TA: Parameters will make or break a situation

Discussion in 'Technical Analysis' started by learner2007, Nov 11, 2017.

  1. A year or so ago I was in Starbucks looking at some charts. A guy who noticed what I was doing struck up a conversation about trading. He said that he had bought wxyz a few days ago and asked me to look at its chart, which I did knowing that he just wanted to hear someone say that it's going to triple by Christmas! As I can best remember the stock had broken out of a long correction with a two month move from 1 to 2 of about 50%. From 2 there had been an extended reaction for about a month down to 3 retracing 40% or so of the 1 to 2 move. From 3 the stock moved up and through 2 where he had bought it. He said that his strategy was to buy on such new highs. I said that while the trend was still intact, in this particular case, I would not have bought at the time. I went on to say that there were two parameters that indicated not to buy now. Additionally, I showed him 7 other parameters, both positive and negative, that, based on the price movement, could/should be considered in this type of move. And that many of these same 9 parameters could also be used in a variety of situations. He said that he had never considered such parameters, and had not known about most of them. I asked him how often under similar situations had the price moved back down toward 3 by say 10% or more, or even all the way back to 3, or through 3. Fewer than not, but often enough to have a big effect on the on balance success of this type of trade was his answer. He clearly saw the value of not taking the situation at face value and how such parameters would qualify the trade.

    So, based on this experience, and having seen the same here on ET so often, to where even though a correct analysis of the technical indication itself is made, the lack of considering the parameters that can be applied to any given situation can so very often result in disappointment, I think many would benefit from a detailed study of such parameters.
    I've noticed that most books etc. do not cover such points. And the knowledge of parameters can only be attained through one's own study and research. To clarify, while many books advise using indicators etc. for confirmation of the technical indication, this is not what I mean by parameters. I mean those which can be found within the price movement itself and volume only. For example, one parameter, which I don't use, but I know some do, could be the extent in percentage by which 2 must be exceeded to create a valid new high. I would say that following the fault of seeing technical indications that don't actually exist, ignoring or overlooking parameters is the main seed of the "TA doesn't work" claim.

    Now, I'm sure that those in ETland who have little TA experience are sitting on the edge of their seats waiting to hear what the parameters are that have been past down from father to son for centuries. Well, being one who respects those who study, do research and work hard, I just ain't gonna tell ya, today anyway. In any event, those parameters that I use are based on my 40 years of work, but may not be the best, and are surely far from all. Studying thousands of technical situations should reveal the various parameters that exist to enhance your performance. Believe me when I say that they will make or break a situation. Knowing that most will not undertake such study, maybe they will be lucky and some readers will post one or two parameters that they use.
     
    Last edited: Nov 12, 2017
    Xela likes this.
  2. fan27

    fan27

    Last I checked, most retail backtesting packages will allow you to test a range of parameter settings for indicators. The whole process will take a few minutes :)
     
    tommcginnis likes this.
  3. For indicators yes, you can set parameters as you like. But I was talking about parameters found within the price movement itself.
     
  4. rin4et

    rin4et

    By parameters, do you mean "price patterns"? Just want to make sure I understand what you are talking about.
     
  5. No, not the pattern as a whole, even though you could have a parameter within a pattern. I was talking about parameters that qualify or disqualify a technical indication and are usually found before the technical indication, but can be found following the indication too.
     
  6. rin4et

    rin4et

    So it is something that you can see visually when you look at the chart? Or is it something that your platform mathematically calculates based on historic price, volume etc?
    In other words is it a sequence of price that you can visually see on the chart since you said it is not a technical indicator which I would classify the latter.
     
  7. Yes.
     
  8. tomorton

    tomorton

    This is all rather painful isn't it? Like when children say, "I know something you don't know. And I'm not going to tell you what it is, you'll just have to guess."

    Kind of like, "I spy with my little eye, something beginning with P".
     
    tommcginnis likes this.
  9. No, you just have to work at it. Sorry for having used such a dirty 4 letter word!
    The purpose of starting the thread was, as had occurred with the guy at Starbucks, to enlighten those not so experienced in TA to the importance of taking parameters into consideration when basing trades on TA.
    Additionally, what I know may be of no use to the form of analysis that another trader uses. But whatever the trader's analysis may be, any parameters that can be applied to a given situation should be discovered and applied.
     
    Last edited: Nov 12, 2017
  10. tomorton

    tomorton


    Nobody can disagree with this, as nobody knows what you're talking about.

    What will be the successful conclusion of this thread?
     
    #10     Nov 12, 2017
    tommcginnis and fan27 like this.