What is Real and What is Not in Technical Analysis

[PristineTrading 10]

When starting to learn about technical analysis you begin by sifting through a maze of tools. Some have what seems to be a magical ability to locate support and resistance. Most of these tools locate these areas by "connecting the right dots" on the chart. However, there are differing opinions as to which are the right dots.

 

Support and resistance areas are also located by using moving averages. These too can have pinpoint accuracy, but which ones? If you continue on this path you'll eventually settle on some combination of these tools, but I guarantee that you will also be second guessing them forever.

 

Let's look at an example of what is real and what is not.

 

 

In the daily chart of Apple (AAPL), we see that prices stopped their decline right at the 200-period moving average. The 200-MA is the most widely followed moving average by traders and institutions, so it is the one that often does become a self-fulfilling prophecy. For this reason, I also put the 200-period moving average on my daily charts. However, I also look to the left to see if there is confirming real price support. As we can see, Apple did not has pushed through the 200-MA and is on its way to real support.

 

Years ago, I realized the only real support that could be relied on with consistency was based on price. However, I didn't come to this realization until I removed all the moving averages, trend lines, Fibonacci lines and even the horizontal lines from my charts. Consistently I saw that while prices stalled at a widely followed moving average, the majority of the time that stall was temporary and prices continued to real support- as Apple did.

 

Do prices ever stop and reverse from a 200-MA without price support to the left? They do at times because of the self-fulfilling prophecy. The way I suggest you handle this is to at least let the 60-minute timeframe reverse trend before trading against the daily trend that has stalled at the 200-MA. Let's look at that.

 

 

The 60-min. chart of AAPL is a clear series of lower highs and lower lows. When the bounce from the daily 200-MA happened, prices stopped right at price resistance, which was an unfilled gap and reversed. With prices having been rejected right where they should have been, the odds of a test of the pivot low that formed at the daily 200-MA was high.

 

On this chart is an excellent example of how to play a breakdown strategy in the area of prior support or any breakdown for that matter. As we know, there is going to be buyers in an area of support. However, when the trend is down and there's no "price support" to the left (a Pristine Price Void, PPV) in the higher time frame, the lower timeframe support is likely to fail.

 

What we see happened when AAPL bounced from support on the 60-Min. is that sellers took advantage (green diamond) and pushed prices right back down. This little bounce and failure sets up a shock for the buyers and signals that prices are ready to resume the move lower. That candle marked with the green diamond was a large green candle engulfing the prior before it turned into a Topping Tail (TT).

 

With that signal in mind, we have a short bias to take into a lower timeframe of choice (I'll use the 5-min.) to look for entry points. That being said, those trading from the 60 min. timeframe can take the signal under the candle marked with the green diamond.

 

 

Moving down to the 5-min. timeframe, we are expanding the data to see more detail of the price action that will provide signals not seen on the higher time frame. The green diamond at the left of the chart marks the same point on the 60-min. chart.

 

While 60-min. traders will be entering after the greater than 100% retracement seen here on the 5-min., 5-min.

 

Those that have taken Pristine Seminars will recognize the secondary signs of continuation that I have marked with light green diamonds. The first is what we call a 180 reversal or a Green Bar Ignored (GBI). The second is a Money Bar setup that Pristine Trained Traders use after a breakdown has already happened. These setups have shock value and are entered after the candle forms marked by the light green diamond. With a PVV below, you can count on prices moving lower.

 

I hope you've gained a few insights into to seeing what is real and what is not in technical analysis. Most spend their time studying what is not real when starting out and many never stop.

 

PRISTINE - A trading style, often imitated, but Never matched

 

All the best,

 

 

Greg Capra

President & CEO

Pristine Capital Holdings, Inc.

[TheDude 10]

Undoubtedly a well meaning article.

 

I like to think of TA in the following way:

 

Even a stopped clock is right twice a day

 

This is why you can put any MA on any chart, and it will seem to be support/resistance a few times

 

This is why you can put any indicator on any chart, and it will seem to pick bottoms/tops a few times

 

This is why you can draw a horizontal line along any matching lows/highs on any chart, and it will seem to be support/resistance a few times further out.

