Fundamental or technical analysis?

[IFeelFree]

Hi IFeelFree,
Welcome to T2W.

You make some interesting points and your approach is certainly a little different to the norm. If you're happy to expand your ideas and put some meat on the bone - I'm sure it will be of great interest to members. So as not to take this thread off-topic, please start a bespoke thread of your own.

Tim.

Thanks. I took your suggestion and started a new thread, "Trading Using Statistical Arbitrage vs. Traditional Technical Analysis". Hopefully, some people might find it interesting.

 

[vitaminC]

Thank you so much!

I'm going to start looking for the best strategy to me. I think, in the begining I'll use technical analysis until I get used to stock exchange and then I will see which strategy I should follow.

See you around the forum!

Hi Leticia,

welcome into the financial markets! like some people said before there is no one right way of analyzing the markets.

Very importantly, it's always good to understand all aspects of analysis. Because retail vs prop traders may have a different mentality during specific "Technical Analysis" indications.
Many traders tend to follow what the indicators say to them and place trades based on indicators, but keep in mind this is when many fake-outs will appear. Smart traders sometimes uses these indicators knowingly to make sure the masses go in one direction while the big boys go the other.


i had first hand experience on this. can share more if you are interested.

 

[BSD]

There is a belief that price trend vis a vis the 200EMA comprises TA which adequately reflects FA. e.g. If price is consistently rising over a long period, FA must be the driver behind this, and price's residence above the 200EMA confirms this.

People holding that belief are in pretty good company.

“We learned just to go with the chart. Why work when Mr. Market can do it for you?”

“One principle for sure would be: get out of anything that falls below the 200-day moving average.”

“I teach an undergrad class at the University of Virginia, and I tell my students, “I’m going to save you from going to business school. Here, you’re getting a $100k class, and I’m going to give it to you in two thoughts, okay? You don’t need to go to business school; you’ve only got to remember two things. The first is, you always want to be with whatever the predominant trend is. My metric for everything I look at is the 200-day moving average of closing prices. I’ve seen too many things go to zero, stocks and commodities. The whole trick in investing is: “How do I keep from losing everything?” If you use the 200-day moving average rule, then you get out. You play defense, and you get out.”

Paul Tudor Jones

http://25iq.com/2015/07/25/a-dozen-...paul-tudor-jones-about-investing-and-trading/

Trading IS simple.

Price goes up, down or sideways, that's it, based on more selling, buying or a status quo going on at the time.

Identify a trend using MA's or simply higher highs and higher lows which is what the MA shows ya in the first place, wait for a pullback, and jump onboard.

That's all trading net profitably is about at the end of the day.

 

[BSD]

Paul Tudor Jones and his former right hand man man Peter Borish are also great fans of Tom DeMark indicators, lust like a lot of other Billionaire Traders out there:

[Magee and Edwards'] Technical Analysis of Stock Trends and The Elliott Wave Theorist both give very specific and systematic ways to approach developing great reward/risk ratios for entering into a business contract with the marketplace, which is what every trade should be if properly and thoughtfully executed. - Paul Tudor Jones intro to Mark Fisher's Logical Trader.

And some heavyweights writing the intro for a book by Jason Perl of UBS:

“Having observed his market calls real time over the years, I can say that Jason Perl’s application of the DeMark Indicators distinguishes his work from industry peers when it comes to market timing. This book demonstrates how traders can benefit from his insight, using the studies to identify the exhaustion of established trends or the onset of new ones. Whether you’re fundamentally or technically inclined, Perl’s DeMark Indicators is an invaluable trading resource.” —Leon G. Cooperman Chairman, Omega Advisors.

“Jason Perl is the trader′s technician. DeMark Indicators are a difficult subject matter, but Jason shows simply how the theory can be applied practically to markets. Whether you′re day–trading or taking medium–term positions, using the applications can only be of increased value.” —David Kyte, Founder Kyte Group Limited

“Jason Perl has taken the playbook from the market’s John Wooden, Tom DeMark, and translated it engagingly in a format that traders of all levels will appreciate. As one who has used these indicators for more than twenty years, I too am appreciative of Jason’s clarity.” —Peter Borish Chairman and CEO, Computer Trading Corporation (Ex Partner of Paul Tudor Jones

“Jason Perl has created a trading primer that will help both the professional and the layman interpret the DeMark Indicators, which I believe represent the most robust and powerful methods to track securities and establish timely investment positions. Think of DeMark Indicators as the Rosetta stone of market–timing technology.” —John Burbank Founder and CIO, Passport Capital

In case you've been off to a quick jaunt to Mars here's a quick rundown on who DeMark is:

His clients included George Soros, Goldman Sachs, Union Carbide, IBM, Minnesota Mining, Steinhardt Partners, Atlantic Richfield, First Investors, Hoisington Investment, among many others. In 1988, DeMark became executive vice president of Tudor (Paul Tudor Jones), a multibillion-dollar hedge fund. In 1990, DeMark established a partnership with Chicago Board of Trade Treasury Bond legend[12] Charlie DiFrancesca ("Charlie D"). In 1990, DeMark and multibillion-dollar fund manager Van Hoisington[13][14] formed Devan Futures. In 1994, DeMark served as special advisor to Leon Cooperman, a $5 billion hedge fund manager. At the same time, DeMark formed Market Studies, a provider of DeMark's suite of market-timing software to data vendors, such as Bloomberg and CQG.[5][15] Formerly, Mr. DeMark was Chairman of Logical Information Machines (LIM).

