You have something that tells you what will happen? Damn, that sounds pretty sweet. Ben Bernanke might like to have a word with you. Not saying that I would trade this way, but take that "triangle" formation as an example. Yes, you would go long the "breakout" with a stop at the low point of the move which created the "breakout" and a sitting order to go short at that same price. So, you lose on the "breakout" trade but make it all back and more on the "breakdown" trade. Only the kind of dumbass who just has to try to be right on every trade wouldn't be able to do that. Obviously, that kind of approach would have worked this time and might not work the next time. That's just the nature of any probabilistic game.
i throw in my $0.02 USD. for example, CL broke down huge on 5/3/2012 right at resistance at the 50 dma. you could say "i'll short here w/ a tight stop maybe 1 ATR above the 50 dma and exit at the 200 dma or 3 or 4 atr." basically TA is telling you where you are wrong (e.g. price goes back above 50 dma).
dollar up, CL and GC down CL and GC are just a currency weak dollar, strong CL Bad world economy, weak CL
Hi Softdown: FrankSlaughtery gave the basics. So, for example, if you're looking to be long a market, a breakout from a consolidation allows you to say "hey, if I'm right, then price should not fall back into the consolidation area". So, you know exactly where you are wrong. That's not to say that price can't fall back into the area and then run away to the upside again. But, more often than not, if you are correct in both your bias and your timing, price should not re-enter the consolidation area. The trick with breakouts from consolidations is to know what makes a good consolidation for you - everyone have their own sets of rules for filtering things so they don't get trapped in the noise. But, even with my own filters, I still got whipsawed a few times in CL - that's just the nature of playing breakouts. If you prefer to play retracements AFTER the breakout, TA still gives you your risk point. Lets say you're more risk averse and prefer to wait to see if the breakout is real and you'll buy the first pullback. In other words, you're giving up price position for a bit more certainty. The low of that first pullback (after price moves on to new highs) gives you a risk point. Again, you'll see enough times when you get taken out of your trade on noise and such but it is still a risk point - i.e.: TA being a risk control mechanism. In this case (and the prior example as well), TA isn't telling you how far price is going to go or how fast it is going to move. It's just telling you where you're wrong and allowing you to size your trade that way. A lot of people have a FUNDAMENTAL viewpoint/bias but you'll still see them using chart points to control their risk and do their timing. Hope this helps. I'm pretty sure there are a bunch of other threads on this stuff somewhere in ET so I'm probably just repeating stuff that's been mentioned here a bunch of times before...
Trying to pass this off as analysis, Technical Analysis even, just misses two vital components... 1) The Technical part is crap 2) Consequently the Analysis is garbage So then when I read comments like... "just want to point out that this is a perfect example of why TA is a load of crap. It's only good for telling you what happened, not for telling you what will happen" and a sponsor replies... "You are 100% correct. TA is a risk control tool - not a forecasting tool. You can use it to make probability projections but that's all it is - probability projections. It's major use is as a risk control tool." Then, nothing personal guys, but honestly if newbies I mentored gave me this after their 1st month I'd have to fail them on so many TA points that I'd be a bit annoyed. For a sponsor to come on to a forum that is supposed to have 70% of the traders using TA and agree that TA is crap and is only for risk control beggars belief when it is linked to their educational service that seems to use TA. ET is predominately a TA forum with approx 70% of the traders using TA and roughly about the same day trading. So please don't mind me if I speak up for the 70% and say arse and elbows comes to mind here, for this is a perfect example of what not to present to your mentor if you don't want a series of questions that might warm your ears. And just to make it clear that I put my TA neck regularly on the line, I have posted hundreds of examples of how TA works and most weeks I stick my neck out and call the next weeks action and follow up with a review. So it's not postmortem stuff like this chart, I'm using TA to predict the move ahead and the type of action expected and that is some of the powerful things quality TA can do. So what's up with this chart and the two lines on it? For a start it completely lacks quality and if you want to get ahead of the game use quality set ups. Secondly it uses bar coloring as an idiot guide that makes PA quality and signal reading slow and difficult. The