 

If TA concepts were valid, they would be able to detect every high/low. We all know they cant. Therefore, the ones they do detect are perhaps more a question of luck than usefulness.

 

Technical Analyst's are Fooled by Randomness more than they care to believe

 

[zdo 20]

Undoubtedly a well meaning article.

 

I like to think of TA in the following way:

 

Even a stopped clock is right twice a day

 

This is why you can put any MA on any chart, and it will seem to be support/resistance a few times

 

This is why you can put any indicator on any chart, and it will seem to pick bottoms/tops a few times

 

This is why you can draw a horizontal line along any matching lows/highs on any chart, and it will seem to be support/resistance a few times further out.

 

If TA concepts were valid, they would be able to detect every high/low. We all know they cant. Therefore, the ones they do detect are perhaps more a question of luck than usefulness.

 

Technical Analyst's are Fooled by Randomness more than they care to believe

 

 

:jadedface:

 

Thanks.

 

…and yet – each and every wave in the oceans ‘tastes’ of the oceans

 

…tick tock... luckily, TA has ‘slightly’ better accuracy than 1 in 43200 (seconds) …

:haha: can you imagine being fooled by randomness 43199 times out of 43200 tries ?

 

 

 

“You don’t have a better bad idea?”

“This is the best bad idea we have, sir - by far”

from the film Argo

 

Blasting TA is no more of effective ‘curtail’ than is lampooning the Hollywood industry.

Blasting TA via logic doesn’t stop or help anyone… the money still keeps coming in…

[TheDude 10]

" luckily, TA has ‘slightly’ better accuracy than 1 in 43200 (seconds) … "

 

 

Prove it please...................................

[DbPhoenix 42]

These debates about TA have been going on for decades, but unless participants defined just what it is they mean by "technical analysis", the exchanges don't amount to much more than Emily Litella's rants about violins on television.

 

Db

[wrbtrader 10]

...If TA concepts were valid, they would be able to detect every high/low. We all know they cant. Therefore, the ones they do detect are perhaps more a question of luck than usefulness.

 

Technical Analyst's are Fooled by Randomness more than they care to believe

 

 

First of all, my definition of a trader using TA is a trader that opens a chart and then makes a trade decision based upon any information they get from that chart. Thus, if there's no indicators on that chart but the trader is still using the chart...its still technical analysis.

 

With that said, a trader does not need for their TA to detect every high/low to prove its valid. You just need to show that when you use TA...it helps you to be profitable in comparison to when you don't use TA. That's something profitable traders understand because TA is just one chapter in their book called trading plan that contains many chapters.

 

Simply, TA does not work alone nor is it a surrogate mother for other things a trader lacks in his/her trading plan. Therefore, if those other key variables (arguably more important) like money management, discipline, trading experience, proper capitalization, proper trading environment are not in place...most likely your TA will not succeed.

 

By the way, I've never met a profitable trader that "only" uses TA and nothing else. Yet, folks get bent out of shape when a profitable trader uses TA as part of their trading plan. The same folks demands proof that TA works "every time" from those profitable traders that uses TA while ignoring the rest of the trader's trading plan.

 

The main problem that I see is that too many traders only talk about their TA and provide very little information or no information about the other components of their trading plan. This gives the impression that they are using nothing else which is far from the truth.

 

Just take a look at every trader forum you're a member of. You'll see the most popular threads are about technical analysis, indicators, chart analysis or similar. Yet, threads like discipline, money management, proper capitalization, position size management, proper trading environment and so on seem almost "not important" or barely manage to get a few replies.

 

TA works and you don't need it to work every time. You just need it to work in your trading plan if you're going to use it. Therefore, if the overall trading plan sucks...TA nor anything else in the trading plan will help someone to be a profitable trader.

 

My rant for the day.

