All You Need... is a Chart

[DbPhoenix 42]

You're mixing apples and oranges. There have been a number of market-moving factors in the past which prompt not much more than a ho-hum these days: consumer sentiment, the price of oil, home sales, unemployment, etc. What moves markets the most these days is interest rates, but not the raising and lowering per se. Instead it is the outlook for rates and rate changes that causes the moves. Re 4/30, what moved the market was not the rate cut itself, but the concern that it might be the last.

[firewalker 10]

You're mixing apples and oranges. There have been a number of market-moving factors in the past which prompt not much more than a ho-hum these days: consumer sentiment, the price of oil, home sales, unemployment, etc. What moves markets the most these days is interest rates, but not the raising and lowering per se. Instead it is the outlook for rates and rate changes that causes the moves. Re 4/30, what moved the market was not the rate cut itself, but the concern that it might be the last.

 

I realize the example may not have been the best, but the point was to illustrate that numbers that come out "as forecasted" sometimes will, other times won't, have an effect on the market. True, interest rates usually create more effect than any other potentially market moving factor... But like you said yourself, some factors have caused movement in the past, they don't as much nowadays. But they might again create more volatility in the future, or not...

 

Anyway, point was to show that when a figure (for example quarterly company results) comes out "as forecasted" does not mean that price cannot take a sudden jump lower or higher.

[smwinc 20]

You're mixing apples and oranges. There have been a number of market-moving factors in the past which prompt not much more than a ho-hum these days

 

I tend to agree with DB.

 

I understand the point your making FireWalker, but I think rather than the generalisation "economic news doesn't matter", should really be changed to less focus on the result of the news, and more focus on what the market is doing into and out of the news.

 

Especially in the markets you have listed like the DAX, there have been 100's of days where you would be blown out of the water if you were not aware of the news coming out. The vast majority of the time there is always "evidence" in the price action that something is going on, but it is often much harder to notice and have conviction when you don't have any reason for a sudden sharp reversal.

 

It doesn't mean that you need to even understand what the news implies (this is almost always the case with earnings); rather using it as a potential timing tool and/or period of volatility.

[firewalker 10]

I tend to agree with DB.

 

I understand the point your making FireWalker, but I think rather than the generalisation "economic news doesn't matter", should really be changed to less focus on the result of the news, and more focus on what the market is doing into and out of the news.

 

Actually, that's the point I'm making. Perhaps I didn't make myself clear. I didn't say the news won't affect the market. Sometimes it will, other times it won't. But it's not the news itself, it's the action of the market that really matters.

 

Especially in the markets you have listed like the DAX, there have been 100's of days where you would be blown out of the water if you were not aware of the news coming out. The vast majority of the time there is always "evidence" in the price action that something is going on, but it is often much harder to notice and have conviction when you don't have any reason for a sudden sharp reversal.

 

Why would you be blown out of the water because of the news? If price moves against you, you have your (be it fixed be it mental) stop, right?

 

It doesn't mean that you need to even understand what the news implies (this is almost always the case with earnings); rather using it as a potential timing tool and/or period of volatility.

 

That's exactly who I use it. I write down the time periods where potentially market moving news is released. If you don't, you might wonder why price is sitting there for one hour (apparently in anticipation of something). But there are many traders who completely shut their eyes to all these things and trade very profitable as well.

[smwinc 20]

Actually, that's the point I'm making. Perhaps I didn't make myself clear. I didn't say the news won't affect the market. Sometimes it will, other times it won't. But it's not the news itself, it's the action of the market that really matters.

 

No problem, I missunderstood.

 

Why would you be blown out of the water because of the news? If price moves against you, you have your (be it fixed be it mental) stop, right?

I was referring to if you traded without consideration of when news is coming out.

