Who says technical analysis doesn't work?

Discussion in 'Trading' started by ProfitTakgFool, Aug 23, 2007.

  1. Price puts in a hard bottom at 1466.50. Note the shifting support lines, indicating a change in bias. Price reacts upwards and corrects back to the 1468.00 area, which is trigger number 1. Rationale: buy the higher low on a "potential" double bottom.

    Price moves up nicely but the bottom isn't in yet because the exact nature of the bottom depends on randomness. Perhaps the market is both random and technical? Of course it is.

    Instead of a double bottom we get a wedge type reversal. The second trigger is on support of that pattern once you see it developing. Also of interest down there is that "1 tick wash" right where my second trigger was (red circle). Many traders will place a stop directly below that bottom and get "washed out" when price trades below by 1 tick. This presents an opportunity to buy if a trader has seen this happen in the past. Is this where the CME traders exploit other traders? Perhaps but the exact reason for this phenomenon isn't that important only the fact that you have "seen it before."

    Price moves up as expected and trades up to the 1471.25 level where it reacts downward. Why? Technical Analysis. The previous high occurred at 9:07 (cst) at exactly 1471.25. Where is your target? 1 tick below 1471.25, or 1471.00.

    Also note how a second attempt to get over this level at 9:50 ended at exactly 1471.25 - technical analysis.

    If you can open your mind to the fact that technical analysis does work (most will accept this theory) and that randomness occurs within technical movements (many will reject this theory because it crushes the glimmer of hope that trading is possible) you greatly increase your chances of becoming a successful trader.

    Keep an open mind and trade what happens. You don't have to time the market perfectly to make money. In fact, timing the market perfectly, consistently is impossible because there is both a random and technical element to the market. The sooner you accept this fact the sooner you are on your way to generating consistent profits from inconsistent movement.

    Obvious question: Where is your stop? In this particular case, that is a difficult question to answer because I wasn’t finished buying. There is another level of support down below that is not illustrated in this example. Had more downward movement occurred and I had finished “building” my position then the stop goes directly below whatever bottom happens to form. Another extremely important concept that gets overlooked is how traders manage their accounts but that is a topic for another day.

    A closing thought....what if price did get over that 1471 area? I'm more concerned with the amount of money I "take" out of the market rather than the amount I "miss." And, had the chart setup correctly and moved over that 1471 area it just presents another opportunity to buy again. Just trade what happens, not what you think or want to happen because "anything" can happen.

    Good Trading to All!
  2. Um you do realize there is a section on this forum for technical analysis?
  3. My bad, perhaps the moderator would be kind enough to move the thread there.

  4. balda


    you got it backwards.

    Your target should be your trigger 2.

    good luck
  5. There is also a forum for traders. What are you doing in it?
  6. Criticizing a profitable trade? LOL, good one Restricted. Pretty good.

  7. I was mocking the Stock_t3d3r. Sorry if you though i was speaking to you, i wasn't.
  8. My apologies Restricted. Based on Stock_trad3r's post history I agree with your view.