some views on applied TA as appeared in traderji forum

[oilman5]

Here we are going through some useful discussion on SECTOR ROTATION by OXY
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Shall be posting the 3 best and worst performing sectors out of the following.
1) Aluminum
2) Auto
3) Auto Ancillary
4) PSU Banks
5) Pvt sector Banks
6) Cables
7) Cements
8) Civil construction
9) Computer Hardware
10) Real estate
11) Engineering
12) Fertilizers
13) FMCG
14) Hotels
15) Media
16) Pharma
17) Retail
18) Software
19) Sugar
20) Textiles
21) Oil Exploration
22) Power
23) Refineries
24) Shipping
25) Steel
26) Telecom
Calculation for the same is done based on equally weighted geometric return values. Each sector consists of between 5 and 16 stocks and a median of 1 stocks, with exception of aluminum is weighted based on only 2 stocks. The base date for the same is 1 Jan 2008 and the base value is 100.
For the day ended : 13 June 2008
The index formula is 100*(Value on current day/Value on nth day). A value of 100.28 means that there's been a .28% appreciation in the index since the day it began.

Best Performing since 1.1.2008:
1) Pharma - 100.2849
2) Software - 95.2413
3) Aluminum - 89.0643

Worst Performing since 1.1.2008:
1) Real Estate - 46.9464
2) Cables - 49.1626
3) Textiles - 49.9353
Suppose there are two stocks in an index - A and B. The index is calculated as follows:
(Rate of change of A since nth day + Rate of change of B since nth day)/2
This gives an equal weight of .5 to each stock.This is the basis of my calculation.
Stock selection is done based on three criteria:
1) Descending order of market cap with a value of at least Rs.1000 crores (in some cases, where unavoidable, Rs.500 crores)
2) Differentiation of that stock's business with other stocks in the same sector (For example: Media and entertainment stocks include television, radio, cinema screening, film production, film distribution etc. Care is made to include at least one of each type)
3) Liquidity of that stock

Each stock is equally weighted in order to avoid any bias to one stock's movement. Since there are no small caps, the possibility of an outrageous move within a very short span is as good as ruled out.
The main trick may be after identifying sector & constituent companies/scrip IN that sector having high probability is to be longed & in weak sector the weakest are to be shorted (all in Fut / Option).
This can be stock/Index.
This Opposite positions can act as insurance.
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For the day ended 20 June 2008

Best performing since 1.1.2008
1) Pharma 92.45
2) Software 82.22
3) Aluminum 81.2624

Worst Performing Since 1.1.2008
1) Real Estate 41.5569
2) Cables 47.4067
3) Civil Construction 48.1443

Re-created my sectoral database, increased the median number of stocks per sector and added new sectoral indices to the list.

The long term investor doesn't need to go by technicals He will focus more on the Fundamental outlook of a Stock & sector (like despite the current battering of infra & cap goods sector stocks they'll remain good long terms bets to him/her & hence a buying opportunity In fact Buffet advises to buy & hold stocks which would not be affected if the stk mkts were to close down tomorrow!)

It's in fact the short term trader who needs to look at short term sectoral strength/outperformance. The only category that can be excluded perhaps is the Nifty trader, but even such a trader could use a collective view of the various sectors as a short-term sentiment indicator.
At the same time, there's no sacrilege in a long term investor taking a graphical view of how a sector has performed compared to the mkt &/or other sectors over say the last 5 yrs.

And i also don't see why a swing or even an intraday trader shouldn't seek outperformance (based on one or more parameters like sectoral strength).

Oxy, just wondering if the calculation can be done on a day-to-day basis i.e. (Close today/Close yesterday) * 100 This would eliminate the need for choosing a base year Stocks can be included/replaced at any time (may be 3-6 mths after listing when the daily range is more in tune with other constituents)
It can be done Kalyan. Substituting cum(ROC(C,1,%) instead of 100*(C/ValueWhen(1, value on nth day,C) - 1) will do the trick. Tried this and got the same result for ranking, only the values varied. Another problem with cumulative ranking is, if a stock is delisted for a particular time, then the index will be deflated to that extent during that time.


One can find out if a sector is ob/os the same way one'd figure out if the mkt is ob/os (using a mkt proxy like Nifty or CNX500 &/or mkt data comprising all its constituent stocks); In fact once one has the base material - the sectoral index & it's constituents - one can slice & dice it any way one wants, to extract whatever info one seeks with the advantage of being able to view a sector as a whole rather than extrapolating what is conveyed individually by 1 or 2 stocks (i.e. you get to work with a larger sample without needing to repeat the rather tedious sampling process every time. This process is abstracted & encapsulated in the form of the Sectoral Index created once).

Finally, everything need not be useful to everyone but i think it's better to keep an open mind
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Originally Posted by Dev Mookerji
As we are not fund managers, and talking about retailers, u must be agrred to, that very few can take more than 2/4 (different scrips not lots) future positions at a time.

Now My point is by simply exploring the system one can watch the stocks making monthly/quarterly/yearly low/high, and subsequently we can judge the weaker and stronger stocks to trade accordingly in one or two or best few stocks giving stronger signal in any direction to trade with in own system .

I'nt it a good idea to select from those list of stocks, which are lesser in number to select with, instead rigorous, sector analysis and then again to analysing stocks from each sector, decided to pick stocks to trade from each sector?

Let the Fundamentalist/Economists/Fund managers do the things, not we the short time trader.
ANS:It's precisely because retailers cannot afford to diversify much that they need to be more rigorous in their stock selection. Sectoral analysis can be an additional tool (and not the ONLY tool) in this process. (Once you narrow down to a few sectors your 'list of stocks' actually reduce to a 'lesser number' - so i don't see how this method increases the workload)

Where's the big harm in retailers adopting some of the best practices of Fund managers (at least to the extent possible with our tools & information access)? And it's not that big Fund Managers have all the advantages. Nimble traders can outperform Funds through quick churning of their small portfolios. Sectoral rotation can be part of a structured method of achieving this.

Why can't the trading goal extend beyond successful trades to greater ROCE (even for retailers)? (Moreover, outperformance on ones winning trades would act as an insurance for the inevitable losses that will happen from time to time)

IMHO, there's more to a robust trading methodology than just Buy-Sell signals. First & foremost (& like all things durable) it needs to have a strong foundation, a solid framework. And (like most other functional 'systems' including economic systems, businesses) there's a Macro & Micro aspect to it. Sectoral Analysis can be used to to fortify the macro framework.

Taking a couple of 'live' examples from this board as illustration:-

Sectoral Analysis can be incorporated in the SMART system, either as a primary component of the stock selection process or as a secondary filter (This would be an addition at the macro level; the micro aspects of the system - entry, exit, trade mgmt etc.- can remain unchanged)
Likewise, a pattern that Asishda has been pointing to of late, in various threads - essentially a Climax bar/Churn bar pair - can be a valuable* addition at the micro level (trading insight & tactics).
surely the views of a highly experienced trader deserves some attention.
( what i call 'valuable' in public. CV may well come up with a Data Mining & Analysis report dismissing as 'nonsense' my gullible beliefs based only on random observations, circumstantial evidence & a statistically insignificant dataset)

 

[oilman5]

For the day ended 26 June 2008

Best Performing:
1) Pharma 90.841
2) Software 82.4921
3) Oil Exploration 78.1580

Worst Performing:
1) Real Estate 37.15550
2) Civil Construction 45.0225
3) Cables 45.3827
I shall add a 30 day ROC of index values along with their absolute values from tomorrow.
Auto Ancillaries is ranked no.11 at 62.1220 and Fertilizers is ranked no.10 at 63.6401

It is on an absolute basis where the value is measured with base date on 1 Jan 2008.
An interesting phenomenon is that 18 sectors have underperformed the Nifty and only 8 are above it.
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Even more significant is the fact that the best performing in the bull phase have become the worst performing i.e. they have moved from one extreme to the other. Another bit of evidence perhaps that abs momentum is persistent (perhaps over a bull-bear cycle)*. I have always been a bit unsure as to what would make better positions (in terms of subsequent returns) at the 'turning pts' - what has hitherto been strong/weak or the converse. This study of indices data might provide some answers.

*statistical equivalent can perhaps be found in beta & alpha
& fundamental equivalent perhaps in valuations reverting to the mean (the leaders of the bull phase would tend to be most overvalued near the inflection point)- Looks like they are averaging out. What went up at the speed of light came down the same way.
For the day ended 1 July 2008:

Code:
Best Performing:
Values ROC (20 day)
1) Pharma 86.6498 -06.7890
2) Software 75.7153 -13.0497
3) FMCG 73.6076 -11.1649

Worst Performing:
1) Real Estate 32.4281 -37.1002
2) Cables 39.8167 -25.5879
3) Civil Construction 40.3393 -28.4504

Nifty 63.4201 -17.3700
ROC changed to 20days on Kalyan's request.

Out of the 26 sectors, only 6 : Pharma, Software, FMCG, Sugar, Aluminium, Oil exploration are outperforming nifty on an absolute basis.
If an trader rotated his money in the top performing sector, they would have lost 13% of their capital, as compared with Nifty's 37%, take slippages and transaction costs. If an trader pulled out his funds the moment the top performing sector crossed below 100, he wouldn't have lost anything at all (slippages and transaction costs apart).

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Originally Posted by kkseal
Conservation of Momentum (subset of Conservation of energy)

Another question to be answered (this one from the realms of quantum mechanics )

What is more important (in a dynamic multivariate environ) - the absolute (the precise location in time & space) at any instant or the Change (from instant to instant)? (even if both are deterministic at any instant)
Depends on the strategy one uses really. Indifferent to both, if trader one is starting afresh.
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my aim is to eliminate the absolute altogether & focus on the change-

I use a crude method to find out where the action is.The method is based on significant moves of the day.I list the stocks that have moved 4% or more on industry wise.This is working well for me.I also monitor some variations like top 100 gainers of the week to date,top 100 gainers of the last 3 days etc.These are workable methods that help me to concentrate on the right sector and industry
The basic purpose is to identify and concentrate our investment on the right sectors and industries .Monitoring the 4%+ breakouts on industry wise on a day to day basis will serve this purpose.Stocks from the strong sectors will repeatedly breakout.Need not perfect the methods to a very high degree of perfection and sophistication.

