Today, most stock executions are based on traders' interpretations of charts. These charts are based on trading data. Much of the daily data is grossly distorted by isolated institutional trades, so that the statistical basis of chart logic is crap. Daily (weekly, monthly) volumes are meaningless and daily trading ranges are utterly fake. A single board lot of any given Composite stock can be traded on the Nasdaq Intermarket Market at any price; this trade will be included in the stock's daily range. By this means, new highs/lows are created, gaps are covered by a single trade, etc. A zillion day traders and fund managers are out there trading on the basis of pretty chart patterns that are fabricated by specialists and stock promoters. This is a form of collective fantasy that works only because said traders and fund managers believe it works. Stocks go up because they're going up (PE ratios of 1000/1 - so?). After the big NASDAQ debacle you might think 'technical analysts' would have learned something - but no, the tech-babble goes on and on. As long as there's money that MUST be invested, the fantasy can be maintained. You can go along with this B.S. and probably have some success - if you're good at keeping abreast of the latest T.A. inventions. It's a house of cards.
I couldn't disagree more. It wasn't the TA guys touting stocks with triple digit PE's, or worse yet, stocks with no PE's. It was the FA's. For anyone who applied simple TA on a long term chart like the 20 sma on the monthly, the handwriting was on the wall well before CSCO was in the teens, or SUNW was in single digits. I know an idiot who still blames daytraders for his MSFT that he bought at 100 being where it is now.
There are just some chart patterns that REALLY work. Double bottom, divergences and exhaustion spikes. Some, I can make no sense out of.....rising phoenix? Bull flag? Bear flag? Dragon? Cow pie? Slim Jim? It is all in what gets you into the trade.
let the facts be told---- very very few TA people caught the top of the NASDAQ or any other top for that matter. typical TA ( as posted by inandlong) only works in hindsight. if this was not the case, the TA true believers would all act in concert thereby being self defeating when shorting and self fulfilling when going long. yes, there are some patterns that appear to have predictive qualities, but when tested statistically, the results are close to random. why is this FACT ignored ?? interpretation of patterns based on surrounding factors, etc, etc, is the key--not a rule based pattern execution. yes, i do use TA but only as a framework to conceptualize , utilizing a quantum model. if you are not visually( artistically ) oriented, counting works just fine for this function wake up--- think---- it makes little to no sense as presented in the trading press and the above quoted post. best, surfer
lets turn it the other way...what do you need to trade ? a low risk entry point with risk related to your individual money managment design and timeframe to trade on. where do get it from ? a framework. what kind of framework ? doesnt matter, could be TA, FA, indicators, pattern... lets take the "wedge" on the daily SP...you could choose to determine your low risk entry point related to this pattern... lets take the trading range for the last couple of days on the SP...you could choose to determine your low risk entry point related to this pattern... an so on
marketsurfer plz. u know better. TA works for umpteens of people. but its not simple, they use confluences of indications. buy when stoch below 20 and short when above 80 stuff obviously doesnt work.