Technical analysis

More nice quotes by guess who in this thread alone:
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Are you really that stupid?
Are you people in this thread really THAT STUPID?
That guy (rohan) is talking out of his arse.
....your BS analysis which you most often get utterly wrong
You are a blatant liar
they hunt down lemmings like you
you have not shown that you even understand 7th grade biology and how bees make love
When I make claims about Jews in finance....
Are you aware of what garbage comes out of your mouth?
...you are one of the lowest in the food chain
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Can you imagine having this guy as your cellmate!!

 

Excellent!!
So now TA can be discussed politely by those for which TA makes cents!!

 

Pure price action trumped both stochastics and internal double top/"failed breakout" signals at the time of the initial chart posting.

It took me a long time to overcome my habit of trading based on overbought/oversold and common technical analysis "patterns" in isolation (double top/double bottom, head and shoulders, etc.) and to learn to trust price and allow the behavior of price to signal my entries instead of getting stuck on my own bias/belief about what is "due" to happen.

 

Hi,
By 'in isolation' do you mean without other indications confirming the pattern?

 

I mean without looking at the patterns in larger context and/or without waiting for the behavior of price to confirm the more likely direction to follow.

 

Sorry, I read into what you said as though you didn't use
the common patterns.

Ok, I see what you meant, being that you confirm the validity
of the pattern by its stage in the overall trend and the PA
within the pattern itself and its breakout. Same here.
Wouldn't you agree that the failure to do such are two of the
main reasons why many misread the charts, and consequently
mistrust TA?

 

Yes, absolutely. Same with indicators. There is no pattern or indicator that I know of which, in isolation, provides positive expectancy. In certain context, however, those same patterns, indicators, even individual price bars, offer very high probability trade setups.

 

Just as you say, a reversal pattern must have something to reverse and a continuation pattern must be preceded by an initial move, which places these patterns in context and provides the positive expectancy you mentioned.Yet the eagerness to make profits creates a false positive expectancy for many using TA/PA by seeing what's not there. And there is where I think one of the most attractive, and overlooked, aspects of TA/PA is to be found. Being that TA/PA also tells you what and when NOT to trade. While you and I may see only 5 trading opportunities in a chart, misread trades by so many traders go on all day, resulting in losses. Of course, the misreadings of the charts are not caused just by the eagerness to make profits. Lack of proper study and misunderstanding of TA, along with the lack of more detailed TA/PA knowledge are certainly the main causes. However, the blame for the losses is usually 'TA/PA doesn't work!'.

So, based on the above, I have often thought that unlike the usual trading threads where
posters try to seek out how to trade using TA/PA, a 'Where did I go wrong on this trade?' thread would be useful for serious students of the market. Like a help desk. I would start such a thread, but even though I have lived off my TA profits for 40 years, I have no reputation here on ET, and such a thread would surely be a flop. However, if someome such as you, NoDoji, who is famous and highly respected here could at least just get such a thread rolling, it might just prove fruitful.
However, while I believe there is a need for such a thread, I don't know, it may very well not work out in practice. Anyway, please consider this idea.

 

Losses aren't a problem because all solid trading methods will incur losses. The problem is when a trader sees a pattern (price bars or indicators or both) and develops a bias such as "There's no way price will ever get to THAT level, so I can just short here and not worry about a stop loss."

It's not losses that result from following a plan that cause problems; it's the losses that come from not following a plan or from trading a bias that's clearly contrary to what the price behavior is telling you and refusing to cut a loss and/or reverse sides when indicated. (Were you not in the losing position, you'd clearly see the opposing opportunity.) If you're positioned against a strong trend expecting reversion to mean, every pullback fills you with hope that the reversion has begun, while for the trend followers every pullback is an opportunity to add to a winning position or initiate a new with-trend position.

I did start the "Help, I've been chopped thread" a while back to help offer ideas for avoiding unnecessary losses during conditions where no particular side seems to have dominance.