If you go through the excel sheet you can find many Bank and reality stocks breaking out.These are heavily hammered stocks bouncing back. Others like fertilizer, software and sugar have clear catalysts.I don't think a computer can to do such an analysis at least in near future.My scheme is to concentrate on simple workable methods.....SMART_Trader
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comments from a practitioner-But with similar methods, there are quite a few pitfalls. my statistics knowledge is not even 0.1% of Oxy. But let me humbly clarify in plain English Sir that this is JUST a relative picture of the mkt, more often correct than wrong. But it is JUST that, nothing more. So use it carefully. as with any statistics, it can be a damn lie.

anyway, to give an example of how you may be mislead, On your base date, you start with a sector that never participated in the bull run, and was at the bottom. now along with all sectors on the base date, if you are giving it a score of 100 and the other sectors (which went much higher) corrects a lot, the ROC score will show this as a relative strong sector than others. Similarly there are other pitfalls. Once you understand them, you will be happier with these type of relative scoring.
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For the day ended 11 July 2008:


Absolute Basis:
Code:
Best Performing:
Values ROC (20 day)
1) Pharma 89.4910 -06.6537
2) Software 76.7400 -09.4886
3) Oil Exp 75.1670 -06.7985

Worst Performing:
1) Real Estate 36.1123 -20.5544
2) Cables 42.3388 -13.8880
3) Civil Construction 42.8174 -15.8901

Nifty 65.8979 -10.3628
Relative Basis:
Code:
Strongest:
ROC (20 day)
1) Sugar -01.5511
2) Pharma -06.6537
3) Oil Exp -07.6861

Weakest:
1) Real Estate -20.5544
2) Fertilizers -19.7369
3) Aluminium -19.2986

Nifty -10.3628
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For the day ended 21 July 2008

Code:
Rank Security Name Absolute ROC 20
1 Pharma 89.1591 -1.3257
2 Oil Exp 74.6702 -4.0307
3 FMCG 73.7586 -7.14
4 Sugar 73.2399 -1.1226
5 Aluminum 72.6772 -4.7524
6 Software 71.0170 -13.0002
7 Nifty 67.6963 -2.5056
8 Auto 61.8244 -6.6382
9 Telecom 61.2871 -9.1347
10 Steel 59.1237 -11.2703
11 Retail 57.4226 -9.4835
12 PVTBK 55.7221 -8.2273
13 AutoAnci 55.1351 -11.5396
14 Fertiliz 54.2343 -11.9932
15 Cements 53.6637 -7.8016
16 Refineri 53.5445 -3.3252
17 Engineer 52.6217 -4.1566
18 Shipping 52.5225 -11.9623
19 Power 52.0392 -2.5489
20 PSUBK 51.9903 -0.8857
21 Hotels 49.5337 -11.8878
22 Hardware 49.5241 -14.0094
23 Media 49.2172 -14.0116
24 Textiles 48.1365 -12.9004
25 ConCivil 42.3067 -7.3383
26 Cables 39.8571 -13.2204
27 RealEst 34.3029 -11.9356
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or the day ended 28 July 2008

Code:
Rank Security Name Absolute ROC 20
1 Pharma 90.5263 2.0904
2 Aluminum 78.7512 15.8097
3 Oil Exp 77.7432 4.078
4 FMCG 75.2129 -0.6091
5 Software 74.1798 -4.5581
6 Suger 73.2399 16.8577
7 Nifty 70.5054 7.2156
8 Fertiliz 68.0763 16.2575
9 Telecom 65.7062 4.466
10 Auto 65.5913 8.0299
11 Steel 62.3703 -1.163
12 PVTBK 59.8002 8.7108
13 Refineri 58.6562 17.145
14 AutoAnci 58.3498 -2.2068
15 Retail 58.1565 -1.8737
16 Engineer 57.9655 14.2624
17 PSUBK 56.4464 18.3422
18 Cements 55.7596 -0.4082
19 Hardware 52.6501 -2.9234
20 Media 52.5452 1.1225
21 Shipping 52.5225 4.2739
22 Textiles 52.2317 5.2758
23 Power 52.0392 13.8677
24 Hotels 49.7675 -3.3366
25 ConCivil 43.9230 4.6354
26 Cables 42.4343 1.7789
27 RealEst 36.4835 5.6671
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use of ET as on 5.12.2014
Indices As On 5th Dec 2014
Returns (%)
Index Day's Close 1 Day 1 Week 1 Month 3 Month 6 Month 9 Month 1 Year PE
ET 100 9265.00 -0.34 -0.18 2.77 4.61 11.32 32.07 37.17 19.02
ET Midcap 15114.27 -0.41 2.43 6.54 10.03 17.27 64.24 72.62 20.91
ET Smallcap 19257.02 0.09 2.33 1.80 4.19 14.63 63.09 75.23 21.66

Sectoral Indices
ET Auto-Ancillaries 33010.39 -0.46 2.72 15.31 18.18 48.18 102.03 131.63 40.82
ET Automobiles 20352.75 0.00 -0.21 2.28 6.61 22.05 46.79 51.83 18.23
ET Banks 20088.65 -0.10 1.31 8.29 15.92 20.74 53.92 59.67 18.22
ET Capital Goods 21171.40 -0.41 0.18 1.94 5.05 0.56 41.31 56.59 25.64
ET Cement 17812.95 1.11 0.33 -0.87 -2.59 -2.00 36.33 43.71 27.47
ET Chemicals 18290.55 -0.12 1.99 5.61 5.27 33.76 86.31 100.16 37.35
ET Construction 20057.52 0.19 -0.13 -1.92 0.33 -10.72 31.01 44.20 82.86
ET Consumer Durable 23309.33 -0.10 2.90 5.75 4.93 24.77 71.19 84.84 44.78
ET FMCG 14046.72 0.72 5.48 9.51 10.94 21.89 29.34 31.92 41.83
ET Fertiliser 9576.56 0.49 3.30 1.58 13.08 21.95 60.90 62.44 25.60
ET Hospitality 7227.58 0.88 7.84 9.09 14.59 22.99 72.36 113.25 -86.00
ET Infotech 8527.03 -1.79 -2.84 0.95 3.20 27.59 17.46 29.65 20.57
ET Logistics 40026.46 -0.60 -0.03 6.80 13.47 28.66 80.11 110.02 34.33
ET Media 7924.90 -0.23 1.02 7.51 19.26 13.91 32.75 38.75 44.23
ET Metal 13310.93 -0.53 -2.53 -1.07 -10.44 -19.09 17.65 10.77 13.85
ET NBFC 37542.52 -0.10 -1.67 3.80 9.95 16.99 40.86 46.13 15.84
ET Oil & Gas 5336.57 -0.67 -3.09 -4.69 -9.54 -11.66 15.39 20.96 11.70
ET Pharma 16479.73 -1.32 0.26 3.30 8.33 43.56 47.00 57.85 27.04
ET Power 3671.61 -0.34 -2.61 -4.31 -2.26 -17.04 24.00 10.70 14.20
ET Realty 2851.45 1.18 2.06 6.18 -2.81 -22.65 28.30 30.13 30.92
ET Retail 1197.75 -0.50 2.44 4.15 3.50 5.67 33.59 22.73 43.65
ET Shipping 11970.70 -0.09 1.53 0.93 -0.54 9.31 55.52 73.58 31.34
ET Sugar 8551.95 -0.94 -1.91 -2.91 -9.14 -22.98 29.12 26.93 -9.04
ET Teleservices 1778.93 -0.88 -3.02 -3.96 -7.26 -2.27 14.99 2.33 16.40
ET Textiles 11134.08 0.13 5.80 5.42 8.65 28.30 68.66 86.17 19.56

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link=http://www.etintelligence.com/etig/researchchannels/markets/etindices/etIndices.jsp?leftNavMenu=Markets

 

[oilman5]

TA basic answered by ST and tradehunter
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From my own experience as a full time trader trading for living for last many years I can very confidently say that Technical Analysis works. It not only works but it is also an essential tool if you want to trade with Swing trading or Intraday trading style.

But will one become a great trader by only knowing TA ? There is no guarantee....all guys attending cricket coaching sessions dont become Tendulkars....do they ? Trading requires great amount of efforts to understand the market, the trends,the environments,psychology of the market participants, understanding risk/reward,probability,stayng out of marginal trades,position sizing....and all that takes lots of time and efforts.....so by just learning some patterns and trendlines no one can become a master trader.

I cannot imagine myself trading without TA and charts......but there are traders who trade very well without TA......they trade on news, inside news of who is buying/selling etc.....that works great for them...TA works great for me........ST
Effectiveness of technical analysis, like any other knowledge, depends on how its being used. People should not confuse with the fact that by merely just knowing the technical indicators and strategies one can be successful.

In my 4 years of trading .... I have realised what other experienced traders have often written, that knowledge is only 30% factor .. rest 70% factor is descipline and money management. I have personally lost money on strategies which have been time tested ..then I realised it was more to do with my descipline and money management.

As you said, teachers can give you knowledge but not descipline so no point blaming the sword when the holder doesnt know how and when to use it.
SH
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Technical analysis knowledge is not only knowing indicator ,patterns , and moving averages ...
it is about designing a trading system which means designing entry and exit setup with due care to stoploss and trailing stoploss...in the way a system is 20% mind is 30% and 50% is money management
for designing a trading system ........back testing the logic(entry and exit rules) is only method to draw a conclusion ,for that at least 3 years we have to back test
if you have done all this you will sure find a success full method to earn
During my earlier days of trading i have purchased all the trading systems available in the market and the result is big loss... after that worked on above steps and now earning-XRAY27

 

[oilman5]

Technical Analysis is no black magic.....it is a decision support system which tells you where to enter in a trade,where to take profits if trade goes in our favour and where to get out if the trade goes against us.
Is TA farce?

My view is it depends on how you look at Technical Analysis. Many people look at TA as in designing a trading strategy and earning money based on the indicated trades. However a lot of people forget that a successful trading strategy is just 20% of what is needed to become a successful TA trader. Rest 80% comes from descipline and money management.

TA is not a science but a game of probabilities, a game where we try to anticipate the crowd behavior and enter into positions hoping others would do the same later on. But just becuase 10% of the traders are succesful means its a farce? I dont agree, its like only a handful who make it to IIMs every year but that doesnt mean IIMs are farce!

Why to give tips/advice/write books/sell softwares if they are a successful trader

Trading is a business which involves investment & risk, similarly all of the above activities are also businesses which require investment and probably smaller risk. A mature trader would realise sooner or later that the risk involved in the first type of business is much larger than the other businesses.
TA is not Trading. Making money in the market need Trading skills, which involves

1) abitlity of understand market direction (TA helps here but there are many who use non-TA based method as well),
2) Risk Management (in trade, over a defined period of time etc)
3) Position sizing - when to go aggressive and increase the position and when to reduce it
4) And on top of all, The mindset of trader - that thinks in probablities, ready to accept the beating when market tell on the face, loud and clear that u are wrong, is emotionally balanced (profit or loss doesn't matter), discpline of following rules/ activities, ability to correct oneself and keep improving..

Now u will see that TA is just a small part of trading. It is people mistake who think that
TA = Trading = Money..
Psychology/mindset is the biggest challange and not all people have traders mindset.
Yes, it can be developed.. but still I think that there is limitation.. whatever I do I can't be Mr World in body building.. That is not my strength.. EAch of us have our strength and weakness.. And let accept the fact, not everybody is meant to be great trader, warrent buffet, soros, paul tudor, john paulson etc.
Trading skills can be learnt and developed.. Many have demonstrated it. I haven't met successful trader who doesn't use TA in his trading.. But not all TA whom I met are good trader..

Why people sell TA service.. because there are lot of buyers for that service. People buy it, because they think other person is GURU of trading and whatever he says, market listens to him.. It is the GAP in peoples perception..
So please don't blame TA for this.

Many successful traders have good business mindset. If one doesn't have business mindset, then it is not possible to make successful trading business. Good trading is boring but that is the fact. These pro traders have their own system that fits their personality, it gives them enough time to other things. And if they decide to sell / teach something which they know well.. then what is the harm.. It is just their business smartness. And if we are not that smart, then either get smart by appropriate action or just focus on what we have to don. You can't stop someone what they want to do.

I wish , people have the maturity to understand what trading is. and use their own judgement about whether to buy the tips/calls from anybody or not.

If I have to restart my trading journey, then I will start from 4) --> 3) --> 2) --> 1) as explained above in my post. Knowing oneself is more important then knowing indicators and patterns. Unfortunately, I have gone thru all of them in zig-zag fashion. Only when I came across professional floor trader's mentorship, they all got in place now.

I took good amount of losses before realising that part of my mind always think contrary to current trend. Maybe that's how I am so rather then beating myself to be like all other trend following traders (there are many successful contrarian traders as well) , I have to tame this nature. So decided to develop a contrarian strategy placed some rules which gave me boundry to take decision about when to be contrarian and when not to be, the whole trading became lot easier. So now my contrarian mind does not bother me so much cause it knows that it will have its own time. I will execute contrarian trade when time is right. My Low risk option strategies (another thread here) helps me in going against the market with limit risk when all other factors are well aligned.

So, it is understanding oneself that makes all the difference here. Signals from same system will give different results to different people.

