Chart Patterns - tosh?

[pttrader]

3.....Your example, simply demonstrates that you indeed know little of the "whys", under SEC regulations, an insider selling stock must provide advance dates of his selling and provide reasons for the sale. This information is public.

Oops you miscalulated by making such a judgement. Of course, anyone can find out this type of insider information. Your mistake is in thinking I don't know this. But just so you know where I am coming from I DO NOT need this info to successfully trade stocks so why clutter up the trading with it? Maybe you do so to each his own.

Besides this was just an example showing that I do not know nor need to know the motives or intents of sellers. Whether that info is available or not begs the question. I just simply don't need it. But here is another example: How would you would find this out? The same Mr president has stock in another company. He doesn't own the company. He decides to sell 100,000 shares of it to buy a house for his daughter. How you going to find out his motives on that? See what I mean? You can't find out all the "why's" of price movment. Nor is it necessary to find out why. Will get back with your other points later if need be.

Pttrader

 

[SOCRATES]

Aaaaah ! Now I see why it is you say charts are subjective.

If, in Directors's Dealings it is revealed that a Director has sold a huge block of shares, who is to know the reason?

It may be due to his view of the enterprise as an insider , or because he wants to buy another house, or a helicopter, or because he is looking to quietly sever ties, or for any other reason.

I agree with you that a chart cannot possibly reveal this. You would have to research elsewhere to dig up this kind of information.

The amount of research you may have to do may not warrant the exposure you intend. However, sometimes this kind of research can be valuable in revealing at an early stage forthcoming changes of fortune in the life of the enterprise, ahead of the market.

There have been many cases in the past in which this kind of "bell weather" indication has been of inestimable value to investors, both existing and prospective.

 

[pttrader]

Tosh.......and the reason is, that for the numbers to reveal FACTS, they must have a context. The context that you are examining them under is the context of the MARKET, which we are both agreed upon can and is manipulated. Therefore by definition these numbers have no validity on which to base your conclusions.

Based upon such reasoning then NOTHING works in the market because the market is manipulated. So manipulation makes forecasting impossible? Hogwash! Air currents manipulate the weather. Does that make forecasting impossible? No, all you have to do is do your best to factor in the manipulation. It can be seen in tape reading and in price action apparently something you do not do too often. But enough. Keep your noggin buried in the sand. Keep on with your so called "safe" trading methods. Even though it is hard to understand how any method (even yours) can be safe because according to you since the market is a context that is manipulated it renders all forecasting invalid.

Finally, it is sad that you resorted to cursing on your post.

You probally won't get any more comments from me.

pttrader

 

[JumpOff]

Indeed.
Some cannot see. Some choose not to see. Some see but cannot accept. Some think themselves too clever to see. Some will never see, for they see only themselves.
Those who see, are those who care and respect and have sense and sensitivity.
They possess "The Right Stuff" and will fly.
Richard

It helps too if you believe the wings on your back are designed for something other than a sunscreen....
*snort*
JO

 

[Naz]

pttrader,

Level2 has a use, and that is for scalping. If you are going to scalp, then Level2 will be of great use. Further than that it will on occasion catch you a big move, but generally you are out with small moves. I have seen any # of posts here,......out now with $0.17 profit etc.

Cheers d998

Without any offence,many of my posts are out for $1,2,3,4. How did i take them with level 2.
Of course scalpers use level 2 direct access,what would you have them do phone their broker?They need good info and a quick fill.
The type of trading one does is down to the individual not the platform they're using.

Nasdaq level 2 is a tool that allows many to trade fast moves,see reversal points ,spot false breakouts and read support and resistance better than any chartist.It should be applauded as an excellent addition to a traders arsenal.

On 28/1 Google rushed out of the gate $4.Level 2 traders like myself were watching the move start pre market and able to jump in before the crowd,trading with the markets money immediately.When it posted it's results post market recently the same thing occured.The speed of these moves gave the level 2 direct access trader an edge over everyone.

Lets remember a $1 move in a stock can be a day's money for a day trader.I can make that in 1-5 mins with Google at times.If anyone out there can let me know a better way of taking and managing my position,please let me see it in action and if its better i'll gladly change.

My screens are for ever open for others to see and over time i've had everyone from CNBC reporters,assistant news paper editors,BBC film crews,Fund managers,Broker CEO's,multi millionares,spread betters,cfd traders,beginners,software guru's,event organisers,Forex traders,chartists,black box traders,traders from many parts of the world.etc,etc........and no one has shown me a better a better trading platform.

 

[TheBramble]

These are not applicable to the huge obstacle course that awaits them.

The obstacle course has a perfected methodology contained within it to ensure that those not fit cannot and will not complete all the tests that await them.

The 'obstacle course' does not exist in reality Socrates. Anymore than do the 'tests' They are constructs of your mind.

As constructs they may well have served you well and been extremely useful - but they are constructs none the less.

