How does one interrept Volume and Time properly? Higher volume on increasing prices indicates stronger up trend, for instance?
Damn good question and I'll try to not draw the answer out too long. Price & volume run hand in hand. Price movement or oscillations are the reflections of the sentiment or the emotions of the individuals that trade inside of any market. Volume shows the amount of that collective sentiment that is effecting the market at any given moment. Time is the monitor where we view a combination of price and that sentiment. The most common viewing options for traders are Minute Charts, Ticks Charts, Range Bar Charts and Volume Bar Charts to use as that monitor. 1. Minute Charts - Varying number of shares or contracts traded per bar. (Volume unstable) 2. Tick Charts - Constant number of Ticks but still a varying number of shares or contracts traded per bar. (Volume unstable) 3. Range Bar Charts - User defined bar range but still varying number of shares or contracts traded per bar. (Volume unstable) 4. Volume Bar Charts - User defined number of shares or contracts traded per bar. (Volume Stable) Price will always be stable because it can not be manipulated. It is a perfect reflection of any Market at any given moment (past & present). Volume Bar Charts then give stability to Volume and Time (Chart Increment). The user (YOU) define the number of contracts or shares that make up each bar. Less contracts or shares gives you faster charts and would be used for intraday trading. More contracts or shares traded per bar gives you slower charts and would be used for Swing, Position or Long Term trading. The environment is now perfectly viewable, atable and non-varying. You now need to choose the chart increment to best suit your trading style (Intraday, Swing, Position or Long Term) and as stated earlier, spend the screen time to learn just exactly what does price do consistently in the "time frame" that you wish to trade. I don't use the term "interrupt" because it implies a subjective action. I prefer "read" because what the ultimate result of this environment is, is to be objective in your decision making process trading on price consistencies. Price does move methodically. One just has to view it in a stable non-varying environment to see it.
I'm glad the fundemtals work for you. I have tried using fundemtal analysis and failed miserably. Maybe my aproach is wrong ( I lost half my account size because of it). I actually have found technical analysis to be far superior. For example, you have a stock like XYZ, it may have the greatest fundy's but you hear on the news that there is a stock option grant inquiry(whatever), the stock loses about 20% of it's value. Fundemtals don't pick that up, but if you use TA, you would have made a 20% profit. I also think that Fundemtals give lesser profits over a longer period of time, I know poeple striving to make about 10% a year, that's sucks!!! Becuase of TA, I average that a month ( a little over 20k account). It's mainly because of variables that proflogic explained. But I do have to add one thing, and that's that I believe TA works because of FA. Support/Resistance, trendlines, all of that works because of the fundemtals of the stock working in the background(+ other variables). Stock's may bounce of support/resistance lines because of valuation. I just see TA as a shortcut, instead of reading the newspaper everyday, spending many hours doing homework and reading 10Q reports .... I just look at the chart, and that's because, just like the other member stated, everything is reflected in the price.... But just like the other member stated, whatever works. I'm am glad that you're making money though. As far as indicators, they really should be used to help back up price patterns in the chart, not as the leading indicator for making decisions. I think MACD, Stochastic, and 12,26EMA 50/200MA, and volume by price is all you need. Adding too much will just confuse you. I actually rarely use MACD anymore. I mainly just use stochastic(full) and the MA's. Stochastic can tell you pretty good price action just like MACD, that's why i dropped it. Just make sure you look check your stocks at all time frames, weekly, daily, and hourly... Looking in too closely can tell you something different than looking at the bigger picture(ie hourly vs, weekly) Monthly charts take precendence over Weekly, weekly over daily, daily over hourly, hourly over intraday... If you really want to get into it, Murphy's TA book is pretty much all you need to start.
Many good replies, Fundamentals trump technicals as far as picking the right stocks, technicals are better used for timing entries and exits. I stopped using technical indicators a long time ago, rather for TA I focus on the pure price action, not a derivative of price. Which means classic support/res, break outs and extension/retracement lines. I think the answer is that they are best used in unison, supporting eachother. By the way for those who say that FA is only for the longer term, NOT TRUE. The biggest overnight/ short term moves happen because of fundamentals - earnings reports, updowngrades, estimate revisions, earnings surprise, mergers, news...the list goes on and on of fundamental data that have huge impact on the short term price of a stock. Another thing is that FA is more factual and TA is much more subjective.
I agreed with most of the first part of your post but the above statement is based on personal opinion. If you build a non-varying stable TA environment, you can create an objective trading environment.
too bad the price you see, has already happened. therefore, its a reflection of past sentiment only. pray tell, what is "present sentiment" in any price chart prior to entry? use your illusion---your logic is flawed, professor. regards, surf
as a close friend of mine so aptly puts it: TA is akin to an Xray, it tells you what happened and nothing more. true understanding of the markets is far beyond TA. One must ask his/herself "why has TA become so popular"? It's because it represents a quick fix/ easy solution to the markets. see where i am going with this??? regards, surf
You have your opinion of what TA is which is a couple football fields displaced from what some of us see. Your definition of TA is not the same definition that some of us use. Your views are just that, your opinions based on your limited information of a vast environment. Most of which you have never ventured into. And where you do get your information is the far edges of what the majority of individuals even consider as TA. I agree that understanding the markets are far beyond TA but what I and a lot of other traders do isn't strictly what is commonly referred to as TA. We see the markets as strictly defined, stable and non-varying environments governed by pure price, pure volume and pure time (chart increments). You have absolutely no clue what we are talking about. You can not even fathom that specific environment of which I'm making reference to, yet you disrespect me and my 11 years of research. One other point, if you think that what I do is a quick fix and easy you ARE clueless. There is nothing quick or easy about what I do. I do not tell you what you do is bogus because I have no clue what you do. Few people do. I don't care. You don't make me money. You don't pay my bills. You don't feed my child. You don't support my lifestyle. You do not matter. I do and what works consistently for me in my trading each day. You need to get that chip off your shoulder and open up your horizons a bit. You'd be surprised what you might find.