 

Try using a Stop in the DAX when FOMC comes out If you use a Stop Market, you will get out at the high/low, and a Stop Limit won't go off - always fun :frustrated:

 

That's exactly who I use it. I write down the time periods where potentially market moving news is released. If you don't, you might wonder why price is sitting there for one hour (apparently in anticipation of something). But there are many traders who completely shut their eyes to all these things and trade very profitable as well.

 

Yes, I agree. That is basically what I do as well. Often news is far too complex for someone like me to work out. I just try and get onboard. I basically shut out everything, and use a squawk Box to alert me for anything unplanned.

 

I don't doubt that there are people out there who trade without consideration of fundamental events, however to be honest I just haven't met any. I have colleagues who trade 100% systematically, but they have rules in place to pull orders before news items.

 

I guess the point of my post is there are many new traders out there who love seeing posts that tell them they can trade very simply and make lots of money. Similar to posts which show you can start trading with $100. I just wanted to highlight the difficulties as well.

[firewalker 10]

I don't doubt that there are people out there who trade without consideration of fundamental events, however to be honest I just haven't met any.

 

Wasp is one, for example

[Kiwi 16]

I don't use fundamentals at all either.

 

What I do though is avoid entries immediately prior to planned news announcements, not because of any knowledge or assumptions about fundamentals, but simply because it's prudent to manage risk by not entering at times where volatility is likely to be high. I also don't enter on the first bar of the day or during the Aussie lunch hour. Actually I don't trade the futures market after the stock market closes either. I'm pretty sure that wasp doesn't enter around fomc announcement times or when their is a big announcement scheduled for 8:30.

 

Other than avoiding times with a historical negative effect on expectancy I am more than happy to let price and volume tell me where the market is currently going.

Edited May 27, 2008 by Kiwi

[wasp 10]

Wasp is one, for example

 

I'm pretty sure that wasp doesn't enter around fomc announcement times or when their is a big announcement scheduled for 8:30.

 

All you need IS a chart....

 

If you have read the chart correctly, only a black swan (Where's my copy of the weekend FT ) will cause a problem.

 

I use to avoid FOMC in the old days and was especially careful around NFP. I didn't even realise it was NFP day this month, the market moved as expected (per the chart analysis) and on I went....

 

Supply and demand is what it is and during news releases or whilst Europe sleeps, it still means the same.

 

Just my views...

[Kiwi 16]

If you knew there was a big announcement due in the next 5 minutes would you enter wasp?

[wasp 10]

If you knew there was a big announcement due in the next 5 minutes would you enter wasp?

 

If the technicals gave me a reason to be in, I would be in expecting that news release to work into my analysis.

[firewalker 10]

If you knew there was a big announcement due in the next 5 minutes would you enter wasp?

 

Personally, 5 minutes before I would hesitate. But on Friday I entered about 15-20 minutes before the news because there was a solid signal and I held on for couple of hours.

[firewalker 10]

Poll is closed... almost 2 out of 3 members replied that they don't pay any attention to fundamentals.

 

My next question is, does it matter which market you trade?

Are the principles you use to trade market-specific or not? Do you think your system/strategy/method would work as well on any other market or not?

 

To sum it up: a chart is a chart, regardless of the timeframe or whether it's a stock, commodity or futures chart? Agree or disagree? And if so, why or why not?

[james_gsx 16]

Poll is closed... almost 2 out of 3 members replied that they don't pay any attention to fundamentals.

 

My next question is, does it matter which market you trade?

Are the principles you use to trade market-specific or not? Do you think your system/strategy/method would work as well on any other market or not?

 

To sum it up: a chart is a chart, regardless of the timeframe or whether it's a stock, commodity or futures chart? Agree or disagree? And if so, why or why not?

 

ES, I only pay attention to the chart unless the Fed says something. Every now and then I will monitor newbie sentiment on an announcement like CPI as I know an easy money setup will occur.

 

CL - I pay attention to both fundamentals and the chart. But I lean more towards the chart, as the fundamentals are a good thing to know if you actively trade commodities IMO - at least a very basic understanding.