As far as business mindset goes - It is not that great. Just basic concepts of what is cost of trading, what is breakeven profit for a trade (i.e. how many points u need minimum to be profitable in a trade), what is your plan to manage your losses, in what condition u would add more money, or take out the money from acct, where are you should be investing your money (books, software, datafeed, broker, learning, internet connection, computer system etc) and how your trading business can finance those cost etc etc..
These are not some points that only IIM guys understand, it is common sense.. but I am surprised how many people don't think on these lines in structured way..(though most of them know it.. but vaguely).. Writing a business plan for trading buss can make a lot of difference.. That is one of the reason that Banks / Lending institute focus so much on solid business plan from a company before lending them any money.
Unfortunately, we don't take trading so seriously becuse we don't think about it so seriously as a business. And when things are done casually, u know it very well how far such casual things can go.

Don't get disappointed and quit the field before u have given proper try to it.
Probably you just need one or two pieces to come in right slots to complete the jigsaw.

I mentioned that like any other field, trading can be learnt. None of us were born engineer, CA, doctor, software programmer.. We learn all those profession in a structured way. Unfortunately, it is difficult to find someone teaching trading like a profession. Most of the people teach part of it..TA/ ElliotWave/ Metastock and leave u false hope that u can go and face the market now. Reading few books on TA or even trading books can not give that clarity. One has to put in effort to assimilate the knowledge and convert that into Skill. And practice those skill to gain experience.

In my view, Professional is the person who has Knowledge, Skill (tricks about how to use knowledge), and Experience with skills.. Weakness in any of these 3 wheels, will only give a unbalanced vehicle which is not able to move forward.
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to change your opinion.. I would rather serach for a successful trader and find out what he does to make money.. Because I want to be successful Trader. Let Tech analysts do what they feel is good for them..

In my view, I would spend more energy to learn/find out about the goal that I am working toward, the route I am taking towards. Rather then spending time on other routes.

Does it make sense to find a software developer who has written world's best trading platform and find whether he is good trader or not ?
Software development is another profession and trading is altogather different.

there definitely are a few people here who make money using TA but I beleive that people who are disciplined and hardworking would make money whether they use TA or not.
I personaly believe that trading successfully all you need to watch is pure price action and nothing else.
there have been a group of select few people who have made tons of money frm the market without using any kind of TA in the past 10-15 yrs. the method used by them is what we now commonly know as btst (which incidentaly today is used and abused by most of the brokerage houses)
Anyway, for someone to make money in the market, neither FA is important nor TA. The only thing that matters is "Edge". Now, how one gets that edge is a different story altogether. I have seen Statisticians become excellent traders and have also seen some CMT's being excellent traders. It is one of those questions which is very difficult to answer and very difficult to judge. Rest assured, there's one thing I can say, those who make money from the markets, never ever reveal how they do it. No book, no seminar contains the actual strategy to do it. This my friend is the reality of trading industry. And when people raise doubts about TA or FA, these smart traders, simply sit back and smile.
.............to bring to the notice of newbies that knowledge of macd and stochastics is not the be all and end all of trading. I have seen a few very successful traders who concentrate on studying just the behavioural patterns of masses (who trade the markets) and then benefit from that information. In the past one year I did not find anyone writing about or wanting to learn these 'behavioural patterns' which I feel provides the 'edge' that u were speaking of.
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I beg to differ from "Rest assured, there's one thing I can say, those who make money from the markets, never ever reveal how they do it. No book, no seminar contains the actual strategy to do it. This my friend is the reality of trading industry. And when people raise doubts about TA or FA, these smart traders, simply sit back and smile." There are forums where seniors not only reveal the complete strategies they trade but also post model trades everyday, post excel sheets of how much made in the month, also post some trades in live markets. These forums are run by traders who trade for living and do not have other hidden motives like giving seminars,paid newsletters, tips etc. And they do a really advanced and highly profitable trading.

There were some great traders here in our forum....they posted some very useful stuff but this being a unrestricted public forum, many people with different interests (some holy and some unholy ) comment on the methods with sole aim to criticise and make any progress difficult . The person who tries to post his methods starts getting a feeling that he is doing a thankless job and he finally gives up in utter disgust.

TA is not something which alone will make great traders...but there are many good traders who trade on TA...it gives you a definite edge by way of trading in the direction of longer timeframe trends, adding in profitable positions, strict chart based stoploss etc. TA is a decision support system which gives you an entry, stoploss, add points and exit from a trade. Other things like position sizing, risk control,traders psychology,adequate capitalisation,backtesting of the method in various data samples etc all play a big role in making of a successful trader.

Hope the above gives some realistic view of trading to aspiring traders and they cut their learning curve to some extent.
why Dr charles cud wr0te book on ADX with new ways of interpreting them? or John Hayden or Andrew Cardwell wrote books on how to use RSI? Why did Mr. Wilder who is originated never wrote this methods of interpretation? Do we think Mr. Wilder did not know/understand this way of interpretation? I m sure he wud know and he wud b trading this way but he published lil part of entire big ocean....

Now we cannot compare people guiding in forum with these book writers coz people in forum and guiding others r normal people and who have urge of helping others...

No offense just my opinion that actual methods,systems, interpretation comes in market when they are not sooooo effective and mostly trader stick to those interpretation and fails in trading... Rather if they start looking at those indicators or methods with unique way or start research and experiment, they wud surely get success... apart from that today everybody wants to earn quick and easy bucks... Trading is the business wherein utmost hardwork and knowledge is required... this simple fact people dont understand and fail...

Today successful engineers, doctors, lawyers, CAs, MBAs all keep on reading/studying/learning new things to keep themselves updated and if i know correctly they spend more than 20 hours a week (apart from regular work) in reading and learning new things.... how many traders spend or give this much efforts in reading and learning things? How many traders have read same book more than 2 times? I think we need to read more than 2 times to understand any concept or theory and that is what we do or did with other profession.
QUESTION TO TA LEARNER
How many indicators or tools u use for trading?
Do u consider urself master/expert of at least one of them?
Is there any indicator or tool, you have read every single available material published on the planet earth?
Have you read any particular TA book more than once like we used to read and refer chapters again and again during our school or college days?
U remember? we used to talk during our school or college days like "arey yaar kitani baar science complete kiya tune?" or "is baar toh meri lagane vaali hai 2 hi baar science kar paya hu... bhagwan 60 marks dila dena to mera average maintained rahega..." or "How many examples/equations/problems you practiced for Algebra?"... have you ever tried and apply this in learning TA or trading?
answer:I have read a few books on TA and I admit that I have not done an extensive research in any particular indicator, but there is a reason for this. my mind tells me that logically all indicators follow price. I read a few posts of yours and saw a very interesting and innovative way in which u look at ADX.
I gained an insight into your 'thought process' and it was very enlightening.

but the way I think is when I see ADX as an indicator,
what does it tell me...that the price has been trending or not....
do I need an indicator to tell me this..... no
now if I see a high ADX reading it tells me that price has been trending till this point in time.
can it tell me that the price will trend tomorrow.... no
I " assume " that since it has been trending it will continue to trend in future.
whatever little knowledge I have of indicators, I have seen that they definitely give me a very good picture of what has happened in the past, but in trying to gauge what will happen in future, I have to make "assumptions".
if making "assumptions" is the way to trade then I may as well make my "assumptions" based on price and price alone.
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Understanding Indicatorick up one or two thing, make good friendship with them, learn them, understand them, take them in your confidence and I assure you, market or chart or indicator will start talking to you... it is same as dealing with people.. if you want xyz person to share everything with u or tell u, u need to be good friends with him, u need to understand him (without having any selfish moto), you need to take him in confidence, build a raport etc...
ndicators are valuable tools in trading but we have to know their limitations. Vast majority have the desire to apply them as stand alone Buy and Sell signals, hence the plethora of vendors selling get rich quick systems, especially in the world of forex.

Just a few moments of dwelling on the way we calculate those indicators will reveal their logical fallacy.
I have mentioned this elsewhere but repeat once again.
Lets take price "A" , which is a variable,
Now we slice and dice it to create an indicator value "X" which inherently is also a variable since it is derived from "A".
We then set about forecasting the movement of variable "A" using Variable "X",

There are very successful traders out there who mix them with price action. and there are others who do not use them at all.
I know a couple of guys, one employing entirely Wyckoff principles, reading charts via price and volume only , made invaluable contribution to a forum dedicated to Wyckoff which has remained out of public domain for decades.
Recently there is another trader who trades live, you can sit over his shoulder and watch how he reads bar by bar, again with the use of only moving average.

I assume/guess is big word friend... here we r trying to make educated or learned assumption or guess......... coming back to serious point, if i m owner of garment shop and made total business of 25k today, do I have assurity I m gonna have total turnover of 25k or more tomorrow? Answer is NO but still tomorrow morning 9 o'clock I m gonna reach to my showroom and open it with the assumption that I will have some business today..... uncertainty is unavoidable part of any business.. you gotta accept it.
IN TRADING UNCERTAINTY IS A KEY WORD.
Everybody speaks based on his experience. I have been fortunate to come in contact with 2 great traders, both TA based, successful and they gave me everything they knew ( the exact methods which they traded). Both these gentlemen had totally different methodologies.....so I had put my views...others may have different experience and that is the reason they have their views.When great traders teach, they expect the students to put in lot of efforts...nothing is given readymade, just put the values and start making money type. Teaching real trading on real methods in realtime is being done even now in a few forums....find out yourself....I will not give any clue even indirectly as I am strongly against such practices.
......... my idea of going to forums is not to learn any new trading system. my endeavour is only to learn the thought process of traders whose posts I consider 'intelligent'. I must say here that I found your approach towards trading to be very simple & practicle and I have benifitted a great deal,just to add here I have a few propiretory trading systems WHICH works well for me .
the system used for trading is what we today know as BTST. this system was discoverd by a friend of mine
some 15-16 yrs. back (accidently) . this guy became a multi millioniare.
there was no technical or fundamental analysis used, just behavarioul analysis of the crowds.
coming to the 'accident', this was the time when nse had weekly settlement (not daily as it is today) the first day of the settlement used to be wednesday and the last day was tuesday.
on a particular tuesday this friend of mine was long (bought) reliance and ITC, he was in a loss and was waiting till the last minute for the prices to improve so that he could sell his shares. at around 3.15 pm the broker's terminal suddenly crashed and he could not square off his position. there was no other option but to pick up the delivery. in those days brokers normally did not give finance, hence he had to arrange for funds with great difficulty. the next day the shares opened around 3-4% above the previous day's close and he was saved frm the loss that he would have suffered on the previous day.
as the saying goes" winners dont do different things, they just do things differently". he could not comprehend as to why most of the stocks opened 3-4% above the previous close. this set him thinking and he reached the conclusion that since wednesday was the first day of the settlement, anybody buying anytime between wednesday and tuesday does not have to give the payment (as is the case with intraday trades these days, u do not have to give the payment if u square off before the close), but anybody not squaring off on tuesday would have to give the full payment for delivery.
he realized the following points of crowd behaviour:

1. most of the people speculate frm the long side, ie. they buy first and sell later.
2. most of the people dont want to pick up delivery, they want to speculate with little or no money.
3. most of the people do not cut their losses, they wait till the last moment to square off. hence there is a big sellig pressure on the close on tuesday.

now he did just the opposite. he arranged some funds and every week he would buy (normally the most liquid and investor fancied stocks) between 3.20- 3.30 pm on tuesday
and sell them off between 10- 10.15 on wednesday morning, irrespective of whether they opened above or lower frm his price. due to the crowd tendency of not wanting to put in the money, normally tuesday closings were depressed and wednesday mornings were euphoric because the same people who had sold off on tuesday would be ready to buy back on wednesday mornings as they would now get a full week without having to pay fr delivery.
he started getting a 10-15% return on a monthly basis and he steadily raised his amounts. this kind of return if compounded properly can do wonders and it did fr him.

