Why Is The Obvious Not So Obvious?

[Mysteron]

Based on my own trading outcome, I actually agree with you and this statement.

The thing I am trying to figure out is how to select a good entry. Watching TA and charts did not seem to help. As an example, one chart I have been watching is TEVA. I couldn't find any warning from watching the charts or from all the TA that the stock would drop 25% in one day?

Maybe someone can do a post-hoc analysis and point it out to me.

Thanks.

Standard TA attempts to track price while filtering out noise. Such an approach requires there to be an underlying dynamic of price behaviour. If that was the case it would be possible to estimate the future direction and value of price with some confidence over short timescales. When viewing a chart its easy to fall into the trap of viewing price as a trajectory and through the minds eye or with the assistance of TA, to predict ahead and have an expectation that price will move in a particular way. The problem with that and with any tracking system is the effect of unknown disturbances.

For TEVA the earnings release on 3rd Aug had an impact on price that TA prior to the event could never have accounted for. Although the magnitude of that disturbance was unknown before the event the timing should have been known and factored in any trading plan.

Note that price had fallen over the past year and that especially during the 5 days prior to the earnings release price had dropped - investors anticipating the earnings release.

 

[Simples]

Over the years I've witnessed some sad cases, people buying all the way down to the bottom, praising their stayer-skills. They hope for a rebound, not just to get out, but for the stock to advance beyond last ATH. But some stocks can lose 90-99% of their value or more (200ish -> 1). In a bear trend: It can always get worse!

This was for a solar energy stock, the future. But sometimes you're too early, and other times you're too late.. No amount of warning or reprisal worked either. Once mind is fixed, it's unwilling to bend.

 

[MrScalper]

Based on my own trading outcome, I actually agree with you and this statement.

The thing I am trying to figure out is how to select a good entry. Watching TA and charts did not seem to help. As an example, one chart I have been watching is TEVA. I couldn't find any warning from watching the charts or from all the TA that the stock would drop 25% in one day?

Maybe someone can do a post-hoc analysis and point it out to me.

Thanks.

The main thing to understand about financial trading or investing is "value"..for..we all want to get a bargain..even when shopping..right!

Price is not value!

Value is relative.. remember the pre dot com PE valuations!

Every financial instrument has 3 main things that you must fully understand..that is..if you want to know what you are doing of course

Some readers know..as like myself..they have received a book from someone..a book..which will not show you how to make money..but will definitely explain to you why you were such a fool for getting sucked into the hype and bull surrounding financial trading!

If you are of the correct mindset..this book can change the way you look at trading and investing forever..and I know this as..even though I had already changed myself by the time I received this book..it was like the cat scene in The Matrix film..De Ja Vue

I will PM you if you want a copy of the book..but you must promise to not give it to anyone else..as the author really deserves the price of the book..which I purchased myself after getting the PDF for free.

I have spent over $10k on books..courses..etc..since I started trading years ago..and this one book..is by far the best book I have ever come across in relation to understanding the financial markets..and why..most who try..fail dismally!

It will not help you with chart reading skills..as..the good stuff for that will never be published.. for "obvious" reasons..if it got out..it would be rendered useless in no time at all..as soon as the big money gang automated it..and yes..of course they could.. anything can be automated these days.. especially when it comes to something so simple as price movements !

Let me know..maybe you already got the book also?

 

[MrScalper]

Standard TA attempts to track price while filtering out noise. Such an approach requires there to be an underlying dynamic of price behaviour. If that was the case it would be possible to estimate the future direction and value of price with some confidence over short timescales. When viewing a chart its easy to fall into the trap of viewing price as a trajectory and through the minds eye or with the assistance of TA, to predict ahead and have an expectation that price will move in a particular way. The problem with that and with any tracking system is the effect of unknown disturbances.

For TEVA the earnings release on 3rd Aug had an impact on price that TA prior to the event could never have accounted for. Although the magnitude of that disturbance was unknown before the event the timing should have been known and factored in any trading plan.

Note that price had fallen over the past year and that especially during the 5 days prior to the earnings release price had dropped - investors anticipating the earnings release.

View attachment 176411

This comes in under "Time"..readers of the book should fully understand this..did you get this book I speak of?

I find it hard to believe that some readers can not fully understand the book..it really is very simple..it is so simple it is "obvious"..well..maybe that is why some can not understand?

 

[ironchef]

I don't know what type of TA you were using to determine an entry point. You might care to explain this, as if it was some way out on the limb offshoot of TA, that may be what's causing your difficulty .

Thank you for your post learner2007.

I trade options and do not use TA or charts to trade. As for success, no, I wouldn't confuse this bull market with my trading skill. I am investigating TA and chart reading to see if they can provide some protections when this bull run ends in the near future.

Before options, I swing traded stocks. Earlier in my trading career, I tried day trade using TA. If I remembered correctly, I tried them all: MACD, RSI, William%R, SMA, EMA, GMA, support/resistance, trend lines, stochastic, Bollinger...... Let's just say that I did not day trade for long, wisely gave that up.

I like to get back into day trading, not that I need to day trade again, just that I read all these success stories on ET and like to see if I can do it too. So far, it is not promising.

Regards,

 

[dartmus]

the higher the reward..the higher the risk

Are you certain this is correct?

Anyone experience the exact opposite of this?

 

[MrScalper]

Are you certain this is correct?

Anyone experience the exact opposite of this?

Yes..you can not get higher returns without taking on higher risk..even if you are making money on a trade..like Mr ironchef with his current GILD positions..if he holds for more gains..then he runs the chance of price reversing.. wiping out some..or all of his gains.. depending on what actually happens.

He must accept this risk if he wants to make more money..no rocket science involved here!

 

[learner2007]

Anyone experience the exact opposite of this?

The stronger the foundation, the less the risk and the greater the reward.

 

[MrScalper]

The stronger the foundation, the less the risk and the higher the reward.

You can not separate risk from reward..no matter how hard you try..even if you become an expert at timing..you are still exposed to slippage and gaps.

I do agree that paying close attention to what you are doing..as in daytrading..can reduce some of the associated risks..but..no matter what way you trade..once you are in a trade you are exposed to all the associated risks.. whether you believe it or not!

 

[learner2007]

You can not separate risk from reward..no matter how hard you try..even if you become an expert at timing..you are still exposed to slippage and gaps.

I do agree that paying close attention to what you are doing..as in daytrading..can reduce some of the associated risks..but..no matter what way you trade..once you are in a trade you are exposed to all the associated risks.. whether you believe it or not!

A strong foundation, a proper entry, and following the resulting trend will protect you against risk to the greatest possible extent. True, there will always be the risk of the factory burning down, earthquakes etc., but that's irrelevant.