What is your basis of strategy to enter a trade ?

[traderwald]

Hi guys,

I wanted to understand the basis of your strategy to enter a trade. More specifically,

1. is it based on a hypothesis and understanding of the reasoning which is then tested to ensure its reliability?

Or

2. is it based on observation of patterns and testing results of those patterns, without actual understanding the reason or hypothesis to those patterns. As long as the pattern gives good result based on testing you go for that trade ?

In other words could the strategy be based on a pattern that occurs but there is no specific reason or mathematical basis for it.

Or maybe another method that you do the trade ?

Thank you

 

[Peter8519]

When a stock is at least 20 days staying above a simple moving average and close higher than the past 50 days. Why 20 days? 60% of stocks which are above a moving average will go below the moving average within 20 days.

 

[trend2009]

support resistance

 

[traderwald]

When a stock is at least 20 days staying above a simple moving average and close higher than the past 50 days. Why 20 days? 60% of stocks which are above a moving average will go below the moving average within 20 days.

I guess the question I have asked is - is there a reason or mathematical logic to the above pattern or is it just an observation based on which the strategy is built ?

 

[tomorton]

Can there really be mathematical proofs of patterns? Chart patterns are formed by the actions of "investors" which are based on their desire for profit against their tolerance of risk against the time available to them for this particular market position.

There will be a spectrum of expectations, risk tolerances and time horizons, and these may be influenced by recent/current market positions specific to the investor but which are otherwise uncorrelated with the position in question and its chart.

When enough investors deploy enough money and maybe they or others remove enough of it within a similar time frame, a pattern emerges. So surely a chart pattern is just an "average" of multiple unrelated behaviours, it has no being of itself?

 

[traderwald]

Can there really be mathematical proofs of patterns? Chart patterns are formed by the actions of "investors" which are based on their desire for profit against their tolerance of risk against the time available to them for this particular market position.

There will be a spectrum of expectations, risk tolerances and time horizons, and these may be influenced by recent/current market positions specific to the investor but which are otherwise uncorrelated with the position in question and its chart.

When enough investors deploy enough money and maybe they or others remove enough of it within a similar time frame, a pattern emerges. So surely a chart pattern is just an "average" of multiple unrelated behaviours, it has no being of itself?

qq: Would that mean that the occurring of the chart pattetns is itself a signal with no further reason to it ?

 

[heispark]

I am trying to catch the change of energy flow as early as I can..... The easiest explanation can be 'higher high and lower low' but actually it's more complex than that.....

 

[remogul92]

Hi guys,

I wanted to understand the basis of your strategy to enter a trade. More specifically,

1. is it based on a hypothesis and understanding of the reasoning which is then tested to ensure its reliability?

Or

2. is it based on observation of patterns and testing results of those patterns, without actual understanding the reason or hypothesis to those patterns. As long as the pattern gives good result based on testing you go for that trade ?

In other words could the strategy be based on a pattern that occurs but there is no specific reason or mathematical basis for it.

Or maybe another method that you do the trade ?

Thank you

I look for strong moves (patterns) long or short in the market. There is no “math” per se but that type of strong move indicates to me that enough money is flowing in the same direction for whatever reason. My strategy is to follow that pattern.

 

[traider]

google dozu, buy and hold, BTFD when economy is strong

 

[tomorton]

qq: Would that mean that the occurring of the chart pattetns is itself a signal with no further reason to it ?

"The reason" is an aggregated set of reasons so in that sense there cannot be a unique reason for a given pattern making itself visible over a given time-frame. A unique reason would at least suggest a unique sentient decision, or at least a unanimous consensus of the group of market participants who can affect price and this is not the reality.

This means to me that it would be futile to seek such a reason or to attempt to validate or qualify or quantify it. Though it would not be futile to do this with the pattern itself.