OB/OS indicators are usually oscillators. Oscillators work best in steady state conditions like ranging conditions. That's why they don't work well in trending conditions. The trick is to know when it's about to trend or range.
%% Who would have figured Bear would bite the dirt in a bear market?? Bear screamed/roared ''our headquarters building is worth more than that !! . '' But like JPM said ''you dont pay up when a house is on fire''
Make yourself a log for the timeframe you are observing. Observe price action with each bar, note the position of whatever flavor of TA that resonates with you. With what you see on that bar, decide if what you see is continuing or changing. You'll get an answer on the next bar. The market gives the right answers to everything all the time. It's only our misinterpretation that gets one on the wrong side of the market or not asking the right questions or not having our eye on the things that matter when they matter. Unless, of course, one has the belief that markets are random and that no reliable consistent method can be used. The suite of TA are mirrors as well as tools. One's view of the markets is similar to The map is not the territory.
Short term trading whether days...a few weeks...or a day..an hour..or minutes has the potential to compound profits that longterm trading (months) cannot. Every PB is an opportunity for compounding. Hurst discusses these concepts. Compounding is the reinvestment of earnings over time. You do not get any compounding from day trading - that it just absurd. With compounding you need a fixed cost basis and a rising price over a period of days to decades. And your claim of Livermore as a day trader when he made his fortune are wrong. Jesse Livermore's own biographies clearly spell out his disgust of day trading, and how the millions came in when was sitting for months at a time. Nothing against day trading personally, I put on a intra-night trade here & there, although I am mostly swing. Seems like only a rare few make it day trading - did it for 6 years full time. In a bull market the real winners are the investors.
"Compounding is the reinvestment of earnings over time. You do not get any compounding from day trading - that it just absurd. You need a fixed cost basis and a rising price over a period of days, weeks, months, years. decades, etc. " It kinda depends on how you look at it. If your account is increasing in value, you can buy more contracts to trade.
It kinda depends on how you look at it. If your account is increasing in value, you can buy more contracts to trade. If you hold it through another day and it continues to rise than your previous days profit will also be earning a profit, adding onto your profits from the current day - that would be compounding. Note how it took more than a day before compounding kicked in. The first day you simply had a % gain, the second day you had compounding. Compounding The process of accumulating the time value of money forward in time. For example, interest earned in one period earns additional interest during each subsequent time period.
I agree with most of your post, but with manual trading, to realize the compounding effect, you'd need to use the appreciation profits made to buy additional contracts. Take an increasing trend. If you just kept one contract through the entire trend, you'd make a profit, but off of just one contract. But if you sold half way through the trend (perhaps at a pull back), and used the profits to buy another contract plus re-entered with your original contract, you'd end up with additional profit. That would be the compounding effect. Would be just like dollar cost averaging.
Thank you for your help. Recently, I am beginning to appreciate chart reading and have found some useful ways to use charts to augment my trading method. So, I am going to continue looking at what else I can do with TA. One of the TA I am looking at is 200 DMA.....as suggested by Mr. Turtle.
If your profits from previous days are reinvested and you end up making profits going forward than yea, that would be compounding. However, you have 2 take into account trading costs which in day trading can be significant, your also faced with having to always buy in at higher prices for longs in a bull or at lower prices for shorts in a bear market which makes it harder when you have to get re-positioned into a new winner every day. As a swing trader: When I have compounding I have a static cost basis, I also get the benefits of overnight gaps in my trade direction which can add considerable profits over the weeks/months. Compounding has a way of working a lot better when left alone letting a profit in motion continue to churn more profits. When I day traded for a living (6 years, mid - late 90's) my trading costs were as much as $45k. On wining years it was transparent - on flat or losing years it was tragic - you don't get any compounding until you first overcome the trading costs. Investors benefit the most from compounding - us more active traders are typically well outgunned by this crown in a raging bull market.