Trading Without Charts?

[John1]

"If we want to buy down-and-out stocks we must wait for the market to tell us the risk has gone out of the stock, and the way we learn that is when the stock refuses to go down any more on bad news. You don't guess, estimate, daydream; you don't need to rely on faith, hope or charity; you can wait for the market to tell you. It is worth repeating yet again, that for those with patience, this is the least risky long-term style of buying stocks.

Justin Mamis, The Nature of Risk."

Hi tenbobtrader,
You and oildaytrader have provided several of the building blocks essential for successful speculating. Your comment regarding risk is particularly pertinant, this principle can be applied to short term futures trading although the techniques will obviously be different. Regarding price, it is possible to trade much closer to the market using price than it is using - charts, price action or indicators -because they all lag, bear in mind that you will now be required to become a contrarian trader. By trading price in its essence you automatically are given the opportunity to reduce RISK which then allows you to find many trades with RRs of 20-1,40-1, 50-1 or greater, and therefore be trading at the optimum times. Hence my observation that trading charts is like polishing turds for most people, no matter how hard they rub It's always going to end up unattractive.

As I've indicated numerous times previously, in order to achieve good outcomes, most people will be required to make a significant mental shift. I've tried to point people in the right direction thru examples, although at this point I appear to have only achieved minimal success. For those that can adapt the rewards should be excellent.

I don't expect to be posting too much in the future due to time constraints as I have many business and personal commitments to occupy my time.

Good Trading

John1

 

[tenbobtrader]

hope all goes well John

http://en.wikipedia.org/wiki/Contrarian_investing

"Contrarian investing
From Wikipedia, the free encyclopedia
Jump to: navigation, search
This article includes a list of references, related reading or external links, but its sources remain unclear because it lacks inline citations. Please improve this article by introducing more precise citations where appropriate. (February 2008)
Look up contrarian investing in Wiktionary, the free dictionary.
n. a person who takes an opposing view, esp. one who rejects the majority opinion, as in economic matters. May also be used as an adjective as in "contrarian investing."

In finance, a contrarian is one who attempts to profit by investing in a manner that differs from the conventional wisdom, when the consensus opinion appears to be wrong.

A contrarian believes that certain crowd behavior among investors can lead to exploitable mispricings in securities markets. For example, widespread pessimism about a stock can drive a price so low that it overstates the company's risks, and understates its prospects for returning to profitability. Identifying and purchasing such distressed stocks, and selling them after the company recovers, can lead to above-average gains. Conversely, widespread optimism can result in unjustifiably high valuations that will eventually lead to drops, when those high expectations don't pan out. Avoiding (or short-selling) investments in over-hyped investments reduces the risk of such drops. These general principles can apply whether the investment in question is an individual stock, an industry sector, or an entire market or any other asset class.

Some contrarians have a permanent bear market view, while the majority of investors bet on the market going up. However, a contrarian does not necessarily have a negative view of the overall stock market, nor does he have to believe that it is always overvalued, or that the conventional wisdom is always wrong. Rather, a contrarian seeks opportunities to buy or sell specific investments when the majority of investors appear to be doing the opposite, to the point where that investment has become mispriced. While more "buy" candidates are likely to be identified during market declines (and vice versa), these opportunities can occur during periods when the overall market is generally rising or falling."

 

[John1]

hope all goes well John

http://en.wikipedia.org/wiki/Contrarian_investing

"Contrarian investing
From Wikipedia, the free encyclopedia
Jump to: navigation, search
This article includes a list of references, related reading or external links, but its sources remain unclear because it lacks inline citations. Please improve this article by introducing more precise citations where appropriate. (February 2008)
Look up contrarian investing in Wiktionary, the free dictionary.
n. a person who takes an opposing view, esp. one who rejects the majority opinion, as in economic matters. May also be used as an adjective as in "contrarian investing."

In finance, a contrarian is one who attempts to profit by investing in a manner that differs from the conventional wisdom, when the consensus opinion appears to be wrong.

A contrarian believes that certain crowd behavior among investors can lead to exploitable mispricings in securities markets. For example, widespread pessimism about a stock can drive a price so low that it overstates the company's risks, and understates its prospects for returning to profitability. Identifying and purchasing such distressed stocks, and selling them after the company recovers, can lead to above-average gains. Conversely, widespread optimism can result in unjustifiably high valuations that will eventually lead to drops, when those high expectations don't pan out. Avoiding (or short-selling) investments in over-hyped investments reduces the risk of such drops. These general principles can apply whether the investment in question is an individual stock, an industry sector, or an entire market or any other asset class.

