False, in fact Step 1 should be determining if your instrument of choice is trending or ranging before you begin to risk money. Step 2 asking the very same question in various timeframes or chart types of choice working your way down from up.
Why Do Most Retail Traders Favour Technical Analysis ?
- Thread starter Fundlord
- Start date
False, in fact Step 1 should be determining if your instrument of choice is trending or ranging before you begin to risk money. Step 2 asking the very same question in various timeframes or chart types of choice working your way down from up.
Definitely false. In fact if something is priced fairly and a market is operating efficiently it should be expected to range until external factors either change things, buyers or sellers significantly alter their expectations, or something else happens. It's just that the latter 3 happen quite often, but it doesn't mean that they always have to happen.
A range is a series of alternating trends when you drill down to a smaller bar interval. On a smaller bar interval chart, when price visit s a previous swing high or low and turns back the direction of the opposite swing high/low a superb "scalping" opportunity presents itself. An adept scalper can sometimes extract more profit from the range by trading it both ways than from a leg of a trend. The risk:reward is excellent as well because the acceptable loss when trading a range is very small (mine is the equivalent of $35/futures contract). On a smaller bar interval chart, you can also see when the market "tips its hand" for the break out of the range and get positioned for the strong trending move that usually follows.
It takes hundreds of hours of careful study to come to understand how to trade this way. Bob Volman's book Forex Price Action Scalping lays down the foundation needed to move into the more advanced tactics of trading ranges that occur in a bar interval smaller than your main trading bar interval.
A trader who uses a 5-min chart for setups/environment would use a 1-min chart for scalping opportunities, for example.
It takes hundreds of hours of careful study to come to understand how to trade this way. Bob Volman's book Forex Price Action Scalping lays down the foundation needed to move into the more advanced tactics of trading ranges that occur in a bar interval smaller than your main trading bar interval.
A trader who uses a 5-min chart for setups/environment would use a 1-min chart for scalping opportunities, for example.
WARNING
Nothing but inactionable platitudes and feel good nonsense like "markets always trending".
Don't let this guy's mod status fool anyone into thinking he knows anything beyond posting.
Great sign. I was on the north shore at 10 years old. Those waves were terrifying with how close they broke to shore when i was there.
You don't need to try to get an edge from fundamental analysis, global new events, economic reports or whatever...you just need to understand that sometimes the information can be useful or helpful to your investments or trading.
Me personally, I need to know what's going on in the world via the above info. It helps me to not trade with tunnel vision and helps me with my overall market context for the day. I just don't believe in trading via technical analysis alone as if nothing else matters. Simply, I choose both (FA and TA) instead of one over the other.
I don't believe this is why retail traders favor technical analysis if that's what you're implying. In contrast, as stated earlier in this thread...it starts with the marketing/advertising by the data / charts / software / brokers / forum vendors.
Simply, TA is a great way to attract new clients. Then after the clients gain access to TA...they then begin looking around to learn how to use it because the resources they first heard about TA do not teach it.
I remember seeing my first advertisements about charts and indicators by Omega Research (now called TradeStation) back in the late 1980s. Then in the late 90s and early 2000 those day trading commercials hit heavy with all kinds of slogans with charts with indicators.
Nothing really has changed today. For example, go to eSignal website and you'll see statements like "Learn the Secrets of Successful Trading"...continuing into statements like "Make A fortune in ANY market...its easy, fast and rewarding...then click on the eSignal chart link or Advanced GET chart link next and you see charts...Ellitot Wave, False Bar Stochastics and many other goodies. Go to TradeStation into their education section...in the first 4 lessons...you're hit heavy with chart analysis while nothing about discipline, risk management, proper capitalization and so on.
This is what newbies see...charts and data as a way to financial freedom.
Now go to the big boys like Bloomberg, CQG, Realtick and so on...they don't hit you with all the fancy charts and indicators mainly because they're not trying to attract newbie retail traders. In contrast, they're hitting hard with ads about data integrity, cost analysis tools, order routing intelligence and so on. These are trading tools not attractive to newbie retail traders but because they're trying to attract firms and professional traders.
Yeah, they do some chart advertisements but its not their primary tool to attract their clients.
Heck, if a retail trader is new to trading (called newbie trader) and goes to bloomberg website...they'll quickly assumed its a news only site and wouldn't even consider them as their charting/data vendor.
Simply, retail traders are attracted to technical analysis because its marketed (heavily) to them specifically by those I mentioned above because its easily affordable as a start up cost of trading in comparison to other more professional tools.
the assumption the poster makes is that because retail traders favour technical analyses, that makes it garbage because most retail traders are losers. Tip - there are very big traders who use technical analyses, spreading techniques, systems trading, pure orderflow reading. There are also losing traders who lose all of the above. Point - methodology isnt that important. What is important is fit, practicing and acquiring skill, and mastering your psychology.