Is it true, you can trade without indicators and candlesticks?

[wallstreetwarrior87]

Let's assume TA doesn't work and by TA I mean any analysis of past price, right up to the present time. So assume that past price has no effect on the future price.

Shakone, by your definition of TA, I cant see how it cant be used in trading one way or another. So I can see why this causes so much debate.

To me observing past price all the way to the current action is reading orderflow. I said earlier that there is far more to orderflow that DOM and level 2.

I have absolutely no issues with people saying they trade using TA, because by your definition I do too

Where I tend to close off from TA is when looking at recent highs/lows etc. Yes TA will make you aware of them, but it cant tell you if that level is relevant. So there for, apart from telling us where price has been (the obvious) what relevance does it actually have.

There is so much more that needs to be considered to know with high probability where price will go next.

Remember a change in trend happens before it ever shows on a chart. Its only when TA says the trend has changed that Joe Public notice it!

 

[Dommo]

My starting point was to consider "what always appears to be true about markets?" and try to enumerate those things, then consider if there was some way I could use any of them.

 

[DionysusToast]

I would love to know what DT (who I think is a smart chap and I like his posts) thinks of the success enjoyed by various posters on this forum over the years (some quite recently) who post realtime journals and do rather well over the long haul who claim to employ simple TA to make their trading decisions?

The answer is very simple. They know the markets they trade very well.

Let's say you have a Forex swing trader using TA. Put him into day trading the ES or a stock and tell him to use the same TA and see how he fares.

They will fail miserably. This is because the things they use in addition to TA are not the icing on the cake, they are the cake.

 

[DionysusToast]

Let's assume TA doesn't work and by TA I mean any analysis of past price, right up to the present time. So assume that past price has no effect on the future price.

So yesterday's highs and lows, or recent swing highs and lows, won't contain any stops just beyond, nor will those stops be hunted, because previous price is irrelevant. Same for intraday. No point hunting stops, because people wouldn't put them under nearby swings, because past price is irrelevant. And there definitely wouldn't be anyone waiting to jump on the breakout, because there's no point. Breakout of what? A meaningless past price?

Of course, nobody cares whether the S&P has been going up for the past 6 months or not, or where the yearly highs or lows are, or what the trend is, or where it closed yesterday. Traders don't even have that info on their screens because it is all irrelevant. Nobody panicked on the 6th May, when it dropped like a lead balloon, nobody observed the speed price was dropping and thought, crap, I better not go long, and nobody in the subsequent days thought it was either a bargain, or that they needed to get out on a bounce. It can't be a bargain unless it is a bargain relative to past price, but we know that doesn't mean anything.

Those that entered a large trade several days ago long (or several hours), and price moved significantly down in the meantime, don't care. That's past price movement. Irrelevant. Nor do those who were short and have seen price go significantly in their favour. That wouldn't affect their decisions at all.

The options trader who has a large position and wants to hedge himself, doesn't care that price has moved dramatically and so has his delta. That's all past price, he's not going to adjust his position in the underlying is he, because of some past price movement.

When big news breaks and price of a currency has shot up 100 pips in 5 minutes, and looks to be going even higher...well again, that's the last 5 minute bar, or several 1 minute bars, and that's not going to affect what anyone does. There is no way anyone looking at that could think it is more likely to go up than down.

This is not in any way a case for using TA blindly and looking at the markets purely through a one-dimensional chart.

Of course stops are hunted. The problem is how do you know that this push for the top is a stop hunt, if the market is likely to reverse or if the market is pulling back to entice people to enter before running the stops again?

TA will never tell you this.

All markets need a reason to move. By using TA, you are looking at the effect and not the cause. This is why it falls over & those that look at the cause are taking your money off you.

 

[DionysusToast]

My starting point was to consider "what always appears to be true about markets?" and try to enumerate those things, then consider if there was some way I could use any of them.

What is true is that people is that the markets are not fair and people don't play fair. It's not cricket and there's no shaking hands (or swapping t-shirts) at the end of a game.

The only money that comes out of the markets is money that went into it. If you put in $100 and take out $200, it means that some other person (or persons) had to lose that $100. This is a simplification but it is true.

For people with big money to make more big money from the markets, they need people on the other side of their trades. They need lots of people putting in their $100 so that they can take it from them. With your little money, it is impossible for you to put people on the opposite side of your own trades.

