understanding the causes of chart patterns

M

mute9003

im narrowing down my gap in knowledge slowly and one of the big bottlenecks is actually understanding what is happening in the background as patterns form

alot of gurus parrot eachother on youtube videos and dont really give any info besides the basic that doesnt help past beginer traders or advanced traders looking for a very specific tricks

so for example its captain obvious that im observing retracements during a falling knife downtrend pattern. but its meaningless to me if i dont understand what is causing it.
what are the sellers doing
what are buyers doing
what about shorts longs who is stuck who is getting out who is getting in and who is crying and cancelling their lambo this weekend etc.

i dont know what to actually search for to learn these things.
i watched so many youtube videos and still cant find answers my brain is complete fn blender now

this forum so far has been the best help btw so thanks for all yallz time (with few exceptions of people who just troll and try to derail posts for no reason)
 
Market is moved by big money not little.

Big money is herd mentality.

Big money doesn't like to lose money.

Big money doesn't like to miss out.

So when you get a massive gap down like FB on earnings, trapped big money is going to avoid selling and will try to wait to get out -> retrace selling.

etc etc.
 
understanding the causes of chart patterns
---->
How to enter a trade using chart patterns


You are trying to understand those things which will cause more confusion.
Logical thinking/reasoning and trading don't mix.
You will end up suffering from data analysis paralysis.

Traders don't attempt to understand those things.
Traders want to know when precisely to enter the trade perhaps using the chart patterns.
And have a system to set and adjust SL and TP.
So just trade based on what you see from the chart, not based on understanding/reasoning.
 
mute9003 said:
i dont understand what is causing it.
what are the sellers doing
what are buyers doing
what about shorts
longs who is stuck who is getting out who is getting in and who is crying and cancelling their lambo this weekend etc.
More...

It's okay, we've all been there. But the market is not so mysterious as it seems.

First, you need to know that macro events like politics and economic numbers actually are the catalysts that drive the market. Second, you need to know a little bit about intermarket relationship. For example, rise in bond prices will be bad for stock prices. But falling stock prices is good for gold. So does that mean bond and gold move in tandem? Not necessarily. Finally, there's the technical analysis. You don't have to be too savvy. You just need to know what the big funds are following. These are mainly MA50, MA200, and VWAP.

Since we little fellers don't have the money or the balls to move the market, it's best to just follow the gorillas. You never wanna be the first person in line in this game. Always let others test the water first. Just be sure you're not the last one in line either. As my mama used to say, "You can't outrun the bear, but you can always outrun someone more stupid than you."

So here's the motto to live by (or not to live by): First in & last out will get you killed.
 
Things you should know about...

The yield curve and yield spreads, and how those are hedged (rate spread). How sovereign debt markets interact with and drive price action in stock markets.

How indexes trade, both against cash stocks and against each other (index spread). OTC/prime brokerage involvement (VWAP). Should understand the basics of index arbitrage and the infrastructure of how this happens between Chicago and NY. High frequency trading and the competitive execution landscape/infrastructure (hedge funds, HFT, OTC, SWAPS, FCM BD SD)

The difference between Reg-T and SPAN margin, prime brokerage.

What these words mean...

Cross Hedge
Delta Hedge
Correlation/Cointegration Trade
Pairs Trade
Spread Trade
Alpha, Beta, Delta, Implied Vol

Should know about vol trading and hedging. If the asset has a listed/otc D1 and vol market, the price action is/will be reflecting changes in the marks on these contracts... i.e. the vol trade is driving volume during sharp moves (sharp moves blow out implied vol), etc. Options/hedge books are delta hedged and hedges are managed dynamically.

There's a lot more to know.
 
mute9003 said:
what are the sellers doing
More...
Selling!
mute9003 said:
what are buyers doing
More...
Buying!
mute9003 said:
what about shorts longs who is stuck who is getting out who is getting in and who is crying....
More...
1XPk.gif


mute9003 said:
...and who is crying and cancelling their lambo this weekend etc.
More...
As long as Lambo not on burning ship, they're ok.
2524.jpg
 
 
mute9003 said:
but its meaningless to me if i dont understand what is causing it.
More...
We don't fully know what's causing gravity. There's a lot we don't fully know; but we can still benefit.
The Nigerian Prince doesn't know why we believe his emails, but the scam still works.
IMO, your time is better spent trying to profit from the markets, rather than trying to figure out why and how the markets work.
mute9003 said:
i dont know what to actually search for to learn these things.
More...
Your queries are related, more or less, to the following search phrases. You can google these:
  • Trading with Level 2
  • Tape reading
  • Short interest
  • Elliott wave theory
There is much debate about the effectiveness of Elliott Waves.
 
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