All You Need... is a Chart

[86834]

Originally Posted by atto The horse is on its dying breath, so I'll make my last remark, and let it be. I don't think anyone has said that fundamentals are pointless, but rather not necessary -- to which I'd agree, as it seems you would as well (since it's possible to trade purely technically). My previous post wasn't meaning to misrepresent what you're arguing either, as I know you use both. If seeking edge after edge to maximize every situation is one's goal, then he may want to thoroughly investigate fundamentals. However, that's not really my goal. My point about the billionaires had little to do with industry: at the end of the day, what works for you and others, works; likewise, what works for me and others, works. Yes, if, hypothetically, you knew -- secretly -- that the Fed would cut rates 50 basis points below expectations, that would be fundamental knowledge not priced in. However, on a more macro scale (I'd argue anything past an initial shock of a number), I do think trading decisions can be performed better from the charts.

I know the point about billionaires had nothing to do with industry, i was just using the example you gave for the 'putting you're eggs in basket'

I think on the macro scale fundementals are most important. I'll start another thread on it when i get up because it will stray off the original topic.

It's 6:50am here and i haven't been to sleep yet and i've already broken my new year resolution by smoking a 20 deck...

[firewalker]

Originally Posted by 86834 The way i took this thread was someone saying fundementals are basically a load of crap, prove me wrong if you think otherwise. That's the bit where i put my 2 cents in.

Just for the record, I don't recall saying fundamentals are crap... all that was said is basically in the thread title: you don't need funnymentals to trade. You don't need MA's to trade, but some manage to do fine with them. Does that mean MA's help people become a better trader? Perhaps for some, but would you say it's a necessary requirement to be a profitable trader? Nope.

Honestly, from my point of view (which is an intraday trading one), I'd really like to see how anyone can improve their results by using a fundamental approach.

I am not putting my head in the sand by choosing to be blind to anything that deviates from my opinion. On the contrary, I am very open to suggestions, but only two weeks ago we had some people around here, claiming that FA are the tools of the professional and how they ignoring it is being a fool etc etc... Unfortunately when it comes down to actually pulling the trigger, none of that information helped.

Originally Posted by 86834 How many professional traders are gonna be posting on internet forum during market hours? Also for these types of trades that i mentioned above, it's impossible to show on a forum live, because by nature they tend to be either a massive spike that retraces just as fast, or market direction will change very rapidly leaving the trader who uses just a bar chart behind, and if you didn't know that there was a figure out, how are you gonna explain, let alone trade these moves?

As for the live trading part: several people have been calling where to enter and where to look for an exit before they put on a trade. The market is not moving 100 points in 1 minute, and it only takes 3 seconds to type "short here" or "long now". The chatroom is ideal for these kind of things. Many traders have been doing it and indeed explaining their trades. As for the rest of the comments, atto has done a pretty good job of answering those so I'll leave it at that.

One last thing example regarding news:

Last Tuesday consumer confidence showed a record low of 38, well below the expectation of 45 of economists surveyed. Yet the market somehow choose to ignore that, hold steady and start moving upwards. How was that already priced in? Hypothetically speaking, if you know it was going to be that bad, wouldn't you want short the market before the number comes out? Whatever explanation people like to give for this, the fact is price was trading near or at support and there were enough buyers around that level to keep price from falling. There might be a dozen other approaches, but a wise man once said "All other things being equal, the simplest solution is the best." Which is why couple of min after the release I took a long trade (ES 872). I hadn't even looked at the CC number, I just traded what I saw instead and I mentioned a potential price target of 886. Seven hours later price eventually hit 886.25 and the high of day was 888.75.

Another example: on Wednesday, dbphoenix mentioned there the odds where higher that the NQ would travel all the way to 1225 after reacting off 1200 early in the day. The high of day turned out to be 1224.75. That makes me wonder, what extra benefit could FA offer above this?

PS: as for the chart you attached, it's too small to really see anything on it...

[OAC]

Originally Posted by 86834 Professional traders are at the front of the information curve ... FACT, prop firms, investment banks etc all spend a vast amout of money on having the fastest most up to date information, that is far out of reach of non professional traders, unless they already know about this stuff and they happpen to already be wealthy and can afford the means before they start their trading journey.... FACT. Waiting for the figure/data to come out on bloomberg/cnbc on sky or cable TV, or internet forums doesn't put you anywhere near the front of the information curve

So I guess nothing is faster on the information curve than putting a bug on Bernanke's phone line ? Then I guess if you are rich enough. nothing is out of reach. But wasn't that what the movie "Wall Street" was all about ?
When you label all this as Fundamental Analysis which institutions spent billions on, you have just created massive confusion.
God save the newbie traders on TL
.

