Techinical Analysis is built on Crowd psychology right?

[bezzer11]

I would like to know if there is any information/books/video out there that clearly links crowd psychology with technical analysis?

Most of the stuff I see on TA barely even talks about psychology and I feel it is useless with out the underlying concepts.

Also, I feel like I am always thinking about the professional crowd versus the retail crowd and how these different crowds react and create patterns.

Am I trying to hard to create a link here? Any info would be very appreciated.

 

[TheBramble]

Am I trying to hard to create a link here?

Depends whether you want to be a trader or a trading psychology coach.

The former doesn’t give a toss about what psychology does or doesn’t come into play in each of the many inter-linked markets each with thousands of instruments available to trade, all of them combining into a dazzling mix of rich complexity. They trade based on their remit, intent, what’s happening right here & now along with their expert assessment of the probabilities of which scenarios are most likely to develop from it.

The latter find a ready market, as will all soft sciences, based on the inherent timidity of those entering what not only seems, but in reality is, a complex environment. The only cure for lack of experience, education and knowledge is – experience, education and knowledge. Intelligence helps. As does an inherent ability. Passion is vital.

There’s absolutely nothing wrong with your quest to attempt to profile the professional versus retail and the interaction between them and to get a handle on what each crowd is thinking and how that impacts the movement of price in any given asset class – except there is no such connection of any kind.

Or if there is, you can trade rather well by assuming there simply isn’t.

If you’ve a desire to explore this area then your choice is wide and varied and have fun. But ultimately, it’ll not make an ounce of difference to you as a trader.

 

[rsh01]

With respect to fx markets, TA/charts in my exp (from what I have read / seen) are more often talked about with reference to areas of supply and demand (which obv does still have a r'ship to psychology but its more about getting business done), and movements of price to and from these areas are big players searching for liquidity...say where institutions have stacks of orders and will push price to zones where they believe they can execute as many of those orders as poss at the best price.

These instutional traders are of course playing with retail traders and other participants psychology when doing this, I.e perhaps creating a fake breakout of the highs to sell into the stops when it breaks. Edit: sorry I forgot to mention that for the likes of you and me its obv advantageous to try and identify where these areas of liquidity are likely to be, where have orders stacked up over time, and where has supply exceeded demand / vice versa etc.

I haven't explained myself partic well. You should checkout gammajammer's articles re a day on the fx spot desk in the 'articles' section.

 

[NVP]

as above ...........I wouldnt build a system or seek and edge around this correlation

 

[Mike Kshemaraja]

I would like to know if there is any information/books/video out there that clearly links crowd psychology with technical analysis?

Most of the stuff I see on TA barely even talks about psychology and I feel it is useless with out the underlying concepts.

Also, I feel like I am always thinking about the professional crowd versus the retail crowd and how these different crowds react and create patterns.

Am I trying to hard to create a link here? Any info would be very appreciated.

Sensible question.

I do not think you are going to find much information or many/books/video because this is where the golden egg is hidden, also the understanding of the two (crowd psychology and technical analysis) combined is an art form which is based on personal perception fused with perceived experience and for those reasons it is not easy to categorise in concepts, even by those whose intention is not purely commercial.

In my humble opinion viewing and understanding technicality as a consequence of the psychology of the participant will give you a fecking great edge.

 

[bezzer11]

Depends whether you want to be a trader or a trading psychology coach.

The former doesn’t give a toss about what psychology does or doesn’t come into play in each of the many inter-linked markets each with thousands of instruments available to trade, all of them combining into a dazzling mix of rich complexity. They trade based on their remit, intent, what’s happening right here & now along with their expert assessment of the probabilities of which scenarios are most likely to develop from it.

The latter find a ready market, as will all soft sciences, based on the inherent timidity of those entering what not only seems, but in reality is, a complex environment. The only cure for lack of experience, education and knowledge is – experience, education and knowledge. Intelligence helps. As does an inherent ability. Passion is vital.

There’s absolutely nothing wrong with your quest to attempt to profile the professional versus retail and the interaction between them and to get a handle on what each crowd is thinking and how that impacts the movement of price in any given asset class – except there is no such connection of any kind.

Or if there is, you can trade rather well by assuming there simply isn’t.

If you’ve a desire to explore this area then your choice is wide and varied and have fun. But ultimately, it’ll not make an ounce of difference to you as a trader.

I am interested in being a trader.

I am not sure if you are saying that it is practically useless to attempt to marry psychology to technical analysis or if is useless to think about the different group’s psychology in the market (i.e. professional vs. retail). I will address both.

I agree that there are a lot of forces that dictate how prices move and maybe you could throw away all the psychology associated with TA and just use a probabilistic method combined with market tone and some fundamentals and make great trades. However, I think it is a leak if you don’t at least try to think about the motivations of buyers and sellers. Is this how you trade?

You say it is semi-worthless to think about the different groups in that market. To give an example about how it might be useful to think about the professional crowd vs retail crowd, lets look at Facebook. When Facebook IPO’d it might have been important to realize there were a ton of retail buyers. Retail buyers that might be a little more skiddish than their professional counterparts. Many of them, I assume, total newbs. Thus it might have been safe to say that any ripples from across the pond would have had a greater effect on the price of FB stock. Maybe this hypothesis is BS but it might be interesting to think about.

