Technical Analysis and Common Sense

Originally posted by rs7

I wrote that assuming that nothing works continuously...that traders have to adapt. Is there some TA trick that has always worked and will forever?
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Perhaps that is not an appropriate assumption.

An indicator based on some mathamatical calculation of price will always remain the same. It will always react to the market in the same manner. Perhaps price action will change, traders perception of the market may change, or the length and breadth of trends, but the indicator will react to that change.

If trading by a set of rules, based on some indicator, and following those rules as based, at this point I don't see a need to change.

A system as simple as a price crossing a MA. With a few rules can be quite simple and will not change; as long as the trader follows the rules and doesn't think about outside funnymentals.

I don't know how long a time you think is long term, (if I understand correctly, you have been at this game for quite some time) but I know of a simple MA system that has been profitable in the last 6 years. That covers the bull and bear markets. Of course there has been bad stretches but one must hang on and follow the rules.

TA, I think, is tough mentally because not all signals work as planned, and going through a prolonged drawdown in an account can cause a guy to change a system to try and make it work better. Most of the changes I have made to my strategies come as a result of a couple of losers in row. Going back over the log, I find I didn't stick to the rules and lost due to that. Not due to TA.

So, at this point, I guess I believe that once a system is developed, it may not need to be changed.

Make 'em pretty, Chris
 
Originally posted by DblArrow


I don't know how long a time you think is long term, (if I understand correctly, you have been at this game for quite some time) but I know of a simple MA system that has been profitable in the last 6 years. That covers the bull and bear markets. Of course there has been bad stretches but one must hang on and follow the rules.

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OK, this is what I wanted to hear!!!! So what is it specifically that has seemed to work for 6 years? (and I understand that there are always times that nothing seems to work...that's ok..I will be trading for a long time to come...I have time to ride out the "bad stretches)
Thanks,
RS7
 
The only "TA" I use is support/resistance. Its funny though that my average win/loss ratio is consistently 50% (for years in stocks and now futures), so I don't believe it has any value as far as predicting the future (for me). I make money by letting my winners run and cutting my losers. Some days I average 30% winners and some days 80%, but in the end it's the average gain over loss that makes it work. This is the best long-term solution I can come up with so far. I believe you can make money flipping a coin using this method but I haven't tested that hypothesis yet.
 
Originally posted by rs7
As I said, I would start with a question.
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Hi rs7...hope I can contribute something here, since I feel I
owe you one. For you guys who are new here, read the thread
"successful trading".







After all this time, it still seems to me that anyone can look at almost any chart and any indicators and come away with what they want to see. I have yet to hear anyone really ever clearly explain what time frames to use or what indicators to look at that work in a universal way.[/Quote]


I don't think there is one universal time frame or way to use an
indicator.


Let me see if I can explain it this way. Lets say you have
2 guys and you give each of them a rubber band.

1 guy might only be able to think of 2 or 3 uses for a rubber band and the other guy can think of a 1000 ways to use a rubber band.

Now take 2 traders and give them a stochastic. Same thing,
1 trader can only think of a few ways to use it, another
trader a 100 different ways.




I think the reason so many traders give up on TA ,is the
traditional ways don't work for them. (didn't work for me
either)


Take me for instance...thanks to you, I have put together
a daytrading method that uses 100 tick bars (candlestick),
bollingerbands and volume.


I use them in a way that is non-traditional and I don't believe
anyone else uses my method.

Here is this weeks results trading 1 contract on the ES mini.


Mon: 13 profit.....9 losses.....65%
Tue: 17..... " 6..... " 81%
Wed: 6.... " 6..... " 50%
Thur: 8 ..... " 2..... " 87%
Today 8.... " 2 ..... " 87%



Sorry, I can't divulge my method. I just worked to hard over
the last 15 years to give it away. I'm sure you understand.



My question is, has anyone found anything that works consistently over a long period of time?[/Quote]


As you know, this is something new I just came up with
(thanks to you ), so I don't know if it will last. But, I
like what I see so far.

And if so, at what point do they alter what they look at?[/Quote]

When it stops working. If my method stops working, it's
back to the drawing board.


How does something that seems so subjective to me make sense in an objective way?[/Quote]

A daytrading method can be objective. Mine is 100%
objective.

What are the rules of the road for reading these maps? Do they exist?[/Quote]


Just the basic stuff rs7...

1. Stay focused
2. Look for intra-day trends
3. Watch the volume
4. Use a method that fits you












Hoping to learn something,
RS7 [/B][/QUOTE]


Hope this helps.
 
Thankyou for the reply Rs7...

I use charts and "TA" in a VERY simplistc manner. For me they are nothing more than a visual portal into the "flow" of the market. I focus purely on the price & volume and do not employ the use of any indicators. I simply use the charts as a means to immerse myself within the action and to calcualte odds.

