Patterns in Short-term v Long-term

Nowler

Established member
980 81
@Brumby

Any decent video tutorials for EW?
I cannot stomach the clowns I have come across in the last hour... I wouldn't ask them for directions! Never mind to explain a market pattern to me :)


Edit:
I've found a few examples that don't repel me
 
Last edited:

timsk

Legendary member
7,122 1,898
. . .I will need to educate myself on EW in order to understand what you said :)
I am a little lost if i'm honest :) I understand some of it of course but i'll spend the next few hours reading up on EW, then I'll come back and hopefully be able to understand fully. . .
Hi Nowler,
There are increasing numbers of traders who believe that all TA is complete bunkum. As a default position for the novice trader, I think this is a sensible starting point. I, like many others, started from the polar opposite end of the spectrum, assuming that all TA 'works' and that all I had to do was find the branch of it that best suited my personality and trading style. With the benefit of hindsight, this was a mistake.

I'd recommend novice traders start from the viewpoint that all TA is pretty much worthless unless and until their knowledge and market analysis convinces them otherwise. Then and only then is it worth delving into specific facets of TA, be it the various different chart types, Elliot Wave, Cumulative Delta, Market Profile - and so on.

To save yourself masses of time (many months and possibly even years) going from pillar to post - I suggest therefore that before you immerse yourself too much into any one facet of TA that you take a step back and ask yourself these questions:
1. Does TA complement your view and understanding of how the markets function? (It's better to work out now that actually you think TA is worthless than in two, five or more years down the road.)
2. If it does, then what is its function - what will TA do for you? Most novices (and a fair few not so novice traders) - look at TA to provide a simple cookie cutter solution of when to buy and when to sell. If that's what you want / need, you must satisfy yourself that TA can deliver this. Where's the evidence? Prove it for yourself; don't rely on what others tell you on T2W or elsewhere.
3. Lastly, is there a facet of TA that will serve your needs better than any other? If you're 100% certain of the merits of TA and you know what you want it to do for you, then you can start to drill down and work out that P&F charts will suit you best or Elliot Wave - or whatever else takes your fancy.
Tim.
 
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Nowler

Established member
980 81
Hi Nowler,
There are increasing numbers of traders who believe that all TA is complete bunkum. As a default position for the novice trader, I think this is a sensible starting point. I, like many others, started from the polar opposite end of the spectrum, assuming that all TA 'works' and that all I had to do was find the branch of it that best suited my personality and trading style. With the benefit of hindsight, this was a mistake.

I'd recommend novice traders start from the viewpoint that all TA is pretty much worthless unless and until their knowledge and market analysis convinces them otherwise. Then and only then is it worth delving into specific facets of TA, be it the various different chart types, Elliot Wave, Cumulative Delta, Market Profile - and so on.

To save yourself masses of time (many months and possibly even years) going from pillar to post - I suggest therefore that before you immerse yourself too much into any one facet of TA that you take a step back and ask yourself these questions:
1. Does TA complement your view and understanding of how the markets function? (It's better to work out now that actually you think TA is worthless than in two, five or more years down the road.)
2. If it does, then what is its function - what will TA do for you? Most novices (and a fair few not so novice traders) - look at TA to provide a simple cookie cutter solution of when to buy and when to sell. If that's what you want / need, you must satisfy yourself that TA can deliver this. Where's the evidence? Prove it for yourself; don't rely on what others tell you on T2W or elsewhere.
3. Lastly, is there a facet of TA that will serve your needs better than any other? If you're 100% certain of the merits of TA and you know what you want it to do for you, then you can start to drill down and work out that P&F charts will suit you best or Elliot Wave - or whatever else takes your fancy.
Tim.
Sound advice!
I agree with pretty much all of it. Would tweak some but all in all, spot on mate!

I see what you are getting at in regards to TA, but I wouldn't necessarily suggest to novices to treat it as complete codswallop (I love this word). As far as I am concerned, candle chart TA is an indicator. Probably one of the most useful indicators I have found and a great way for me to visualise what the rest of you are doing. I would however be attempting to instill the same critical qualities that you are trying to drum home, just from an alternative angle.

