T/A won't make sense to me until I understand this:
- Thread starter jonbig04
- Start date
Patterns are not trade signals by themselves...
When you see a pattern (e.g. double top) you should then wait to see if your entry signal will tell you to open a trade position in that double top pattern.
Trend lines are not trade signals by themselves...
When you see a trend line (e.g. drawn to show higher lows) you should then wait to see if your entry signal will tell you to open a trade position at/near that drawn trend line.
Simply, you are asking the wrong question.
The question you should be asking which can only be answered by you is the following...
Is your well defined entry signal and trade management after entry equally effective regardless of the time frame?
You are ready to start trading when you can answer the above by yourself along with increasing your odds of being a successful trader.
Last of all, you are viewing this incorrectly via the words you've used by using the word ALL.
Simply, try to first develop a well defined trading plan and you won't have to worry about ALL patterns or ALL trend lines.
Mark
John yes, sort of, you might get a well defined uptrend on a 30 minute chart, but it might just be a small advance within a downtrend on the daily chart... and when the daily chart hits daily resistance, you might get a double top on the 30 minute chart before the daily chart eventually rolls over... most t/a tends to work on all time frames as a general rule, the patterns you speak of arenât that effective though.
Mark is a smart guy btw, read what he said a few times over.
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.
Keep it simple. Do not over analyze . More indicators is not better.
Lastly whether you use TA or throw darts at the paper to chose
stocks. Your money management will determine your success.
Lastly whether you use TA or throw darts at the paper to chose
stocks. Your money management will determine your success.
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.
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.
One way to define a pattern is to look at the historical chart to find the similar displays of the same stock and the periods (time frame) it was in; it's the human nature that behaves in similar ways in response to certain market conditions therefore patterns exist. You will also need to find a reliable indicator to confirm your entry and exit, even though the pattern was there you would want to wait for the right time to enter the trade via indicator, trend line, or R/S... Try to leave your emotions away from the trade and stay with your TA skills is the way to consistency IMO.
sg20
Congrats jonboy!
For someone who is so early into their attempt to understand the markets you have made a very milestone discovery. TRADING IS TEMPORAL! It takes many people a very long time to figure this out but you have recognized it early. Your analysis, and the conclusions you draw from it are all going to be influenced by the time frames you consider. When you do start trading (using T.A.), remember this; multiple time frame analysis is imperative to establish context, then be sure to trade the time frames of your analysis. Don't try to make 1min intra-day scalps based on EOD chart analysis, and don't try to make a swing trade based on 1 min charts. This should be self evident, but you would be amazed at the amount of people who struggle with this.
P.S. the TEMPORAL aspect of trading applies to risk analysis and money management decisions as well.