Technical analysis

NoDoji said:
Losses aren't a problem because all solid trading methods will incur losses. The problem is when a trader sees a pattern (price bars or indicators or both) and develops a bias such as "There's no way price will ever get to THAT level, so I can just short here and not worry about a stop loss."

It's not losses that result from following a plan that cause problems; it's the losses that come from not following a plan or from trading a bias that's clearly contrary to what the price behavior is telling you and refusing to cut a loss and/or reverse sides when indicated. (Were you not in the losing position, you'd clearly see the opposing opportunity.) If you're positioned against a strong trend expecting reversion to mean, every pullback fills you with hope that the reversion has begun, while for the trend followers every pullback is an opportunity to add to a winning position or initiate a new with-trend position.

I did start the "Help, I've been chopped thread" a while back to help offer ideas for avoiding unnecessary losses during conditions where no particular side seems to have dominance.
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While what you said is 100% true, if the three stages in trading are analysis, discipline and execution, I would say that the losses which you spoke of occur in the discipline stage. Helping a trader with TA is one thing, but discipline is the rough one, being that you can lead a trader to a set up, but can't make him click! However the losses I mentioned result from problems in the more basic analysis stage. The reason being that I all too often see on ET, in magazines, newspapers etc. posted charts that show a clear lack of basic
TA/PA knowledge or the misunderstanding of it. Even something as simple as how to draw a trend line correctly. And, of course, this leads to disaster in the execution stage. That is why I thought we could help correct some, but of course not all, of the basic TA mistakes made in losing trades in a 'What did I do wrong?' thread. And limited to corrections rather than as you mentioned,"...while for the trend followers every pullback is an
opportunity to add to a winning position or initiate a new with-trend position." which would require teaching how to differentiate a pullback move from that of the possible start of an extended reaction or correction on which an entry would not be advisable.

Anyway, as you know much better than I if such a thread would be useful, I'll pass on the idea. Maybe I'll try posting some examples in a 'IMHO... common mistakes made in basic TA' thread.
 
learner2007 said:
Anyway, as you know much better than I if such a thread would be useful...
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I do think such a thread would be useful as long as the hindsight analysis is fair. Just because a trade ended up unprofitable doesn't necessarily mean the trader misread the price action. I've provided hindsight analyses for people and very often my response to a losing trade was along the lines of, "A long entry wasn't a bad decision there" or "The short you took there made sense."

Sometimes the full loss could've been avoided by trying to exit at or near break even when a conflicting signal occurred during the course of the trade. The problem with that suggestion is unless I know someone's trading plan in detail, I have no idea if break even exits improve or reduce the overall long term profitability of the trading plan. That can be determined only by a thorough statistical analysis of both options (leaving stops and targets in place vs. break even exits under certain specific conditions).

Nebulous phrases like "conflicting signal" should be precisely defined before embarking on such statistical analyses; if not, there's a good chance the discretionary "eyeball analysis" will see the trades that work and be blind to the ones that don't.
 
marketsurfer said:
Theres tremendous value in voicing your opinion and ideas in ways i couldnt imagine not so long ago.
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Based on my personal experience I know you're right but your post implies something different than my experience, even tho we both arrive at the same conclusions from our experiences. I'm naturally curious what you couldn't imagine until recently and you're mentioning it so obviously you want to tell us about it. Please elaborate. Based on both my experience and your description of your experience elaborating will add tremendous value to it for you.
 
NoDoji said:
I do think such a thread would be useful as long as the hindsight analysis is fair. Just because a trade ended up unprofitable doesn't necessarily mean the trader misread the price action. I've provided hindsight analyses for people and very often my response to a losing trade was along the lines of, "A long entry wasn't a bad decision there" or "The short you took there made sense."

Sometimes the full loss could've been avoided by trying to exit at or near break even when a conflicting signal occurred during the course of the trade. The problem with that suggestion is unless I know someone's trading plan in detail, I have no idea if break even exits improve or reduce the overall long term profitability of the trading plan. That can be determined only by a thorough statistical analysis of both options (leaving stops and targets in place vs. break even exits under certain specific conditions).

Nebulous phrases like "conflicting signal" should be precisely defined before embarking on such statistical analyses; if not, there's a good chance the discretionary "eyeball analysis" will see the trades that work and be blind to the ones that don't.
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I'm glad at least to hear that you feel such a thread would be useful.
As you say, an overall change in market sentiment, a fire at the factory, or the death of the CEO's dog may result in a loss, rather than just the misreading of the chart. And I know that the help you have provided to so many in the past as you described above requires a lot of information, and it can be quite hairy and difficult to pinpoint the cause, especially if the trader has reached the level of having developed a plan. If the plan is faulty, the thread would become too involved and quite a burden for the commentator no matter how much he wants to help. My idea was that after seeing so many incorrect uses of the basics of TA, answers as to the reasons for the losses on trades based on TA could easily be provided by those with more experience. And limiting the thread to the correction of the causes for losses would keep out those who are seen so often here just looking for an easy
way to make money without doing any real study on their own.

I think there are too many traders out there who will eventually say 'TA doesn't work' because they learned everything they needed to know about TA in 3 days and 2 nights from a comic book. And there are those who skip through the basics as they don't see the basics as that beautiful set up which will make them rich. And developing a TA trading plan without a sound knowledge of the basics is bound to fail IMHO. True, there are many people who don't have what it takes to learn TA, just as some aren't good at board games such as chess, or find it hard to learn foreign languages. Yet for those who make a serious effort to learn TA, but aren't successful simply because of misreading the TA basics on the charts, I hope a good way to help them can be found on ET.
 
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>NoDoji

Just saw that previously someone did start a 'Losing trades' thread. It had little interest
and died. So it looks as though my idea wasn't so hot. Very sorry for having taken up
your time with this.
 
Hi guys,

well - TA works! You probably would not understand this article (different language) but just look at the Excel img.: http://www.etrading.sk/obchodny-sys...-ziskovos-obchodneho-systemu-preoptimalizacia

Moving averages comparison, wheat, corn, soybeans, soybean oil. Years 1960-2008.
Tested 3-year periods. 78.400 combinations of MA. Should you stick to any of them you wouldn't go wrong.
And that's just basic Exponential moving average - my most favorite one is the Kaufman's adaptive MA - look at the curve (this time an english version): http://www.technicalindicators.net/...ysis/152-kama-kaufman-adaptive-moving-average

TA works (I like especially adaptive moving averages and am not much into the oscillators). You just shouldn't combine too many indicators and keep your system as simple as possible.
 
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