One thing I surely do not use them as, is a 'predictive' tool. Maybe they can be used to predict her next move, much in the same way a poker player will use an opponents 'tick' to predict whether one is bluffing or holding a fullhouse, but I was never really concerned with the probabilities of one thing occuring over the other. For me the game is simply about the odds, nothing more and nothing less. I found out a long time ago that I did not need to be "right" more than "wrong", I just need to hold on tightly when she is accomodating a position and to let go lightly when she is not.

PEACE and good trading Rs7,
Publias
 
To me, all a chart shows is what the market did in the past. I believe the market moves purely off news flows and sentiment so this is what I pay attention to.
 
rs7,

Since I'm not really qualified considering the fact I've only been trading 2 months, you can take this for what it's worth.

I focus entirely on TA, particulary S/R. Specifically, I short resistance and I buy support. I carry tight stops on everything I trade. Though I do daytrade from time to time, the majority of my trades are swings. Instead of trying to explain further, take a peek at these charts as they are what I follow daily....around 120 to see. They are not mine.

http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID133031
 
Originally posted by rs7

OK, this is what I wanted to hear!!!! So what is it specifically that has seemed to work for 6 years? (and I understand that there are always times that nothing seems to work...that's ok..I will be trading for a long time to come...I have time to ride out the "bad stretches)
Thanks,
RS7
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Been trading all these years and NOW you are looking for a system? :D

It is a system that uses a specific time period and EMA. Thats all of the indicators. Been in use realtime real profits for the last 6 yrs. It was designed for the ES and I don't know how it works on other markets (execpt ED and seems to work there.) It has independently been backtested by two folks that I know of (using TS.) The originator (I am not he) states that it has made an average of 500 ES points a year, (one contract basis) with drowdowns form 50 to 90 ES points. But he also says that the system is only right about 30% of the time. Which is also been shown in backtesting.

Now who want to trade a system that is 30% with a $4,500 drawdown? I for one do. Because the $1,500 winner out does the $250 loss!

To be fair, It might be considered a swing system as it uses the 30 min chart. But there is often more than one trade a day, but in a good trend, it could be a couple days between.

But the idea is a TA system that when the rules are followed does work in various market conditions.

Make 'em pretty, Chris
 
Originally posted by DblArrow


Been trading all these years and NOW you are looking for a system? :D

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No, not really. But I am always open to new ideas and I know I can alway learn!!!!

If you read my "successful trading" thread, and my posts within it, you would know that I am not a believer in systems, so I wouldn't be looking for something I don't believe in.

However, I am a believer in keeping an open mind. If someone could convince me to change my outlook and show me a "system" that worked better than my "style" (a whole different animal), I would certainly be interested. So far, this has not happened.

All I really want is for one person to explain to me why since there are so many studies available to me, if any of them are better or more accurate than others.

I can pull up virtually any kind of chart and any kind of study you ever could dream of with the technology I have available to me.

When Superego was doing his rant, I asked why he used stochastics rather than RSI or MACD. I did not get an answer. All he did was emphatically state that we MUST use stochastics with whatever time frames he used. (sorry I don't remember what they were). He did however tell me I should read about stochastics if I wanted an answer. This lead me to believe that he did not have an answer himself.

When I first started to be aware of these indicators, I was working for EF Hutton. I called their TA department and asked if someone there could explain stochastics to me. No one could. This made me suspicious, and I have remained suspicious since. I do know that there is a mathematical formula. I do know that it can be calculated. But I don't know if it is of any more value than any other oscillator. If one oscillator is better than another, why then does my software even have the less valuable studies?

What was used before computers could calculate these studies in virtually no time? I know that I could detect head and shoulder patterns, cup and handle, etc., with a pencil and some graph paper. But I could not do oscillators. Even moving averages would take a lot of time and effort. And without a calculator (so lets go back to the ancient days of 1971), I could not do them without devoting my life to it.

So is the answer that computers now finally make trading a viable profession? Were Joe Kennedy and Jesse Livermore and Bernard Baruch, and the rest just lucky?

I am only on a quest for knowledge. If anyone can show me the light, I want nothing more than to learn how to use the tools available to me.

I have been pretty successful trading for 16 years without using TA. But if it will make me a better trader, or make my life less stressful, please, tell me how to make use of all this information!!

Thanks to all,
RS7
PS: A very wise man told me just today that "on the bottom of the ocean, next to every shipwreck, you will find a chart".
 
Originally posted by TAguru5
rs7,

Since I'm not really qualified considering the fact I've only been trading 2 months, you can take this for what it's worth.

I focus entirely on TA, particulary S/R. Specifically, I short resistance and I buy support. I carry tight stops on everything I trade.
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You show great promise..the "tight stops" and the "focus" are very important. You have what it takes...in one word, DISCIPLINE!
Now you just need to develop feel, which comes from experience. Just keep an open mind, and adapt to what works and abandon what doesn't and learn from your mistakes.
I wish you all the luck in the world, and I thank you for your response!!
RS7
 
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