then came the daily settlement and for sometime it seemed that this system would not work, but big brokers like india bulls and india infoline came to the rescue . they started giving their clients 7-8 times limits in intraday. all these trades were squred off forcefully by the brokers between 3- 3.15 pm, so this friend of mine made a portofoilo of liquid investor fancied shres of diff. sectors and the modus operendi remained the same. people come & buy stocks 7-8 times of the amount of money that they have and are forced to sell off @ whatever rate prevailing @ 3.15, hence he started buying between 3.15 and 3.30 and selling of next morning bet. 10 & 10.15. the same idiots would come and buy 8 times of their capital inthe morning. this way one delivery that he picked up would remain with him for many days, till the time the stock is showing upwards movement. the stt etc. for delivery was paid only twice. rest of the days it became just an intraday transaction , sold in the morning & squared off in the evening.
admittedly there are a few days in bet. when the market opens lower, the key is to book the loss on these particular days but more often than not, becos of the greed of the people to take up positions 8-10 times of their capital, the mornings open generally better than the previous close, becos the the overnight risk is eliminated and people get 8-10 times exposure again for the whole day.
there have been 2 major makt. falls in this period, yes he lost 10-20% in a single day a few times but made a return of over 100% in the preceding few months of the fall.and after the fall, the key is to lye low till the mkt. stabalizes and then reennter.
there are many other facets to this which are beyond the scope of this post. I have just tried to give an insight of the methodology of a very successful trader. there is no TA, no FA, just the behavior study of the masses and benefitting frm it.
although the market dynamics have changed a lot since which are again beyond the scope of this post, just to try it out,anybody can make a portfolio of any 8-10 liquid fast moving cash shares of his choice (shares that are not in f&o) and backtest it on the past six month or one yr data. what would have happened if he would have bought blindly half of his position @ 3.15 and the rest @ 3.25 everyday, and sold off the same between 9.00 and 9.15 the next morning. this can be checked on shres of ur choice. remember u keep the same stocks till the the time they are moving , so u pay the delivery commission & stt only while buying and selling once and everyday trade is treated as an itraday squareoff, sold in the morning and bought back in the afternnoon.

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I don't think TA is totally hopeless, they can reveal the *current* trend,
the shorter time frame the better, but TA seems to fail to capture any 'black swans' i.e high impact low probable events.

TA seems to be helpful to react rather than predict.

so far what I have understood is : use TA to react, remember black swans can ruin any TA predictions so *ALWAYS* use stop-loss protection,
a) no way there is any assurance from TA, given the past price history future can be predicted, as it can be possible in physics based on laws of cause-effect !

b)evidence problem: one of the trader published all his TA signals that was winning, but I bet some one can publish 2 times more failed TA signals, these failed TA signals should be also counted if TA has to be judged for its usefulness !

c) predicting future is hard problem. in physics there is something called 3 body problem, where adding a third body to the equation astronomically makes the calculation complex to predict the position of the bodies ( calculations include their mass, gravity, momentum, force, direction etc).
Stock market is more complex than 3 body problem of physics. so its just too 'hard' or NOT possible to crank out TA solutions that work, so easily-lots of ifs /buts to be tackled....there is a concept called 'computational irreducibility' i.e you just can't crank an equation to predict 10 steps ahead from now given current state of the system. The system has to go thru all the steps and we have to wait till 10 th step to see what actually happens.( better stick how much u can handle)

climatic simulations, stock market... all such things have their 'non computationally reducible' part in them ! SO guys, you just don't have a magic solution or hidden secret weapon from expert traders etc. Given a million traders, some one will definitely make the top list and you guys are going to wonder about his secret weapon, but there isn't any ! i.e , given million traders to start with, someone like Buffet with luck playing crucial role to emerge as big winner is NOT that surprising at all !

d) inherent randomness: There is inherent randomness, in computationally irreducible systems i.e you can generate random numbers/events which has nothing to do with PAST state of the system ! NO USE TREND THERE TO FIND A SYSTEM ON PREDICTION
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.if someone can buy n hold good shares for a long period of time, nothing can beat that, but a very few people are actually able to achieve that. I am speaking frm a trader's perspective.
the problem that we normally face as traders is that we try n capture the whole move and we all know that only a very small percentage of traders succeed. I would be personally very happy if I buy a stock for 100 today, sell it for 103 tomorrow and it goes to 110 in the afternoon, becos of the simple fact that whoever has bought it today has got a good profit and would want to buy it again tomorrow and there is a high probability that I would be able to sell it for 113-114 the next morning. what matters to me is the cumulative return at the end of the month. lets look at it in another way, if a stock goes up frm 100-400, and I am able to manage 150 Rs. frm that move, I would be more than happy, considering my risk is also less as compared to buy n hold.
regarding ur second doubt about stocks in downtrend opening gap down, thefirst thing is to book the loss and then the idea is to weed out such stocks from the portfolio and replace them with moving, investor fancied counters periodically.
as I said in the previous post, the market dynamics have changed now and the return in the above mentioned method is not outstanding anymore, but it is still above average. check it on a few yrs. back data and you can see the results for urself.
what I believe is that prices make charts and not vice versa.

 

[oilman5]

SOME MORE DISCUSSION ON TA
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1) As price outcome is Random ,hence TA has no effective role to guide future price direction.
2) Hence let us transgress to a 'Statistical Module' than technical indicator based module.
Let us participate in a healthy discussion on this to clear my & our mind from this confused state.I am just kick starting this in this thread.Ppl who are really honest to thy plz participate to clear our confusion,honestly we are here to develop ourselves ,so that our Equity curve is healthy than to 'Show Off' how knowledgeable one is,it will not help to pay our monthly bills.You/i/we may be a Gr8 knowledgebable guy ,USELESS,if not translated in MONEY.
There is also another growing feeling/understanding that we will have to Uplift ourselves to 'System based Trading',which majority of us agree more or less.
Hence to make an effective System we have to address the above Dialectical contradiction.

All indicators are derivatives of price & volume. Once u are experienced enough to evaluate price action only , the indicators will loose their relevance.

Another thing, we keep talking of risk/ rewards ratio..
Give a thought to " reward/ effort ratio"...
By using/analysing indicators etc we may be putting in that extra effort that may not add incremental value to decision making.

I will shortly post a review of my postion in a scrip based on price action alone. Presently back testing it with various indicators to see if it could have
yielded better results.

as a trader we r always in dilemma...
random price behavior is fact of market.
fortunately market sometimes shows trendliness
its then u have to take advantage..
news come in market as oppurtunity and or shock...we must handle it carefully
so being a budding trader balance of 3 element is essence...so is original build up of psychology
to trade in random characteristic of market u must require some random entry system...basically oversold condition is useful here....with small amount experiment may be tried...best is watch.
in trend case..ur gun powder is dry...so shoot accurately ..money will come autometically
its third factor...unknown news event skew distribution statistically make or brake one a successful trader.
for metastock user...regression slope with confidence limit a good system..
however we r greedy enough to create own catastrophy..normal failure to book small loss ..takes as system failure

system based trading is nothing but what suits u...a clear demarkation for what and what not...
aim is +equity curve...
knowledge is useless , unless converted to money...
i personally believe pattern helps...
a set of stock[micro view ..a detail idea why each of them shall click]
and some set of condition where u can judge quicker and accurately is must.
present theme world market...buy on strength...higher rel strength is a good indicator

another concept is probabilistic model....actually toughest to implement in real market.[i treat myself lucky when market behave as i thought...when wrong how to minimise loss...]
cyclicity and volatily r imp element about which i have not solved yet.
Cyclical & Volatility Should Be Used To Advantage, Not To Combat.....It Is We As Traders, Who Should Be Lightning Quick To Detect & Adapt...Accordingly.....

Somebody Said, "It Is Not What You Trade, But How You Trade."
There is a misunderstanding of exactly what technical
indicators are doing. One of the best ways to explain this is to explain
what technical indicators are NOT doing.

95% (or more, there are exceptions, such as volume) of all technical
indicators are NOT giving you any information that is not already
available from the chart action itself. In other words, technical indicators
are NOT giving you any new information whatsoever. Technical
indicators are simply focusing on one aspect of chart information that is
already their. They simply make it easier to see a certain characteristic of
market action that may not otherwise be quite as obvious. That is it.

And, a majority of the time, the focus, or the aspect that is being
made more obvious is where the current price is compared to where it has
been in the past.

For example, in a nutshell, stochastics are simply showing where the
current price is compared to the 14 day range on a percentage basis. If
the range is 100 and the price is in the upper 10% of that range, the
stochastics are going to show a percentage of 90% or more. There are
various things that are added to this, such as taking a 3-day range of
this level instead of the raw and exact number itself, but you get the
idea of what it is focusing on.

Now, is this information anything that is not seen from the chart
itself? Of course not. It is simply not as obvious to the eye, and that is
the benefit of the indictor.

One thing is for sure though, technical indicators tell what is and
what has been, but not what is to come. There is nothing magical about
them, there is nothing new that is provided through them. So be very
careful in how much emphasis you put on them in your trading.
And that is the Truth About Trading.
Ryan Jones
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Trading successfully and researching something are completely two different things. Transitioning from one role to another successfully is the key. Many times there is temptation to get too involved in research. Easy availability of software and tools also make this task easy. So temptation is to spend more time on research or keep tinkering. If you get caught in that role, your trading suffers. So I have clearly compartmentalized those two roles.

Many people have problem in role transition. I am in touch with some traders who are still fine tuning some of the ideas discussed here or researching other ideas. Many of them have the role transition problem. They are very successful in researching and developing and back testing ideas, but find it difficult to transition to trading the ideas successfully.

In organizational settings also you will find same things. Many people aspire for a role, but when they get it, they fail to perform in that role. Role transition is critical skill required if you want to go higher in hierarchy in organization. Same way role transition is the key in trading. Unless one is conscious of it, one can spend lot of time in roles not useful for trading.
We are simply seeking a filter that is smooth, non-lagging and (preferrably) non-linear and adaptive. Even if we succeed in arriving at such a filter, it's usefulness in trading will still need to be proved in the form of one more concrete system/s.
The Main Function Of T.a.is To Show The Demand And Supply Positionof A Market Or A Particular Stock. And Helps In Finding The Trend Of The Market.
But The Ultimate Goal Is The Profitable Trade. T.a. Helps In Obtaining That Goal By Giving The Required Direction./signal
due to question of drifting i contribute .
let us replace fullmoon ..with overbought...price has got full light.
newmoon..oversold..pessimistic days r over...light of price starts improving.
...so now its ta............
as on today..2 theme cyclicity and volatility ..i am working as time spares ..
cyclicity is workable...only phase i can little bit guess..but amplitude..till un predictable...hurst works ..definitely increase my knowledge..
mesa..is good...however .....to put entry ..hope it behave price will follow soon.......its not a traders tool...more a luck if i am right,.....next volatility.
it will rule indian market...
tradingmarket...site has done pioneer work on it,.also toby crabel.
read them it will be helpful...its justlike endgame..problem or oppurtunity slowly unfolding ...
most imp. +pt...it helps to execute[my weak pt zone]....since future..unfolding slowly...u can act ..decisively.
it helps to VISUALISE A TRADE....
callgiver..gives excellent idea...a biased directional view...an anticipatory reverse..to give ordinary mortal...a greed driven oppurtunity by which he earns..[but normally he himself can not put money on it......his own conviction is so poor........]
next comes analyst...an excellent if and but 'scenario view...always solve the crime..after it is committed.remember he is a failed trader...
more bad he lags conviction...he earns by postmortem.
.......if call giver and analyst...2 types of pro [prototype] r like this...where we ordinary mortal stand?...no where...
trading is not that easy man...its success rate <1%
.....fortunately successful traders help...not humbag like other profession.
here atleast ..3\4 successful ones r present....depending on their mood time availability..they come to resque/upliftment....fact is few survived titanic tragedy...u reqd a skill to survive in icewater.
...........what we can apply?
not a child...this time i am right...this time i am right...the joy of a callgiver...
....instead..how much money i can made out of this call.....
not an analyst...see i told u this....instead...with a risk analysis enter this trade...ready to be wrong always...get out early...AND FORTUNATELY PRESS THE WINNER AGGRESSIVELY when right
a trader is a far superior animal[god is right word]..he has to balance in between instinct of a callgiver and analyst...a futuristic view...an execution master ..+ applied money manager.
...he shall have to wait call is low risk one..give sufficient conviction to join..
face the dilemma if wrong...unlike praying ...quickly get out to save his hard earned money......only and only surprise occurs...he has to be WISE to his full capability.
judgement of ta...is basically search for continuity...and or reverse pt...
purpose entry /exit..
...for simplicity pl remember...after volatility contraction mode...volatility expansion shall come..directional bias u have to check...
for objective analysis...compare 5day volatility/60day volatility..[.in metastock]......just check in gr,A, stock..
...i tell u...will get good money..[novices dont see this adult movie]
...............................................
Like I have always pointing out the current fashion is “It is all in the price Action”.