The people with big money know all about TA. It would be naive to think they don't use that against Mr Retail.

 

[Shakone]

This is not in any way a case for using TA blindly and looking at the markets purely through a one-dimensional chart.

You shouldn't use anything blindly. This is serious. It is your money. By the way, my chart is two-dimensional

Of course stops are hunted. The problem is how do you know that this push for the top is a stop hunt, if the market is likely to reverse or if the market is pulling back to entice people to enter before running the stops again?

TA will never tell you this.

You don't actually NEED to know what it will do there in order to make money. You never know what it will do with certainty anyway. Even you wouldn't claim that, would you? So you have an idea about what it will do, you enter before it hits those stops. If it continues on, then you stay in for a large profit, if it is reversing sharply you get out for a small profit. You go along with what the price is actually doing.

The people with big money know all about TA. It would be naive to think they don't use that against Mr Retail.

Exactly. And this is yet another reason why it is useful.

Let's say you have a Forex swing trader using TA. Put him into day trading the ES or a stock and tell him to use the same TA and see how he fares.

Maybe because swing and day trading are not the same. Otherwise I wouldn't agree. I use the same method on GBPUSD, Dow, Crude. It works best on the Dow, but does still work on the others too.

 

[arabianights]

The people with big money know all about TA. It would be naive to think they don't use that against Mr Retail.

I'm always rather skeptical about this claim of nefarious construction of TA patterns to attempt to steal money ... in any case if it's being used against someone it isn't retail traders, but naive fund manager types, in my view...

This is different to squeezing, which of course goes on, but then I view markets as just a series of squeezes anyway...

 

[Prawnsandwich]

Shakone, by your definition of TA, I cant see how it cant be used in trading one way or another. So I can see why this causes so much debate.

To me observing past price all the way to the current action is reading orderflow. I said earlier that there is far more to orderflow that DOM and level 2.

I have absolutely no issues with people saying they trade using TA, because by your definition I do too

Where I tend to close off from TA is when looking at recent highs/lows etc. Yes TA will make you aware of them, but it cant tell you if that level is relevant. So there for, apart from telling us where price has been (the obvious) what relevance does it actually have.

There is so much more that needs to be considered to know with high probability where price will go next.

Remember a change in trend happens before it ever shows on a chart. Its only when TA says the trend has changed that Joe Public notice it!

Its a dangerous game trying outsmart the market by picking the exact point of a change in trend....when talking about high probabilities, these are increased by trading confirmed trends...by consistently being able to take chunks out of them, rather than picking tops or bottoms.....I think this is where a lot of newbies fail...

 

[megamuel]

First off Megamuel sorry to hear about your difficulties with the markets...obviously there are many in the same boat, and it takes many a lot longer than 2 years to get consistently profitable..

I think that your approach of stopping what you are doing till you sort things out is a good move, rather than to continue to lose money....though perhaps you could consider trading on a demo or with a very small account instead of just staying out of the market altogether as it takes much practice as we all know...

By the way its just not true that the professionals don't use charts or TA....

Having said that, I'm not sure that DT has provided specific examples of how he trades using Order Flow / DOM, but rather has expounded generally on some of the messing about that goes on amongst the participants...

Now, I could go on at length here about various general TA trading strategies - range break-outs, range reversals, trend following etc etc, in the same way that DT has discussed Tape /L2, but that would be to miss the point, and there are obviously a huge amount of approaches....and there are some good threads on this forum

As I have said on a few occasions already I am not prepared to set out how I trade or what my "edge" is, for the reasons I noted. I did give some examples of TA methods.

I'm afraid I cant just provide you with a profitable trading strategy, just like that.....and none of us know whether DT is profitable with his order flow trading....

In terms of the discussion, again I have to come back to the main argument - DTs assertion that all of TA / charting is useless and doesn't work...which is just nonsense

Best of luck with your trading..

Thanks for the reply PS,

I understand it can take a long time to become proficient in trading so I'll persist for now! Actually, the 2 attempts I made at trading I came out break even and with a small profit so technical I didn't lose anything but I knew I had to learn some more before being able to make proper money! At the moment I'm just testing out some methods on MT4, making my analysis and marking down entries and exits and trying to find ways to improve. Not risking any money right now though!