Personally, I find TA to be a phenomenal tool in my belt but too many people are looking for something that isn't there. The holy grail. Though one could certainly argue that there is a holy grail... but instead of looking outward, people should be looking inward :smart:

Any holy grail in trading, as far as I am concerned is an optimal level of qualities; being analytical, critical, creative, be willing and ready to work hard, and to thoroughly enjoy it. Whether they use fundamentals or TA, ultimately it doesn't matter as long as they realise the limitations of what ever lens they wish to look at the market through. If they can find an area where their tool works, then great but one must be aware that while a hammer is great for putting nails in wood, it's not so great at opening a carton of milk. Same goes for tools/indicators used in trading.

If one possess those qualities, then they can pick up any tool or indicator and make a sound logical judgment on whether there might be something to it, or whether they should invest anymore time into it. Which from my understanding is the same goal that you are conveying. No blind faith! Have reason and results for everything!
 

Quantt

Established member
944 58
Hi Nowler,
There are increasing numbers of traders who believe that all TA is complete bunkum. As a default position for the novice trader, I think this is a sensible starting point. I, like many others, started from the polar opposite end of the spectrum, assuming that all TA 'works' and that all I had to do was find the branch of it that best suited my personality and trading style. With the benefit of hindsight, this was a mistake.

I'd recommend novice traders start from the viewpoint that all TA is pretty much worthless unless and until their knowledge and market analysis convinces them otherwise. Then and only then is it worth delving into specific facets of TA, be it the various different chart types, Elliot Wave, Cumulative Delta, Market Profile - and so on.

To save yourself masses of time (many months and possibly even years) going from pillar to post - I suggest therefore that before you immerse yourself too much into any one facet of TA that you take a step back and ask yourself these questions:
1. Does TA complement your view and understanding of how the markets function? (It's better to work out now that actually you think TA is worthless than in two, five or more years down the road.)
2. If it does, then what is its function - what will TA do for you? Most novices (and a fair few not so novice traders) - look at TA to provide a simple cookie cutter solution of when to buy and when to sell. If that's what you want / need, you must satisfy yourself that TA can deliver this. Where's the evidence? Prove it for yourself; don't rely on what others tell you on T2W or elsewhere.
3. Lastly, is there a facet of TA that will serve your needs better than any other? If you're 100% certain of the merits of TA and you know what you want it to do for you, then you can start to drill down and work out that P&F charts will suit you best or Elliot Wave - or whatever else takes your fancy.
Tim.
This is a very good advice! Thanks for posting it and hope more new traders will read and try to understand it...
 

darktone

Veteren member
3,917 1,000
Hey folks


Whens alls said and done, unless you find a way to be buying on the left side of the line along with the very very few, youll likely get similar results to just about every one else buying the right side of the line.

I might have just saved you 5 years.
 
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timsk

Legendary member
7,122 1,898
. . . I see what you are getting at in regards to TA, but I wouldn't necessarily suggest to novices to treat it as complete codswallop . . .!
Hi Nowler,
Yes, you're quite right; I over egged the pudding somewhat. Apologies!

The point really is that novices would do well to question everything and not to automatically assume that XYZ must be correct and/or apply to them because lots of people on T2W (or wherever) appear to be of one voice. The key is to keep an open mind, rid oneself of assumptions and know that what has value, meaning and purpose for you might be completely useless to someone else. And that's why trading is so tough: there are relatively few universal truths that apply to us all.
Tim.
 
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Kaeso

Established member
836 91
To make money using tardical analysis you have to be good all-round as a trader, hence its not as straightforward as one hopes in the beginning :)
 

Nowler

Established member
980 81
...The point really is that novices would do well to question everything and not to automatically assume that XYZ must be correct and/or apply to them because lots of people on T2W (or wherever) appear to be of one voice. The key is to keep an open mind, rid oneself of assumptions and know that what has value, meaning and purpose for you might be completely useless to someone else. And that's why trading is so tough: there are relatively few universal truths that apply to us all.
Tim.
Ain't that the truth!
Thanks for the input mate, I'm sure others will find it beneficial also.
 

Brumby

Established member
593 137
The price action over the past 24 hours on the EURUSD is both informative and illustrative of trading as opposed to TA and specifically regarding price patterns.

TA is about analysis and out of that trade decisions are made. In other words, analysis and trading are effectively two separate components. At the outset of my comments, I emphasized that price patterns while easy to identify after the fact it is not the same as trading the patterns as they evolve in real time. In other words, patterns can morph into various forms and the only certainty is after the fact. Studying and knowing about price patterns and trading them requires different skill sets. The problem is the natural assumption that knowledge of price patterns mean one can successfully trade off them. This is far from the truth.