True eventually it is all the price action. What amuses me is many newbies to TA also say this. In my opinion to evaluate the price action by just looking at the chart takes years of experience, reading hundreds of charts. Or ..I wonder am I dumb?

This is where the indicators come into picture. The indicator themselves try to depict the price action in different ways so that it could be understood in a easier manner and one can develop certain rules to trade. Indicators are of great help for those starting TA and they gain experience slowly their understanding of the price action and effect of volume get better and eventually they may use less and less of the indicators. Another thing that amuses me is that those very people who say it is all price action have been posting chart with their own indicators embedded in them.

After years of studying charts, the charts themselves tell me a lot and yet I continue to use Indicators though many of them are my own. I don’t still trade without Indicators.. Or ..I wonder am I dumb?

Agreed that the very process of the market is a random one. TA..let us say…the more conventional one… works on the principle of probability. Sure, the past behavior of stock would not repeat in future. Here we are talking of the probability that ..say . a stock making higher high would continue to do so in the near future though there no guarantee.
We are talking of the probability that a stock which has seen lot of buying … over bought…would soon see selling on profit booking. ( here I would like to say that the current OB and OS indicators are rather lacking really). The randomness of the stock market has prompted many like Ehlers to apply the mathematics of random signal analysis to the stock market. But what is surprising is that many of simple conventional indicators quite well mimic the advanced mathematical Indicators…like ..EMA(EMA) could very well mimic the Laguerre Indicator…
1 simple logic,without datas nothing works & data is derived from O / H / L / C / Vol / OI .So any derivative of Price is nothing else but Technical.
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one line "use whatever you are comfortable with". let me tread the middle path.

what do you mean by an indicator? if it is a tool that indicates something, then even P and V can be considered to be an indicator and so thats the end of the matter. whatever indicates what you require, use it.

if u believe that indicators are the tools that are DERIVED from P, V, T etc, then you can view it like this: indicators help you in seeing the snapshot. How?
It may be cutting through the noise;
or combining several elements that you cannot ordinarily "derive" by just looking at price volume etc. ;
comparing several elements OTHER than price and volume;
cutting out subjectivity from your PV interpretation etc.

So what snapshot do you want? This will very well answer your indicator requirement.
1. Overall market direction over the different time frames.
2. Quality of the market move.
3. What the big money is doing?
4. What is the speed of the move?
5. What is the market sentiment?
6. What is the strength of the market move?
7. What is the volatility persisting over the current period?

These are some of the questions that will need mathematical manipulation of price, volume, time and other factors over a certain period of time, which essentially we call as INDICATORS.

In case you dont need these and just want to see if in the last 1 hour what P,V is doing to take a position for the next 3 minutes, go ahead. thats your NEED. Nothing else is required for you.

Hope that answers to some extent.

To end, theres no answer as to whether it is lunar cycle or bicycle that works. neither is it the issue of whether it is a non stationary time series or just random numbers. it again depends on the way you look at the market and utilize your theory to interpret it.

whereas Ehler's Dominant Cycle Analysis depends on the presence of real cycles, Juriks JMA is a causal nonlinear adaptive filter that cleans non stationary time series data, while william blau balances smoothness and lag in momentum oscillators by using double smoothing.
If you can replicate the situation that led to the initial results, you will get the same outcome over and over again. however that is not possible in the market. so the results will not be the same. and as karthik said, this is where the RM becomes so important.

if yo study the construction of the indicator, you will immediately know where they will fail, and in situations like that, they wont be dependable since you did so much research on the Jurik MA, let us take MAs as an example. You know by looking at the construction whether they will lag more or overshoot more in different conditions. so during a rapid breakout, you know which one will be more dependable.
You will precisely know where it will fail and not only how it will fail. For example the RSI will be in overbought levels for long time when the market is in strong uptrend. dont we all know this fact. why is it so? only because of the way it is constructed. will you take this overbought signal? how do you define overbought and oversold levels in the first place. These are some pointers that can get you there. it depends on your indicator. for example if you have an oscillator that looks at OB and OS during trading range, it will start failing in the timeframe where market has broken out of the trading range.

on the other hand if you use an indicator that identifies range bars with a level of volatility, it will never fail.
To this we can add a few more things to assist more like

1. Market sentiments.
2. Bullish or Bearish consensus.

what you see in the charts is nothing but above (1) and (2).

Overall, it is like that you got to choose that fits your style to follow it and keep improving.

"One man's noise is another man's Ferrari". So in a higher timeframe the market may be in a range and your OS/OB may work perfectly. But in a lower timeframe, it may have broken out like a raging bull. If you put the same indicator on this timeframe, it wont work. This has no direct connection with the answer to your question, but to answer properly, this is essential, as you cant use the same OB/OS etc on daily and 5-min chart and get the same result.

as for level of volatility, it may be the ratio of historical volatility of X(N) and X(N/M) days (basically 200, 50 etc). I am not putting any absolute value, level or indicator for the simple reason that I am trying to answer froma conceptual viewpoint that can be mapped on to any indicator.
If you understand market structures and indicator construction, you'll know exactly what it is.the issue here is that when i use X days Narrow Range or Y days volatility, I am always using a relative timeframe. But when I am using a RSI overbought level, I am not using such a thing, I am using a level that is fixed by someone, which is not correct for all market phases. Can we use a self-adaptive RSI? Or check where RSI has been in previous Bull/Bear phases for this security? The options are endless.
you will find some of the specific answers in Constance Brown's book and also Encyclopedia of Technical Analysis by Colby. Many such articles about self adaptive RSI etc have appeared in Technical Analysis of Stocks and Commodities.
You will learn in which conditions this MA will fail. If you can map the same market condition to your findings, you'll definitely know. In fact many users put "artificial" closing data 30 mins before the mkt closes to find out different scenarios. There is a good article with guide stats in TASC about how to predict MA crossovers 1 day in advance.
copied from-http://www.jurikres.com/down/product_guide_.pdf
so ....Mathematical Indicators will always lag,
1)because of them being derivative of price or whatever
2)because of fixed time
3)most importantly,they are based on assumption that a trend in motion will continue to do so,just like Newtons first law of motion.
...............................
for that matter TA will always lag, cos as a definition, we are looking at PAST price behavior, whether you look through price/volume or their derivatives.
Now can this be used to predict future behavior. Dmitris Tsokasis has put a very good article in TASC about Predicting MA crossover 1 period in advance. youwill know the price point at which the crossover will happen TOMORROW. whether it will actually happen or not, noone can say.

And Tradecision etc has a NN model that throws up predicted mkt levels based on your inputs and even compares predicted vs actual. even Jurik has NN solutions to build a LEADING indicator.

coming to my point, i never commented as to whether indicator will lag or lead (i have never been able to make a leading indicator yet). i always depend on price action to show the way. what i have replied to asish is that indicators do assist, as do price. but at the same time, a carefully formulated indicator will be more accurate than others. when a stoch reaches its oversold level, you can say that THERE WAS A FALL in prices few periods ago.
When the stoch has just turned down from overbought, you expect it to continue downward, just as you expect price bar to continue downward if it breaks out of a channel downwards. but that doesn't always happen. that is because of the construction. we have heard of the Stoch Pop for a long time now. whether it will actually continue is anybody's guess.
but in certain cases, indis can give a very good overview of the market that you cant get by looking at the chart. lets take a few examples:
1. tick, ticki and trin. seeing this you can immediately know what the overall mkt is doing at a flash. and you know when the mkt is out of synch. wizard mark cook made his millions by using this a lot.
2. A/D line works in the same way.
3. can you look at a price chart immediately and tell me about volatility sqeeze at that point accurately?
4. Can you look at a days action and tell me what was the level of buying and seeling at different prices. whether large amounts were sold at the high and then it came down, or first it came down and then large amounts were bought at the low and then it went up? you can do this by looking at the tick data with volume, or by using AD/Money Flow in one go or proprietary calculation that I do (many many others do too). in the first case you are making note yourself, keep adding/subtracting volume for each tick etc. in the second case the same data is mathematically manipulated to give the snapshot in an instant. look at CV's blog and u'll see how volume bars print instead of normal prepackaged ones.

when we are talking about MA, they will always lag or overshoot. that is th way they are by definition. so we cant really talk about indicators lagging by using MAs.

we have to get out of the bounded mindset that indis are the ones packed in the charts or popularized by sellers/gurus. we have to use a broad based definition of anything that indicates what we want. e.g. instead of flipping through charts to find NR bars, my code prints an NR bar in an instant. indis dont have to be complicated maths. they can be simple ones serving your purpose.

btw there are quite a few range projection indices too that try to project n-period range.

..............................
of course market has cycles. there is no doubt about it. but can we identify them accurately. thats a different matter altogether. contrary to gurus and sellers, dominant market cycles are not time symmetrical. only in hindsight you can identify them with 100% accuracy.
What I learnt from going to be an objective TA trader

dont accept what is dished out. question. question, question.
research, research, research.
understanding market structures, data mining and decision analysis are far more important during initial development stages.

why did i suddenly put it here? to serve as a guidance for all. when using indicators ask yourself
why? why is RSI bounded by 100?
ask what? what happens to stochastic when it is at OB level when price falls than when it is at OS level.
Ask how? how is stoch calculated? how does it affect its ability? how do channel methods operate.
ask when? when do such indicator behavior arise such as stoch pop, RSI failure swing etc.
and ask where? where can i find info about all these things.

initially i also thought that take some indicators plug them, at the most optimize them..and presto the cash registers start jingling. it doesn't happen that way (u know by now i'm sure). though no two indis are made equal, a careful study of the ones where u r using, a written description of what it does and doesn't, when it does and doesn't, etc help you use it successfully in different market conditions. even the simplest of indicators can give u good results. indis by definition and construction are very PRECISE tools. so they will work under certain mkt conditions, and not work AT ALL in others. which path you want to tread is abolutely your choice.
Most people are just using Indicators blindly following rules explained in various web sites /forums/books. Few try to understand what these mean and how we can interpret them better. Few ask the question.. why and how..
we have to get out of the bounded mindset that indis are the ones packed in the charts or popularized by sellers/gurus. we have to use a broad based definition of anything that indicates what we want. e.g. instead of flipping through charts to find NR bars, my code prints an NR bar in an instant. indis dont have to be complicated maths. they can be simple ones serving your purpose.

