I do not remember who said that we trade our beliefs, but I think it is true. So I believe that TA has no value in predicting the future. For me, because there are so many time frames, levels of support/resistance, fib numbers, etc.. I just consider those points where something will happen but with a 50/50 probability. And, then, assuming always this 50% probability, I try to have a risk/reward ratio > 1:2 . Also, TA brings consistancy such as if this happens (Set-up) then I trade that (Actual trading with proper money management). As an example of the fallacy (this is the way I see it) of formation, only in a few days, will we know for sure that the S&P is making a double top right now. For me it is 50/50. I just do not know. But I am ready to go for more upside, with stops in place because the trend is up. Double tops are easy to spot after the facts.
It does not matter if you feel you are following or predicting, you are always, when opening a trade, trying to step "in front" of something. Just because the market has already begun to move in the direction of your intended trade does not necessarily mean the risk of your trade is lower. Those who try to ride trends inherently need to use much wider stops than those who try to catch tops and bottoms, so there is one clear example.
Great point, that is pretty much how I fell about things now. I think TA works great as long as you realise its limitations.
If you are trying to scalp smaller trends or smaller profits on larger trends you would not necessarily need to place wider stops if your entry was at the proper point in the trend. You do have a good point about lagging but nothing is perfect right.
The proper use of TA is to find the patterns etc that lead to continuations, reversals etc and trade the breakouts, with the odds in mind. This is a game of probability and you probability should know the odds that this or that pattern will probably do this or that. Chasing a move in progress more times than not will get you in just before a retrace and your stop gets hit.
Im not saying im chasing but looking for the starts of patterns. Im just not rying to get ahead of the reversal.
Well, ok. let me try to say this: You see a "RUN" and you missed it. What to do? As stated: chasing a missed breakout can de a bad idea. What next to do? You make assumption that the mkt will "continue" on, but as stated you want to avoid a reversal. What to do? Your choices at this point is to wait for a retrace, because you assumed the mkt will "continue" on. Remember? Mkts usually will make a run in 3 legs, if you missed the first leg you wait for a retrace to enter. The retrace % usually will be approx 50% the distance of the previous legs move from the breakout to last legs top, ok? Anything more than a 50% retrace is going to make you nervous about the assumption of a "continue" on, right? THEN you would start to look for a reversal, NOT before. (See how your mind is always in synch with price action?) OK, the mkt retraces 50% and stalls, this is your first clue that price is indeed going to "continue" on. You watch price action and look for a breakout of the consolidation. look for a bull flag if long for instance, look for another run. Your mind needs to be in synch with what the mkts game is. With experience you will be "INTUNE" with price action. Thats all for now gotta run. Good Luck