Technical Analysis vs. Fundamental?

[Xela]

I read the fact in the book which took data from over 10,000 different days that most candlesticks only work 2/3 of the time as they should do.

You (and possibly the author whose book you read, if you're accurately quoting it) and I must have radically different ideas of how candles are supposed to "work", if you imagine that they're "supposed" to predict price-movements. (I was tempted at first to ask "supposed by whom?", but I don't really even want to prolong the conversation, to be honest.)

I dont find that hard to believe.

Personally, I find it ludicrous nonsense.

If candles "worked", as you apparently suggest they do, anything like 2/3 of the time, then they'd be all anyone would ever need to trade profitably. And that laughable notion was the prompting motivation behind my post above. Probably I shouldn't have bothered.

 

[tradingbiscuit]

Actually, you did not ask for an explanation but instead you did ask for someone to show you the "correct ways" (your words). You also stated candlesticks are unreliable 1/3 of the time. That's like stating they work 2/3 of the time. Thus, I will assume you just got your words mixed up and that you meant to say they are reliable only 1/3 of the time to correlate with your other negative commentary about TA. Just in case I'm wrong and you believe candlesticks works 66% of the time...you do realize that's a profitable method via whatever method that resource was using in its testing...yet you're struggling to have similar like results ??? (that's a question).

Note: Do you even know what was the details of the trade method being used to test Japanese Candlestick patterns ? Without those details...its not applicable for anyone else outside of the person that did the testing. In fact, I ignore research or backtesting when someone doesn't reveal the details of the trade method used in testing Japanese Candlestick patterns or any other type of TA pattern. Details like context of each trade signal, entry/exit info into the price action after the trade signal, risk management, stop/loss management, trail stop management when trade is in the profit and many other variables that greatly impact the success/failure rate of a pattern signal.

Yes, I have been useful in notifying you that you do not have enough time to make any analogy about what works or does not works via your words of "10 trades". Therefore, anyone else that reads that comment...they will know that they can not determine if something works or does not work with very little experience involving 10 trades along with the fact you failed to mention any backtest results.

The goal is to make money. Its an important goal. Thus, if you say you know fundamental analysis works but it requires you to not be short term trading...you need to sit down and reevaluate your goals. Seriously, think about that carefully...if you know you can not make money as a Short term trader because TA fails or you imply you fail at using TA but you know you can make money via fundamental analysis...it seems to me you should stick with fundamental analysis instead of short term trading assuming your goal is to make money.

Don't worry...the above observation is something that involves behavior finance (that is a very useful hint for something you should research deeply).

Once again, I gave you useful info (my observation about your comments on fundamental analysis in prior post and now my recommendation to you about behavior finance in this post) to further research such if you're serious about making money via what you know. In contrast, you seem to be struggling with short term trading and you're not making money. Seems like a no brainer to me about which direction you should be heading right now or did I miss your point of your story ???

Therefore, I will not encourage you to stick with short term trading via TA. Thus, had you not mention anything about fundamental analysis working unless you forgot to say that its something you had heard but not actually tried. Thus, you really do not know if fundamental analysis works for you or not although you implied it does work for you.

Stick with what you know and you're good at...its really that simple.

Yet, if you truly want someone to give you useful techniques to help you with TA (your words)...start with this forum list call Hall of Fame threads and there's many TA threads in that list @ http://www.elitetrader.com/et/index.php?pages/hall-of-fame/ for you to choose any particular topic you're interested in about TA.

The above is useful info...your choice if you want to use it or not but others have found it very useful.

Ive seen you suggest Hall of fame list in you previous post somewhere. I checked it out but it doesnt really solve the issue for me. Within TA i mainly use S&A and candlesticks. I can draw good s&r lines but I struggle in understanding how far the price is going to go up or down, above the support line for example. And Ive searched everywhere and no one has mentioned that anywhere. What if price goes through support, and shortly comes back down and breaks through support. While people have said you cant predict it, and I should use risk management, I have used stop losses quite well in the past and I have only made losses in the past trades that I did and dont want to repeat it. On the other hand, ive seen a lot of people predict the point where price is going to go and they were quite accurate. Of course you can never be 100% right but you should at least have an idea of where the price is going to go before you make a trade, which the people on this website deny. Personally I think fundamental is more logical for me but you have to check quarterly profits and stuff which I cant use in short term trading.

 

[tradingbiscuit]

You (and possibly the author whose book you read, if you're accurately quoting it) and I must have radically different ideas of how candles are supposed to "work", if you imagine that they're "supposed" to predict price-movements. (I was tempted at first to ask "supposed by whom?", but I don't really even want to prolong the conversation, to be honest.)