I realise you can't just give me a profitable trading strategy, I wasn't expecting that. I was just after some concepts that you think work. You answered it when you said "range break-outs, range reversals, trend following etc" but do these actually work? Sure trend following looks good in hindsight but in real time, by the time a trend is confirmed, you jump on, it can just as easily reverse. Break outs... How many times does it break out then break back in again?! I'm not saying that TA doesn't work. I just haven't been able to work it....yet! Also, are there any professional traders reading this that trade with TA? At least that would solve one argument!

HI Sam,

I Love your honesty, can you imagine how simple and a delight T2W would be if everyone here was so honest.
Vendors would open threads with "I can not make any money trading so I will sell you my methods instead." Most Veteran members would open with "I can not trade so I am hanging around here, I've been here so long people think I know what I am doing, I love the kudos."

Had a look at your journal link.

I honestly believe that trading is not about "Mastering the Trade" (incidentally I thought it was a completely sh*t book.) but I think its about mastering your mind. (and then having a big enough account to do what you know you can do. - To have a large enough account to trade only a tiny % of it is SO important. Trading any ware near 10%, If you have 10 bad trades out of 16, you have all but blown your account.)

I don’t think it is about a system that works, there is no Holy Grail, I think it is about a system that works for you.

Have you looked at swing or position trading it may suit you better. More time to plan and do the right thing.

Smart Live Markets offer 10p a pip SB, with no time limit and MT4. This would allow you to trade with real money at PROPER position sizing and would release you from the fear that imposes a stop loss that is to tight. If you wanted to try longer time frames, a day stop loss would only cost you £8 on some currency pairs.
Then you can increase your size when ready.

You are young, do not live for trading. Get on with your life, job plans and women plans. Trade part time as a hobby, if you develop as a trader, then you can move yourself forward naturally without forcing it.

Good Luck

Jason

Hi Jason, again, thanks for the reply.

Yes, I'd say I am quite honest. This is evident by how unpopular I am at work! A lot of people do not like to hear the truth! I guess T2W is a very profitable place for dishonest vendors prying on peoples desperation, laziness and lack of intelligence. If I wasn't so honest myself I'm sure I'd be much more profitable selling systems that don't work than actually trading so I can see the appeal!

Interesting point about "Mastering your mind", could you expand a little? I've heard similar phrases mentioned before regarding mind and psychology but I'm unsure as to how it really applies. I mean, surely all that's needed is some setups that work and discipline? And I am sure if I had some setups that 'worked' I would follow them with the strictest discipline imaginable! As for trading capital. I'm actually saving up some money while I'm not trading and placing it in more long term investments - shares and metals. I'm up to about £7k at the moment. I'd like to be ready to start trading by the time I reach £10k but I'm more doubtful of that as time goes on. One question I'd like to ask though is, how is having more capital beneficial to trading? Other that being able to trade smaller % per trade, are there any other benefits?

Yes swing trading is ideally what I'd like to do. I tried briefly day trading company results, had a little pop at Mr.Charts strategy and a few others, quickly realised day trading wasn't really for me especially with such small capital and been since looking at swing trading. Is this what you do? Do you use TA? Most recently I've been looking at trendline breaks. I've got a little setup and I'm improving it all the time. Hoping to demo it soon and see how I get on. Its quite simple though so I doubt it'll work. I know a lot of people say its best to keep it simple, I have no choice as I am quite a simple person... There are so many intelligent people out there in this game, surely they can take advantage of my.... simple...ness!

Yes I'm young but I'm getting quite desperate now. I hate my job.... but I can't do a job interview for a new one because of my panic attacks. I could start up my own business but for that I'd need to drive - can't pass my test because of my panic attacks. I feel so trapped and trading is the only way I see to get out at the moment. I really don't know what I'll do if I can't make it trading.

Thanks for taking the time to reply.

Sam.