Others may find your constructs quite alien and have far better ones - for them. There is no single solution or truth about the market. To talk of axiomatic or fundamental truths is a delusion. We can make 'judgements' about the interplay and inter-relationship of Time, Price & Volume - but they are NOT axiomatic.

We're a little off topic - as many of the post are on this thread - but as an offering to the original intent of Rossored's question - a 'construct' is also what TA is.

We apply 'meaning' to numbers (which are also nothing more than useful constructs), connect the numbers with lines and levels and histograms.

From these, we choose to extrapolate on probabilities.

And some of us trade them - quite successfully too.

So, no (once again) TA is not tosh. But there is a lot of it about I agree.

 

[trendie]

Chart patterns - tosh ? No.

As long as you dont expect the patterns to be correct ALL of the time. They need to be right only SOME of the time.
But they provide a context to a trade.
They allow you to define an entry, and possibly even a profit target.
Key to this, an exit point, should the pattern fail.
( this is analogous (sp) to the guy who uses a coin-flip, or pendulum to trade. )

Patterns provide a "structure" of defining being right if the pattern succeeds, and defining being wrong should the pattern fail. ( and exiting )
This would be true even if you used Gann, Fibs, MACD.

These are all ways of defining "do I have a reason to enter a trade", and "the reason is no longer valid, then exit ( or take profit ) ". Experientially, they may give us the edge we all seek.

How often do you get soaked if it starts raining and you have no umbrella ?
If you randomly took an umbrella with you, you may or may not get soaked.
If you used a barometer to decide when to take an umbrella, you may still get soaked, but on balance, you will take the umbrella on days that are probably more likely to rain than others !!!

Its all about the edge, over a large number of events.

 

[barjon]

ok what about a little experiment for anyone who likes playing with numbers and can devise a program (FC are you listening ).

Generate 200 random numbers between (say) +15 and -10. Start of with a "share" priced at 500 then apply the first random number to give the new closing price, then apply the second random number to give you the next closing price and so on. When you've finished draw the chart.

The imbalance in the random number +- range should result in an apparent "uptrend" and I wonder how many recognisable chart patterns and/or apparent s/r and trend lines the chart would contain.

It would only be a line chart of course, but could always do the same for open high low as well (let's say our share opened at 495 low 490 high 502 close 500) and we'd have a full candlestick chart. Any bets on how many candlestick signals (hammers, shooting stars, dojis etc etc) the resultant chart might contain

good trading

jon

 

[Naz]

The great thing is so many people use t/a that you can anticipate people entering at certain points and base your trading startegies accordingly. Beat them into the trade and exit into their fear or greed.Long may many continue to use it.

 

[TheBramble]

After a range bound channel of approx 80 periods with 600 serving as support (obviously - it's a 00!) we have a breakout to the upside - as predicted. Barjon - great system

And point proven?

As an example it's a non-starter for a couple of reasons. (1) No volume. (2) No OHLC.

But if it were to be traded, I imagine many BO artists would have done well and support was clearly in 'evidence'.

To relate to a point pttrader made above - you don't have to or need to know the reason why - just trade the action.

So yes, I think point proven. This could have been traded.

And before anybody asks, No, I'm not going to do a LII exercise.


edit: added the xls for you to play with.

 

[trendie]

interesting idea, barjon, although this has been covered in various guises on the coin-flip threads.
the problem is, are the markets random ?

the price behaviour is a functional of the emotions of a multitude of investors in different time-frames.
surely, support/resistance is a interface of traders in different time-frames. ( does s/r occour more often at round numbers ? If so, this a human artifact )

some long-term traders are awakened when prices hit 50 SMA or 200 SMA.
many short-term traders act on intra-day pivot-levels.
some traders trade on retracements.
( I think the reason why 62%, 50% and 31% are so common is because the Gann 5/8 (62.5%) and Fib 61.8% are so close, as are Gann 3/8 (37.5%) and Fib 38.2%, and also 50% )
a confluence of different ideas meeting at the same numbers = many more traders active for their own particular reasons / beliefs / strategies.

this is why, I think, there is a fractal nature to the markets.
patterns, s/r, retractements can be found on different time-frames, because traders with different time-frames act in their particular time-frame.

how can this be shown randomly ?

 

[Salty Gibbon]

The great thing is so many people use t/a that you can anticipate people entering at certain points and base your trading startegies accordingly. Beat them into the trade and exit into their fear or greed.Long may many continue to use it.

What about using TA but not using the conventional entry points ?

I always attempt to get in prior to the conventional entry point by using various means at my disposal.

Seems to work ok.

 

[TheBramble]

The great thing is so many people use t/a that you can anticipate people entering at certain points and base your trading startegies accordingly. Beat them into the trade and exit into their fear or greed.Long may many continue to use it.

I know your style is quite different Naz.

As an aid to us understanding how your above comments 'work' would you care to elaborate on it in relation to the example I've give above?

