For what it's worth, here is my personal experience with TA. For a couple of years I studied all the books and traded with a loosely defined plan based on various types of TA. I lost a lot of money. Then I had a long think to myself (about 6 months) without trading. I came up with simple quantitative means to evaluate entries and exits independently. I learned to play poker and about probability as applied to gambling. Then I applied basic TA (such as buying S, selling R, with a suitably defined trend) and saw that it produced favorable bets, meaning it skewed probability distributions in my favor. I started trading again in January of this year. This will be my first year with capital gains instead of losses from trading. Year. The answer to Sufer's question about why do so many people lose with TA if TA works: they aren't using it properly. There is no secret information, so to speak. I don't know anything about S/R and trends that isn't in Edwards and Magee. It's about application and the understanding of basic probability and statistics, the ability to make reasonable probability estimates, and the ability to monitor changes in these probabilities with time.
the basic flaws in TA
- Thread starter marketsurfer
- Start date
getting back on topic----
buying support and selling resistance? doing the opposite will work just as well. anyone care to show via a testable hypothesis that this is not correct?
surfer
buying support and selling resistance? doing the opposite will work just as well. anyone care to show via a testable hypothesis that this is not correct?
surfer
Hehe,
I spotted that subtitle:
"HOW GREAT TRADERS MAKE MILLIONS IN UP OR DOWN MARKETS".
It reminded me of a quote by that great trader Barend Baruch on the back cover of "ON EXTRAORDINARY POPULAR DELUSIONS OR THE MADNESS OF CROWDS".
Baruch wrote:
"THIS BOOK SAVED ME MILLIONS".
nononsense
PS. I donno if Baruch practiced TA
Quote from nononsense:
Hehe,
I spotted that subtitle:
"HOW GREAT TRADERS MAKE MILLIONS IN UP OR DOWN MARKETS".
It reminded me of a quote by that great trader Barend Baruch on the back cover of "ON EXTRAORDINARY POPULAR DELUSIONS OR THE MADNESS OF CROWDS".
Baruch wrote:
"THIS BOOK SAVED ME MILLIONS".
nononsense
PS. I donno if Baruch practiced TA
Baruch's most famous trend following quote is: " Don't go for the extra eighth just make the middle 50%" This does not establish that he, in those days, used TA as some of us know it now but it is self evident that he was on the ball.
i haven't read the whole thread...
so some of this stuff has probably posted many times before...
active trading is only part TA, you have to know where to place your stops....
most traders that say TA doesn't work are those who have never made a huge number of trades using it....
also most non-believers use "off the shelve" charts and then can't understand why they don't work everytime.....
others have mentioned that a trader needs to ask him or herself, "what part of the leg do i want"
i like to let others capture the first part of the move, then jump in for about the middle 60 to 70 percent of the move......
i day trade only and have no problem finding enough set-ups...
what has really surprised me is that using these charts my win-rate has become huge.....
so some of this stuff has probably posted many times before...
active trading is only part TA, you have to know where to place your stops....
most traders that say TA doesn't work are those who have never made a huge number of trades using it....
also most non-believers use "off the shelve" charts and then can't understand why they don't work everytime.....
others have mentioned that a trader needs to ask him or herself, "what part of the leg do i want"
i like to let others capture the first part of the move, then jump in for about the middle 60 to 70 percent of the move......
i day trade only and have no problem finding enough set-ups...
what has really surprised me is that using these charts my win-rate has become huge.....
here's my 2 cents on support and resistance....
let's say you normally use a 3% stop...
does't matter because this works on a 5 or 7% stop as well....
the index or stock you are trading appears to have hit resistance....
shorting an index or stock when you think it's at resistance is a great set-up because you then can use what you think resistance is, as your stop.....in some cases this can be as little as 1/2 to 1% ......thus you are only risking a small stop versus your normal stop loss.....set your stop slightly above what resistance might be......
if your stop gets blown out, flip your short because you now can play the break-out......
my 2 cents may not worth anything because i mainly trade e-mini index futures and trade only during the highest volume periods of the day.
let's say you normally use a 3% stop...
does't matter because this works on a 5 or 7% stop as well....
the index or stock you are trading appears to have hit resistance....
shorting an index or stock when you think it's at resistance is a great set-up because you then can use what you think resistance is, as your stop.....in some cases this can be as little as 1/2 to 1% ......thus you are only risking a small stop versus your normal stop loss.....set your stop slightly above what resistance might be......
if your stop gets blown out, flip your short because you now can play the break-out......
my 2 cents may not worth anything because i mainly trade e-mini index futures and trade only during the highest volume periods of the day.
Quote from marketsurfer:
getting back on topic----
buying support and selling resistance? doing the opposite will work just as well. anyone care to show via a testable hypothesis that this is not correct?
surfer
If you followed the dbphoenix stuff you can see alot of the traps he fell into regarding S and R.
Regarding stock trading using the "natural cycle" with a quality universe, your comment on doing the opposite will yield up to 500% a year on the long portion of the statement.
As far as the short side is concerned, their is no symmetry there to consider. This is because the choice of a quality universe precludes its appplication to short trading.
There is a guy with a jounal who says he makes more with the short side in a semi scalping arrangement. Unfortunatley he is just using NASDAQ as his universe and just looking for daily plays so he is a poor marginal example.
Look at the commentary made on a recent MIT study on the benefits of pattern trading. The patterns addressed relate closely to the S/R stuff. The poor choise of a universe to examine defeated the major value of the study.