Personally, I find it ludicrous nonsense.

If candles "worked", as you apparently suggest they do, anything like 2/3 of the time, then they'd be all anyone would ever need to trade profitably. And that laughable notion was the prompting motivation behind my post above. Probably I shouldn't have bothered.

You know what I mean when I say worked and supposed to work. Of course there are other factors involved in trading, thats why they only work 2/3 of the time. If there were no other factors the chances would be higher. If I say patterns work 2/3 of the time which sounds about right your logic would fail wouldnt it.

 

[VPhantom]

10 trades or 1000 trades. If you dont know the technique behind it you wont accomplish anything. Some traders have been trading for 10+ years but still arent very good at it.

There's a big difference between 10 and 1000: screen time. You can save time by finding someone else's system that works well for your own style, but you still need plenty of screen time with your markets to become familiar with them. Intuition comes from experience. Now, 10 years and still bad, that's a learning problem.

Of course you can never be 100% right but you should at least have an idea of where the price is going to go before you make a trade, which the people on this website deny.

Placing a trade is betting on the direction of the market based on some conviction. Placing a trade is accepting that price could go in either direction, but that based on your personal backtesting, the current setup has better odds of success than of failure, over the long run. And those odds may still be favorable if you're "right" only 40% of the time if the properties of your chosen system gives you an outsized reward vs your typical maximum risk.

If you're waiting to find a system that provides you with directional calls which are right 80% of the time, you'll still be waiting on your deathbed.

 

[wrbtrader]

Ive seen you suggest Hall of fame list in you previous post somewhere. I checked it out but it doesnt really solve the issue for me. Within TA i mainly use S&A and candlesticks. I can draw good s&r lines but I struggle in understanding how far the price is going to go up or down, above the support line for example. And Ive searched everywhere and no one has mentioned that anywhere. What if price goes through support, and shortly comes back down and breaks through support. While people have said you cant predict it, and I should use risk management, I have used stop losses quite well in the past and I have only made losses in the past trades that I did and dont want to repeat it. On the other hand, ive seen a lot of people predict the point where price is going to go and they were quite accurate. Of course you can never be 100% right but you should at least have an idea of where the price is going to go before you make a trade, which the people on this website deny. Personally I think fundamental is more logical for me but you have to check quarterly profits and stuff which I cant use in short term trading.

The stuff you mention such as "I struggle in understanding how far the price going to go up or down, above the support line" is stuff that's NOT possible to predict nor should you be concerned about such types of predictions.

Simply, you're approaching trading incorrectly and you're on that path of trying to be right instead of trying to make money. Yeah, as you stated, you should have an idea where you think price is going to go before a trade. Yet, you didn't mention something else that's just as important. You didn't mention that you should also have a plan B if price doesn't do what you expected it to do and you should be prepared to exploit that plan B.

Traders that only have one plan...the one they expect to happen...these are traders trying to be right. In contrast, traders trying to make money...they are prepare to exploit what they expected to happen and ready to exploit if what they expected did not happen.

By the way, you did that again...mention fundamental analysis without giving any information if you're profitable or not with that. Simply, if you're profitable via fundamental analysis and you're not profitable via short term trading...the goal is to make money or you're subconscious has tricked you into going a route that you've been condition to go by others ?

I come from a trading family and the first thing I remember my old man telling me when I was young in that he doesn't like the market that he trades nor the trading style. Yet, he does it because he's profitable at it and he has a family to support. Thus, I learned quickly at a young age that there will be times that you do what you need to do and that other stuff is just for fun.

Once again, if you know you can make money at fundamental analysis...do it...make your money and you can use short term trading as some sort'uv hobby or leisure activity on the side that has very little impact on the profits you make from fundamental analysis.

 

[heavenskrow]

Here's a last summary by the author of "Professional Commodity Trader". A book I highly recommend even more than Reminiscences of a Stock Operator.

The author based on his analysis of a copper chart was accumulating a large copper position.
A guy from a well-known private banking group comes in and hands him a portfolio of research done by many smart guys describing there was too much copper supply and that they plan to purchase instead in 1973.

"Well the rest is history. Yes, there was too much copper in London warehouses-much too much. And this enormous inventory was weighing on the market. And no one could have imagined-least of all my banker friend or his fancy economic study-how this enormous supply could be consumed over the near term. I couldn't either, for that matter , but that didn't trouble me.The market action "told" me in no uncertain times that prices were heading higher, and my strategy was based on that. Let the others worry about why it may go up-they'll be still pondering long after the move is under way.

