If You Can Draw A Straight Line (You Can Become A Successful Trader)

Status
Not open for further replies.

dbphoenix

Legendary member
6,926 1,225
Given the newfound popularity of "trading price", and as slogging through my old threads is a punishment I wouldn't inflict on my worst enemy (well, yes, maybe him:)), I offer the following as a result of my never-ending efforts to make all this as simple as possible.

Straight Line Approach, The​

Keep Your Hands And Feet Inside The Stochastic
Until Your Oscillator Comes To A Complete Stop


Charts are among the most mysterious aspects of the financial markets that the beginning trader will face. For many people, charts look like a child's experimentations with a Spirograph. But charts are really nothing more than stories, using symbols rather than words, like algebra uses symbols instead of numerals (yes, I know that words and numerals are technically symbols, but you know what I mean). They are a bit like the storyboards used in producing movies and cartoons, except we use dots and lines rather than drawings or photographs. Understanding the stories these charts are trying to tell can make you money. Or, at the very least, save you what could become a great deal of money.

Many technicians and technical analysts sabotage their own case by making the subject of charts and charting so elaborately complex as to be ludicrous. More than a few beginners have visions of wizened old crones with palsied hands, stroking – in a vaguely obscene way – ancient leather pouches filled with dessicated chicken bones which they scatter onto pitted and scarred tables while muttering invocations to Chaikin, Bostian, Donchian.

These technicians then explain the results of their analyses much as Lewis Carroll might, by pointing out how brillig the pattern is, and how the slithy toves are gimbleing in the wabe, while over here (they point), the borogroves are mimsy, which indicates a possible outgrabe by the mome raths, unless of course the Bandersnatch whiffles, in which case . . .

It's just not that hard.

A chart is a visual representation of transactions. The results of these transactions are depicted by either a line which will look like a map of the Pacific Coast Highway, or by a bar which represents the opening price (the little notch on the left side of the bar), the low for the day (the bottom of the bar), the high for the day (the top of the bar) and the closing price (the little notch on the right of the bar). At the bottom of the graph you'll usually also find volume bars which will tell you how many transactions were completed that day.

But beyond all this, a chart is a visual representation of buying and selling behavior on the part of investors, not just a tally, and this behavior creates patterns, like ranges, or "boxes". Thus if you approach this from the viewpoint of psychology and sociology rather than cut-and-dried mathematical models, you'll have a leg up. These patterns do not exist in nature. They are created by the buying and selling dynamic.

(for the rest, see the pdf attached below)
 

Attachments

Last edited by a moderator:

malaguti

Senior member
2,278 428
made me want to draw trend lines all over again and I gave them up years ago
great piece, cheers DB
 

tar

Legendary member
10,441 1,309
If you can differentiate between green and red you can become a successful trader .
 

counter_violent

Legendary member
9,348 2,358
Oh goody....this document demands serious study, from newbies all the way up to seasoned campaigners.

Welcome back DB....( assuming you are back ! )
 

dbphoenix

Legendary member
6,926 1,225
I should say that a chart helps those who can read it or rather who can assimilate what they read. The average chart reader, however, is apt to become obsessed with the notion that the dips and peaks and primary and secondary movements are all there is to stock speculation. If he pushes his confidence to its logical limit he is bound to go broke.

There is an extremely able man, a former partner of a well-known Stock Exchange house, who is really a trained mathematician. He is a graduate of a famous technical school. He devised charts based upon a very careful and minute study of the behaviour of prices in many markets -- stocks, bonds, grain, cotton, money, and so on. He went back years and years and traced the correlations and seasonal movements -- oh, everything. He used his charts in his stock trading for years.

What he really did was to take advantage of some highly intelligent averaging. They tell me he won regularly -- until the World War knocked all precedents into a cocked hat. I heard that he and his large following lost millions before they desisted. But not even a world war can keep the stock market from being a bull market when conditions are bullish, or a bear market when conditions are bearish.

And all a man needs to know to make money is to appraise conditions.

--Jesse Livermore
 

dbphoenix

Legendary member
6,926 1,225
Oh goody....this document demands serious study, from newbies all the way up to seasoned campaigners.

Welcome back DB....( assuming you are back ! )
Thanks for the compliment. At least it took serious writing. If one is to get the most out of it, then, yes, it does demand serious study. Whether it gets it or not is another matter.

There've been times when I've thought I've wasted the last fifteen years, but then if I hadn't done what I did, I wouldn't have come to the realization that reading Wyckoff was not enough for those who were new to it. Not nearly enough. Much less studying it, which few people were willing to do. Nor was my insistence on journals productive. Why? Because I never addressed the fear. I never realized -- until a couple of years ago -- just how bad it was. And over the past fifteen years, it's gotten much worse. One can go on about trading plans until he turns blue, but if the trader is paralyzed by fear when the time comes to hit the Transmit button, the trading plan is useless. And I'm sure that the average trader has come to understand this, which is why so many of them have abandoned the whole trading plan notion, if they ever put one together in the first place.

So I came up with the SLA. Training wheels for the beginner, the way back for the damaged trader. It's specifically designed to build confidence, to generate success. Not that it always has the desired effect. There's still the fear. And if the fear is immobilizing, then I know nothing this side of therapy which will improve the situation, and I don't have the time to go there. The trade who needs it is really better off just quitting.

However, even some damaged traders are beginning to work their way back, and good for them. I hope they stick to it, though it's really up to them, depending on how much they want it.

Hope you enjoy it.

Db
 
Last edited:

barjon

Legendary member
10,209 1,523
Good to see you db.

Aye, sticking to your trading plan is dead easy on paper, harder when you've got a bit of cash on the line and often extremely difficult when you've got more cash on the line than is comfortable.
 

dbphoenix

Legendary member
6,926 1,225
Good to see you db.

Aye, sticking to your trading plan is dead easy on paper, harder when you've got a bit of cash on the line and often extremely difficult when you've got more cash on the line than is comfortable.
Here's something to chew on:
 

Attachments

  • Like
Reactions: darktone

timsk

Legendary member
6,890 1,785
Hi dbp,
In your previous incarnation on T2W, I wondered if the phoenix part of your username had any significance. In line with classical mythology, clearly it does!

Welcome back.
Tim.
 

dbphoenix

Legendary member
6,926 1,225
Hi dbp,
In your previous incarnation on T2W, I wondered if the phoenix part of your username had any significance. In line with classical mythology, clearly it does!

Welcome back.
Tim.
Actually, Whack-A-Mole would be more accurate . . .
 

Pat Riley

Established member
794 178
Keep Your Hands And Feet Inside The Stochastic
Until Your Oscillator Comes To A Complete Stop
That made me laugh. I'd only had a conversation earlier today with a colleague about technical analysis and he'd said there was a bit of mileage in the old stochastic. It's all smoke & mirrors ta me, but when she showed me the entry and exits for directional traders I almost thought it looked like a good deal.

Nothing is ever perfect all the time, especially with summer trading volumes, but I suspect Mr. B has the germ of a good idea if yer willing to put in the effort.

Good man. How's that dry desert air?
 

dbphoenix

Legendary member
6,926 1,225
That made me laugh. I'd only had a conversation earlier today with a colleague about technical analysis and he'd said there was a bit of mileage in the old stochastic. It's all smoke & mirrors ta me, but when she showed me the entry and exits for directional traders I almost thought it looked like a good deal.

Nothing is ever perfect all the time, especially with summer trading volumes, but I suspect Mr. B has the germ of a good idea if yer willing to put in the effort.

Good man. How's that dry desert air?
Mr. B?
 
Status
Not open for further replies.