Some contrarians have a permanent bear market view, while the majority of investors bet on the market going up. However, a contrarian does not necessarily have a negative view of the overall stock market, nor does he have to believe that it is always overvalued, or that the conventional wisdom is always wrong. Rather, a contrarian seeks opportunities to buy or sell specific investments when the majority of investors appear to be doing the opposite, to the point where that investment has become mispriced. While more "buy" candidates are likely to be identified during market declines (and vice versa), these opportunities can occur during periods when the overall market is generally rising or falling."

For the diamond dealer it was deceased estate auctions, for most, the answer is out there, to find it all you have to do is adjust your thinking! Think risk management!

Good Trading

John1

 

[John1]

Hi tenbobtrader,
You and oildaytrader have provided several of the building blocks essential for successful speculating. Your comment regarding risk is particularly pertinant, this principle can be applied to short term futures trading although the techniques will obviously be different. Regarding price, it is possible to trade much closer to the market using price than it is using - charts, price action or indicators -because they all lag, bear in mind that you will now be required to become a contrarian trader. By trading price in its essence you automatically are given the opportunity to reduce RISK which then allows you to find many trades with RRs of 20-1,40-1, 50-1 or greater, and therefore be trading at the optimum times. Hence my observation that trading charts is like polishing turds for most people, no matter how hard they rub It's always going to end up unattractive.

As I've indicated numerous times previously, in order to achieve good outcomes, most people will be required to make a significant mental shift. I've tried to point people in the right direction thru examples, although at this point I appear to have only achieved minimal success. For those that can adapt the rewards should be excellent.

I don't expect to be posting too much in the future due to time constraints as I have many business and personal commitments to occupy my time.

Good Trading

John1

The paradox outlined in the following link forms the basis of my non-chart trading. To solve in the positive requires innovative lateral thinking. Difficult, but it can be done.

Good Trading

John1


http://seneca.fis.ucm.es/parr/GAMES/Paradox in Game Theory Losing Strategy That Wins.htm

 

[cuotes]

The paradox outlined in the following link forms the basis of my non-chart trading. To solve in the positive requires innovative lateral thinking. Difficult, but it can be done.

Juan Manuel Rodríguez Parrondo, (born January 9, 1964) is a Spanish physicist best known for the strikingly counterintuitive Parrondo's paradox, where switching between losing strategies can in some cases win. In 1996, he developed games of chance, now called Parrondo's games, that exhibited this apparently paradoxical phenomenon. Much of his work touches on thermodynamics and information, and he is known for contributions to the theory of noised induced phase transitions, Brownian ratchets, physics of information, and statistical mechanics.


The Parrondo's paradox explained. Theory, equations, applications and also a simulator for flip coins games :smart:

http://usuarios.lycos.es/paradojaparrondo/ (in spanish, naturally )


Dr. Sergei Maslov from Brookhaven National Laboratory had shown that if an investor simultaneously shared capital between two losing stock portfolios, capital would increase rather than decrease. (On the downside, as of the time of writing, it was too early to apply his model to the real stock market because of its complexity.)

Consider the following situation:

An investor has the choice between two funds A and B. Both funds decrease in value in the long-term average, but there are some intermediate periods where each fund increases its value.



Assume now that fund A is likely to make a profit in a high-interest market, while for fund B this is more likely in a low-interest market. It should not come as a surprise that one can make money by alternating between fund A and fund B, according to market conditions. Maybe a little more surprising is the fact that (depending on the conditions of the "games" involved), even by randomly choosing A or B in each step, a profit can be made.



This is the essence of the so-called "paradox'': The right combination of two losing strategies can be a winning strategy.



The key is to know the "rules" or conditions of the games exactly so one can decide which game to play in which situation. This is also the reason why one cannot gain momeny by applying Parrondo's paradox to the stock market. It is well known that by only buying or only selling one cannot make money. In fact, the strategy "buy low, sell high'' has been known for centuries, but obviously is hard to follow in the real world.

 

[John1]

Think Hybrid!

Innovative people regularly combine parts of well known concepts, and use them in previously unheard of ways to achieve successful outcomes in areas traditionally considered unfruitful!