 

[oilman5]

As I have been pointing out earlier in some other thread, concentrate on price and volume. Not on complex indicators. Why? Reason is simple. Market will move when majority decide to take trade in a particular direction.
It is big institutions and persons whose buying or selling can significantly influence the movement of share price. Their concerted action is the decider. One more thing. It is not so easy to decipher next movement of price as the ameture trader thinks. Reason for failure of these retail guys are many, which is beyond the scope of this post. Further, successful trading requires proper entry, proper size positioning, proper trade management and proper exit of course all with strict decipline and under strict emotion control. This will be too much for majority of these retail guys. One successful trade they think they can conquer the world. Next trade they throw all caution to the wind.

if big instution dictate everything then baring bank or amaranth wouldnt gone bankrupt. the same goes for proper enrty, proper size positioning, proper trade management etc etc. very good to preach, but when the market opens in a sell freeze all goes for a toss, whatever "strict decipline and under strict emotion control" the person may be in.

i am fortunate to come accross some sucessful traders in my short life span. they never seems to have an attitude of conquring the world. infact was surprised to see the down-to-earth attitude.
but the key to sucess in the market is not the knowledge but the proper implementation of the same.

how good the doctor may be, he will not treat their own kins. same with lawers and so on. why? the answer is know and is very logical. but dont you think the same principal should apply with traders too. sir, with due regards, its very easy to say "adhere to them", when the basic principal are against us.

well, all i can say, nothing should be kept to chance. even those "unexpected events" should be accounted for while designing a system. if not then i am sorry to say but that system is half-cooked.

i am not asking to skip education, but conventional education is burdened by generalisation, which in turn is destined to fail. i give you an example:

just now one of my trader friend visited me armed with an issue of a highly popular vernacular magazine. as i browse through the mag, one article refers to a seminar (conducted by a very respected name here in calcutta) where the guru says that most of us (the small investors) trade with 90% if their capital while 10% is meant for long term investment. while the reverse is true for any fund. the statement is backed by a fund manager of an reputated house (also present in the seminar). this statement is a clasical example of conventional wisdom, but generalised to its nth, making it defunct.
................................MACD
Developed by Gerald Appel, Moving Average Convergence/Divergence (MACD) is one of the simplest and most reliable indicators available. MACD uses moving averages, which are lagging indicators, to include some trend-following characteristics. These lagging indicators are turned into a momentum oscillator by subtracting the longer moving average from the shorter moving average. The resulting plot forms a line that oscillates above and below zero, without any upper or lower limits. MACD is a centered oscillator and the guidelines for using centered oscillators apply. .........

MACD Formula
The most popular formula for the "standard" MACD is the difference between a security's 26-day and 12-day Exponential Moving Averages (EMAs). This is the formula that is used in many popular technical analysis programs, including SharpCharts, and quoted in most technical analysis books on the subject. Appel and others have since tinkered with these original settings to come up with a MACD that is better suited for faster or slower securities. Using shorter moving averages will produce a quicker, more responsive indicator, while using longer moving averages will produce a slower indicator, less prone to whipsaws. For our purposes in this article, the traditional 12/26 MACD will be used for explanations. Later in the indicator series, we will address the use of different moving averages in calculating MACD.

Of the two moving averages that make up MACD, the 12-day EMA is the faster and the 26-day EMA is the slower. Closing prices are used to form the moving averages. Usually, a 9-day EMA of MACD is plotted along side to act as a trigger line. A bullish crossover occurs when MACD moves above its 9-day EMA, and a bearish crossover occurs when MACD moves below its 9-day EMA.

What Does MACD Do?
MACD measures the difference between two Exponential Moving Averages (EMAs). A positive MACD indicates that the 12-day EMA is trading above the 26-day EMA. A negative MACD indicates that the 12-day EMA is trading below the 26-day EMA. If MACD is positive and rising, then the gap between the 12-day EMA and the 26-day EMA is widening. This indicates that the rate-of-change of the faster moving average is higher than the rate-of-change for the slower moving average. Positive momentum is increasing, indicating a bullish period for the price plot. If MACD is negative and declining further, then the negative gap between the faster moving average and the slower moving average is expanding. Downward momentum is accelerating, indicating a bearish period of trading. MACD centerline crossovers occur when the faster moving average crosses the slower moving average.

MACD Bullish Signals.........
MACD generates bullish signals from three main sources:

Positive Divergence
Bullish Moving Average Crossover
Bullish Centerline Crossover

A Positive Divergence occurs when MACD begins to advance and the security is still in a downtrend and makes a lower reaction low. MACD can either form as a series of higher Lows or a second Low that is higher than the previous Low. Positive Divergences are probably the least common of the three signals, but are usually the most reliable, and lead to the biggest moves.
A Bullish Moving Average Crossover occurs when MACD moves above its 9-day EMA, or trigger line. Bullish Moving Average Crossovers are probably the most common signals and as such are the least reliable. If not used in conjunction with other technical analysis tools, these crossovers can lead to whipsaws and many false signals. Bullish Moving Average Crossovers are used occasionally to confirm a positive divergence. The second Low or higher Low of a positive divergence can be considered valid when it is followed by a Bullish Moving Average Crossover.

Sometimes it is prudent to apply a price filter to the Bullish Moving Average Crossover to ensure that it will hold. An example of a price filter would be to buy if MACD breaks above the 9-day EMA and remains above for three days. The buy signal would then commence at the end of the third day.

A Bullish Moving Average Crossover occurs when MACD moves above its 9-day EMA, or trigger line. Bullish Moving Average Crossovers are probably the most common signals and as such are the least reliable. If not used in conjunction with other technical analysis tools, these crossovers can lead to whipsaws and many false signals. Bullish Moving Average Crossovers are used occasionally to confirm a positive divergence. The second Low or higher Low of a positive divergence can be considered valid when it is followed by a Bullish Moving Average Crossover.

Sometimes it is prudent to apply a price filter to the Bullish Moving Average Crossover to ensure that it will hold. An example of a price filter would be to buy if MACD breaks above the 9-day EMA and remains above for three days. The buy signal would then commence at the end of the third day.

A Bullish Moving Average Crossover occurs when MACD moves above its 9-day EMA, or trigger line. Bullish Moving Average Crossovers are probably the most common signals and as such are the least reliable. If not used in conjunction with other technical analysis tools, these crossovers can lead to whipsaws and many false signals. Bullish Moving Average Crossovers are used occasionally to confirm a positive divergence. The second Low or higher Low of a positive divergence can be considered valid when it is followed by a Bullish Moving Average Crossover.

Sometimes it is prudent to apply a price filter to the Bullish Moving Average Crossover to ensure that it will hold. An example of a price filter would be to buy if MACD breaks above the 9-day EMA and remains above for three days. The buy signal would then commence at the end of the thA Bullish Centerline Crossover occurs when MACD moves above the zero line and into positive territory. This is a clear indication that momentum has changed from negative to positive, or from bearish to bullish. After a Positive Divergence and Bullish Centerline Crossover, the Bullish Centerline Crossover can act as a confirmation signal. Of the three signals, moving average crossover are probably the second most common signals.

Bearish Signals
MACD generates bearish signals from three main sources. These signals are mirror reflections of the bullish signals:

Negative Divergence......................

Bearish Moving Average Crossover
Bearish Centerline Crossover
Negative Divergence
A Negative Divergence forms when the security advances or moves sideways, and the MACD declines. The Negative Divergence in MACD can take the form of either a lower High or a straight decline. Negative Divergences are probably the least common of the three signals, but are usually the most reliable, and can warn of an impending peak.

There are two possible means of confirming a Negative Divergence. First, the indicator can form a lower Low. This is traditional peak-and-trough analysis applied to an indicator. With the lower High and subsequent lower Low, the uptrend for MACD has changed from bullish to bearish. Second, a Bearish Moving Average Crossover (which is explained below) can act to confirm a negative divergence. As long as MACD is trading above its 9-day EMA, or trigger line, it has not turned down and the lower High is difficult to confirm. When MACD breaks below its 9-day EMA, it signals that the short-term trend for the indicator is weakening, and a possible interim peak has formed.
Bearish Moving Average Crossover.

The most common signal for MACD is the moving average crossover. A Bearish Moving Average Crossover occurs when MACD declines below its 9-day EMA. Not only are these signals the most common, but they also produce the most false signals. As such, moving average crossovers should be confirmed with other signals to avoid whipsaws and false readings.

Sometimes a stock can be in a strong uptrend, and MACD will remain above its trigger line for a sustained period of time. In this case, it is unlikely that a Negative Divergence will develop. A different signal is needed to identify a potential change in momentum.

Bearish Centerline Crossover.....
A Bearish Centerline Crossover occurs when MACD moves below zero and into negative territory. This is a clear indication that momentum has changed from positive to negative, or from bullish to bearish. The centerline crossover can act as an independent signal, or confirm a prior signal such as a moving average crossover or negative divergence. Once MACD crosses into negative territory, momentum, at least for the short term, has turned bearish.
The significance of the centerline crossover will depend on the previous movements of MACD as well. If MACD is positive for many weeks, begins to trend down, and then crosses into negative territory, it would be bearish. However, if MACD has been negative for a few months, breaks above zero, and then back below, it might be a correction. In order to judge the significance of a centerline crossover, traditional technical analysis can be applied to see if there has been a change in trend, higher High or lower Low.

MACD Benefits
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One of the primary benefits of MACD is that it incorporates aspects of both momentum and trend in one indicator. As a trend-following indicator, it will not be wrong for very long. The use of moving averages ensures that the indicator will eventually follow the movements of the underlying security. By using Exponential Moving Averages (EMAs), as opposed to Simple Moving Averages (SMAs), some of the lag has been taken out.

As a momentum indicator, MACD has the ability to foreshadow moves in the underlying security. MACD divergences can be key factors in predicting a trend change. A Negative Divergence signals that bullish momentum is waning, and there could be a potential change in trend from bullish to bearish. This can serve as an alert for traders to take some profits in long positions, or for aggressive traders to consider initiating a short position.

MACD can be applied to daily, weekly or monthly charts. MACD represents the convergence and divergence of two moving averages. The standard setting for MACD is the difference between the 12 and 26-period EMA. However, any combination of moving averages can be used. The set of moving averages used in MACD can be tailored for each individual security. For weekly charts, a faster set of moving averages may be appropriate. For volatile stocks, slower moving averages may be needed to help smooth the data. Given that level of flexibility, each individual should adjust the MACD to suit his or her own trading style, objectives and risk tolerance.

MACD Drawbacks
One of the beneficial aspects of the MACD is also one of its drawbacks. Moving averages, be they simple, exponential or weighted, are lagging indicators. Even though MACD represents the difference between two moving averages, there can still be some lag in the indicator itself. This is more likely to be the case with weekly charts than daily charts.

MACD is not particularly good for identifying overbought and oversold levels. Even though it is possible to identify levels that historically represent overbought and oversold levels, MACD does not have any upper or lower limits to bind its movement. MACD can continue to overextend beyond historical extremes.