 

Stocks, depends on what I'm doing. Swing trading, I just make sure I'm not entering on the day before earnings. I don't want to get in then get blown out by some ridiculous gap. But for the most part with stocks, I don't even know the company name. I use maybe three technical patterns for trading stocks, and if I see that pattern and the options market is liquid enough for me, and I see a nice entry then I go in.

 

It really comes down to volatility. We could argue that the ES is volatile, but it's not as volatile as some stocks and commodity markets. If I know a market I trade acts volatile to a specific report then I will pay attention that report. I wouldn't trade orange juice without studying the crop report.

[Trader333 10]

In my view it depends on the timeframe that you may be trading. By this I mean that if you are trading for only a couple of minutes maximum (which is one approach that I use) then I don't take any notice of a chart and do it from the order book. I am in and out very quickly and only rely on the volatility which I can see as the orders move around on a price ladder. As this happens I can see where to enter and exit and pretty much know that I will make a profit 90% of the time. For longer timeframes then yes I agree that a chart is very useful based on testing of support and resistance levels.

 

This is not the only approach though and I know that you are aware of how Grey1 trades which I have also used and is almost entirely based on indicators along with risk diversification. In the time that I have known him (which is over 5 years now) I think that he has only had around 10 losing days in total. Yesterday he gave a live day trading web based seminar that had around 35 people attend. He told us he was going to make $1000 profit and did it with ease. To select potential stocks to trade he uses fundamentals as a first port of call and then uses TA to actually trade them.

 

 

 

Paul

[firewalker 10]

In my view it depends on the timeframe that you may be trading. By this I mean that if you are trading for only a couple of minutes maximum (which is one approach that I use) then I don't take any notice of a chart and do it from the order book. I am in and out very quickly and only rely on the volatility which I can see as the orders move around on a price ladder. As this happens I can see where to enter and exit and pretty much know that I will make a profit 90% of the time. For longer timeframes then yes I agree that a chart is very useful based on testing of support and resistance levels.

 

Actually, I believe that even on the smallest timeframe, S/R can be enough to take decent trades off. Being only in a trade sounds more like scalping to me, but whatever works for you

 

This is not the only approach though and I know that you are aware of how Grey1 trades which I have also used and is almost entirely based on indicators along with risk diversification. In the time that I have known him (which is over 5 years now) I think that he has only had around 10 losing days in total. Yesterday he gave a live day trading web based seminar that had around 35 people attend. He told us he was going to make $1000 profit and did it with ease. To select potential stocks to trade he uses fundamentals as a first port of call and then uses TA to actually trade them.

 

There are -obviously- a wide number of approaches possible. There are those who do fine without ever looking at a chart, and there are those who do fine without even knowing the company of which they are trading the stock and just play technical patterns. Whatever works I say! But when it comes down to analyzing the supply and demand and making decisions on what price does, any thing else you throw on top of a chart is probably superfluous.

 

But -and this is according to what Grey1 told me- he's not an intraday trader and he thinks daytrading is not the way to profit, so unless he does actively trade stocks each and every day, it's a completely different ballgame (this puts the 10 losing days in another perspective). If I sit on a 'virtual loss', but don't close out my position for the day, I don't have a losing day...

 

All of this is pretty relative, especially since he said about a month ago that the markets were -quote "very strong" and would never turn lower again (the DOW was trading at 13100 at that time, meanwhile we dipped a decent 1000 points).

 

But, like I said, each to their own!

[Trader333 10]

Well I think there may be different interpretations here. What Grey1 has said is that he does not make most of his profit from day-trading and it mostly comes from 1 to 3 day positions and that day trading is just for pocket money. That said in 2006 he posted day-trading results for months and made between $2K and $10K a day in profit all of which can still be seen on the threads. You are right in that he doesn't really like day-trading as such but he is very capable of doing it. I have also seen him day-trade in his own house and it is a pretty impressive method that he uses.