Edited November 8, 2012 by wrbtrader

[zdo 20]

my definition of a trader using TA is a trader that opens a chart and then makes a trade decision based upon any information they get from that chart

wrbtrader, that’s just beautiful. (… but probably not to the indicator haters…sad)

TA does not work alone

Not entirely accurate… more accurate would be something like ‘logically sound, fixed rule TA does not work alone’.

Few believe me when I say , returns on TA with selective logical defiance at adaptive times are not random… (and it should be noted that most beginners can’t just skip to that stage… nor is it easy to 'code' )

:helloooo:

The main problem that I see is that too many traders only talk about their TA and provide very little information or no information about the other components of their trading plan. This gives the impression that they are using nothing else which is far from the truth.

More splendid wisdom.

Let me go ahead and take it even further ... on over the top as usual…

beware anyone who claims to be disclosing ‘everything’ about his trading approach. He may be really trying but it can’t be done by anyone who is not gifted and skilled in authentic transmission. (which also requires a fully prepared recipient, btw) . 'Mentors' who are 'teaching' trading = fkn nonsense. I don’t even try.

 

My rant for the day.

Best rant I’ve seen in a long time. Thanks.

[TheDude 10]

First of all, my definition of a trader using TA is a trader that opens a chart and then makes a trade decision based upon any information they get from that chart. Thus, if there's no indicators on that chart but the trader is still using the chart...its still technical analysis.

 

With that said, a trader does not need for their TA to detect every high/low to prove its valid. You just need to show that when you use TA...it helps you to be profitable in comparison to when you don't use TA. That's something profitable traders understand because TA is just one chapter in their book called trading plan that contains many chapters.

 

Simply, TA does not work alone nor is it a surrogate mother for other things a trader lacks in his/her trading plan. Therefore, if those other key variables (arguably more important) like money management, discipline, trading experience, proper capitalization, proper trading environment are not in place...most likely your TA will not succeed.

 

By the way, I've never met a profitable trader that "only" uses TA and nothing else. Yet, folks get bent out of shape when a profitable trader uses TA as part of their trading plan. The same folks demands proof that TA works "every time" from those profitable traders that uses TA while ignoring the rest of the trader's trading plan.

 

The main problem that I see is that too many traders only talk about their TA and provide very little information or no information about the other components of their trading plan. This gives the impression that they are using nothing else which is far from the truth.

 

Just take a look at every trader forum you're a member of. You'll see the most popular threads are about technical analysis, indicators, chart analysis or similar. Yet, threads like discipline, money management, proper capitalization, position size management, proper trading environment and so on seem almost "not important" or barely manage to get a few replies.

 

TA works and you don't need it to work every time. You just need it to work in your trading plan if you're going to use it. Therefore, if the overall trading plan sucks...TA nor anything else in the trading plan will help someone to be a profitable trader.

 

My rant for the day.

 

You're no damn fun are you.

 

That DBPhoenix is also too damn clever. :crap:

 

Our definitions of TA differ. Thats cool. By your definition, I also use TA. By my definition, I don't.

 

I'd define TA as the classic Edwards & McGee, Pring and other similar stuff: shapes, patterns, lines, and other stuff that is a derivavtive of the trinity of price, time and volume.

[TheDude 10]

Science is the great antidote to the poison of enthusiasm, superstition and TA.

—Adam Smith

 

(BTW - he was talking about my definition of TA, not yours!!)

[DbPhoenix 42]

 

I'd define TA as the classic Edwards & McGee, Pring and other similar stuff: shapes, patterns, lines, and other stuff that is a derivavtive of the trinity of price, time and volume.

 

That's one type. Another, which predates Schabacker, Edwards, and Magee, focuses on the imbalances between demand and supply as reflected in price movement, which is itself determined by transactions among buyers and sellers. A third, post-1950, focuses on "indicators".

 

To state, then, that TA "works" or "doesn't work" means little unless one (a) defines what he means by "TA" and (b) explains just what it is that he expects TA to do. If for example he expects TA of one sort or another to "pick tops and bottoms", he will most likely be disappointed. But then he will also likely be disappointed if he expects the same thing of fundamental analysis.

