A year or so ago I was in Starbucks looking at some charts. A guy who noticed what I was doing struck up a conversation about trading. He said that he had bought wxyz a few days ago and asked me to look at its chart, which I did knowing that he just wanted to hear someone say that it's going to triple by Christmas! As I can best remember the stock had broken out of a long correction with a two month move from 1 to 2 of about 50%. From 2 there had been an extended reaction for about a month down to 3 retracing 40% or so of the 1 to 2 move. From 3 the stock moved up and through 2 where he had bought it. He said that his strategy was to buy on such new highs. I said that while the trend was still intact, in this particular case, I would not have bought at the time. I went on to say that there were two parameters that indicated not to buy now. Additionally, I showed him 7 other parameters, both positive and negative, that, based on the price movement, could/should be considered in this type of move. And that many of these same 9 parameters could also be used in a variety of situations. He said that he had never considered such parameters, and had not known about most of them. I asked him how often under similar situations had the price moved back down toward 3 by say 10% or more, or even all the way back to 3, or through 3. Fewer than not, but often enough to have a big effect on the on balance success of this type of trade was his answer. He clearly saw the value of not taking the situation at face value and how such parameters would qualify the trade.
So, based on this experience, and having seen the same here on ET so often, to where even though a correct analysis of the technical indication itself is made, the lack of considering the parameters that can be applied to any given situation can so very often result in disappointment, I think many would benefit from a detailed study of such parameters.
I've noticed that most books etc. do not cover such points. And the knowledge of parameters can only be attained through one's own study and research. To clarify, while many books advise using indicators etc. for confirmation of the technical indication, this is not what I mean by parameters. I mean those which can be found within the price movement itself and volume only. For example, one parameter, which I don't use, but I know some do, could be the extent in percentage by which 2 must be exceeded to create a valid new high. I would say that following the fault of seeing technical indications that don't actually exist, ignoring or overlooking parameters is the main seed of the "TA doesn't work" claim.
Now, I'm sure that those in ETland who have little TA experience are sitting on the edge of their seats waiting to hear what the parameters are that have been past down from father to son for centuries. Well, being one who respects those who study, do research and work hard, I just ain't gonna tell ya, today anyway. In any event, those parameters that I use are based on my 40 years of work, but may not be the best, and are surely far from all. Studying thousands of technical situations should reveal the various parameters that exist to enhance your performance. Believe me when I say that they will make or break a situation. Knowing that most will not undertake such study, maybe they will be lucky and some readers will post one or two parameters that they use.
So, based on this experience, and having seen the same here on ET so often, to where even though a correct analysis of the technical indication itself is made, the lack of considering the parameters that can be applied to any given situation can so very often result in disappointment, I think many would benefit from a detailed study of such parameters.
I've noticed that most books etc. do not cover such points. And the knowledge of parameters can only be attained through one's own study and research. To clarify, while many books advise using indicators etc. for confirmation of the technical indication, this is not what I mean by parameters. I mean those which can be found within the price movement itself and volume only. For example, one parameter, which I don't use, but I know some do, could be the extent in percentage by which 2 must be exceeded to create a valid new high. I would say that following the fault of seeing technical indications that don't actually exist, ignoring or overlooking parameters is the main seed of the "TA doesn't work" claim.
Now, I'm sure that those in ETland who have little TA experience are sitting on the edge of their seats waiting to hear what the parameters are that have been past down from father to son for centuries. Well, being one who respects those who study, do research and work hard, I just ain't gonna tell ya, today anyway. In any event, those parameters that I use are based on my 40 years of work, but may not be the best, and are surely far from all. Studying thousands of technical situations should reveal the various parameters that exist to enhance your performance. Believe me when I say that they will make or break a situation. Knowing that most will not undertake such study, maybe they will be lucky and some readers will post one or two parameters that they use.
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