Comment re. TA TA has many limitations, it will get trumped by high volatility, news events, cat's jumping onto keyboards and selling a billion PG (or shall we just refer to it as the event) etc. etc. It is the responsibility of any practitioner to be fully aware of these limitations and to use TA accordingly. That said, if you can define a probability edge from the use of TA, then WHAT'S THE PROBLEM?!?
Of course there are those who would argue that TA breaking out of the rising wedge predicted something ominous. The postmortem tells the reason for "the event". Incidentally I've never seen TA trumphed by cats or news etc. because at some level PA has to move and the market tipping the hat cannot be hidden. I have on the other hand seen endless poor technicians claiming TA can't perform or how limited it is. Take news for example. Often it's much the same as high volatility. At a sub 1 minute level the move is telegraphed. On a bigger time frame use a simple breakout strategy. Chop is warned about so you can position yourself. I would change what you said slightly and say you have to be aware of the limits of your TA knowledge and ability and trade to your strengths. However those limitations are going to be a permanent barrier if a trader believes his limitations are THE limitations imposed on all traders. Like yesterday: the return to the wedge breakout was expected. So you watch the volume as it diminished into the touch of the breakout line. That means you expect a reversal on higher volume than the last green bar. Late in the day surprise, surprise there is a sell off and that is very dangerous for the market but the warnings were in place. All of this behavior was expected in advance and trading the TA at a lower level was a gift. Time & Price gave 3 vibrations approaching the top of the wedge (approximated by the blue line on the chart) so when the 4th appeared in advance the chances were it would reverse like the prior 3 vibrations. The top trend line of the wedge was a gift but so was the nature of approach. Now the approach into the wedge breakout yesterday is one hellofa signal and today's close will be very important. If it's a late day sell off it will be all the worse. While the weekly looks like we have still got strength the ability of one day to trash the market remains, especially with good news due today. What a great Friday for traders. Wat's next? Fat fingers or war?
Or to expand . . . TA limitations are sometimes self inflicted. When analyzing a variable environment, expect varying results. When you analyze a fixed environment, expect stable results. High volatility, news events or some idiot potentially selling a billion shares of PG won't trump a fixed environment but it WILL drive a variable environment crazy. The cat on the keyboard is the exception though. That is why you ship the cat off to a neighbor with a big dog if it messes with your trading. It is the responsibility of any practitioner to be fully aware of all of the intricacies and idiosyncrasies in using TA but that isn't the case. Traders, for the most part, become familiar with some of the rules, try to play the game and lose because they didn't bother to learn ALL of the rules. Then, even worse, those traders start threads, recite riddles and try to cover over the fact they never had the patience to learn all of the rules in the first place. Then, because misery loves company, people migrate to these posters because they think they know something they don't. They do, they know they didn't learn all of the rules. They ridicule those they took the vast amount of time needed to break the environment down to learn all of the rules as well. Bottom line guys . . . if you lay your charts out randomly, you will get random results. If you take the time to learn how to set up your charts, eliminating the random nature of their creation, then when you create a chart, WHATEVER analysis you apply to it will be hugely more accurate and hugely more consistent.
I agree with the both of you wholeheartedly, and what I do know is that so far today all of the reaction levels I predicted using TA are getting reactions. The proof is in the pudding.
Sounds nice, "holiday in the wild". Yes I'll keep an open mind, I have actually looked at the website MAESTRO gave a link to. My rant was on the day that the wonderful new UK government announced plans to raise capital gains tax from 18% to 40%!!!!! Not that I pay tax at that rate right now, but if I ever become a full time trader that would be the tax rate *sigh* . Hmmm... I wonder what its like to live in Burkina Faso
Good day all. Not trading today. I have other things on my mind currently - like being on the wrong end of a grenade or bullet. Having to keep your head down does not make for a happy trading finger. So - let me steer for a second... First - BOB - Blow Out Bottom/Blow Out Bar ??? Second - ze generals. I found the generals book pretty interesting 'cept it's not a book - it appears it's the accompanying documentation to a web seminar - all 500+ pages of it. I can only hope for those present that it was more than one sitting. It starts off looking a lot like a swing trading methodolody. It talks of a certain segment of the trading community with deep pockets that measure themselves in comparison to the performance of the S&P500. Anyone that's brought a mutual fund knows this makes sense. It also says that these people can't beat the performance by investing in the S&P500 so they need to be selective. OK - also makes sense. There is talk of these people getting into certain stocks and pushing them for a return. We know TA traders will hump (sic) on a trend, so this also makes sense. There is talk of relative strength too. Then it jumps into day trading setups and I have to admit it seemed like a bit of a quantum leap to me and I can't help but think there must be something in between. I can understand the concept that certain groups will be investing in stocks and that in this case you can argue that for a period these stocks may rise. On any one day though, I find it hard to see how this is of benefit more than going into an earnings stock for a day trade. If I look at relative strength on the S&P500, it seem to me that more is not better. I have a strength measure that largely agrees with RSI but is less granular - it gives me a number between -10 to +10. I have seen that those that hit the heady numbers like 7 onwards are actually pretty much done and that those with lower strength, that are just going actually make more sense. So - I have 2 things I don't understand when looking at this literature.... 1 - How do we leap from what 'ze generals' are jumping into on a 'macro' level into any sot of day trading action plan at a 'micro' level ? 2 - How do we use a measure of relative strength when it appears that those with more strength appear to be cooked and ready to serve (apple turnover) ? Note - spreadsheet of S&P500 with current strengths & daily ranges attached.
Big Outside bar? Where do you live that you're worrying about getting shot DT? You cant let a little thing like that interfere with your trading!!!