TECH-nikaal ANALysis...!

linkon7

Well-Known Member
#1
A friend of mine once told me :
"Technical Analysis" is just a smart way of loosing money... with lot of CONFIDENCE !

He is a broker on BSE, has a nice office in Mumbai and has a branch in Kolkata, manages many big HNI clients and doesn't believe in TA. TA is my bread and butter and i hated it when he called TA as TECH-nikaal ANALyst and FA as FUND-a-MENTAL ANALyst.

I hated his cynicism but never understood his order flow / accumulation / distribution / bulk deals analysis. I was not privy to such information in real time and admired him when his picks hit target with good frequency.

I guess we all choose our own poison and I have chosen TA as my path to financial freedom. But big question is.. does TA really work or is it like a carrot on a stick that dangles in front of a donkey so that he doesn't loose HOPE and can be suckered into chasing it forever and never destined to catch it...!

This is probably the reason why 95% people are consistently loosing money in the market. Acceptance of the randomness of price movement is the key to success in this market and TA makes one believe that there is method to control madness. Only thing we can control is the risk per trade and we are playing probabilities of a pattern that historically has proven to be profitable over a series of trades.

Success can be achieved only if we get rid of the need to be successful...!

This is a catch22 that i wish to discuss on this thread....!
 
#6
Hi..

SUPPOSE/ASSUME:

90/100 Traders make there decision based on some colourfull/confusing Tech Indicator on there chart, They Buy/Sell when "that" RED Line Crosses Blue Line etc..etc..

So the Herd is following some Method..

Does that indicate Tech Analysis is on work...?

Regards

Santosh
 

linkon7

Well-Known Member
#7
Problem starts with our desire to be right all the time. We want at least 80% of all our trades to be winners. We don't mind getting less profit but we hate losses. We prefer playing for smaller targets. Most common scenario is that profit on 3 trades is wiped out in a single trade. Some times, market stops us out before rocketing in our direction without us....!

Does the solution lie in using wider stop loss and giving trade room to mature. Not really. We can get 3 such stoploss hit in a row and then be too chicken to take the 4th trade that turns to be a monster, while we watch with shock. Even if we did take the 4th trade, we will invariably exit the moment we recover our losses of the 3 trades. Keeping profit on the table is a lot harder than we think.

Our mind is not tuned to accept losses. Even if its a loss of opportunity as sometimes we end chasing a trade simply because we were reluctant to take it when the signal came and once it is proven to be a big winner, we want to be a part of it. Result is an entry at the worst possible location where we end up buying the top or shorting the bottom.

We all like to believe that Discipline is the key to out problems. In pursuit of discipline, we sometimes become very strict with our loosers and exit at first sign of trouble. We then look for that single trade that will salvage all losses and bet big on that trade since we desperately need a winner. We search for reasons to increase lot size from the charts / fellow traders and invariably, eyes see what it wants to see. God forbid if, that single make or break trade turns to be a looser, we stupidly remove the stoploss and enter into HOPE mode. This is when we blow the account or do some serious damage to our capital.

How we manage our trade dictates our profit. How much we risk on every trade dictates our survival. These topics have been discussed multiple times but somehow, don't have much appeal till we truly get rid of the dependence on systems.
 

linkon7

Well-Known Member
#8
Hi..

SUPPOSE/ASSUME:

90/100 Traders make there decision based on some colourfull/confusing Tech Indicator on there chart, They Buy/Sell when "that" RED Line Crosses Blue Line etc..etc..

So the Herd is following some Method..

Does that indicate Tech Analysis is on work...?

Regards

Santosh
Technical analysis does not mean a blue line crossing the red line. Even when people think they are trading pure action by only looking at candles with volumes, they are ultimately trading a pattern that they have recognized to have an edge and it has historically proven to give more reward compared to the risk. The outcome of a trade still remains random. But over a series of trades that are executed to perfection, that pattern has an edge.

That pattern can be anything. A combination of price candles, trend line, indicators or anything the trader might fancy. As long as the trader has no clue on the cause of price movement, he will be trading the effect or the pattern on the chart.
 
#9
...
they are ultimately trading a pattern ...
... that pattern has an edge.

That pattern can be anything...As long as the trader has no clue on the cause of price movement, he will be trading the effect or the pattern on the chart.

I think these few lines are more valuable than anything and everything we can learn about trading.

linkon7, am I understanding incorrectly what you actually wanted to say? :-


Allegory of the Cave


Metaphor of the Cave
 
#10
But big question is.. does TA really work or is it like a carrot on a stick that dangles in front of a donkey so that he doesn't loose HOPE and can be suckered into chasing it forever and never destined to catch it...
Hi Linkon i am not sure if you remember me or not but once we interacted when i was saying the same thing....My words were:

the only difference is now you loose money in a systamatic manner because you are following a system....
And your reply was:

Someone who thinks this way and knows he is still a beginner is on the right path to success....!
Your words proved right, i am making good enough money but not by my own technical analysis but by someone else's technical analysis.

That was the time when i really believed that Technical Analysis was a smart way of losing money but recently i met a technical analyst and he proved that it can be done, i mean money can be made by technical analysis and our dreams can come true :)

Please do not ask who he is ;)
he is here on Tj as a tip-provider, although he hardly gives any tip because he is afraid that his existing clients will get angry.....:rofl:
but i can not tell his name because i do not want myself to be blamed as an advertiser for him.

the only intention is to tell tj members that "Dreams can come True" by technical analysis :)
 

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