base line is good: there are 2 swing points giving a projection for the 3rd reaction which comes as a double tap so you have a long off this line with a Key Reversal PA signal. But you can easily miss that signal with the bar coloring which lags the action and will make it difficult to distinguish a quality PA signal from one to be avoided. From the top you have only 1 swing point which means instead of having 3 reaction points for a quality trend line you have only 1 resulting in line placement that is fickle and thus the break out signal generated is low quality/uncertain. To use a good quality base line with a low quality top line and see the converging of these as meaning anything is being hopeful. It might work - it might not. Then to consider this pattern as a triangle, even if the top line was quality, misses the huge void after the top. If this was filled with at least 2 waves it would be a quality triangle whereas in reality, no quality triangle exists. This is very poor pattern analysis so what do you do? You look sideways. There was an opening gap that the "fake" top stopped at which is strong high quality resistance. This also was an almost perfect ABC projection from the base. Intraday there was a perfect high quality 30m reversal signal and daily there was an inside day that broke to the downside. These are all excellent invitations to be on the short side of the market. However the OP's question was on the PA after this on the base line. When PA attacked the base line it was the 5th time and it used all that coiled energy to push through hard. Those who read the short signals would be holding short and not surprised to see a forceful break down. Those who missed the early reversal signals had a no-brainer opportunity to take the break of the rising trend line for a handsome profit. Other will have seen the H&S pattern formed on the rising TL that is of much higher quality than the triangle and noted the downside projection target. So there was both a narrow context sell and a larger context sell being signaled daily and a high quality intraday reversal set up. I have no idea if there was a fundamental reason or news event that drove the PA but that's what I like about TA: it is a fantastically powerful trading weapon if you learn high level skills. However if you don't learn good basics and go on from there, then garbage in - garbage out and in that case the conclusions quoted above are correct. Moreover this is skimming what is required to properly analyze this chart but it highlights enough to show a poor grasp of the basics. As I said my defense of TA is not personal for not everyone uses TA and if someone trades a different method and makes it work then kudos to them. But if you stick your neck out about TA when you don't know what you are talking about, then I'm sure you'll not mind mind me helping you wind your neck in a bit just as you would do with me if I were to tell you what you do is crap I have attached what swing lines look like, what a quality triangle looks like with internal swings and the dark blue "garbage wiggle" is not what you want to try to make money from. I'd be very interested in seeing how TA can be used for risk control when you have little clue what TA is.
XSpurt: Shoot---I don't even know where to start in responding to your post. So I'll try to keep it short instead. First, I wasn't attacking TA - I was simply agreeing with someone that TA isn't a forecasting tool. I still stand by that. I use charts EVERY DAY and TA every day. You and I may disagree on what makes a good "triangle" or how to read it and use it but that disagreement is what makes the markets. For me, give me 5 touch points on converging trendlines and the chart has my attention. I believe Edwards and Magee wanted only four. I find 5 is much more reliable in these markets. I'll tolerate some spikes through the trendlines given the noisy nature of modern markets and ,generally, I'll try to stay out of the actual formation of the triangle (not always successfully). Sorry if you thought I was impugning TA. On the contrary I LOVE TA and even served on the board of one of the premier TA organizations in the US for my max term. I just don't like to have TA be misunderstood - such as criticized for being useless as a forecasting tool when that's not the intention of most of TA. (I know, I know, even within TA organizations you have the debate on forecasting ability or not...) TA is a tool and, like all tools, I believe you have to understand its limitations.
wel, maybe to men, you buy her 10 barrels of crude and I buy her a gold neckllace and let's see who makes her smile. (never mind the fact that now I have to ride my bicycle to get her her next meal.)
"They are just a currency" No they are not stupid fucking dumb shit retail trader, even if you think they behave like one. I wondered why some people around here get so pissed off. Now I know why. I digress. Now you know it ain't a currency, no matter how much that head of yours says it is.