 

The point of trading is to make money. One can make money through the appropriate use of the appropriate form of TA. But then he can also do that through the appropriate use of FA. What is more important is whether or not he knows how to use the tools that are available to him. If he doesn't, and doesn't care to learn, then neither TA nor FA will "work" for him.

 

Db

[zdo 20]

TheDude

re; "BTW - he was talking about my definition of TA, not yours!!)"

Check again. The distinction you are making is "Not Real"

All these “definitions” - yours too - are subsumed under wrbtrader’s ‘definition. Rephrasing his def slightly -

TA is when a trader opens a chart or other visual representation of a tradable instrument and then makes a trade decision based upon any information they get from that representation

All 3 of the 'types' of TA’s DBP ‘defined’ do that – including your’s… Hierarchies aren’t lateral.

zdo

[straddle 10]

I dont totally believe in TA but if others trade based on TA it becomes an instrument to predict others' behavior .

 

Ex if a stock has a strong support at 900 and it breaks it people will start selling confirming the TA sign. The stock didnt fall because TA was a good predictor but because people believed in the sign .

 

Its like the joke with the weather man and the native americans

 

It was October and the Indians on a remote reservation asked their new Chief if the coming winter was going to be cold or mild.

 

Since he was a Chief in a modern society he had never been taught he old secrets.

 

When he looked at the sky he couldn't tell what the winter was going to be like.

 

Nevertheless, to be on the safe side he told his tribe that the winter was indeed going to be cold and that the members of the village should collect firewood to be prepared.

 

But being a practical leader, after several days he got an idea. He went to the phone booth, called the National Weather Service and asked, "Is the coming winter going to be cold?"

 

"It looks like this winter is going to be quite cold," the meteorologist at the weather service responded.

 

So the Chief went back to his people and told them to collect even more firewood in order to be prepared.

 

A week later he called the National Weather Service again. "Does it still look like it is going to be a very cold winter?"

 

"Yes," the man at National Weather Service again replied, "it's going to be a very cold winter."

 

The Chief again went back to his people and ordered them to collect every scrap of firewood they could find.

 

Two weeks later the Chief called the National Weather Service again. "Are you absolutely sure that the winter is going to be very cold?"

 

"Absolutely," the man replied. "It's looking more and more like it is going to be one of the coldest winters ever."

 

"How can you be so sure?" the Chief asked.

 

The weatherman replied, "We're sure it's going to be cold because the Indians are collecting firewood like crazy!"

[TheDude 10]

TheDude

re; "BTW - he was talking about my definition of TA, not yours!!)"

Check again. The distinction you are making is "Not Real"

All these “definitions” - yours too - are subsumed under wrbtrader’s ‘definition. Rephrasing his def slightly -

TA is when a trader opens a chart or other visual representation of a tradable instrument and then makes a trade decision based upon any information they get from that representation

All 3 of the 'types' of TA’s DBP ‘defined’ do that – including your’s… Hierarchies aren’t lateral.

zdo

 

 

So, If open a chart on bigchart.com and select 'earnings, splits, dividend payments' and other fundamental events, and trade based on those events, then I'm using TA am I?

 

After all, I'm basing those assumptions on info from a chart right? OK, I could have got the same info from else where - like newspapers, websites etc. And If I compare earnings against price change, then thats also TA is it, because I can see the info on a chart.

 

Maybe the chart is just the easiest and convenient method for me to collect the data and make comparisons.

 

As DBP eludes to - the idea is to profit from asymmetrical order flow. That ability is going to depend on your ability to analyse that.

 

I'm primarily an intraday trader. I do trade some positions on day time frames etc.

 

In my opinon - if its worth anything, I think TA and charts are losing their value on an intraday basis. Still useful on longer time frames. You've got to be a lot smarter - partly due to HFT slamming markets in a burst, then withdrawing. It requires moving out to longer time frames and being willing to take more heat. That means youve got to see more reward - but in the day time frame, moving out to a larger fractal means you have less time for the market to move to decent profit, and less opportunities.

