Message Font: Serif | Sans-Serif
UnThreaded | Threaded | Whole Thread (86) | Ignore Thread Prev | Next
Author: HCourtney Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 23034  
Subject: Re: FORE! Date: 3/3/2001 12:03 AM
Recommendations: 27
>> I'm not saying that you won't be able to do it, far from it, but you will need good fortune (and lots of it) in your favor to do it. <<

A trader that relies on luck will be looking for another profession right quick. Trading is a learned skill that is mastered only thru good old-fashioned hard work, study, and experience. TA utilizes very, very specific techniques that play the best odds that exist w/in the endlessly repeating patterns/cycles of the marketplace. A trader relies on "good fortune" only as much as the trained athlete. Yes there are more poor traders who lose than skilled traders who win {thank God); there are also a lot more bad actors than good ones, it doesn't mean acting is not a true art.

The market is an auction, therefore the driving force is supply & demand. Value is determined by perception of the participants at the moment the item is up for bid, evidenced by their willingness to buy or sell at this or that price. Van Gogh died broke, a few years ago his "Sunflowers" sold for 80 million bucks. Another culture in another 100 years may use it for kindling. The recent bubble, or the fact that well-established reliable companies' stock have fallen along w/the rest of the market, illustrates the significance of perceived value.

Technicians use charts to read the emotional crowd, the so-called "dumb-money" that makes up most of the participants, as well as those on the other side - the relative few, the professionals, the manipulators. TA attempts to get on the side of this "smart-money" by reading the tracks of their intentions that charts reveal.

You keep saying "no proof, no proof" but if a successful technician was to show you his portfolio and his specific trades then you¹d just say "sure but you¹re just one winner among a thousand losers" or "you just got lucky during such and such period". Have you checked out legitimate sites like, Pristine, HRE? Are all these well-respected, successful, sometimes brilliant people just charlatans? Do you believe that the markets are manipulated by professionals? If not, then you simply don't understand the process, which given your obvious experience and knowledge I just can't believe. Professionals make their living, a very nice one, by reading supply & demand, playing the naive against the naive. You say you've read the Burrow, so what about accumulation/distribution? Do you believe it? If the smart money is distributing stock on the way up and at tops, and accumulating on the way down and at bottoms, since this is the way they make money, and if one can detect this on a chart, what is to prevent one from playing with those big boys?

Technicians play the best odds in a particular situation. Let me give you a very specific, common technique as an example: Buying pullbacks. It's popular because it works (however, as it becomes more and more well known, it will work less and less well, since common knowledge closes that door of market inefficiency that the technician relies upon).

Stocks go up, pause, retrace a bit, resume the uptrend, then repeat the process. Over and over and over again. A trader finds a stock that is in a strong uptrend, and then buys on the pullback to support, in anticipation that the ut will continue. This is based on that old chestnut, an object that is in motion tends to remain in motion until something stops the damn thing. A strong uptrend can be determined by simple visual inspection of the pv chart, as well as ma's, tl's, RS. Would you agree that it is possible to determine that as of *today* a certain stock XYZ is in a strong uptrend relative to the rest of the market? Is it making higher highs and higher lows? Does volume come in stronger on the rallies and diminish on the reactions? Are the reactions shallow? Are they shorter in time than the rallies? Are rallies more volatile (but not too volatile, indicating a top)? Are the price bar spreads generally greater on the rallies, C>O, closes near the highs? Are the spreads on reactions tighter? As the reaction nears previous support, are the closes higher than the open and near the tops of the range? Does it find support at several cross-points - a prime retracement level, a ma, a previous high (resistance becomes support), a trendline? Perhaps it also forms a certain congestion pattern, a bull flag or triangle. Or a certain candlestick reversal pattern, a doji or hammer. Is the overall market strong? Is the parent index strong? Is the sector strong? How is a correlating stock performing? If you're buying intraday, what are the tick and trin doing as price approaches your buy point? What is the time cycle? Is it a reversal period? You say you¹ve read Db's site and the other material, so I assume you're familiar with at least some of this.

I'm not being facetious, the technician looks for as many confirming factors in his favor as he can, that's essential to the craft. One reads only what is actually *there*, you don't let your imagination create opportunities than don't really exist just because you wish to trade that day or you¹ve had a bad streak and reallllly need to get some confidence (and cash) back. The technician removes emotion from the equation by looking at certain predetermined criteria and acting or not acting upon that information. He/she plans the trade and trades that plan and does not waver during the holding period.

You also look at reward:risk. Where is the nearest point of resistance in the timeframe that you are trading? This is your target/reward. Where is the nearest support that if broken will show you were wrong? This is your protective stop price, the amount of risk. Traders generally look for 2:1, 3:1 and greater reward/risk ratio. Smart traders, those who survive, are more concerned with controlling risk that seeking profits. This is as much a part of trading as technical analysis. A professional always knows he can be wrong. Control risk properly, choose high probability setups, and profits will come of their own.

Some of the things I've mentioned are specific to ST traders, but much of it can apply to IT or even LT traders. The point is TA is a craft, even an art, and it¹s quite, quite real. To say that you've read the Burrow, or the books, doesn't mean you grasp the thing. When I first got into Canslim it took me a solid six months of living it to "get it". Even if you decide to take it seriously, maybe you¹re just one of the thousands of bad technicians who never catch on and never will. Fine with moi, we¹re allllllways happy to take your money. But to peruse the material, w/o ever actually, sincerely working within the actual process, is not the way to arrive at a conclusion of validity. Try paper trading for a reasonable period of time. At least 10 or 20 trades. Fail at it. Then find a good technician and detail your trading style, including charts of your specific trades during the experiment, if he's worth his salt he'll show you what you did wrong. TA is not the failing, it's the inadequate trader.

Print the post  


Foolanthropy 2014!
When Life Gives You Lemons
Post of the Day:
Macro Economics

Looking at Currency Ratios
What was Your Dumbest Investment?
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?