Good Trading

John1

 

[John1]

"The key is to know the "rules" or conditions of the games exactly so one can decide which game to play in which situation."


A good place to start is by finding what rules or conditions you can and cannot control in relation to the markets and then apply this concept to them exclusively! This means that you must think outside the boundaries of convential thinking regarding market behavior.

This also underlines my view regarding ones ability to predict market behaviour thru charting.

Good Trading

John1

 

[cuotes]

Innovative people regularly combine parts of well known concepts, and use them in previously unheard of ways to achieve successful outcomes in areas traditionally considered unfruitful!

Right

 

[cuotes]

predict market behaviour thru charting.

Don't you think that charts sometimes lead us to get the wrong idea?

General speaking, do you find any advantage in using "range" candlestick chart type instead of traditional candles of x minutes?

 

[John1]

Don't you think that charts sometimes lead us to get the wrong idea?

General speaking, do you find any advantage in using "range" candlestick chart type instead of traditional candles of x minutes?

Charts regularly lead people to get the wrong idea!

Considering that I've consistantly argued against charts it should be obvious that I see no advantage in either approach.

Good Trading

John1

 

[adadadog]

Great posts from John1!

 

[HawkTrader]

Charts regularly lead people to get the wrong idea!

Considering that I've consistantly argued against charts it should be obvious that I see no advantage in either approach.

Good Trading

John1

So what is the 'right' idea?

 

[jtc172]

The charts are your friend

 

[dealer911]

Anyone with ideas on how to do this? I already don't use indicators. Now I would like to get rid of the charts and trade just on order flow, time of day, or anything else.....any good ideas?

I guess if you have decided to cast aside your charts then you need good real time info and news.. you could trade economic numbers, corperate results, news announcements etc..
as long as you have a good money management system and strict stops then why not.!
bloomberg or reuters are expensive but ransquawk.com or sigma squawk are ok. You need to be able to interprete the data quickly though !

 

[Devilicus]

So what is the 'right' idea?

the one that makes you money.

If there was some special way of making money without using charts or anything else people have wrongly suggested that John may be alluding to(FA/tapereading/pitnoise/algos etc), the cat would be out of the bag by now! To think that there is a whole concept/method that none of the thousands of people on this forum are even aware of is silly, lol. Even my old mate grey1 doesn't know (or care) what John is talking about, and he's spent over a decade trading professionally and working on risk models for financial institutions in the heart of the trading world etc. Someone's having a laugh I think.

Would be nice to hear from other sucessfull chartists like trader_dante, Kitejedi, Gamma, TheBramble etc.

 

[morgan_edge]

the reason why this thread is playing on peoples mind, is the same reason why journey to the basement was so popular, none of this stuff actually means anything, and what you do make of it is a reflection of your personality rather than having anything to do with the external environment. The only reason it forces you to think is cos there is nothing to think about. Trade any way you want and be objective.

Dont like to think that ive been led on a wild goose chase, but ive spent alot of time and energy on this subject now since this threaD began, trying to work out what is actually being discussed BY John and im none the wiser. Very frustrating.

On a brighter note, im having my best ever trading spell over these last 4 weeks, after 4 years of trading. Maybe things are finally falling into place with my CHARTING!??

 

[TheBramble]

Would be nice to hear from other sucessfull chartists like trader_dante, Kitejedi, Gamma, TheBramble etc.

I ain't got no distractions
Can't hear those buzzers and bells
Don't see lights a flashin'
Play by sense of smell

 

[Trader333]

I ain't got no distractions
Can't hear those buzzers and bells
Don't see lights a flashin'
Play by sense of smell

You must be a Pinball Wizard


Paul

 

[TheBramble]

Who's there....?

 

[Frank563]

John does have some great insights and I loved reading his posts. Admittedly, I did have to use google for 'chuck a wobbly' and 'bell end' someone else posted but I believe had I not spent so much time with my charts I may have known what they meant straight away.

Although I could not trade without them, I do agree that you have to apply something out of the box and unconventional when using charts and indicators and avoid going crazy with lines, indicators and fibos till you cannot even see the chart with all the other crust going on. Having said that, Jesse Livermore seemed to bob along just fine without charts winning -and losing- fortunes in the spank of a deal so it can be done just not by me.

Find what works for you consistently and I think you will find that it is unconventional in terms of how the masses read charts and indicators.

ta