MACD calculates the absolute difference between two moving averages and not the percentage difference. MACD is calculated by subtracting one moving average from the other. As a security increases in price, the difference (both positive and negative) between the two moving averages is destined to grow. This makes its difficult to compare MACD levels over a long period of time, especially for stocks that have grown exponentially.
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If you increase the Time axis to say 30 yrs then Nifty is rising.So to measure any movement there has to be a Time axis.Shortest the time frame more uncertain is the movement.Now you decide which is your time frame.
Any devise (Technical etc) does work in judging the Past movement more accurately than Future.Our effort is to get more than 75% success for Future.Hence any thing less than 75% strike rate is a big NO for any whole time trader.
Trading is actually monotonous & boring after some time , but that should not deter us for honing self & the arsenals continuously,putting efforts everyday should become a habit which one should be unaware of.(Just yesterday Jesse was telling me he was about to back test a new thing after having break fast).Consistence is rare to attain, hence once attained we can not let our Grips to slacken ,.....we will do so only to our own peril to perish.This is true for any proffesional path.
A bad workman quarrels with his tools.Indicators are not systems, they are only tools.
If you use the right tool at the right situation it will work.Knowledge and skill of the trader makes them work.
Suppose you want to open up your computer cabinet, you may need a star screw driver.You can manage with an ordinary screw driver or even with your kitchen knife. A pipe wrench is totally useless in this situation. Can we declare the pipe wrench a useless tool ?
There are hundreds of ways to make money in markets.stick to the methods that works for you, but give respect to other methods also.
.........a trader is like a soldier and he needs to protect himself by putting on shields , bulletproof jacket..etc..though this stuffs dosent gaurantee him from getting killed but increases his chance of surviving ...same way lot of observations on tickers, stoploss ,charts helps the trader then the one who trades blindly.
if we know how our tools work then that can be used for some purpose.Let me cite a simple example say in the Last phase of a Strong Trend;the irrational / exuberence phase;when we can find Bigger Fools than us to buy at still higher price;there when the Reversal sets in,many of us get caught,or greedy like me who still Hold on believing it will go UP after this correction........there a Simple/Exponential Moving Average can warn us well ahead.
Indicators work as good or as bad as any trend following system.What is an indicator ? It is a tool you incorporate in your decision support system with proper stops/profit taking rules and good money management to make a complete system. Take a simple indicator like RSI,tune it to the timeframe you trade and the cycles duration in that timeframe and it will indicate the opportune overbought/oversold zones,make sure that it doesnot stay there for more than 5 bars to avoid getting cought in a runaway move against you and ones it comes out of OB/OS zones,take entry with swing high or low as stoploss. Does it gurantee sucessful trade ? Nothing in the mkt gurantees that and once you have a proper posn size and stoploss in place you need not worry.It will catch some very profitable moves some small losses and some scratch trades BUT never large losses as the stops will ensure that.

I find that indicators work in 70 % time which the mkt spends going nowhere(in a trading range ) which is a pretty good and in 30% time when the mkt is trending the indicators will give few small losses but not too many as the mkt trend will prevent repeated entries and repeated losses.On the other hand in 70 % non trending mkts,the trend following systems will give repeated entries and repeated losses. Another point is indicators or oscillators will give you entry at much better price than a trendfollowing system ( as they will wait till breakouts/breakdowns and will be away from stoploss and may inflict greater damage to one's trading capital) and the method which works in 70% mkts is it not a "holy Grail" with proper stops and money mgt ?

It all boils down to the reward/risk equation and expectation of a system.I know a trader who trades on hourly RSI and makes money every month which will be of envy of many trend followers and day traders.Another trader friend trades on hourly TRIX and is equally successful.It all boils down to what works for one person is the best for him.

And lastly,a miserable failures of grand daddies like Robert Prechtor ( Elliot Wave) and Richard Dennis (Turtles fame ) will prove that there is nothing like what works and what doesnot. The Q is what works for me and the trading system with which I am mentally in tune with is the best for me.
........,indicators do assist a bit in decision making but they are not the only reasons for taking a trade because they dont give consistent results and their usage depends upon the market conditions....some indicators work well in a trading market while others in a trending market ..
secondly,how much do indicators asist in risk management?.. for e.g ..the daily RSI gave a sell signal on nov 5th 2007 and the buy signal came on 23rd of jan 2008...if we had gone with RSI we would have missed all-time highs because we sold much earlier and we would have witnessed a carnage to our portfoilios since 23rd jan (being the day we bought)..i can keep on going with such e.gs for many of the popular indicators like MACD , OI (we all know of the number of stocks in ban period confirming that the OI was rising in the direction of the trend indicating that the trend is in tact) etc...according to me a simple pivot or a TL does a better RM job than any of these indicators
thirdly,Do they asist in position sizing ? definitely not for e.g. MFI in daily charts asked me to buy when DLF was at 900 , now again it asked me to buy at 500(surprised that there is not a single sell signal in the past 5 months) , had i bought at these levels it is called averaging down which is aginst TA rules ... a simple pivot break made me buy DLF at 440 which helps me positions size better as it is hell of a lot cheaper now than at 900.
Assistance of indicators also depends upon who are using them ...kathik may interpret MACD better , asishji might use RSI better while i find using OI data a bit helpful for my trades ...for e.g if i find the stock/or index where the majority of OI addition happened on days when the stock was up and not down ,i will mark it in my personal dairy and go short the moment it shows some weakness because the downside pressure on long unwinding will be more on such stocks which will inturn give me more ROI in a short time but this is contrary to the popular belief that addition of OI on up days is positive for the stock .... yes , it is a positive but the next time we find a LL-LH pivot break on the downside we will give more preference to go short on the stock that has seen more OI build up on up days than on down days for e.g.tata steel and the entire scenario can work the other way also for e.g a stock/index with extreme shorts for e.g. nifty was at a 60 pt disc day before yesterday trading near a crucial support and i know even a mildly good global market will make the bears panic and we know what happened yesterday. Like this there are many ways we can interpret the OI data and i know of many people in traderji who are using traditional indicators with modifications done by them which gives them a edge while trading real time...
To sum up , especially for people who are new to trading should avoid trading based on these fancy indicators and should trade only on time tested methods (like saints)...later on as you gain experience you will find ways to use the indicators to better use through personal research and not through books which only tells you how to use them (and loose money).

............................
Wise men of our field has always been harping on 1 point ;that follow PRICE
only.Smart men of our field always harp on 1 point Price is deceptive it will
never show us it's intention & to find out that we have to get rid of 'Noise'
etc.
Now with the help of TA how can we Define;present status;Determine;Future course;
Decide;our action based on data with its analysed input in our hand.

Here enters different 'School of Thought' := starting from MA cross over to
Mkt-Profile.

Being confused about Which one to follow we land up trying to Learn few or most
of the Methodology but in this proccess we learn some 5% some 40% and after quite
some time start to believe nothing is absolute,nothing works most of the time.
In this scenario of multiple choice of Methodology we find that almost most of
the 'Methodologies' address both 'Price' & 'Time' ,either by using 'Periods'
in the code they garner information from past OR by using the Charts interface
(as Trend Lines do).
Here the Smart guys always warns us that information of Past is no SURE way to
understand Future.They will show us Statistically that a H & S formation is a Crap
to follow.They will also use Past but in a more scientific way by 'Nural Network'
'Genetic Algo' etc etc.

I always hated & still hate Bookish Knowledge which where never practised in Mkt.
If i utter 1 single word 'Data Mining' there will be 100 voices telling me what is
the ULTIMATE way to do that,People who have actually used the concept ,& from their
data bank of raw data could bring out the significant information,i only Respect them
& will willfully Listen to them attentively.

Being a dumb i only understand that Globe's greatest Brokerage/Fund house had the
resource to rope in Gr8 brains to analyze Data,amongst them these Houses had harnessed
almost all the Super brains from Russia to Antartica but they have ALL being HIT
in the belly by the US Sub-Prime crisis,most of them where floored.



So what should i do now.I take recourse to another 'New Methodology' & pursue that
Dream
OR
depend on my Trading a/c's ledger to find out which Methodology has given
most & follow that with blinkers in my vision towards 1 Goal of Mastering that
Methodology.


That is the Precise reason i always believe to earn atleast Rs 200.00 everyday consistently for few months/years ,if i can do that i am through from this Maze.
we should use,here enters a perception angle,past experience,so EVEN for a Simple Trendline we can get confused so absolute conceptual clarity is most essential while dealing the subject of Technical Analysis.
Charts are a visual record of price movement. If one isn't interested in price movement, one may not find much of value in them. As a map, however, they are about as close to the "territory" of price movement as you're going to get,

But then we begin to fiddle with it: time bars, volume bars, tic bars, range bars, equivolume bars, candles, lines, histograms, etc. Plus all the infinite number of indicators with all their variations. Eventually price is nearly lost, and we can't even determine the trend.

In the market, the transaction and the agreed-upon price is the "territory" and everything begins there. If we mess it, or ignore it entirely, we become disconnected with what the market is doing. In order to know what to do at the time that one needs to do it, one has to be connected with what is happening in front of him, not on a fanciful representation of it.
Trader has to walk the territory/survive, not just trace a route on a map, a route that may not even exist in the present.
..........................
Indicator/Osc :=
Mkt never ever shown us it's basic intention blatantly (except in Parabolic drop or rise)
Hence we put the Datas through some mathematical/statistical process to eliminate the Noise & try to bring out the hidden intention of the Price/Mkt.
Another aspect than Limiting the info from Data.
Now we want to garner information of Price so that from it's
past behaviour try to figure out it's future course of action
which the Mkt is trying to camouflage from us.Here when ever
we put Period we not only induce Sliced info or Limit info,
we here also incorporate Time dimension means in Time perspective
we view Price maybe the Time is sliced but we view Price vis-a-vis
Time.
This Time is also essential becoz we need another parameter to
understand Price,that means from Yesterday's close (Time) the
Price Today( another Time unit ;Today= Yesterday plus one day)
is Up or Down so with a reference Fixed parameter we can form an
opinion about Price.Here our Time parameter we tend to FIX ,we always
say if this Hrly Bar close is above so & so Price then good,the EoD
Closes where is Important.
Why becoz we have FIXED the Time or Reference Parameter.Here enters
another age old Fixation amongst Trader community about TICK data
in intraday format or 1 min/5min/30min/60min.
See how indirectly we are also accepting the vagaries associated with
Time & see how we started with Price analysis & to analyse that with a reference Parameter Time; we slowly incorporate ALL the vagaries of Time.
Let me elaborate a little.
Few years ago i found Nifty respected 13 Days MA,means unknowingly i found
that there was some type of 'Cyclic' funtion of Time.Infact there are a
seperate complete 'School - Of- Tought' ,there are Technical Traders who
trade by cycle.'Gann' has a Time Analysis,even we have Fib-Time analysis,
now forget about again another chapter on Time study but we the Intraday Trader see everyday that near or after 12 Noon,now-a-days Price reacts differently.
So now understand by incorporating Period we have also incorporated the
vagaries associated with Time.
Probably i am boring you,but see how we started to Analyse Data for Price
devoid of Noise with Indicator & Osc & slowly facing different aspect to
deal with.

We as a Trader want to know atleast a confirmed BOTTOM of an ongoing Down Wave,where this down wave stops to reverse ; at what precise Price zone,so that we can Average there,or we make a Fresh Long for a fast appreciation of Price.
Does that mean that is the Bottom FOREEVER !! no this MAJOR WAVES BOTTOM .
Renu mentioned that on every rise there will be Sell ,right for that very reason we become SPECTATOR & WAIT & WAIT in side line,this indicator can guide us WHERE to Buy ;when to take action;when to Avg;so that with a fast apprciation of Price can Lighten my Portfolio.
This indicator until now has SHOWN us one day in advance the bottoming PRICE zone only TWICE since Jan,not very frequent but in both occassion minimum 900 points plus.
So when we got that in Jan does it meant Mkt has bottomed ; then why we got it again in Oct ? A major waves bottom was experienced in both occassion.

My assertive statement is this that a trader with his/her dedication and Focus can develop a 'Price Derivative' ;a tool can be compared as a surgeon's scalpel ,precise incisions,WHERE TO ENTER & WHEN TO ENTER.
That was my assertive statement nothing with present Mkt. bottom.
understand these 3 Lines ,Blue/Light Green/Deep Green.They are designed so as to catch the ensuing 'Pivotal Low' price zone to happen in next bar from where the Reversal would start.This is designed in Metastock (the code for which is self designed & not available in public domain) after one understands 'Saint's Pivot' concept the next quest (starts) is to catch the PROBABLE PIVOTAL LOW (which has yet not happened but may happen in Next bar)early so the Stop is nearest,& to get the maximum run/juice.This is a new concept which defies the basic premises that 'Predicting Future is Futile',hence not advisable for newbies.-uashis

 

[oilman5]

"I always think market as war between two equally strong opponent Bulls & Bear(anyone can turn the table anytime, so don't be partial ). Although they have completely different characteristics. We have to thinking sensibly how market behavior is changing using these price action.

