so so many Day traders are consistently profitable, what do they use instead of ＴＡ? At least I know a few many money on support and resistance.
Only a fool would enter a true 50/50 trade, YES TA is not perfect, about 70% some setups 75-80% at best. Still pretty dam good odds.
Totally disagree with ops premise. T/A is of one tool in your trading arsenal. If you want to buy an equity instrument and use no prior price action, then go ahead. That is like committing suicide. The best way to see the benefits of T/A is to see what others see. Most of time, its seeing the bigger picture. There are very good trading resources available on the net that stick with simple methods. stockthrust.com - stock picks from technical analysis thepatternsite.com - bulkowski's site chart.ly - see what others see The point is, too many people complicate trading when they should make it simple.
I know some guys who have a win/loss ratio of 0.35 and they make millions. Maybe you can figure out why? 'Bout TA, the only thing I may add here is that ANYTHING works at times, even if you make a rule that if you need 5 sheets of toilet paper or less on a given day to wipe your ass then you go long, if more than that then you short. It works, I promise you, but only at times. Why? Because market microstructure is dynamic. It gets less dynamic the more you move into longer time frames. Matter of the fact is that any TA works at certain times but does not most of the other times. Of course there are strategies with the same indicators and set of parameterization that are net profitable but I am willing to claim that applying the same set of indicators and parameters across markets and across different cycles and market dynamics does not get you much more than breaking even, if even that.
I would gladly enter a trade with way below 50% probability of profit, provided it has good enough R:R.
There are some of the current algorithms that don't have the same limits of an "expiration date" for their usefullness like typical quant methods you are probably familiar with. None of those were developed in the Hong Kong or Singapore finanacial markets because you don't have many individuals there that are into research or creating something, "new".
I tend to agree with you Asia. Especially on the win/loss ratio. Here is why: You open a long position in a random market at a price of 1000. - Stop Loss (SL) is in at 995 - Take Profit (TP) is in at 1005 Since markets move at random your trading result after 100 trades will be around zero, 50/50 chance. But wait! There is the brokerage. So your nett result will be zero minus the costs of 100 trades. Salesmen want you to take many, many trades. That makes the brokers rich and since they often team up with a broker, they profit from that as well. Lesson from this example: as long has you have a fixed stop loss ÃND take profit you are doomed to fail. So how do I solve this? Now we enter the same market long again at the level 1000. Only this time our stop loss is fixed, we limit our losses at 995 and we let our profits run. To protect our profits in this example we use a simple trail stop of 10 ticks (or pips or points, whatever word you use). Mind the word âprotectâ. There is a huge difference between protecting profits and taking profits. For the sake of the example I wont discuss 100 trades, but only ten. Percentagewise itâs all the same. This is an example of what is most likely to happen when taking those ten trades: Trade # one reaches 1001, you get stopped out at 995 -5 Trade # two reaches 1003, you get stopped out at 995 -5 Trade # three reaches 1001, you get stopped out at 995 -5 Trade # four reaches 1005, you get stopped out at 995 -5 Trade # five reaches 1002, you get stopped out at 995 -5 Getting sick and tired of it yet? Trade number 1 and 2 reached no lower than 993 and 992 and then came back up again. So it actually sucks that you got stopped out! But trade number three came down to 985, four reached as low as 970 and number five went all the way down to 955. So good you had that SL in at 995. We move on! Trade # six reaches 1007, but with the 10 tick trail stop you get out at 997 -3 Trade # seven reaches 1009, but with the 10 tick trail stop you get out at 999 -1 Trade # eight reaches 1015 and with the 10 tick trail stop you get out at 1005 +5! Trade # nine reaches 1030 and with the 10 tick trail stop you get out at 1020 +20 Trade # ten reaches 1045 and with the 10 tick trail stop you get out at 1035 +35 What just happened here? I took 10 trades and to my frustration I had seven losers in a row! I swear after loser number 7 I was about to throw in the towel! But let me check my trading account balance⦠Total profit +60 Total loss -29 Brokerage -5 Nett result +26 So with only a 30% winners I still make money! âAmateurs want to be right, professionals want to make moneyâ. And of course it will happen that you have 10 or maybe 15 losses in a row. During those periods you will find out if trading is suitable for you. Are you mentally strong enough to deal with those small but many losses? But at that same time it will also happen that you have 2 or maybe three big winners within 8 trades. The key to dealing with these situations is proper money management. Do you have the discipline not to increase the number of contracts during a losing streak? And at the same time can you keep yourself from not spending money from winning trades on wheelbarrows full of Dom Perignon!? Good money management means that you only increase your risk exposure (# of contracts) when you reached the next step of your predefined profit schedule. Shaka , Frits
good post - now if you combine that idea with something that has better than 50/50. simple momentum, a moving average etc. i do think ta has its place. but mentally and money management are key. m