 

[Mr. Charts]

Hi Sam,
I'm sorry to read your last post. Maybe you should get some professional help for the panic attacks as they are clearly affecting your life.
To be frank, perhaps you shouldn't trade at all in case you get a panic attack in the middle of a trade.
I wish you the very best for the future,
Richard

 

[megamuel]

Hi Richard,

Thanks for your reply. This has been mentioned before that my panic attacks might affect my trading but in all honesty I know it won't. My anxiety is purely social and not general so when I'm at home alone in front of my computer I'd never get a panic attack. I'm pretty certain I wouldn't panic more than the average person if I had a losing trade for example. The problem is with situations like tests, interviews, assessments, presentations etc. where I am being judged or certain situations like travelling when I know I can just hide if I wanted to (flying for example). Actually I've been to the doctors and I have been prescribed some beta blockers to try for these certain situations. It should help my blocking my adrenalin and stopping the physical symptoms of my panic attacks which is the main problem, and its good because I don't have to use them all the time like most anti-anziety or depression drugs. These are normally a heart medication. Hopefully they'll work and I can start moving on with my life Thanks for your concern though Richie!

Sam

 

[Mr. Charts]

Hi Sam,
Beta-blockers tend to be the easy answer from GPs and I doubt they will solve the problem long term. Perhaps you should see a specialist.
If the panic attacks occur purely in a social environment there may be a non-medication based treatment and your GP should direct you appropriately.
Of course, if your avatar is a photo of you, then there's no hope
Richard

 

[Jason101]

Hi Jason, again, thanks for the reply.

I guess T2W is a very profitable place for dishonest vendors prying on peoples desperation, laziness and lack of intelligence.

True

Interesting point about "Mastering your mind", could you expand a little? I've heard similar phrases mentioned before regarding mind and psychology but I'm unsure as to how it really applies. I mean, surely all that's needed is some setups that work and discipline?

Play on words regarding your disappointment in a highly regarded book, which I thought was a cr*p book. But to expand I think the mind aspect is about being in tune with your trading, in feel, expectations, rythm of market movement, rythm of the amount of losses per win, the time until your next win, the amount of discretion you give yourself, your beliefs in what works, these are all personal to you, this list can go on and on. Rather than try to fit your mind to apply to systems, I think it is better to apply systems to fit your mind. When I became happy with these mind aspects, I became peaceful and relaxed and stopped searching, other than to refine my methods. Some people will take the p*ss when I say this but I feel as though I found the trader within me. What helped me was to write down everything I believed in on index cards, a different coloured card for different aspects such as green for money/trade management, pink for indicators etc , a title, my beliefs and research. I then fitted these cards together like a jigsaw puzzle, to build a personal system. I am sure it is not a unique trading system, bits borrowed here and there, but it just fits me like a glove.

And I am sure if I had some setups that 'worked' I would follow them with the strictest discipline imaginable!

Hats off to you on your discipline, that has to put you way above most.

I'd like to be ready to start trading by the time I reach £10k but I'm more doubtful of that as time goes on.

Tread easy, that is a lot of money made from pulling pints.

One question I'd like to ask though is, how is having more capital beneficial to trading? Other that being able to trade smaller % per trade, are there any other benefits?

Thats all I meant properly capitalised, you are more likely to keep to 2%, (if your plan requires that).

Swing trading Is this what you do? Do you use TA? Most recently I've been looking at trendline breaks.

I use swing trade entries to build into positions, using traditional TA. I am not really into hardcore indicators but more into drawing on my charts. BTW I am just so selective in my criteria, you would not believe it.

I've got a little setup and I'm improving it all the time.

I think that is what it is about, finding a setup you like and improving and improving it.

Its quite simple though so I doubt it'll work. I know a lot of people say its best to keep it simple,

Mine is simple too, but it does become more fine tuned with time.

Yes I'm young but I'm getting quite desperate now. I hate my job....

What helped me in a job I hated was to arrive early, leave late, do extra work above and beyond what was expected, this was a deliberate strategy to trick my mindset into believing I wanted to be there and I wanted to do the job, it took a while, but it did work for me.


I will PM you about the panic attacks I used to have in my 20's.

Jason

 

[DionysusToast]

I'm always rather skeptical about this claim of nefarious construction of TA patterns to attempt to steal money ... in any case if it's being used against someone it isn't retail traders, but naive fund manager types, in my view...

This is different to squeezing, which of course goes on, but then I view markets as just a series of squeezes anyway...

I don't think there's anything nefarious about it, plus you don't need to create the TA patterns to pull people's pants down.