In bear markets, prices fall faster than they rise in bull markets. Down moves are sharper and rallies tend to be quicker than they are in bull markets. Due to that reasons market moves down much faster in corrections also than it moves up in rallies.
Now from the price action of last two days (along with other world markets) it is obvious that short momentum is shifting with bear. All near term support in smaller time frame charts like 30m is gone away(gave us enough big profits also ). So now it is time to look at daily(next is weekly ) chart for near term support for bulls(possible target for bears: ).
So, it is next possible boundary(doted thick blue line) where bulls have some strong ammunition to face bear.
From my experience, whenever such big fall occurs in short time(several support broken easily one by one), there is a chance of damage in short term trend, as daily & weekly charts starts affecting(if price is not reversed within few days). We have take care of this to make big profit, there is always chance of bigger profit in beginning of a trend change. That blue line can be next possible target for bears(next support for bulls).
.......now it is about Patterns using Sup/Resistance & Gap Trading Strategies.
Another important observation is 50% fibo retracement of last big move on daily charts almost coinciding with that gap up support. From tech analysis point, whenever multiple resistance/supports coincides at one point(it becomes critical), it can act as a magnet and can creates hollow zone below and above also.

That is the my way of thinking without being partial to bull/bears. Giving equal respect to both. Hope it helps".....H.C.

 

[oilman5]

here is some of my view on TA
...........................................
1]why TA - there exists only 2 analytical method, FA and TA. Because of accounting concept , u should start with Fundamental . Knowledge of detail of management a/c, balance sheet-P & L,Cashflow , Ratio -Proforma study,Sensitivity & forecasting ability -DCF-FCFF, understanding valuation .
A thorough study on MICRO + MACRO economics , corporate finance as well as Investment analysis ,Porter Model - prerequisite for FA.
So one may learn it, and then try to improve further, OR ignore and directly turn to learn TA.
As FA is more study on Economy ,Market sentiment factor is neglected there. So ardent TA follower can justify himself - to decipher PRICE directly , as well as market sentiment.
after all ,Father of TA , Mr Dow - proven beyond doubt Stockmarket reflects Economy , NOT economy runs market.

2] what is TA
U have to read CMT referred books to understand it. First Hebrew is TA writers r not traders , mostly failed traders or academician.even observation of real earning idea of Mr Dow (1890-94) are published by Mr Robert RHEA in 1932 . Before that LIVERMORE traded ,GANN made money by forecasting. ELLIOTT had given waviness- its utilisation.
Templeton-Graham-Todd created an era of fundamental for next 2decade.
Only after development of new-economy ,ardent follower of break out practioner Mr Darvas created a mass appeal of TA in 1957,fueled by many a TA writer, utilizing MA ,MACD , stochastic,RSI- finally success of TURTLE. Meanwhile J Hurst,Larry William worked independently on cycle ,oversold/overbought using computer.
So again came era of writers/academician - whose books indians (3rd world countrymen) have read , tried to practiced but failed ,yet earned from countrymen as TA preacher.
Even some trade-therapist are born to make by their observation and selling as extensive
research.
Actual development came ,when a lady called LINDA busted the myth of turtle , extensively shorting at resistance , demystifying in a book alongwith Tradingmarkets.com Director Laurence Connors.
With the help of Austrian economic theory,importance of growth,measuring idea of participants/greed trading system are born.
still there is some chaos, so random based- fractal development - going into detail (micro price study- seeing its effect on longterm)- as well as brain theory are popularised by Dr Bill william.
With the introduction of High speed mainframe computer came the idea to earn by Order mismatch , earn by level2 study.
full wheel is completed when we understand support/resistance , trend continuation,trend reversal - money flow from one sector to another(play plan in nontrending market)- ofcourse the trap game.
Latest fad is SEE THE PRICE ACTION , upmove continuation probability, at imp resistance trend terminal tendency ,reversal study , down trend continuation, again at imp support whether price Hold, reversal at bottom.

3] Some TA tools- i dont like to open pandora box.
1] for uptrend- higher high/higher low or use suitable MA
2] for Trend continuation 2MA
3] for Momentum - RSI
4] For range- ATR
5] For breakout- use of volume thrust
6] for location - previous support /resistance at Imp pivot
7] for oversold turning - william%r
8] for reversal at top- bear engulf + divergence study
9] for reversal at bottom- bullish engulf at imp FIB value
10] gen understanding on market- advance/decline curve + p/e chart of sensex

4] How to apply TA
Here comes all problem . TA tools r useful ,as per hands of beholder.Those who r not ready to go through basic of TA, they will kill their money by using it. Why parents keep blade/matchbox out of reach from a 2yr toddler?
Unless u understand construction , u cannot use it . Logic given by novice is like we are creature of GOD, U dont have to know biology - just keep a pair of young sixteen yr boy& girl naive, humans will be generated.
My logic is Surgeons are not born- first to be a doctor , then one of the best to get MS, then after MS -practice well to reach there.
So reversal condition,continuation- congestion to be understood in detail if you try to be ta based trader.
Just one hints - 5min chart is showing strong continuation , so may trade in 15min timeframe in a high probability target, yet ready with a stop on 2bar low.
5] TA tools r to be based upon U + present market condition

U - have to define you as a trader. If any timeframe u can not predict what will happen now- continuation/reversal/congestion with a certainty- u cant be a trader.Now we all know basic probability. 1= certainty,0= null event. so price is telling presently will be in congestion, up continuation OR reversal - this 3 cases , one end has to be nullified.For another higher probability 0.6 is ok for trading .
Say last election may'2014. Presence position @that time Congestion(actually with upbias,market has uncanny ability to do naturally most of the time,so dont fight market)
but up or down Violent MOVE is certain . So trading strategy is buy both call& put. Sell quickly opposite one after confirmation AND ride + add winner.
So out of this 3, continuation/reversal ,going nowhere -must be deciphered ,nullifying one OR one event with probability >0.6. This shall come from experience/ur interpretation of TA tool or pure price action study . I have developed the same by extensive watch of price Live, as well as playing with omnitrader where right side is hidden (in gamemode u went back 1yr data,then u guess hard rightedge bar by bar)
U may start with any indicator and start with its validation in particular market condition.
I use Aroon(a further refinement of ADX).
2MA -5 & 20- to understand impact of smoothening after week /month effect in price- this r EOD,but in live market only PRICE.
Trading context also to be seen , who r awaiting - when they shall join Bull or BEAR , -Remember battle of waterloo - Napoleon was not lost by British force, Nepoleon sent his trusted lieutenant to fight against German & then to join him at waterloo, but German forces sidetracked ,used camouflage and appeared from other side outwitting French General ,creating nemesis of Nepoleon the great.Yes MONEY is key force ,if will join in short -nifty will go 7800, but if it joined bull side(as expected)- move up is highly likely.
Remember must dont see daily chart, min deciding tool for them weekly, they also study monthly chart as well as macro economic interpretation first hand.
So present market condition always to be seen by expected moneyflow in/out,sentiment of market participants, expected govt policy - vs.- their reflection in price.
Just remember 2things (1) bhao bhagwan Che. (2)price can behave only 3way- up/down/going nowhere- ur job is to decipher what may happen - how u can make money , if price behaves as u anticipated, also u have taken a position but price behavior showing attitude Not WHAT U ANTICIPATED( trigger stop ,get out early before it inflict heavy loss)
Since LOSS phenomena is normal outcome on a particular trade,u must develop a bleeding tolerance zone . Never go out of ur comfort. Infact many a great trader r on a good fighter on comeback days - when they psychology learnt Not to fight ,book small loss -COME ANOTHER DAY.

.....................................
Other comments:
IT took me 7 long yr to learn TA, below 6month Hard study its time waster. All TA practicer who earns from market knew the truth ( i am old believer of 10000hr)

 

[oilman5]

If u go through my above post in detail, definitely u can understand
TA and its application in trading.
1st part is theory - theoritical development of TA in cronological order.
1] Dow theory
2] understanding Pivot ,swing pt
3] when to fold- when to play aggressive, imp of volume study. buy on rumor,sell on news. Buy at lower price-book profit at higher price.
4] In bull market u should play from LONG,after strong distribution u must play for SHORT.Dont fight against trend momentum.
This thing u understand by reading Livermore & Gann.
5] Elliott theory & its appln in Nifty ,condition of society & economics to understand application of Elliot , vs HOW far it can be applied in reality .
6] Economic development and its use stock market by playing breakout
7] Strict use of Mechanical system ,Risk control vs when to add.
8] Channel play ,cyclicity - J M Hurst
9] use of TA tools like MA , MACD ,RSI ,Overbought/oversold - when to play mean reversion,
10] Attack at Resistance by PRO high probability event, use of bollinger band
11] understanding randomness of price, our brain is mail tool, we have to its behavior,-how it behaves in structured condition as a Chess player- sense of danger, understanding ploy by opponent to avoid trap,PLAY aggressive when opportunity comes sensing winning
12] Use of calmness - a place to decide,as trading is multifaced decision making tool, Visualisation so be ready for alternate as price may unfold with Time
13] Avoid distraction of Media, believe in to go ahead What price is telling,-clarity to be ta taken from one time frame higher
14] Observation and observation - understanding 3 way of price move possibility , eliminating which is least likely and what is most likely -in timeframe u want to trade.
Practice and train yourself - Discipline to take trade,book loss early if wrong ,hold winner to get better benefit.
APPLICATION
HERE U DO TRADING IN MARKET WITH REAL MONEY,slowly building ur buffer - writing and studing in detail ,loss making and winning trade -reason behind it. NOW fix you with this
@ PRESENT condition. Soon u find market conditions change - so different set up / or sit idle (patience), you shall find another rule/guidelines which may work in this 2nd set of market condition.
So up/down trend play (continuation) -congestion(distribution or accumulation) TREND REVERSAL -R THE CONDITION OF MARKET ,U SHOULD PLAN FOR.
somebody also add another dimention ie. volatility, basically after low volatility,certain aggressive activity followed by directional bias .THAT is only for experienced hand.
To use time leverage ,we use SOFTWARE ,so quickly find out opportunity ,- only useful who knows exception to the rules,as money exists only for a FEW(highly knowledgeble)
and they shall take out it from most number novice practicers/academicians.
.....................
Many year back i have given trading system/tools to trade - i am sorry to say they are workable , even today .
Recently Saint is teaching by seminer -How to higher timeframe bias in lower timefreame.( also swing trade condition as perceived by him in nontrending market)
In one thread this yr , i have given many a technique freely - which i apply to earn . So far capable , i dont have to sell any thing ,market will give sufficient to run my family .
Key word in trading-EXPERIENCE,PRACTICE,PATIENCE ,READING PRICE,DISCIPLINE
hope u enjoy

 

[oilman5]

so the persons can understand trading is a search for opportunity.Its a paradoxical game
losing trade may appear any time.understand hot topic black swan.
concept of hunter and the hunted.-the basic of reward/ risk...when situation is out of hand.

hopefully have seen one 1bull-bear cycle..or as a pro 100% retracement and comeback.
Then trading is within comfort level.
philosophy of trade : market is war arena..ruthless fighter can only survive

: trading offers great no of oppurtunity to pick
.A position may be oppurtunity or a trouble[loss]...nobody knows while picking,what it shall be.TIME will unfold..whether it is profit making one or take money out of you.

corollary :do i know how to trade?if yes, how to do effectively
[trading performance]
specific method to be followed again and again[system]
system vs. individual psychology ----- TUNING

element : experience
market research and put data for validity
testing [ ofcourse u must have ability to test]
position management

if no system : poor trade result occurs with emotional trading.
when personal psychology not match with particular style
loss of oppurtunity[ missing oppurtunity due to fear]
wrong expectation

hence a system of timing must have
1. set up condition
2. entry
3. exit...profit target
4. risk analysis
5. exit ..contingency plan