The second point I would like to make is that there are various market forces at any point in time that can influence price movements resulting what may be random price movements and consequently any individual trade result may simply be a random distribution of events driven by timing and luck.

The third point is that price movements normally has a fundamental driver. The problem with TA is that it ignores the "why" and instead focus on the "how". Trading price patterns is about mapping out how it will develop and positioning the trade accordingly. Unfortunately "why" is what cause price patterns to develop and because events are specific to time and subject, they do not necessarily repeat in the same form and manner as other events as reflected in previous price patterns. In other words, fundamentals always trump TA.

My purpose in using the EURUSD pair and to explore how it can be traded in real time using price patterns is meant to bring out the issues of trading price patterns.

I will update the EURUSD chart once I have a bit more time.
 
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Brumby

Established member
593 137
An updated chart on the EURUSD reflecting recent price action. The EW count has been re-labeled.
Based on the latest EW count, I can conclude a number of things.
(1) The recent price action in the last few sessions are corrective in nature.
(2) Trends do not begin with a 3 wave structure - always 5 waves. As such, there is no evidence of a trend reversal.
It should also be noted that trying to determine the final structure of a corrective count is a fool's errand. Money is lost trading corrections and made in trading impulse. In other words, know when to stay flat.

 

FXX

Experienced member
1,156 197
An updated chart on the EURUSD reflecting recent price action. The EW count has been re-labeled.
Based on the latest EW count, I can conclude a number of things.
(1) The recent price action in the last few sessions are corrective in nature.
(2) Trends do not begin with a 3 wave structure - always 5 waves. As such, there is no evidence of a trend reversal.
It should also be noted that trying to determine the final structure of a corrective count is a fool's errand. Money is lost trading corrections and made in trading impulse. In other words, know when to stay flat.

(Sorry if this is hijacking the thread)
I don't trade wave theory and noticed you mention 5 waves. I am currently looking at the EURUSD from a daily time frame and this is where I am at in my thoughts. The euro has had what looks like at least 4 waves (I am not sure the degree of measurement that fits the definition of a wave). Where the fundamentals are now between fed and ecb, I see at least a 38% correction being played out. As you can see by the chart my trade levels in play (swing trade of course).

 

Brumby

Established member
593 137
(Sorry if this is hijacking the thread)
I don't trade wave theory and noticed you mention 5 waves. I am currently looking at the EURUSD from a daily time frame and this is where I am at in my thoughts. The euro has had what looks like at least 4 waves (I am not sure the degree of measurement that fits the definition of a wave). Where the fundamentals are now between fed and ecb, I see at least a 38% correction being played out. As you can see by the chart my trade levels in play (swing trade of course).

I think it is important to ensure I am not misunderstood and so I would emphasize a number of things :
(I) The nature of the thread is about price patterns. My aim is to engage in some form of meaningful conversation connected to how price patterns my be traded, its limitations and its usefulness.
(ii) I specifically selected EW because there are very specific rules in how waves are identified and labeled. Consequently I believe there is more structure and objectivity to any discussions about price patterns as opposed to discussions about say, head and shoulders.

Having said that, if you look at the daily chart on EURUSD, there are a series of lower highs and lower lows since September. If you have a view that the EURUSD will go lower that is a reasonable position just on price action alone. However we know prices don't just go one way as there are typically two way price action. The challenge of every trader is to attempt to position a trade at the inflection point to take minimal heat and extract maximum profits.

I will take the 4H chart from EWI that I shared earlier and add further thoughts to it.


The main question is whether the recent price rally into the $1.1870 region is complete or not. My view of the price action and the rejection of prices off that region (in 3 waves) suggest to me they are corrective in nature and not impulsive. I believe (referring to 4H chart) there will be some form of further two way price action before the correction is complete based purely on proportionality in terms of how long it took Wave 1 to complete 5 waves down. In other words, I think only wave A is complete, with wave B forming but another rally of wave C is yet to develop.
 

Kaeso

Established member
836 91
hi guys
i just wanted to add another perspective to the E/U chart, I don't have a trade view on it at the moment or disagree with any previous charts I just though it might be interesting to add my simple take on it (no indicators or candles). Basically chartwize I only "see" the downward trendline being broken to the upside and now a bounce off the other side being attempted, but overall you could also say its been going sideways!... :)

EURUSDDaily.jpg
 

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