The index futures are quite well known for being faders markets and so there's always sellers of highs. You will regularly see the market reverse at the high and a lot of lot traders come in and sell it. Typically this will form a red 5 min bar at the high, often with a topping tail. More TA traders jump in when the bottom of that 5 min is breached. At this point you have a bunch of traders with stops above the high and this will be thousands of contracts worth. Those stops are often only 6 or so ticks away.

So - you have
- people selling the high
- people selling the breach of the candle that made the high

These are the people you buy from when you get in

Then you have
- breakout traders with buy orders above the high
- sellers with stop orders to buy above the high

These are people you sell to when you get out

In terms of trade sizes - you can see 1 lot to 100 lot traders doing the selling here, so it's not all retail. Often it is just 1 lot traders though.

You don't need to create the pattern, that'll happen on it's own. What you can do is run through the high as people got themselves trapped.

I am not sure anyone can control the markets for hours - but 10-20 minutes is possible and this is all it takes from what I have observed.

 

[DionysusToast]

You shouldn't use anything blindly. This is serious. It is your money. By the way, my chart is two-dimensional

I was talking philosophically

You don't actually NEED to know what it will do there in order to make money. You never know what it will do with certainty anyway. Even you wouldn't claim that, would you?

At certain times, it is very clear the game that is being played andwhat the likely outcome is. The difference between just using a chart and using order flow is you can actually see what is happening with the tape. You can see small fish and big fish committing money to the markets. Small fish tend to get eaten.

So you have an idea about what it will do, you enter before it hits those stops. If it continues on, then you stay in for a large profit, if it is reversing sharply you get out for a small profit. You go along with what the price is actually doing.

Exactly. And this is yet another reason why it is useful.


Maybe because swing and day trading are not the same. Otherwise I wouldn't agree. I use the same method on GBPUSD, Dow, Crude. It works best on the Dow, but does still work on the others too.

Agreed - in both types of trading, you have different things that will cause people to enter trades. Fundamentals are much more significanct in swing trading.

With TA, you look at the effect of these people trading the market and get in hoping you aren't the last to notice it. If you trade based on the cause of people entering, you will be in with the smart money.

 

[spy74]

I don't think there's anything nefarious about it, plus you don't need to create the TA patterns to pull people's pants down.

The index futures are quite well known for being faders markets and so there's always sellers of highs. You will regularly see the market reverse at the high and a lot of lot traders come in and sell it. Typically this will form a red 5 min bar at the high, often with a topping tail. More TA traders jump in when the bottom of that 5 min is breached. At this point you have a bunch of traders with stops above the high and this will be thousands of contracts worth. Those stops are often only 6 or so ticks away.

So - you have
- people selling the high
- people selling the breach of the candle that made the high

These are the people you buy from when you get in

Then you have
- breakout traders with buy orders above the high
- sellers with stop orders to buy above the high

These are people you sell to when you get out

In terms of trade sizes - you can see 1 lot to 100 lot traders doing the selling here, so it's not all retail. Often it is just 1 lot traders though.

You don't need to create the pattern, that'll happen on it's own. What you can do is run through the high as people got themselves trapped.

I am not sure anyone can control the markets for hours - but 10-20 minutes is possible and this is all it takes from what I have observed.

you give the impression of "mindless TA" guys who all exhibit systematic/predictable market behavior capable of manipulation, when in the example you've given above, the guys "stealing money from them" by trading the other way, are exhibiting the same systematic/predictable behavior which is just as easily manipulated by a predator looking to control the market with size.

I think what you are really saying is that newer traders will often look for a quick n easy rule/indicator/method to apply to make consistent $$ in the market as quickly as they possibly can, which can easily be deduced by more experienced traders and taken advantage of.

As has been said before on this very thread, there is far more to trading TA than the mindless application of chart patterns and candles in isolation.

 

[DionysusToast]

you give the impression of "mindless TA" guys who all exhibit systematic/predictable market behavior capable of manipulation, when in the example you've given above, the guys "stealing money from them" by trading the other way, are exhibiting the same systematic/predictable behavior which is just as easily manipulated by a predator looking to control the market with size.

I think what you are really saying is that newer traders will often look for a quick n easy rule/indicator/method to apply to make consistent $$ in the market as quickly as they possibly can, which can easily be deduced by more experienced traders and taken advantage of.

As has been said before on this very thread, there is far more to trading TA than the mindless application of chart patterns and candles in isolation.

This has been said a number of times, yet no-one has come forward and offered any meat to this argument. There is plenty of "it just works" on here, though.