[Hlm]

I will start off by saying that I have nothing against fundamental strategies and those that trade them. I actually use to trade news in Forex as well as swing trade (non news related) penny stocks off of fundamentals. For me personally, I moved over to the pure technical aspect for two reasons. One...to make things as mechanical as possible. Two...to decrease my draw downs. Of course, the second reason can vary greatly depending on the experience of the trader, etc.

Now to the meat...

Originally Posted by 86834 Fundamentals are extremely important, and unless you fully understand the impact of fundamentals on the market that your trading will never really progress and you should stay away from trading around figures.

I might agree with you a little if you mean to put an intraday position on right before or right on release of a big announcement and specifically for it (especially in the FX world). But if you are meaning staying away from going in and out before and after the an announcement I would disagree. Which leads me to my next point...

Originally Posted by 86834 Investment banks spend millions upon millions upon millions researching fundamentals and incorporating them into their trading strats, then invest billions upon billions based on them. That's fact wether you like it or not. People need to realize that we're in their backyard, and sitting there saying fundamentals have no place or whatever, is just plain ignorant.

You are right, and this is ABSOLUTELY why I am purely technical. This is exactly why my methodology/edge will always be around and work in open liquid markets. Why would one want to waste their time trying to match or even beat these "big boys" at their own game. Big money spends their time putting on (before news) and taking off (after news) their positions in chunks because they can't do it all at once while getting the fills/averages they want. These swings, waves, or fractal like moves is where someone like me can consistently make money using pure technicals. I don't mind putting all my eggs in one basket (technical analysis) since without the basket (aka Big Money) there would not be a market to trade.

Originally Posted by 86834 So do i.... for example by bringing fundementals into my trading alongside technicals i'm maximizing profits per time invested because i'm taking advantage of more opporunites available in the market by using both techs and fundamentals.... rather than saying all i needs is techs

This can vary so much. It depends on what your positive expectancy and draw down is for each. But to say that bringing both into trading automatically increases your profits per time invested is most likely not true in my opinion. Of course, for you, it may depending on your strategies. But different strategies have different risks and fit different personalities. Especially when you are dealing with fundamentals which by nature aren't mechanical friendly.

Originally Posted by 86834 Don't judge the skill of trader on just how much they make. If someone has a candle stick pattern that gives them 2 ticks a day, and thats all they know, all they have to do increase their size acording to their account size and they'll make a lot a money. Doesn't mean that they understand whats going on tho. Earning a couple of million a year doesn't mean you're anyone in this game, all of my colleagues earn more than a couple million a year but in the grand scheme of things they're nobodies... i'm nobody.

I am still trying to figure out what you are getting at here. Someone who can consistently make money (say 2 million a year) with a candle stick pattern that gives them a couple of ticks a day (again, consistently)...is not a skilled trader to you? My response to you would be a simple "so?". I guess it depends on what your personal idea of success is. I'll take my 2 million a year and enjoy every second of my life without understanding what's going on and not being anyone in this game. I could be completely off (apologize if I am) but your mentality kind of sounds like those that try to buy the bottoms and sell the tops. Those that are looking to catch the entire move. You don't have to be the president to be in politics.

I will leave it with this...as those before me have stated, it's not that one can't trade with fundamentals or use them in their strategies, but that it is indeed not needed to be consistently profitable in this business. Just like I am sure some would argue that technicals are not needed to be consistently profitable as well.

P.S. It would be great if those that do trade fundamentals start some threads on the topic.

[86834]