 

whats a dude to do??

[SIUYA 11]

Dude - I actually read it as you are agreeing with the original post....

 

and that you are pretty spot on when you say "Technical Analyst's are Fooled by Randomness more than they care to believe"

 

This however does not negate that as a tool TA is not valid.

No tool is fool proof, a cure all, a one stop shop for ensuring success in any business or venture or profession......and for those that claim it is, or those that claim that something is useless they are equally misguided IMHO.

This is one of those discussions whereby an extreme view of one side or the other makes no sense, but if it works for you to some degree (even if you are fooled by randomness) then thats probably not a bad thing.

[johnw 10]

So the battle between TA and FA is on again.

 

I would sum it up as follows .....

 

Most People know FA about TA

[DbPhoenix 42]

So, If open a chart on bigchart.com and select 'earnings, splits, dividend payments' and other fundamental events, and trade based on those events, then I'm using TA am I?

 

The purpose of FA is to determine the value of a company. The purpose of TA is to determine the value of a stock. The two need not, and often do not, have anything to do with each other. So the answer to your question is "yes".

 

After all, I'm basing those assumptions on info from a chart right? OK, I could have got the same info from else where - like newspapers, websites etc. And If I compare earnings against price change, then thats also TA is it, because I can see the info on a chart.

 

It doesn't really matter whether you get the information from a chart, stock quotes from a newspaper, a ticker, a filing, a spreadsheet, or some other source. If you're using the information to determine the value of the stock, then you're using TA. This seems nonsensical since the values of companies and their stocks has become so confused over the past thirty years, but this confusion is a chief reason why fundamentalists got into so much trouble in 2000-01. One of the virtues of the CANSLIM approach is or was to select stocks based on their fundamentals then determine via TA when and at what levels to buy them.

 

Maybe the chart is just the easiest and convenient method for me to collect the data and make comparisons.

 

As DBP eludes to - the idea is to profit from asymmetrical order flow. That ability is going to depend on your ability to analyse that.

 

If one is seeking to profit from a stock that's "undervalued", then, yes. But one can also profit from investing in companies that are undervalued. The meaning of "undervalued", however, is different for each and determined in different ways.

 

I'm primarily an intraday trader. I do trade some positions on day time frames etc.

 

In my opinon - if its worth anything, I think TA and charts are losing their value on an intraday basis. Still useful on longer time frames. You've got to be a lot smarter - partly due to HFT slamming markets in a burst, then withdrawing. It requires moving out to longer time frames and being willing to take more heat. That means youve got to see more reward - but in the day time frame, moving out to a larger fractal means you have less time for the market to move to decent profit, and less opportunities.

 

whats a dude to do??

 

Perhaps it depends on the market. I trade the NQ and find no difference in its character between now and a dozen years ago. But it also depends on what one is looking at and what he is looking for. Someone who is attuned to demand/supply imbalances will be looking at and for different things than someone who is focused on patterns or indicators. How one profits, or whether or not one profits at all, will depend a great deal on his assumptions.

 

Db

....................

[MightyMouse 12]

TA runs into a problem when you take time into account.

 

A guy loses his job in 2007. He gets his severance and opens a book in October 2007 and reads that when the 8 month ma moves above or below the 21 month ma, it is a solid buy or sell signal. So, the 8 moves below the 21 and he shorts the S&P at some point in November 2007. All the expert traders on TL would never take such a trade since everyone knows the MA crossover doesn't work. But, this guy isn't exposed to this expert advice and he holds onto his short until the 8 crosses back over the 21. Well, that doesn't happen until sometime in March 2008. He cashes in quite a nice gain. He decides to take his new girlfriend on an extended vacation and later decides to never trade again since when he comes back he gets another job.

 

A novice trader with an econometric background opens a book in 2007 and reads about MAs and back tests an assortment or strategies over a number of timeframes. He concludes that there is no evidence that trading MA crossovers is a valid strategy. By February 2008 he has yet to make a penny. His old girlfriend is sick of paying his way and leaves him, but he is content since he is close to finding the holy grail and he has become an expert on TL.

