Technical Analysis: Is it voodoo? Or does it work?

[Soultrader]

	Quote:	The Bear
	Guys this TA thread is numbing my brain. I'm going crazy now. I've just finished reading every single post on this. You fellows are the most exacting insane detailed people EVER. I thought we were all just gamblers (And TA is a way to stay objective so we don't blow our plot) Can someone answer my limit down question when they get a chance.

hahaha. Yea... TA is no rocket science. What I did find fascinating was to really understand the psychology behind price behavior. Would it be totally off track to say that price action is trader psychology? Or did I just pull another mistake there...

[Kiwi]

Re psychology, in my earlier post I said:

	Quote:	Kiwi
	If by IS you mean its there NOW then No. It takes time for the markets to adjust to information so although peoples reactions to information will be reflected in price, there is a time lag and opportunity for both fundamentalists and trend followers on various timescales as a result. Key points from a trading perspective are that there is lag and that what is reflected in price is peoples reactions to information.

I neglected to recognize that it's also peoples reactions to prices historical (and very recent) behaviour so there is a second order effect. Re psychology, we need to remember that its also the reactions of machines (programs) to the recent (milliseconds potentially) price and volume action.

The reactions to price and volume action will be partially responsible for both the overreaction of markets (people jump on because they can't miss out) and the under reaction (people holding back even though they have new information because they want to see if the "market" reacts to the information).

[torero]

Ok, let's end this argument once and for all. Here's Wikipedia's definition:

"Technical analysis, also known as charting, is the study of the trading history (the price and volume over time) of any type of security (stocks, commodities, etc.) to attempt to predict future prices. In its purest form, technical analysis is concerned only with the actual price behavior of the instrument, based on the theory that all other factors affecting valuation will be reflected in the price before an investor can become aware of them through other channels."

Technical analysis - Wikipedia, the free encyclopedia

So, if you're analyzing price or volume, it's TA. That goes for MP, VSA, etc.

[Kiwi]

And as much as I love Wikipedia I note that even High School students are no longer allowed to quote it as a source in assignments. Too unreliable.

[walterw]

Hey Kiwi Wikipedia has nice things men ¡¡ even you can learn chartpatterns jejejej..... ok very good conclusions, now can somebody start a good sound technicall thread, so we can enjoy ourselves with some good TA ¡¡¡ ?? jejeje good trading today¡¡ cheers Walter.

[dalby]

soultrader, you admitted you were wrong? this violates internet macho protocol 19-65 (b) that states that "No participant in internet chat or bulletin board posting can ever admit they are wrong about anything, lest the entire edifice of internet argumentation collapse."



seriously, though - props for your post.

[dalby]

what is at issue here in this discussion of TA : Psychology.

I see this same sort of tactic in almost all areas of study, not just stocks.

There will be a clearly defined term for a school of thought or practice.

Some people who use a subset of same will try to distinguish THEIR method or practice or understanding by distinguishing it as NOT part of the greater set.

For example: market profile.

TA is defined as the study of price qua price. Iow, not the fundamental reasons WHY price did X, but WHAT price is doing and has done.

Clearly, Market Profile is just another way of modeling price over time vs. bar charts or PnF charts, etc.

Thus, it is a form of TA.

But market profile adherents want to distinguish since OTHER TA is "icky" and "non-scientific" in their eyes.

I've seen this tactic (usually unconscious) in everything from weight training to martial arts to rocketry

[Thoth]

I have seen someone trade using data from another market to successfully trade yet another market, so I think that dispels the myth that price action is everything. Especially when you don't even have to use the price of the market your trading to trigger the buy sell decisions off of. Anyone ever heard of this?

I knew a big sp pit trader who never let the price of the sp decided if he was going to buy or sell. Did you know there is a board in the sp pit and I once asked who decides what is on that board. I was told well the members decide what is on that board, that's who.

maxux

[Anonymous]

	Quote:	Thoth
	I have seen someone trade using data from another market to successfully trade yet another market, so I think that dispels the myth that price action is everything. Especially when you don't even have to use the price of the market your trading to trigger the buy sell decisions off of. Anyone ever heard of this? I knew a big sp pit trader who never let the price of the sp decided if he was going to buy or sell. Did you know there is a board in the sp pit and I once asked who decides what is on that board. I was told well the members decide what is on that board, that's who. maxux

"Every time I think I'm out............they pull me back in". LOL


First of all Price is king. It is reality. Price and Volume are the only two indicators. But, we all know how I feel :p

The actual person to talk to is NihabaAshi. His mastery as a price action trader is humbling and something to strive for by those who call themselves students of the markets or price action only traders.

Now what you do not understand is the concept of correlation. Market A can be positively correlated with Market B. The more that number tends to 1, the higher the correlation. Market A can be negatively correlated with Market B. The more that number tends to -1 the higher the correlation.

With positive correlation, as Market A goes up, Market B goes up also.

With negative correlation, as Market A goes up, Market B moves equally, but in the opposite direction. That is, down.

Therefore, a price action trade using specific price set- ups may look for those set -ups on a broad range of markets. If the set-up appears in Market A the correlation with market B should mean that B goes up also. Hence a trade in B can be signaled by the price action of A. But it remains all about the price action.

More specifically, NihabaAShi uses candle patterns. Some of which are discussed on the elitetrader.com forum thread "trading hammers (revisited)". Now if market A meets the requirements of (his) valid hammer pattern, but market B only has a hammer line (a hammer line traverses to hammer pattern if and only if ALL the requirements are met), a trade in Market B can still be made both because of PRICE ACTION (which was in Market A) and Correlation (which is a statistical phenomena).

Simply, Price, volume, volatility , and news events are used to make trading decisions. The fact that some markets trade together is used to broaden the chance for opportunities, especially when the pattern requirements are so exacting.

p.s. He does not only use hammer patterns. He was one of the first to discover WRBs and WRBs is his primary method. Japanese candlestick are his secondary method..............

p.s.s. I use WRB & Long Shadow analysis and VSA as my primary methods. I am learning Japanese canldesticks as the secondary method. I currently trade the EURO. But I can make "sister" trades in the EURO based on the Price Acion of the SWISS FRANC because it is highly correlated (negatively) with the EURO. That is, when the SWISS FRANC goes up, the EURO goes down.

[torero]

	Quote:	Thoth
	I have seen someone trade using data from another market to successfully trade yet another market, so I think that dispels the myth that price action is everything. Especially when you don't even have to use the price of the market your trading to trigger the buy sell decisions off of. Anyone ever heard of this? I knew a big sp pit trader who never let the price of the sp decided if he was going to buy or sell. Did you know there is a board in the sp pit and I once asked who decides what is on that board. I was told well the members decide what is on that board, that's who. maxux

If this pit trader used the price data of another market, it's still TA. TA is TA is TA, whether price of another market or not. Whether who determines what's on the board, doesn't matter, if price is on that board, it is......... TA.