I think I learned more about the markets after I left my "indicators" at the door. Having read way too many books on indicators, I mourn not so much the money wasted on the books as much as the time I spent reading and researching/testing their "value." No doubt, you have heard of Ed Seykota. Almost everyone at ET seems to mention him or quote him at least once. It may interest you to know that he designed a charting package in the mid-90s called Technical Tools. It was an end-of-day charting package. As I recall, the original version had perhaps 1 or 2 "indicators." Others were added later only because customers demanded them. However, is it not telling that one of the most quoted Market Wizards saw fit to develop a charting package without the razzle dazzle of indicators? What does that tell you about the value of razzle dazzle indicators? As an aside, he has since divested of his interest in that company and it subsequently went out of business. But that has no bearing on the insight provided by what he thought was important for trading. Regards, Thunderdog
...thanks for your reply. Without getting proprietary, what do you use to reliably predict support and resistance? Prior highs/lows, prior opens/closes, round numbers, floor pivots, Fibonnaccis, option strike prices, today's open? My problem is that the S/R landscape can get so cluttered that you can pick anything. Did you backtest the system you currently use? Best regards. - Mike
Yep, there is alot of things you can do, unfortunately that leads to paralysis by analysis. For example I am currently stalking an INTC short. If INTC were to close right now, tomorrow I would be looking to short if it breaks todays lows, with a stop just above todays high. Why: Significant resistance at $29. At least 2:1 reward to risk, based on the first level I have drawn, lower high on daily chart, reversal candle etc. Time of year, overboughtness, need for a significant pullback etc. I haven't backtested it, but forward testing has worked ok. I think you just have to pick something and stick with it. Thats the key to trading. Whatever you do, make sure it has a reasonable chance of success (which includes accounting for risk), and then be consistent at implementing the plan.
...thanks for the lesson. The way you describe the secondary influences, it sounds very intuitive. Do you make a checklist and vote on weight, or just go by "feel"? - Mike
Good advice...that was my biggest problem when I started out. First it was pullbacks, then if I had a bad day I'd try breakouts, then when I had a bad day, I'd try divergences, then when I had a bad day, I'd try S&R levels, then when I had a bad day, I'd start the circle all over again...hehe You have to choose your style and stick to it, no doubt about it.
Yeah I guess a lot of it is intuition, but I don't feel bad about that cause i know any given trade is 50/50, as long as I have the same mechanical setup. Think of this way. A lot of smarter people then me would identify a setup that was more then 50/50, and exploit it, and smooth it out to 50/50. I just got to make sure that when I win, I win enough to cover my losses + some profit.
...thanks and have a great day. My guess is that you are far better than 50/50, because money management generally won't save a random entry system. - Mike