 

[barjon]

bramble

good one! In essence I suppose I had built in a surfeit of demand so a rise was inevitable but, because the numbers are random, it's only a co-incidence that there seems to be a break out and therefore an entry point. Knowing the bias, buy and hold would have been the correct strategy. btw you could also do randomly produced volume bars and a high volume confirmation of the breakout would not be impossible

Anyway the main point was about chart patterns. I was not suggesting trendie that the markets were random (that's a different argument). I was suggesting that many chart patterns we rely upon could be seen in a randomly produced set of numbers by pure chance.

jon

 

[Mr. Charts]

Aha, Salty!
By entering a position before the trigger levels used by TA-only people but when indicated by reading the tape, your probability of a successful trade is higher. Not only that, but your profits are greater when the pattern works. If the normal TA pattern that the crowd jump in on actually fails, you can exit usually with a small profit because tape reading skills give you such a major advantage, you can often tell what is going to happen before it does. This is not some magic method, but is a skills set which can be learnt but then which requires considerable experience to master.
It is all about anticipation - a little like reading the road ahead. You can never know the future with 100% certainty, but combined with the correct position management skills, market environment, sector behaviour, patterns, level 2, time and sales, (all of which are individually large subjects in their own right), you are normally in a situation where you actually know everything you "can" know. For the unknowable there are tight stops. When what should happen doesn't, I personally exit - and simply move on to the next opportunity.
Richard

 

[Trader333]

Barjon,

You may be interested in the Montecarlo simulation which would give results based upon a similar idea to what you were discussing. There is an Excel spreadsheet available for this which I will put on here if there is interest in it.



Paul

 

[Salty Gibbon]

By entering a position before the trigger levels used by TA-only people but when indicated by reading the tape, your probability of a successful trade is higher. Not only that, but your profits are greater when the pattern works. If the normal TA pattern that the crowd jump in on actually fails, you can exit usually with a small profit because tape reading skills give you such a major advantage, you can often tell what is going to happen before it does. This is not some magic method, but is a skills set which can be learnt but then which requires considerable experience to master.
It is all about anticipation - a little like reading the road ahead. You can never know the future with 100% certainty, but combined with the correct position management skills, market environment, sector behaviour, patterns, level 2, time and sales, (all of which are individually large subjects in their own right), you are normally in a situation where you actually know everything you "can" know. For the unknowable there are tight stops. When what should happen doesn't, I personally exit - and simply move on to the next opportunity.

Dunno whether I am reading the tape or not Richard - certainly not your version of the tape - but I am reading something and it gets me in before conventional TA would have me get in, and it works most of the time.

I always look for simple ways of doing things because I have always believed that any seemingly complex operation can be reduced to a set of simple procedures. You just have to pick at it for a while, stand it on its head, look at it from a variety of angles and you can usually find the key to unlock the secrets of the complexity - real or imagined.

This applies equally well to stock market trading, working out what your wife is going to do next or building a rocket launcher in your back garden.

 

[Mr. Charts]

Agreed.
Most things appear complex until you break them down into their constituent parts then put them back together - and then, lo and behold, understanding dawns.
Trading is difficult to begin with but then once mastered becomes more routine as with all skills.
Experience makes things easier and easier.
Including figuring what your wife is going to do next.
Richard

 

[barjon]

Barjon,

You may be interested in the Montecarlo simulation which would give results based upon a similar idea to what you were discussing. There is an Excel spreadsheet available for this which I will put on here if there is interest in it.



Paul

Paul

Isn't that something about shifting blocks of sequential data around so they occur in a random order when backtesting. So as to establish your worst case scenario loss?

good trading

jon

 

[pttrader]

Chart patterns - tosh ? No.

As long as you dont expect the patterns to be correct ALL of the time. They need to be right only SOME of the time.
But they provide a context to a trade.
They allow you to define an entry, and possibly even a profit target.
Key to this, an exit point, should the pattern fail.
( this is analogous (sp) to the guy who uses a coin-flip, or pendulum to trade. )

Patterns provide a "structure" of defining being right if the pattern succeeds, and defining being wrong should the pattern fail. ( and exiting )
This would be true even if you used Gann, Fibs, MACD.

These are all ways of defining "do I have a reason to enter a trade", and "the reason is no longer valid, then exit ( or take profit ) ". Experientially, they may give us the edge we all seek.

How often do you get soaked if it starts raining and you have no umbrella ?
If you randomly took an umbrella with you, you may or may not get soaked.
If you used a barometer to decide when to take an umbrella, you may still get soaked, but on balance, you will take the umbrella on days that are probably more likely to rain than others !!!

Its all about the edge, over a large number of events.

Even though I trade very few chart patterns as I prefer to trade the pure numbers in price movement I must say that this post gives a good reason for trading them, and "how" to trade them by protecting your capitol. A chartist would do well to heed these words posted by trendie. Great post trendie!

pttrader