TA is many things to many people. If used properly, it can help uncover the “Best of the Best” trade entries to take. I use Fib levels for support and resistance and extensions for targets in the context of wave form analysis (not Elliott Wave). I combine this with a couple of moving averages and an ergotic TSI for entry context. I also mix in a little T&S reading once I am in the trade. I find this works in medium to strongly trending market conditions. If the market is stuck in a range, the best thing to do is sit it out. The second best is to learn to scalp the range that is setup. The absolute hardest thing to learn in trading is when to sit it out. When you trade in sub-optimal conditions you just end up donating the profits from previous sessions. My brand of TA helps me see the optimal conditions. At that point, you just need to lever up, set your targets and have the balls to hold it to target or get out if something changes. Trend lines, MA’s, support & resistance and certain indicators are good tools, but it boils down to using the tools to synthesize current conditions and make a decision. After that it is management.
What is Technical Analysis? Anything on / derived from - a chart Anything derived from the action of price movement ============================= Why does it work? Because it contextualizes behavior - and humans are creatures of habit / repetitiveness - to a point Holds for BOT programmers as well RN
Spot on , done properly TA is nothing more than measuring the psyche of market participants as a whole , Bot programmers who have a handle on this mass behaviour rather than curve fitters will rule the world . Learn price action first , then learn to code and you will give yourself a shot to be elite , top 1% .... 10,000 hours needed , if you havent got the time/drive go do something else .. IT WILL NOT BE EASY
No doubting that , majority (probably all ) of price action based bot traders start manual systematic , its the natural progression .. discretionary to manual systematic to EA systematic , a long and arduous path with a pot of gold at the end if you make it , the shit you have to learn and unlearn , id suggest 90% of what i learnt in first 5 years is now in the bin where it deserves to be , took a long time to let it go . If you lucky enough to get a mentor who is in the 1% you might get that 10k hours down to 5k .. i wasnt so lucky , i paid my tuition the hard way
Source is Al Brooks website, I don't think I'm allowed to link to it. Price action What is price action? There is no widely accepted definition of price action, but I think a broad one is most helpful for traders. I like the one that I use in the first video in the course, and I am basing this article on that video. Price action is any representation of price movement of any financial instrument, on any type of chart and on any timeframe. Here are some examples: One of these is a daily chart, another is a 5 minute chart, and the third is a 1 minute chart. Also, one is a stock during the 1987 Stock Market Crash, another is a recent Forex currency market, and the third is gold. Can you tell which is which? Of course not, and the reason is that the same people and computers are trading all of them and they are using the same techniques for all markets and time frames. (The answer is the chart on the left is a daily chart of GE, the middle chart is a 1 minute chart of the EURUSD foreign exchange market, and the one on the right is a 5 minute chart of gold. Any type of chart is good for trading The charts below show that it does not matter what type of chart that a trader uses because they all are just different representations of what is taking place in the market and traders can see the same setups on all of them. This is a 5 minute chart of PBR, the stock of a Brazilian company. This chart has 300,000 shares per bar and the setups are just as clear as on the 5 minute chart. This chart of PBR has 1,000 ticks per bar. This is a Range chart of PBR, which again shows the same setups. This monthly chart of PBR shows the same patterns that traders see on 5 minute charts and daily charts. Markets are fractal, which means that the same patterns occur on all smaller and larger time frames. Every tick matters You sometimes hear traders refer to some movement as noise, as if the behavior was random. What they do not appreciate is that the market is controlled by hundreds of computers that never rest. They are constantly crunching numbers and executing trades. The movements are very precise because all of the algorithms are aware of the key prices. These are support and resistance levels and act as magnets that draw the market to them. Once there, the market then decides on which magnet it will then test, and the move can be up or down. Every little move is an example of price action and traders never dismiss anything as unimportant. Sometimes something very small leads to a big move. Traders who understand what is going on will often take these trades. The stop of sometimes very tight, which means that the risk is small. Small risk always means low probability, but the reward can be so large that it more than offsets that low probability. Something very minor often leads to a strong trend, as happened here within the tight trading range near the high of the day. There was a small double top within that tight trading range, and it formed just one tick below the high of the day. Alert traders shorted one tick below the signal bar, risking 5 ticks to make a reward that was many times larger. After the market began to trend down, the probability of lower prices increased and many traders waited to take later entries. You can see the big bear trend bar that formed once everyone agreed that the bears had won and that the market was going lower. Price action is a reflection of human behavior All of us have a good understanding of how to buy and sell things, and how to determine a fair price. We do it every time we buy something at the store or sell something to someone. Our behavior is logical and it is a survival skill, and humans have optimized it over thousands of years. We do it very well. Markets are simply forums for buying and selling and are entirely controlled by human behavior, which is in turn controlled by our genes. This means that price action has been the same since markets began and it will remain the same unless we evolve into a new species. Computers make decisions faster than we do, but ultimately they come to the same logical decisions as us. This means that price action has not changed, even though 75% of the trading is now automated. This is a weekly chart of the Dow Jones Industrial Average during the Great Depression. There were no computers at the time, but the chart still looks the same as any chart today, on any time frame. Trading is difficult As every beginning trader soon discovers, making money as a trader is much more difficult that websites, books, and ads make it seem. However, it is not impossible. Although trading is not a zero sum game in the long