 

I know homebuilders who, for a very long time, made insane amounts of money in the Northeast of the USA. If you were to look at a home price index, you would see that they made money while prices were rising. If you took an MA of the home price index you would also see that there was an MA crossover. Some, by random luck, were able to walk away with most of it. Random luck being that they sold the last home built just as the market began to collapse. Others who were either not so lucky or late to the game lost everything. If a savvy investor back tested the housing market, he would never get involved and either never make money or never lose money because he would conclude that in the long run you can't forecast future housing prices by using a MA.

 

In time all things work and in time all things stop working. If in fact you keep doing the same thing over and over and over, you will eventually lose. It may take a lifetime or several lifetimes, but nothing lasts forever.

 

Making money involves risk. You will never get to make significant money in a market, no matter which market, without a significant risk of loss. You are a trader or investor if you are willing to take risks to make money.You are no longer a trader or investor when you are afraid to take losses. You will never ever be able to figure out beforehand if the next trade is going to make money or not because the last time the strategy worked, may be the last time it works for a while. You will just have to take the risk. I will posit that anything to the contrary is just nonsense.

[TheDude 10]

It's like this:

 

Jimmy works at a hedge fund. He has a credit limit of almost $400,000,000. The hedge fund he works for has $billion AUM.

 

Jimmy trades mostly ES, sometimes TY, now and then 6E.

 

Jimmy doesnt use a chart. He doesnt need to. Jimmy can push the market round a few ticks/points as he wishes.

 

Jimmy is in constant contact with his other ex-colleagues at a few banks and other funds dotted round mid-town Manhattan.

 

Now - how can your chart, with all its lines, channels, stochastics etc tell me when Jimmy is about to enter the market? Can Gann lines help? Fibonacci? Jimmy's birthday happens to be on a Fibonacci number, but he tells me thats just a coincidence.

 

You see, I want to be in the market when Jimmy decides to do so. But as Jimmy doesnt use a chart, I guess a chart wont be able to tell me either.

 

And the only defence you have against Jimmy and his millions, and his mood, is some silly line youve superimposed on a chart that you, and only you happen to believe in. DBP's trendline is 2 points away as he connected the lower low that you missed. WBR's trend line is another point below that - for what ever reason he has - looking at another time frame etc.....

 

Ever wondered why that breakout didnt continue?

 

TA is little more than the human desire to try and make order out of seeming chaos.

 

[Folks - Im talking of 'traditional' TA here. Edwards & McGee. Trendlines, shapes, silly patters, etc. Please folks, lets have a proper conversation. None of these weasel words like 'any data on my screen is TA' - because thats just silly]

Edited November 9, 2012 by TheDude

[DbPhoenix 42]

It's like this:

 

Jimmy works at a hedge fund. He has a credit limit of almost $400,000,000. The hedge fund he works for has $billion AUM.

 

Jimmy trades mostly ES, sometimes TY, now and then 6E.

 

Jimmy doesnt use a chart. He doesnt need to. Jimmy can push the market round a few ticks/points as he wishes.

 

Jimmy is in constant contact with his other ex-colleagues at a few banks and other funds dotted round mid-town Manhattan.

 

Now - how can your chart, with all its lines, channels, stochastics etc tell me when Jimmy is about to enter the market? Can Gann lines help? Fibonacci? Jimmy's birthday happens to be on a Fibonacci number, but he tells me thats just a coincidence.

 

You see, I want to be in the market when Jimmy decides to do so. But as Jimmy doesnt use a chart, I guess a chart wont be able to tell me either.

 

If you want to be in the market when Jimmy decides to do so, then I suggest you develop a relationship with Jimmy in hopes that he'll call you when he enters the market. A chart won't help you. But then neither will a spreadsheet.

 

And the only defence you have against Jimmy and his millions, and his mood, is some silly line youve superimposed on a chart that you, and only you happen to believe in. DBP's trendline is 2 points away as he connected the lower low that you missed. WBR's trend line is another point below that - for what ever reason he has - looking at another time frame etc.....