The concept of TA is a bit like driving with your eye on the rear view mirror.

 

[DionysusToast]

Now - I find the following a tad unfair...

First off Megamuel sorry to hear about your difficulties with the markets...

I'm afraid I cant just provide you with a profitable trading strategy, just like that.....and none of us know whether DT is profitable with his order flow trading....
..

PS - why not send megamuel an email with that simple chart showing him how to daytrade ?

By the way I'd post you a simple chart showing you how to daytrade, but I'd prefer to leave you wallow in your own self-agrandised ignorance....

OK - but why not send to Meganuel ? He seems like a nice chap.

TBH I couldn't be arsed showing you how to day trade using a very simple effective candelstick / bar pattern....and I'm not talking about any complex pattern from Nisson....

I mean, if it's so simple...

No, as I said after wading though your constant anti-charting / TA rantings I have no inclination to show you how to daytrade, and its clear from your previous threads that its not something you can really do.....

It really does sound like the guy needs help...

I'm afraid I cant

Aaaaahhhh :whistling

Don't tell me - that really simple chart you could post contains a super-secret 'edge' which, if discovered would be adopted by so many people that your top secret edge would disappear.

Right..

 

[DionysusToast]

OK - sarcasm aside. Let us now forget DOM & T&S and remember what it represents.

It represents using the cause of a move, whereas TA is based on the effects of the cause only.

Let's say a stock had moved down to it's 200 Daily MA at $20 from it's prior resistance at $30. It bounced off the 200 Daily MA to the upside with a large range bar WITH VOLUME, it moved up to $23, a reasonable 15% move on the day.

There's a lot of TA traders would consider this a bullish move, say that 'everything is in the price' and go ahead and take a position. This is trading based on the effect.

Now - let's consider that the cause of this move to $23 was that a competitor had announced it's intention to buy the company at $23 a share.

Knowing the cause, you would rightly surmise that one of the following is possible.

1 - The takeover goes ahead, shareholders get $23 per share(plus any additional sweeteners that TA traders have no clue about at all and could take a whole new thread).
2 - The takeover is thwarted and price drops back to where it was
3 - The buyer of the company ups their bid and you actually make a profit on the trade.

Knowing the cause for a move like this would have you passing on a trade that would most likely tie up your trading capital for zero reward.

From this point forwards, I'll not mention DOM/T&S again because it really was just there to illustrate a point.

The point being that you the cause of a move is more important than blindly jumping on the move itself.

In return, why don't the TA proponents agree to actually post some arguments FOR TA other than "it just works", "there's lots of TA books", "lots of people on internet forums say they are profitable with it"

As a guideline consider starting off with why TA should work. My premise is that the concept is flawed, so not matter how much of it there is, it's all based on a flawed concept - which says that analysis of past price movements will cause traders to react in a certain way.

Of course, all of these other traders haven't read the TA books and so don't know you are using TA to get one up on them. You will therefore take a 'bite' out of the trend but there will always be a 'bag holder' there for when you exit.

 

[megamuel]

Hi Sam,
Beta-blockers tend to be the easy answer from GPs and I doubt they will solve the problem long term. Perhaps you should see a specialist.
If the panic attacks occur purely in a social environment there may be a non-medication based treatment and your GP should direct you appropriately.
Of course, if your avatar is a photo of you, then there's no hope
Richard

Actually I went to the doctors specifically to ask if I could try beta-blockers so it wasn't like it was a cop out on his behalf. He actually spent time explaining to me other options but in the end we both agreed that beta-blockers would be best. The reason being that I don't really suffer with anxiety in every day life, its just for specific occasions and its not the actually worrying that bothers me, its the physical symptoms that mess me up - feeling sick, faint, sweating, shaking etc. The beta-blockers should stop some of the adrenalin flow and ease these symptoms. Its something I won't have to take all the time, only when needed, and hopefully the more positive experiences I have in such situations, the easier they will become in the future. Of course I'd rather not have to take anything but I've had counselling before and it didn't work for me. It actually made me worse for reasons I can't be bothered explaining right now! But there is no amount of positive thinking that will stop physical symptoms! Sometimes I don't even worry that much but I still get this horrible sick feeling. Anyway, we'll see. Anything is worth a try right now!

Sam.