks out of publication. Don't pay the 200 for the backcopy. Much of it is online...
http://books.google.com/books?id=i3...=ACfU3U3Ekys-3Sb-CRDcyLijYT88FtnBmQ#PPA123,M1

get pardo's book instead, as it is more up to date. GL.

http://www.amazon.com/Evaluation-Op...=sr_1_1?ie=UTF8&s=books&qid=1214812236&sr=8-1

why do they stop printing books if people want them! it makes them so expensive...it must be speculators....

 

[kidPWRtrader]

Quote from jonbig04:

I understand. So far in my studies I haven't gotten past the most basic of patterns. What was confusing was in the book I was reading they kept mentioning specific performances of certain patterns e.g. "the head and shoulders pattern appeared 431 times and resulted in 406 reversals. The average length of the pattern is 62 days". The almost always mention the stats in the context of days and months. Intuitively I assumed that the time frame was arbitrary, but I didnt want to make any false assumptions so early in the game. I'm looking forward to learning more patterns and other methods for creating what you call a "well defined entry signal". Im reading another book as well that has to do with the psychological aspects of trading. Hopefully this will help me develop what you call a "wel defined trading pattern". So far it seems like the main conflict is that no matter what indicators you have its your interpretation of them that matters, and that human touch is necessary to trade. But its that same human touch that makes you deviate from your plan and lose money. I dont think that has a whole lot to do with trading specifically, but more to do with controlling simple human nature. I've actually learned this lesson the VERY hard way recently and outside of trading, so im hoping that lesson will help me control my profit destroying emotions haha. Thanks for your advice.

ps i dont sleep anymore! damn futures.


EDIT: this is my interpretation of what ive learned so far, I realize im lightyears away from actual trading.

Jesus christ man... you are reminding me of the not so distant past and nearly gave me a panic attack lol. I'm going to give you some advice that I should have gotten when I first started.

1) Ditch those pattern books
2) Keep reading those psych books
3) Make no assumptions and assume ignorance and watch price without bias
4) It will eventually sort of make sense to you

I'm barely at 4 but I can tell you if you keep reading you are going to be stuck for a while in the land of assumptions confused as hell because most writers can't trade in the first place...

 

[jonbig04]

Quote from kidPWRtrader:

Jesus christ man... you are reminding me of the not so distant past and nearly gave me a panic attack lol. I'm going to give you some advice that I should have gotten when I first started.

1) Ditch those pattern books
2) Keep reading those psych books
3) Make no assumptions and assume ignorance and watch price without bias
4) It will eventually sort of make sense to you

I'm barely at 4 but I can tell you if you keep reading you are going to be stuck for a while in the land of assumptions confused as hell because most writers can't trade in the first place...

a panic attack aye? haha not my intention. Thanks for your advice. I have a somewhat rudimentary grasp on the basics of t/a, and a part of me wants to stay here. There is another post further up this page with all sorts of t/a concepts I dont understand. I just want to be able to figure out what the bulk of traders are feeling/doing and make money accordingly. You mentioned you are "barely 4", what does that mean?

 

[lilduckling]

here is how the impact of chart patterns have changed.

strengh of having that edge in:


1920 = .44 magnum

2008 = fishser price water gun


truth is, today it matters very little.... everyone is looking at it in a way like..... say... spy vs spy mentality.

If a chart set up looks picture perfect BUY set-up.... than way too many money movers will be getting ready to sell into it or to short it ..... trying to catch trapped bulls.

but all others also understand this ... and will try to make a move to trap the bears in case they fail..... it goes on and on.

its like a 4 way tug of war.

But the kicker is.... while all the chart pattern heroes are at war,
the real market movers are in another level altogether.... they take advantage of news items that can slap the markets in any dirrection.....before anyone else.

and even if you spent $2000 a month in news feed srvices.... you would still loose.... because for the most part, NONE of us here know how the market will react to news ..... sometimes bad news is good news, good news is bad news. all we can due is wait and see how the market reacts to it... then make our move..... if its economic news, we stay out alltogether... wait.... then buy or sell depending on what our complex multi-computer screens burp out.

point is..... when it comes to news.... we dont have the edge on the big dogs..... news are instant through out the globe.... this is where having a degree makes a diffrence..... knowing how the news will impact the markets.

begining of the century all we had was telephone.... news was not instant..... chart patterns knowledge was akin to being a guru... it made millionares......today not the same..

so we stick to out trendlines, patterns and indicators.... and
hope we can nibble off a few inefficencies ....

i say again:
chart patterns 1920 = hot 19 yr blonde
chart patterns 2008 = 85 yr lady with boobs sagging to her knees