 

Ever wondered why that breakout didnt continue?

 

I don't trade off trendlines. I trade off imbalances between demand and supply. If Jimmy's big buy results in an upmove, I'll take it. If it doesn't, there won't be one and I'll continue doing whatever I happen to be doing.

 

TA is little more than the human desire to try and make order out of seeming chaos.

 

It can be, depending on what type of TA you're referring to.

 

[Folks - Im talking of 'traditional' TA here. Edwards & McGee. Trendlines, shapes, silly patters, etc. Please folks, lets have a proper conversation. None of these weasel words like 'any data on my screen is TA' - because thats just silly]

 

"Traditional TA" predates Edwards and Magee by quite some time. But if your only defintion of TA is that which you consider to be useless, then your only other choice is fundamental. "Jimmy" is using one or the other. Determine what he's using and use that.

 

Db

....................

[zdo 20]

TheDude, Missed seeing your post earlier...

" luckily, TA has ‘slightly’ better accuracy than 1 in 43200 … "

 

 

Prove it please...................................

 

Prove what?

Randomize an SMA length (from 10 to 200) and run it on 'charts' * of + 30 instruments ‘showing’ 2500 bars each

At least 5% of the price APPROACHES to the MA will ‘hold’ and ‘turn price away’

5% beats the snot out of .0023148 %

… doesn't "prove" much … but sufficiently proves "it”

 

 

 

 

… resistance to closure will take you further than you can imagine…

 

... going further

How can a central tendency, such as an SMA, (which lags or is incorrectly right shifted in most charts / representations by half the number of periods in the MA length (and an EMA lags by 2/(P+1) ie. ~1/3 number of periods)) sometimes provide clues to where price will be turned away / ‘supported’ or ‘resisted’?

imo ,it can’t…. and also doesn’t make much sense.

But if you observe (visually or quantitatively) and id the slope / angle of a ‘swing’ / wave’ / movement , you can ‘learn’ which central tendency lengths correlates well with those angles to produce the ‘turn aways’ and vary your central tendency parameters accordingly.

(...and, again, is it really the central tendency doing it? Doubtful. )

More likely the central tendency of the ‘optimal’ length is just doing a pretty good job of tracking one side of the angular ‘channel’ being formed by price’s ‘oscillations’ within the ‘channel’

(Why does price ‘oscillate’ within ‘channels’ around ‘value’ *? Don’t know. Don’t care. Ask Dalton and Co.

or some other auction theorist,

of some anti 'auction theorist,

or Mitsubishi,

or even WHY? himself )

 

This type of stupid TA

Too much work for you?

Not aligned with your aptitudes?

Not interesting enough?

+60% accuracy not good enough for you?

Any and All of the above objections are ok. I completely understand.

"Find your own way" zdo

 

 

 

 

 

So, If open a chart on bigchart.com and select 'earnings, splits, dividend payments' and other fundamental events, and trade based on those events, then I'm using TA am I?

Those are not fundamentals. They too become technicals. They are news events revealing quantity snapshots that may be used to exclaim quality fundamentals… the convenience with which one can include plots of them on a ‘chart’ makes it that much easier for the information to become ‘technified’ in many minds…

as DBP says “the idea is to profit from asymmetrical order flow”. Real order flow work is not mentally possible (or not fascinating enough, etc ) for many, so they have to infer, speculate, project using old fashioned (and all these newly created) ‘technicals’ …

 

“predicting the future is hard, especially if it hasn’t happened yet” yogi bera

 

Have a great weekend all.

 

* why do I use so many ‘ ‘ ie single quotes around words?

Bcse there is something ridiculous , something off, about those ‘’ words… something that needs to be questioned… not just accepted as is… especially going from a 'writer' to a 'reader'...

[DbPhoenix 42]

as DBP says “the idea is to profit from asymmetrical order flow”.

 

Actually, I've never said that. It's much too sophisticated for how I trade.