 

[bezzer11]

With respect to fx markets, TA/charts in my exp (from what I have read / seen) are more often talked about with reference to areas of supply and demand (which obv does still have a r'ship to psychology but its more about getting business done), and movements of price to and from these areas are big players searching for liquidity...say where institutions have stacks of orders and will push price to zones where they believe they can execute as many of those orders as poss at the best price.

These instutional traders are of course playing with retail traders and other participants psychology when doing this, I.e perhaps creating a fake breakout of the highs to sell into the stops when it breaks. Edit: sorry I forgot to mention that for the likes of you and me its obv advantageous to try and identify where these areas of liquidity are likely to be, where have orders stacked up over time, and where has supply exceeded demand / vice versa etc.

I haven't explained myself partic well. You should checkout gammajammer's articles re a day on the fx spot desk in the 'articles' section.

Yes this makes sense. The whole supply and demand does relate to psychology but more so in a rational and logical way.

You mentioned the BIG players. I think it is really important to get a grasp on these big players and attempt to rationalize their response. This is because they might be doing what you suggested “creating fake breakouts to sell into the stops.” I know central banks try to intervene in these markets sometime. “Currency Wars” by James Rickards talks extensively about this. I think you explained yourself very well btw. I will check that article out thanks.

 

[bezzer11]

as above ...........I wouldnt build a system or seek and edge around this correlation

Maybe not. But, if you get a good grasp on it, why not try.

 

[bezzer11]

Sensible question.

I do not think you are going to find much information or many/books/video because this is where the golden egg is hidden, also the understanding of the two (crowd psychology and technical analysis) combined is an art form which is based on personal perception fused with perceived experience and for those reasons it is not easy to categorise in concepts, even by those whose intention is not purely commercial.

In my humble opinion viewing and understanding technicality as a consequence of the psychology of the participant will give you a fecking great edge.

I agree completely! I will try my best to do so. It does seem like it isn’t something that is rigid and you would have to develop your own system…just like everything else. I have ordered “The psychology of technical analysis” by Tony Plummer. If it is any good I will pm you and let you know.

 

[kimo'sabby]

I would like to know if there is any information/books/video out there that clearly links crowd psychology with technical analysis?

Most of the stuff I see on TA barely even talks about psychology and I feel it is useless with out the underlying concepts.

Also, I feel like I am always thinking about the professional crowd versus the retail crowd and how these different crowds react and create patterns.

Am I trying to hard to create a link here? Any info would be very appreciated.

Auction crowd psychology is well documented by, Wyckoff, i believe. Maybe worth a read?

Edit: I personally don't believe it's worth seperating the market into anything except buyers and sellers, rather than retail and institutional. IMHO, of course.

 

[Mike Kshemaraja]

I agree completely! I will try my best to do so. It does seem like it isn’t something that is rigid and you would have to develop your own system…just like everything else. I have ordered “The psychology of technical analysis” by Tony Plummer. If it is any good I will pm you and let you know.

Ok, thanks.

But keep in mind that Bezzer is not Tony and viceversa.

My suggestion is: screen time applied is better because of the subjectivity of the issue.

I would take in consideration every little detail: the strength of the trend, the way
she pullbacks, did she form a higher bottom? the way she stalls, where did
numerous contract exchange without effecting the price? And so on and on and on......

 

[Mike Kshemaraja]

Auction crowd psychology is well documented by, Wyckoff, i believe. Maybe worth a read?

Edit: I personally don't believe it's worth seperating the market into anything except buyers and sellers, rather than retail and institutional. IMHO, of course.

I agree, when the big bulls get involved they will find the big bears defending their own position, this situation will also happen when they are not involved created by the smaller bear/bull tag of war which are evident all throughout the chart.

In my humble view , we as retailers has not the luxury to enter in the middle of any fight (because if we do, then we have to hope), but only once the fight is resolved jumping on the wagon and being nimble, that is why the questioning of this thread is important.

Edit: I have edit this post to make more sense.

 

[bezzer11]

Auction crowd psychology is well documented by, Wyckoff, i believe. Maybe worth a read?

Edit: I personally don't believe it's worth seperating the market into anything except buyers and sellers, rather than retail and institutional. IMHO, of course.

Yah, I see he has a lot of good stuff. Ill check it out thanks!

 

[bezzer11]

Ok, thanks.

But keep in mind that Bezzer is not Tony and viceversa.

My suggestion is: screen time applied is better because of the subjectivity of the issue.

I would take in consideration every little detail: the strength of the trend, the way
she pullbacks, did she form a higher bottom? the way she stalls, where did
numerous contract exchange without effecting the price? And so on and on and on......

Yah, its hard to learn and apply but remain individualistic all at the same time but thats what you gotto do in this business. Thanks for all you input.

 

[Mike Kshemaraja]

Yah, its hard to learn and apply but remain individualistic all at the same time but thats what you gotto do in this business. Thanks for all you input.

B

Passion, tenacity, humility, flexibility will help, of course artistic flavour also has its importance, which seems you do not lack of......

Mike

 

[bezzer11]

B

Passion, tenacity, humility, flexibility will help, of course artistic flavour also has its importance, which seems you do not lack of......

Mike

Thanks for advice and kudos Mike! This is a thread I'm sure I will revisit a few times.