Hey guys, I know there are a lot of people who don't believe in T.A. This is not your thread. For the rest of you, I just wanted your opinion on how far in the future a person could reasonably project/guestimate assuming no surprise shocks to the economy? TIA, SM
Well it depends. When volatility is low my RSI 13.7 coupled with my exponential mass weighted MACD (6.8,13.2, 48) can see 2 weeks into the future with very little noise. The tricky part is measuring what the volatility will be. But in general a good technician/indicator should see about 2 weeks into the future if you want to stay competitive with the local psychics.
That's why only T.A. nothing better than only F.A. You need use sum(T.A;F.A) and useful result will be more responsibility.
A trend-following T/A-algorithm does not have a time component, as there is no 'time' in the definition of a trend. If you wish a time component in the algo (or in your "rules-based trading"), you have to code it explicitly. What you decide to code can be based on market knowledge, prior trading/triggering behavior, account subtleties, etc., that may be different in every market. Thus, in practice, a trend-following algo does not have a profit-taking exit, only a stop-loss -- putting into practice, "Let your winners run; cut your losers short."
I never set up trades or manage them according to my future projections of what price will do. All trades are selected and opened identically, all the winners are pyramided, and I get out when the TA deteriorates, not on reaching a projected price target or time horizon.
None, can you guess for any length of time your heart will keep beating? Back testing gives probabilities however in life anything can happen any given time. Intraday to using monthly charts, all you can somewhat control is risk(amount to risk) and risk management(whether the signal is valid based to the left of present and managing trade in present). If you can reasonable control "risk", trading is like flipping coins, more chances of doing, eventually you end up profitable outcomes. If you can control risk well, losses decrease. Decrease losses means lower drawdowns to me and less to make up. Also, duration of time, if you believe the market will go so far based on chart configuration or Gann etc..., on a larger timeframe it might be a very tiny move. Heavy Volume pushes the market, so keeping an eye on volume, coat tail till market continues to trend but when lighter volume happens, tighten stops, get out, go to lower timeframe or hedge open profits. And yes, I do use TA, but I seldom do swing trades as the risk is same for longer term thereby can dance longer term options on both sides. I applaud those who do so well at swings, but I prefer to stay in.
Oh, "TA works"... but I doubt in the way you suggest. You propose that you can "see into the future as to when market players will collectively change their minds about buying/selling". TA is a great thing, but it's not that. So far as "into the future"... this is where "range indicators" might come into play. If you're buying when a range indicator is "low in its scale" (as you should), you might anticipate that the market/issue will rally until the range indicator gets "high in its range"... that could be 5-8-ish days. During that time, you'll likely experience a few corrections which you will presume to be "minor and should be ridden out". That may or may not be correct. There is a corollary concept at play too. Each security has a "normal noise oscillation range". That is a range in size where it can go back and forth without indicating a change in trend.... IOW, "just noise". The size of the range varies a significant amount between, say, a utility (which might be 6%) or a biotech (which might be 20%). You can play for the "noise range move", but as it is "completing the range move", you should reevaluate. Rinse and repeat. KISS baby, as always!
You're using T.A. the wrong way. Regardless, the markets will always be impacted by the economy, geopolitics, other markets and other variables...daily, weekly, monthly and yearly. The best you can do when using T.A. or any other type of trading style is to use it in suitable market conditions along with being able to recognize when you shouldn't be in the markets via T.A...there's then the issue of managing your trade position properly whenever you're in the market. Yet, if you're stuck on projecting/guestimating and such...just backtest your T.A. to determine how far you can do such into the futures with success. Simply, you don't need anyone's opinion...do your testing because you'll believe your own results in comparison to the opinions/results of someone else. wrbtrader