 

Also I don't recall him saying that the Dow would not go any lower (which was back in March) what I remember was him saying that he was closing his Short portfolio because he thought the worse was over and he was opening a Long portfolio instead. He did this publicly and made a fortune out of it along with others who did the same.

 

I know that you have different views to him but in the end it doesn't really matter. I think you are both great traders but do things differently and I do things even more differently than that but I like to be open to how others make money regardless of how they do it

 

 

Paul

[firewalker 10]

Well I think there may be different interpretations here. What Grey1 has said is that he does not make most of his profit from day-trading and it mostly comes from 1 to 3 day positions and that day trading is just for pocket money. That said in 2006 he posted day-trading results for months and made between $2K and $10K a day in profit all of which can still be seen on the threads. You are right in that he doesn't really like day-trading as such but he is very capable of doing it. I have also seen him day-trade in his own house and it is a pretty impressive method that he uses.

 

Also I don't recall him saying that the Dow would not go any lower (which was back in March) what I remember was him saying that he was closing his Short portfolio because he thought the worse was over and he was opening a Long portfolio instead. He did this publicly and made a fortune out of it along with others who did the same.

 

I know that you have different views to him but in the end it doesn't really matter. I think you are both great traders but do things differently and I do things even more differently than that but I like to be open to how others make money regardless of how they do it

 

 

Paul

 

While I think this thread is getting off-topic, I believe your post warranted a reply, so I've sent you a PM.

[Trader333 10]

Fair point and I was only trying to respond to your request for comments on whether the principles used to trade are market-specific or not and the methods involved but as you say I have digressed.

 

 

Paul

[firewalker 10]

... one perfect example of how the smart money bought into the bad news.

 

 

Consumer confidence came in at 50.4, much lower than forecast, (apparently the lowest level since 1992).

 

Following is what happened next. Price fell on the news, but immediately buying came in and pushed price back up. After a period of consolidation, we turned higher. Volume was key.

 

 

Since I was short from the moment the markets opened, I didn't go long but the initial volume on support was enough to close out my position partially.

[Guest forsearch]

Looks like PPT propped the market up today, in advance of tomorrow's FOMC event.

 

-fs

[Sledge 13]

... one perfect example of how the smart money bought into the bad news.

 

 

 

 

Firewalker-

Not only did the smart money BUY on the bad news, but notice how the herd was sucked in on that bar! You saw a SLEW of the herd get slaughtered by going SHORT on that bar and it was a bloodbath, that chart hardly hesitated on its way back up. Bears got murdered.

 

You even saw a very rare opportunity that would have let the greedy and now stupid bears get out on the second bar inside the circle. After seeing the first bar close- anyone who was short and had a right mind would have said "oh crap, I was wrong" and reverse position to the long side.

[firewalker 10]

Firewalker-

Not only did the smart money BUY on the bad news, but notice how the herd was sucked in on that bar! You saw a SLEW of the herd get slaughtered by going SHORT on that bar and it was a bloodbath, that chart hardly hesitated on its way back up. Bears got murdered.

 

You even saw a very rare opportunity that would have let the greedy and now stupid bears get out on the second bar inside the circle. After seeing the first bar close- anyone who was short and had a right mind would have said "oh crap, I was wrong" and reverse position to the long side.

 

Thanks for the comment. It was indeed the typical 'herd getting caught on the wrong side of the move'... would you consider the close of the first bar sufficient enough reason to go long immediately? It was only because there was potential support around that level that I would feel confident enough to do so. But you're right, it clearly showed how strong demand came in.

[firewalker 10]

Looks like PPT propped the market up today, in advance of tomorrow's FOMC event.

 

-fs

 

I'm not into the conspiracy PPT thing, it seems more logical to assume the buying occurred because there was support there

[Guest forsearch]

PPT is the smartest of the smart money out there of all.

[firewalker 10]

PPT is the smartest of the smart money out there of all.

 

Are you being ironic?

If not, do you have anything to substantiate those claims?