In 2008, Steven A. Cohen, founder of Stamford, Connecticut-based Point 72 Asset Management, which manages $15 billion,[16] and John H. Burbank, founder of San Francisco-based Passport Capital LLC, which manages $4.1 billion,[17] became partners in DeMark Analytics, LLC. The firm has its headquarters in Scottsdale, Arizona.[18]



https://en.wikipedia.org/wiki/Thomas_DeMark

So that's what, 40+ Billion USD following his indicators.

Truth be told, simple MA's and Oscillators used in conjunction with a solid understanding of price action - eg as simple as Tudor Jones's mention of Elliots waves and their often enough no more than three thrusts up in an uptrend (yes sometimes you do get more or less but often enough it's true ) etc. - will and do show the same thing, trend and cycles in that trend.

It's as with all tools, use em the right way and they work, misuse em and don't blame them for failure.

 

[dbphoenix]

OTOH, Wyckoff predates all of them.

If one needs the indicators, by all means use them. If not, don't.

 

[BSD]

Oh yeah, quite agree with that DB.

First you have to understand price action, that precedes everything.

Indicators show you no more or less than what price shows you, but to me at least they do a good job of visually enhancing that, like a magnifiying glass if you will as per a 200 MA, and showing you the path of least resistance, and the cycles in that, with, to me at least, greater clarity than all the little irrelevant wiggles price can go through on it's journey from A to B.

Kinda like flying a plane. You don't really need instruments - at least outside of clouds - but it can make it easier if that's your cuppa tea.

Weren't the earliest TA traders the Japanese actually, trading rice futures in the 17th century on principles similar to what Dow proposed later on.

https://books.google.de/books?id=HM...epage&q=japan technical analysis rice&f=false

Had to google OTO, lol.

 

[dbphoenix]

Homma, the 18th century.

And no MAs

 

[BSD]

Yay but same stuff like trend lines, just like Siamese Twins:



Me being somewhat lazy I like MA's, you being the young spurt you like mental activity and hence trend lines, but they show the same smoothing of price_




Using TLs can also help, though if you don't want to mess with continually re-drawing them, you can also calculate an MA that will fit whatever trend you're following. This will most likely not be the standard 20 or whatever. It may have to be 12 or 14 or some such. But the MA should look like a TL and serve the same function. It won't serve as S/R, but it will warn you of changes in the trend (which is all a TL is supposed to do anyway).

http://www.elitetrader.com/et/index.php?threads/pullback-entry-strategy.26275/

Trading IS simple

 

[dbphoenix]

Trendlines and MAs, however, are not quite the same thing. MAs are calculated. Trendlines are not, nor do they smooth anything.

As for being "the young spurt", sad to say I'm older than nearly all of the people here.

In any case, one should use the absolute minimum he requires to make a decision. The more stuff he consults, the more likely he is to hesitate, and hesitation means lost opportunities, if not loss of trading capital. If one absolutely has to have indicators, then he should have them. Otherwise . . .

But perhaps all of this is more suited to a TA thread.

 

[BenTen321]

Thank you Fugazsy.

Now I have to find my way in trading. I've looking for more information to decide which strategy I should follow. Although it's difficult because there are so much information....Wish me luck!

There are a lot people who suggest you different but i suggest that do what you know that is best for you or not. Because all have their own trading style. But you start with your own. Best of luck. See you soon with good new

 

[BSD]

But perhaps all of this is more suited to a TA thread.

Yup particularly as all of this is really pretty academic.

The advantage of MA's is that everyone sees the same thing.

Ask ten people here to draw a trendline, and you'll probably get ten different results, even if you've explained trend line drawing till you're blue in the face.

;-)

But in terms of net profitable trading it really doesn't matter what you use as long as you stay consistent in your approach and it's based on basic market behaviour:

Identify a trend using trendlines, or MA's, or without any help and with only price action...

Identify a pullback using oscillators, trendlines, or again just price action...

Jump onboard...

Exit when the first swing is exhausted roundabout when it starts pulling back again, or hold on through several swings until the trend is exhausted, and there you go, that's all trading is about.

Simples, if admittedly not always easy.

 

[tomorton]

Yup particularly as all of this is really pretty academic.

The advantage of MA's is that everyone sees the same thing.

Ask ten people here to draw a trendline, and you'll probably get ten different results, even if you've explained trend line drawing till you're blue in the face.

;-)

But in terms of net profitable trading it really doesn't matter what you use as long as you stay consistent in your approach and it's based on basic market behaviour:

Identify a trend using trendlines, or MA's, or without any help and with only price action...

