DblArrow: i too traded a 30 min ES sytem at one time until it hit a massive drawdown back in january -feb 2002.... $6300.. OUCH... I am curious ... are you actually trading this system and if so , for how long and with what results. Also, if you daytrade do you trade this system in a separate account to ease the possible confusion when trading different systems?? thanks
Technical Analysis and Common Sense
- Thread starter rs7
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To answer the first post yes, in a seperate account. I have only been trading it since May and watched it for a month before that. The guy I got it from, in about March, had said that Jan and Feb gave the system a real beating! It is somewhere in the vicinity of 40% since I started, but I am up about 125 points. There have been some tough days and weeks but overall it is a sound system.
Your above statement is perfect! It just shows how much of a mental game this really is! When the winning percentage is low it just shows how much the mental aspect of trading really kicks in, but if one is confident in the system and plays by the rules, one must continue to take all trades.
Make 'em pretty, Chris
Humor, thats what that was an attempt at! Thus the smile - 
Let me ask you - what would it take to convince you that a system is valid? Could you be convinced? Do you have specific criteria? Winning percentage? Risk/Reward Ratio? What? If I showed you a chart with indicator and price and explained it (as I saw it) would that convince you? I would be happy to try that.
Don't get me wrong, I am not a SE, but I am convinced that I have a viable strategy or two. There is however almost always some subjectivity involved.
On choosing an indicator.
I say you can use anyone you want - just learn it, love it, live it! Well not quite but you get the point.
It seems to me that some work better than others in various markets - why? I have no idea. i.e. I like the CCI on the indexes and a highly modified STO on the bonds and notes. However I could switch them and I think after a time get them to work - as I will often watch the bonds and notes with both.
For me it is not a matter of understanding the philosophy of the indicator - just how it reacts or follows the market.
"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".
Very good quote - I like it! But more ships get to where they are going than end up on the bottom!!
Make 'em pretty, Chris
Let me ask you - what would it take to convince you that a system is valid? Could you be convinced? Do you have specific criteria? Winning percentage? Risk/Reward Ratio? What? If I showed you a chart with indicator and price and explained it (as I saw it) would that convince you? I would be happy to try that.
Don't get me wrong, I am not a SE, but I am convinced that I have a viable strategy or two. There is however almost always some subjectivity involved.
On choosing an indicator.
I say you can use anyone you want - just learn it, love it, live it! Well not quite but you get the point.
It seems to me that some work better than others in various markets - why? I have no idea. i.e. I like the CCI on the indexes and a highly modified STO on the bonds and notes. However I could switch them and I think after a time get them to work - as I will often watch the bonds and notes with both.
For me it is not a matter of understanding the philosophy of the indicator - just how it reacts or follows the market.
"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".
Very good quote - I like it! But more ships get to where they are going than end up on the bottom!!
Make 'em pretty, Chris
rs7...
First of all, maybe your not reading some of these replies...there are different paths to profits.
You seem to think (at least that's the impression I've gotten) that their is only one way or one indicator or some sort'uv holy grail.
if there is a holy grail...it is within the trader and not within the indicators being used
Further...I truly am amazed that your walking around wondering if one indicator is better than another especially since you've been in the business of trading for 16 years.
There is no holy grail that I know about. If there is such a holy grail (an indicator that's better than all...makes profits no matter what type of trader is using it)...a trader would be an idiot to come online to tell all.
The stochastics is no better than the MACD. The RSI is no better than the Bollinger Band. Volume indicators are no better than money flow indicators.
It is YOU that is the critical element. YOU that makes the difference whether a particular indicator works or not.
rs7...several weeks ago I shorted the NQ @ 980...a trading pal shorted it at 980.50 (he got the better price) but covered for a loss about 15 seconds later at 981.50...about 8 mins later I covered @ 976...we both used the same indicator...we both saw the same pattern...he used my trade strategy setup.
However...after his loss...he said that volume indicators are not reliable.
rs7...once again...the critical element is you the trader...how you interpret the situation...how you apply the trade methodology.
In addition, since you've commented to someone else in this thread...You have what it takes...in one word, DISCIPLINE!...
it's a good bet you already know it's the trader and not the indicators...hmmmm
However...lets continue on with this as if you didn't know that.
rs7...You need to give the Superego thing a rest and move on.
Below I mention my favorite indicators and try to understand that indicators have a personality of their own.
We as traders choose indicators like we choose a mate. There's something about the indicator that's appealing to us when other indicators have no sex appeal. Beauty in the eye of the beholder.
rs7...once again...no indicator is better than the other, it's what the trader feels about it that decides why he prefers it over another.
Look at it this way...I love Bollinger Bands, stochastics, volume indicators, exponential price moving averages and Japanese Candlesticks...I feel comfortable with these indicators...they fit my personality.
They make me money. It does not mean they are better than the different indicators used by another trader that is making him/her money.
I think your having a difficult time understanding that point or refuse to deal with the fact that its the trader that's the key element.
rs7...now I'm really curious...who is telling you that one indicator is better than another...how did that get so deep seated into your thoughts?
Those that said such...are they successful traders. Did they proved this to you or was it small talk over a few beers?
rs7...you have been successful at trading for 16 years...why do you want to jump ship and put aside what has gotten you this far to test and try to apply something you have doubts, skeptism about?
I grew up in Chicago and knew a lot of pit traders because of my step-father...they use to always say to each other during a late night of poker...Didn't anybody ever tell you...if it ain't broke...don't fix it.
Let me ask you this question...lets say your a seasoned veteran...your making 105k per year trading the Eminis...regardless to what the market is doing.
And you use two indicators called CCI and the Percent Price Oscillator for many years...they make you a lot of money. However, you've tested Bollinger Bands...and lost money.