What actually happened is very simple. One day a Chinese trade group arrived in London, and when they went home, they took all the copper with them. Suddenly no more copper!
And a year later, when my banker friend was planning to buy his copper, it was selling at $1 a pound."

Personally I don't have the man power or brain power to do an in depth fundamental analysis on each stock, sector, commodity, country, etc.
I'll let the research teams at GS do the legwork, and try to follow what they are doing through reading price action.

 

[tradingbiscuit]

The stuff you mention such as "I struggle in understanding how far the price going to go up or down, above the support line" is stuff that's NOT possible to predict nor should you be concerned about such types of predictions.

Simply, you're approaching trading incorrectly and you're on that path of trying to be right instead of trying to make money. Yeah, as you stated, you should have an idea where you think price is going to go before a trade. Yet, you didn't mention something else that's just as important. You didn't mention that you should also have a plan B if price doesn't do what you expected it to do and you should be prepared to exploit that plan B.

Traders that only have one plan...the one they expect to happen...these are traders trying to be right. In contrast, traders trying to make money...they are prepare to exploit what they expected to happen and ready to exploit if what they expected did not happen.

By the way, you did that again...mention fundamental analysis without giving any information if you're profitable or not with that. Simply, if you're profitable via fundamental analysis and you're not profitable via short term trading...the goal is to make money or you're subconscious has tricked you into going a route that you've been condition to go by others ?

I come from a trading family and the first thing I remember my old man telling me when I was young in that he doesn't like the market that he trades nor the trading style. Yet, he does it because he's profitable at it and he has a family to support. Thus, I learned quickly at a young age that there will be times that you do what you need to do and that other stuff is just for fun.

Once again, if you know you can make money at fundamental analysis...do it...make your money and you can use short term trading as some sort'uv hobby or leisure activity on the side that has very little impact on the profits you make from fundamental analysis.

Ok assuming i can use risk management, how do i get an idea of where the price is headed. How can people predict where the price is going to stop. Yes, risk management is necessary but I dont want to rely just on Risk management in making money.

 

[wrbtrader]

Ok assuming i can use risk management, how do i get an idea of where the price is headed. How can people predict where the price is going to stop. Yes, risk management is necessary but I dont want to rely just on Risk management in making money.

I'm not talking about risk management although I do think its important. Also, as you continue believing that prediction is a key variable to successful trading...I do not believe such. In contrast, I believe as I stated...be prepare to exploit if what you expected to happen did not happen (plan A is what you expected and plan B is what you do not expect to happen...prepare to exploit both).

Yet, if you're interested on topics about risk management...there's a few threads on that or you can talk to those that think its the only key to successful trading...guys like romik and buy1sell1 or something like that.

Anyways, I can easily see where you're stuck and that fact you're continue to be repetitive about it even after I clearly said its the wrong path...nothing I will say will change that route you're heading down.

Thus, you have the info you need...its your choice if you want to research it or not but you really need to find out on your own that successful trading involves so much more than trade signals. Good luck with your trading.

 

[Xela]

Of course there are other factors involved in trading, thats why they only work 2/3 of the time.

I can only repeat what I said above. Personally, I think this is nonsense (sorry!): if candles "worked", as you suggest they do, anything like 2/3 of the time, then they'd be all anyone would ever need to trade profitably, which is self-evidently risible.

I dont want to rely just on Risk management in making money.

You got that part right, anyway: risk-management in itself (even though in one sense it's what trading is all about) doesn't give anyone/anything an "edge", at all. You need to have a proven edge before you can start applying the fundamentals of risk management to it (and indeed even before you can work out how to, in any specific instance).

 

[tradingbiscuit]

I'm not talking about risk management although I do think its important. Also, as you continue believing that prediction is a key variable to successful trading...I do not believe such. In contrast, I believe as I stated...be prepare to exploit if what you expected to happen did not happen (plan A is what you expected and plan B is what you do not expect to happen...prepare to exploit both).

Yet, if you're interested on topics about risk management...there's a few threads on that or you can talk to those that think its the only key to successful trading...guys like romik and buy1sell1 or something like that.

Anyways, I can easily see where you're stuck and that fact you're continue to be repetitive about it even after I clearly said its the wrong path...nothing I will say will change that route you're heading down.

Thus, you have the info you need...its your choice if you want to research it or not but you really need to find out on your own that successful trading involves so much more than trade signals. Good luck with your trading.

Well you said it yourself you should have an idea of where the price is going to go. Also what do you mean then by exploiting the unexpected price change. How do you do that.