Identify a pullback using oscillators, trendlines, or again just price action...

Jump onboard...

Exit when the first swing is exhausted roundabout when it starts pulling back again, or hold on through several swings until the trend is exhausted, and there you go, that's all trading is about.

Simples, if admittedly not always easy.

This sums up exactly my reservations about straight lines, trend lines, trend channels but also Bollinger Band boundaries etc. Yes, I can draw and interpret these, but the major players in the market, with sufficient money to actually move prices, are probably looking at different lines. The nice thing about an MA is that you can see whether a) its going upwards or downwards, and b) whether price is above it or below it. Every 200EMA chart will give the same answers to these two questions: with trendlines these simple but key facts depend on how far back you start drawing your line.

 

[BSD]

That sums up perfectly why I like MA's, Tom.

I have two on my charts, a long term one for trend, a short term one to help visualize cycles or pullbacks if you will within that trend, and one oscillator to help gauge depth of pullback, and that's it.

I don't do MA crossovers, I just use them to show me the trend and it's waves.

Paints a crystal clear picture, with zero discretion or interpretation necessary.

 

[Fugazsy]

I didn't say that "there isn't a good way to everyone". It is true that there are many ways of making money in the market, but they must all begin with an understanding of how the market works. Those who fail never bother to find out.

Maybe you can explain to us your own perception of how market works.

 

[Fugazsy]

This sums up exactly my reservations about straight lines, trend lines, trend channels but also Bollinger Band boundaries etc. Yes, I can draw and interpret these, but the major players in the market, with sufficient money to actually move prices, are probably looking at different lines. The nice thing about an MA is that you can see whether a) its going upwards or downwards, and b) whether price is above it or below it. Every 200EMA chart will give the same answers to these two questions: with trendlines these simple but key facts depend on how far back you start drawing your line.

MA can be also used as price channel but not at close but as high/low.
Try this for short: 10sma at high and 8sma at low, two consecutive bars completely below the PC indicates the trend, a pull back to the PC can act as resistance, entering with a limit order or with a reversal move could be some of the options entering.....

 

[tomorton]

Ingenious, Fugazsy. Though MAs might be the first thing we learn, they needn't be the first things we forget.

 

[dbphoenix]

The advantage of MA's is that everyone sees the same thing.

That would be an advantage if it were true. But given the near-infinite number of settings along with a wide variety of MAs, beginning with "simple" and "exponential", finding two people who are looking at the same thing would be a challenge.

 

[dbphoenix]

Maybe you can explain to us your own perception of how market works.

See my signature.

 

[Forexmospherian]

That would be an advantage if it were true. But given the near-infinite number of settings along with a wide variety of MAs, beginning with "simple" and "exponential", finding two people who are looking at the same thing would be a challenge.

Agree

and also every chart with a time frame over 60 mins is different - all depending on your brokers time zones around the world

When traders say my 4 hr candles changing now with a doji - yes it might do on their charts - but there will loads of other traders who charts change 4 hrs candles at 2 other times - all depending on platforms geared to US or Singapore or European times

I look upon MA's a a poor second behind LRs - but that's my own preference with FX - although talking of time frames - everybody forgets the importance of time intervals and key times in this new automated trading environment.

I also think trading is not simple or easy

If that's the case why do 80 -90 % of all trader fail - even clever guys.??

Treat it too simple and you get simple results

Treat it as a brain & mindset test against super computers with infinite variables along with big players having the advantage of size - I really do think if 95% of all retail traders saw the same thing and reacted with the same trade - 1 or 2 Banks could easily out trump them and reverses the trade putting them into loss land.

Retail traders are ants against mighty Elephants and Lions - but our massive advantage is we have the "edge" of only needing to follow rather than lead moves.

The game is too make money - we want it off the market - and the market wants it off us - do enough study and improve all your trading skills and you can definitely make a lot more than you give back

Good Trading


F

 

[dbphoenix]

Actually the data for any given instrument is identical. If price hits N in New York at 0200, it hits N all over the world at the same moment. The difference lies in how the trader chooses to bundle the data. The choice to use candles is just that, a choice. Choosing to bundle it into 4hr segments is also a choice. But all charts are tick charts. And in the case of the NQ or ES, there is no "close" until Friday afternoon. In the meantime, it's a continuous stream. If one is able to tap into how and why price is moving in that stream, he can follow the lead of those who have the money to move price (it isn't the daytrader) and profit along with them.

As to why so many people fail, I suggest that it is largely because they don't know what they're looking at. Therefore they trade in an almost continual state of surprise. Add to that the likelihood that they have no thoroughly-tested and consistently-profitable trading plan, or that -- if they do -- they don't have the discipline to follow it, and you have a recipe for failure. This is not to say that one cannot develop such a plan using indicators. But few bother to do so, involving as it does meticulous record-keeping, trade reviews (with or without charts), planning for the next session, and so on. Without that, it's all just couldawouldashoulda.

Db