Now..you know someone that's just as successful as you are and they use Bollinger Bands and volume indicator for all their trade decisions but have lost money using/testing the CCI and PPO.
Which indicator is better?
Or do you think it was the application (trade methodology) of a discretionary trader that made the difference?
To sum it up...stick with what you know best and try hard to not dwell on things you have doubts about.
NihabaAshi
just few last things to fundamentals (if you allow):
many years ago (actually this was my second trade ever i think) i bought stocks from a pretty small but very fine company that i always liked somehow. bought a few shares but didn't know what to expect and to be honest - i had no clue about the market - about TA / fundamentals, etc. the company had (and has) good management - excellent fundamentals - excellent outlook - everything was pretty fine. but it was a very illiquid stock - traded on a rather unimportant small exchange. so what happened? the stock went from over 50 to under 30 over a period of more than 2 years (in those 2 years the fundamentals constantly improved). i lost some money - and i learned that fundamentals are not the only important thing.
another thing - like TA also fundamentals tell more about the past than about the future. a company might have a good outlook - based on its fundamentals - but everything can change quickly these days.
and now on to TA:
i guess in a good trading concept it is just a very small part of the whole picture. discipline, money management, etc. are the most important factors - as we all know. so it (TA) is only the signal for pulling the trigger. and the simpler it is - the better.
so for me it works this way: i only trade one market - always the same time frame - i concentrate on one or two setups that appear again and again and tend to work maybe 7 times out of 10.
but again - the most important thing is a well written plan - and in my plan the technical part is maybe only about 10%.
Nihaba hit the nail in the head! No one indicator is "better" than the other. Stochastics are not a mysterious, arcane science. RS7 should pick up a book on technical analysis and all of his questions will be answered. He can't expect everything to be spoonfed to him. There is no TA holy grail. This is a fruitless search. RS7 should re-read his posts on the "super successful secret to trading." The secret lies within you. Don't believe the charlatans who claim to have a consistent secret formula. THERE IS NONE!!!
TA helps skew the odds a little bit in your favor in terms of price prediction. In other words, instead of a 50-50 trade, maybe TA gives you a 10% improvement. Some extreme chart patterns (breakouts/breakdowns) can add another 10% in predictive accuracy. You still have to pull the trigger to make the trade, know when to take profits and know when to cut losses. Inferior traders always seek a Holy Grail to explain away their shortcomings. They spend many years seeking one and get frustrated at every turn. Look to improve your stock selection, risk and money management and good things will happen. If after 16 yrs. of trading, you haven't found your system and style of trading, you'll never find one!
TA helps skew the odds a little bit in your favor in terms of price prediction. In other words, instead of a 50-50 trade, maybe TA gives you a 10% improvement. Some extreme chart patterns (breakouts/breakdowns) can add another 10% in predictive accuracy. You still have to pull the trigger to make the trade, know when to take profits and know when to cut losses. Inferior traders always seek a Holy Grail to explain away their shortcomings. They spend many years seeking one and get frustrated at every turn. Look to improve your stock selection, risk and money management and good things will happen. If after 16 yrs. of trading, you haven't found your system and style of trading, you'll never find one!
The problem with fundamentals is that the number of people who really, truly know what the fundamentals of any one company are can usually be counted on two hands. Most of those people work for the company and are biased, or work for that companies investment banking firm and are biased. The biggest fallacy out there is that the public is on the same level as the insiders when it comes to fundamentals.
With the state of accounting rules and enforecment, companies have truly been able to spin it any way they want, and I am not just talking about the few companies that had fraud. I am talking about every time you hear that a company "beat by a penny". How many times have you heard that ? Every time I hear that I know that those earnings numbers are being played with somehow. They play that game as long as they can, and then one day they come out with a billion dollar "one time charge" to make up for all the earnings that they didn't really have over all those quarters. Basically the quarterly earnings have been faked for a long time, and it is a wide spread practice among all of the publicly traded companies.
My suspicion is that the real operating earnings of the s&p 500 peaked out well before the market peaked, but we were being fed misleading information, and the stocks were still going up, so we didn't care.
With the state of accounting rules and enforecment, companies have truly been able to spin it any way they want, and I am not just talking about the few companies that had fraud. I am talking about every time you hear that a company "beat by a penny". How many times have you heard that ? Every time I hear that I know that those earnings numbers are being played with somehow. They play that game as long as they can, and then one day they come out with a billion dollar "one time charge" to make up for all the earnings that they didn't really have over all those quarters. Basically the quarterly earnings have been faked for a long time, and it is a wide spread practice among all of the publicly traded companies.
My suspicion is that the real operating earnings of the s&p 500 peaked out well before the market peaked, but we were being fed misleading information, and the stocks were still going up, so we didn't care.
I think this is what RS7 had in mind when he started this thread: "Does technical analysis work for daytrading?"
I am not an expert on daytrading, and the main reason is that I have not been able to discover any technical analysis tool that is valid for time frames shorter than an hour. When you get that short term, it all starts to break down and it starts to look like betting on coin flips.
Also, I have not found that the mathematically derived indicators like stochastics and MACD are valid for intraday timeframes at all, even though I think they work well on daily charts.
I am not an expert on daytrading, and the main reason is that I have not been able to discover any technical analysis tool that is valid for time frames shorter than an hour. When you get that short term, it all starts to break down and it starts to look like betting on coin flips.
Also, I have not found that the mathematically derived indicators like stochastics and MACD are valid for intraday timeframes at all, even though I think they work well on daily charts.
I have to diagree - here is a MSFT chart using what I used yesterday to trade the notes. With a couple rules this could be profitable.
It is TA with 2 indicators and does work, went 9 of 10 on notes yesterday.
I think after a little analyzing you could develope your own rules.
Make 'em pretty, Chris