 

Db

[zdo 20]

Actually, I've never said that [the idea is to profit from asymmetrical order flow]. It's much too sophisticated for how I trade.

 

Db

 

well you're stuck with it now bubba

everything on the internet is true

[TheDude 10]

It was I Zdo. I said that.

 

DBP - you seem to look at everything as either TA or FA.

 

There are other ways of looking at the market, especially for a day trader.

[TheDude 10]

TheDude, Missed seeing your post earlier...

 

 

Prove what?

Randomize an SMA length (from 10 to 200) and run it on 'charts' * of + 30 instruments ‘showing’ 2500 bars each

At least 5% of the price APPROACHES to the MA will ‘hold’ and ‘turn price away’

5% beats the snot out of .0023148 %

… doesn't "prove" much … but sufficiently proves "it”

 

 

 

 

… resistance to closure will take you further than you can imagine…

 

... going further

How can a central tendency, such as an SMA, (which lags or is incorrectly right shifted in most charts / representations by half the number of periods in the MA length (and an EMA lags by 2/(P+1) ie. ~1/3 number of periods)) sometimes provide clues to where price will be turned away / ‘supported’ or ‘resisted’?

imo ,it can’t…. and also doesn’t make much sense.

But if you observe (visually or quantitatively) and id the slope / angle of a ‘swing’ / wave’ / movement , you can ‘learn’ which central tendency lengths correlates well with those angles to produce the ‘turn aways’ and vary your central tendency parameters accordingly.

(...and, again, is it really the central tendency doing it? Doubtful. )

More likely the central tendency of the ‘optimal’ length is just doing a pretty good job of tracking one side of the angular ‘channel’ being formed by price’s ‘oscillations’ within the ‘channel’

(Why does price ‘oscillate’ within ‘channels’ around ‘value’ *? Don’t know. Don’t care. Ask Dalton and Co.

or some other auction theorist,

of some anti 'auction theorist,

or Mitsubishi,

or even WHY? himself )

 

This type of stupid TA

Too much work for you?

Not aligned with your aptitudes?

Not interesting enough?

+60% accuracy not good enough for you?

Any and All of the above objections are ok. I completely understand.

"Find your own way" zdo

 

 

 

 

 

 

Those are not fundamentals. They too become technicals. They are news events revealing quantity snapshots that may be used to exclaim quality fundamentals… the convenience with which one can include plots of them on a ‘chart’ makes it that much easier for the information to become ‘technified’ in many minds…

as DBP says “the idea is to profit from asymmetrical order flow”. Real order flow work is not mentally possible (or not fascinating enough, etc ) for many, so they have to infer, speculate, project using old fashioned (and all these newly created) ‘technicals’ …

 

“predicting the future is hard, especially if it hasn’t happened yet” yogi bera

 

Have a great weekend all.

 

* why do I use so many ‘ ‘ ie single quotes around words?

Bcse there is something ridiculous , something off, about those ‘’ words… something that needs to be questioned… not just accepted as is… especially going from a 'writer' to a 'reader'...

 

Well, maybe I'm a bit tiered (it was a long, long weekend), but your first point seems to kind of agree with my original hypotheses (if I havent misunderstood you): Yes price will bounce off of these random MA's, just as they will off a randomly drawn line, or react to some random indicator with a random setting. Fooled by randomness. Remember??

 

 

 

As for the last point, well this is where these TA debates fall over. You have one camp who believe everything in the known universe is TA, and you have others (such as myself) who refer to TA as the old time based bars, volume at the bottom, time on the x axis, price on the y, and an array of useless stuff overlay on top to 'predict' the future.

 

For day trading, I find the traditional TA next to useless. Im sure some find value in it. Good for them. I still have some use for it in position trading though.

[TheDude 10]

It was I Zdo. I said that.

 

DBP - you seem to look at everything as either TA or FA.

 

There are other ways of looking at the market, especially for a day trader.

 

Take a look - traders at work. Note they have some charts in the background, but they are not the focal point of what they are looking at.....