This brings us to the point where the formations they evaluated are in relation to selling resistance and buying support mostly (a couple of exceptions). you can easily see by their data results as compared to the spread of S and R that they missed the boat largely. The values they got actually show that the inverted H%S, for example, does not traverse the S and R spread at all.
What this means is that buying support is not much of a "bet" for making money.
Most of the books written and papers published are raught with this level of thinking which is well off the mark.
One of the best formations to use in the S and R game is the C&H, an IT formation advocated for climbing out of the box in which financial planning is trapped. Again this is a long only strategy where the trader is going long at resistance.
So , where a person to study the S and R and what to do at these levels for the full range of universes taken segment by segment, he would come to the following conclusions for making money.
Conclusion 1. The most common action at S and R is testing the value. By definition this can be seen and understood as a narrow lateral channel where the trendline is formed by the S or R respectively.
Conclusion 2. Once a person gets past the entry/exit mentality and arrives at the hold/reverse strategy, the lateral testing channel is a high velocity money set of plays.
Conclusion 3. The lateral channels end. They, then, take the formation of a pennant (the C&H is a FTP) which behaves with high probability according to its shape (FTP, FBP or symmetric pennant).
Conclusion 4. Your hypothesis, of BO's on the S and R. The plateau kind of steps. Books, commonly, have sections on the steps that are gone through during general advances or declines over time. This is the buy resistance/sell support descriptive stuff. Two of the classic trading approaches follow this orientation: front runners and trend followers. This huge door is opened by using trend following in conjunction with the S and R annotation. S and R are usually bands and they encompass the historical trading and investing activity. Loosey goosey stuff. Trends deal with the more of more on the bars extremes (Higher highs and higher lows woud be the long expression). So trends march through the S and R levels. Usually the S and R is continually adjusted as it is reached by a trend on the march. If you look closely at the requirement for this to happen it is found in the P, V relation. What may be better than what s genrally done would be to make better definitions of how the market works. This will not happen it turns out. What is found it that increasing market activity (volume) it what affords the march of the trend a further reach. It is well known that the media precipitates the increased activity through reportage and attention. You can see in ET that their is a continuing melage of "tips". when you look at EOD chart of a year or mores duration you can see two things easily: this increase in activity over time and the "plateaux" of activity defining the succession in steps.
Summary.
You asked a question that most people do get to at some point. It is the question that comes up after swing trading has been pummeled to death to explain why it doesn't work a lot of the time. The question does not have the same answer for long as it does for short.
When a person goes through the eight stages of doubling his money velocity. He gets out of a lot of myths and then incorporates what is needed to know to go upward and onward.
Here is an example. A moderator here posts some stuff on how he "bets" on trades based on what he thought he read in Magee.
He strated trading two years ago or more maybe. All unsuccessfully. Now after a 6 month hiatus he is "betting" apparently better using an entry/exit somthing or other. He may be profitable this year. This is all beginner stuff and he is unable to "read" the market as yet.
He may get to some other level at some point. People have to go through stages they tell us. This stage of dealing with S and R is one for some people. Most of these and other people have the forming bar on the very right of their screens (some software still being sold in this modern age will not let a trader move the forming bar to a more logical place). they cannot project S or R of the price operating channels (fractal by fractal) on their screeens to even see the near term future of what your question is dealing with.
The S and R you want to discuss as the opposite of something, puts two versions of S and R on the table. The one that makes money most often is the one your raised from the one that makes lesser monies. People slowly miagrate from one level of understanding to another. It is not so much a debate or discussion of stuff but rather a slow recognition of how to go to where the money is.
The moderator example is of a guy who has been a loser from the beginning, taken a 6 months break, changed his ways to "betting" another way, and now may get to breakeven (he is ahead he thinks now) and in the future he will change to another way to not repeat his past.
Coolweb is doing his thing with a method that gets something for 6 months. I don't read it as yet but i would like to see his chages too.
S and R is not in either person's bag of tricks as yet. Neither is trend following. Nor is fractal analysis. nor is putting the future on the screen by moving the forming bar so the projections can be annotated for the price to fill as the future moves to the present.
Your question is one where regarding the future is important. So it is annotated there and all the other aspects are annotated. Seeing the pennant form after the lateral channel on the S or R is all annotated in the future ahead of the forming bar.
Having the pennant there for price to fill gets all the "betting" off the table once and for all. The flat side of the pennant is asociated with the S and R; the sloped side of the pennant is associated with the trend. by having the two contribute to the annotation in the future, you get a nice chance to see the next leap of the price from your annotations once the bar begins to form. It is a nice timing gismo.
A lot of the stuff above enables a person to do a few doublings of their current money velocity. One thing that is particularly rewarding is to get stuff on the screen to monitor. If a question is on the table, what is being used to see it on the screen?
Some questions do deal with future prices relative to the present price. Why not have a place to annotate right now where this will be going on?
The answer to Sufer's question about why do so many people lose with TA if TA works: they aren't using it properly. There is no secret information, so to speak.
whether a trader realizes it or not, he or she has a market bias to over come.....i prefer to preconceive nothing about the index or stock i'm about to trade.....a bias will cost you money, and spoil a good trade.......
whether a trader realizes it or not, he or she has a market bias to over come.....i prefer to preconceive nothing about the index or stock i'm about to trade.....a bias will cost you money, and spoil a good trade.......