run because the economy has grown forever (the total dollars in the stock market are about 10 times more than during the 1987 crash…there is vastly more wealth today), it is essentially a zero sum game over the course of the next several weeks. There will always be traders who are better than others and they will consistently make money. That should be the goal of every trader…to trade consistently well. We do not have to trade perfectly, but we do have to trade well, and that is something within reach of all of us. However, to do anything consistently well for many years is always difficult, but the challenge is part of the appeal. That is why we play tennis or golf, or watch soccer or football. We like to compete. Market inertia Traders focus on the current bar and hope to figure out what the bars just off the screen to the right will look like. As everyone knows, the best predictor of tomorrow’s weather is what is happening today. Well, the same is true with trading. The bars to the right that we do not yet see probably will look like those to the left. Markets have inertia and tend to continue to do what they have been doing. My 80% rule is that 80% of trend reversal attempts will fail, and 80% of trend breakout attempts in trading ranges will fail. Trends have a strong tendency to remain as trends, and trading ranges are very resistant to change as well. The market is constantly testing the strength of traders who hold the opposite view because it knows that eventually they will be right, but successful traders know that traders betting against inertia will be wrong 80% of the time. They therefore like to bet against those other traders and buy reversal attempts in bull trends, betting they will become bull flags, and selling bottoms in bears, betting they will become bear flags. They also buy low, sell high, and scalp in a trading range, betting that all of those strong rallies and selloffs will fail and then reverse. The lure of candlesticks & indicators People are naturally hopeful. We want to believe that the world is good and fair, and that we will succeed in whatever we are doing. The trading world is filled with websites, videos, and books that make trading sound easy. The message is clear…just memorize a dozen candle patterns or use a secret indicator and you will get rich. Traders quickly learn that this is untrue, and they discover that the only way that they will succeed is by working very hard to understand how markets behave. There are no secrets. Everything is right in front of them. Covering it all up with indicators only reduces their chances of success. 60 minute EURUSD foreign exchange market chart with many indicators, which make it very difficult to see the price action. Beginners are often afraid of the market and try to hide it with lots of indicators. Yes, they create a psychological barrier between the trader and the market, but rather than protecting him from the dangers of the market, it prevents him from seeing what the market is doing and therefore he is unable to trade profitably. This is the same 60 minute EURUSD Forex market chart without indicators. It is easy to see what the market is trying to tell traders if they are willing to listen. If not candlesticks or indicators, then what is price action? Traders correctly believe that Goldman Sachs, high frequency trading firms, and hedge funds make a fortune. However, they are not using candlestick patterns and indicators to do so. So, what do successful traders do instead? Carefully listen to technical traders on CNBC…they tell you every day!They repeatedly talk about support, resistance, channels, prior highs and lows, and trend lines, and you rarely ever hear anyone mention a candle pattern or an indicator.They also talk about whether a trend is strong or if the market is in a trading range. They mention higher highs and lows in a bull, and lower highs and lows in a bear, and they assess buying and selling pressure, probability, risk, and reward. Finally, they often talk about trade management, like where to put stops and when to take profits. Traders are always thinking in terms of support and resistance. This means that as soon as they see two reversals, they draw a line and then watch what the market does when it tests the line again. They also see if the market reverses down when it tests a prior high, as it did here. The 5 minute chart of the SPY formed a double top and a wedge top at bar 7, a double top at bar 5, and double bottoms at bars 4 and 8 (both had 2nd entry buy signals). Many traders do not think of this pattern as a double top bear flag, but it is common and reliable. Double tops and bottoms are rarely perfect and often look very different from how they are usually described in books and websites. Many traders often incorrectly refer to these charts as price charts, which is only half correct. They are two dimensional, which means that they have a second variable…time. These are price versus time charts, and time is often more important than price. If the market begins to have a series of trend bars in one direction, it is a sign that one side is winning and that a trend might soon become obvious. Bottom line There is nothing magical to trading and the institutions cannot hide what they do. It is all right in front of all of us every day and on every chart..and it is called price action. It is the key to successful trading, but trading well takes much more work than simply memorizing a handful of candle patterns or relying on a secret indicator. However, if a trader takes his job seriously and works very hard to learn his craft, the reward can be everything that he hoped it could be.
Technical Analysis determines a bias on the direction of an underlying. In other words picking a stock direction. The hard part is managing your money around that bias. No technical analysis is always right in fact statistically they are most likely correct 50% of the time. Lets say you find one that gives a slight edge (i don't believe you can) . What percent of your portfolio are you going to employ for each trade? When do you take losses? When do you take gains? You may have picked the stock to rise to a certain level but what happens when at first it goes down before it rises back up and hits your target? You could take a loss by hitting your stop making the trade a loss even when you were right!
If you have nothing to say sometimes its best to say nothing , the naiveity on these boards is astounding so back into my box i go and i will leave you all with these gems , The dinosaur guy with his cut and paste is a true reflection of the complete lack of independant thought that abounds in this place
There is a big difference between price action at the intraday level now and in the pre-HFT era, unless you can show some pre-HFT charts that look similar to the following:
@brisvegas Sad to see you go, but you've disclosed enough information to this community, that 100 books and 10 years may not be able to uncover. They should all be grateful. Damn thread crappers ruin it all