Originally Posted by firewalker Just for the record, I don't recall saying fundamentals are crap... all that was said is basically in the thread title: you don't need fundamentals to trade. You don't need MA's to trade, but some manage to do fine with them. Does that mean MA's help people become a better trader? Perhaps for some, but would you say it's a necessary requirement to be a profitable trader? Nope. Honestly, from my point of view (which is an intraday trading one), I'd really like to see how anyone can improve their results by using a fundamental approach. I am not putting my head in the sand by choosing to be blind to anything that deviates from my opinion. On the contrary, I am very open to suggestions, but only two weeks ago we had some people around here, claiming that FA are the tools of the professional and how they ignoring it is being a fool etc etc... Unfortunately when it comes down to actually pulling the trigger, none of that information helped. As for the live trading part: several people have been calling where to enter and where to look for an exit before they put on a trade. The market is not moving 100 points in 1 minute, and it only takes 3 seconds to type "short here" or "long now". The chatroom is ideal for these kind of things. Many traders have been doing it and indeed explaining their trades. As for the rest of the comments, atto has done a pretty good job of answering those so I'll leave it at that. One last thing example regarding news: Last Tuesday consumer confidence showed a record low of 38, well below the expectation of 45 of economists surveyed. Yet the market somehow choose to ignore that, hold steady and start moving upwards. How was that already priced in? Hypothetically speaking, if you know it was going to be that bad, wouldn't you want short the market before the number comes out? Whatever explanation people like to give for this, the fact is price was trading near or at support and there were enough buyers around that level to keep price from falling. There might be a dozen other approaches, but a wise man once said "All other things being equal, the simplest solution is the best." Which is why couple of min after the release I took a long trade (ES 872). I hadn't even looked at the CC number, I just traded what I saw instead and I mentioned a potential price target of 886. Seven hours later price eventually hit 886.25 and the high of day was 888.75. Another example: on Wednesday, dbphoenix mentioned there the odds where higher that the NQ would travel all the way to 1225 after reacting off 1200 early in the day. The high of day turned out to be 1224.75. That makes me wonder, what extra benefit could FA offer above this? PS: as for the chart you attached, it's too small to really see anything on it...

As for time for posting live trades, in danger of sounding like a snob, but i'm gonna say it anyway, i stand by that no professional trader (maybe a couple) are posting on the forums during market hours if they're trading, and by professional i'm classing people who have made a career in the financial markets by rising through various paths in the city. I stand by my statement that sitting at home trading for yourself and trading in the city are completely different worlds (i'm not for one moment knocking people trading on their own at home, more power to you), but you have to accept that it's like comparing sunday league football to the premier league. Active city traders and fund managers in the city work together, go to meetings together, play football together, get wasted together and go to each others weddings. During market hours if i've got a debate of an observation, am i gonna mess around on the internet, or sit and talk to the other 7 traders in my office that work for me?

At the end of the day if people on these forums were that good 90% of them would go to a firm in the city and go 'hey look this is my trading record and pnl, i'm hot stuff' and you would get hired if you can prove you can do it, then you wouldn't be risking any of your own money, and you would have massive rapid potential to the upside in terms of earnings. When i started in the city with three other grads, it took us about a year to be a clip size that was earning us 1m a year. Plus once you're in the city you're learning for the best of the best, have the best tools on the planet at your finger tips, and have massive networking opportunities.

Put all these factors together and you have two different class of traders that are worlds apart, and like i say i stand by my statement that 'professional' traders in the form that i described above are not gonna be posting on forums for the reasons above. If i caught one of my traders messing around on a forum during market hours i would fire him.

Like i say, i repeat i'm not knocking anyone, or putting the forum down because i think it is a great place for people wishing to know more about trading to come together. However when i read posts like these they are full judgmental heuristics

The heuristics are all over the place because 99.9% of traders trade their beliefs about the market, and once they've made up their minds about them beliefs, they're highly unlikely to change them. So when you go and trade whatever market, you think that you're considering all the available information (all i need is a bar chart, price actions tells me everything), but instead you've just eliminated most of the useful information thats available by your selective perception.
For example when you're looking at a 5min candle stick chart thinking thats all you need, then that a heuristic called law of representation, meaning that you are assuming that something is assigned to represent something. So you look at you candle charts and think to yourself that it's the market trading, when in reality it's just a line on a chart, no more, no less. However you accept this as being meaningful because...

you were told it was meaningful when you first started studying the markets,

everybody else uses candle stick chart to represent the markets

when you think about the market trading you typically visualize a daily bar

A candle chart doesn't tell you anything about how much activity occurred, and it doesn't show you how much activity occurred at what price. There is a lot of information that is extremely useful to a trader that isn't shown in any form on a candle chart. For example did the transaction involve opening up new contracts or closing out old ones? What kind of people were doing the trading? Did a had full of floor traders trade with each other all day long, trying to outguess and outmaneuver each other? How much of the activity was in a single unit, how much activity was in large units. How much was traded by a single trader, how much was traded by large funds or institutions?
Also a candle chart doesn't show who's in the market, like how many people are long and short in the market and what their position size is. All this information IS available. I can go on and go, like how chart gives you no psychological information such as how many people are sitting outside of the market with the belief it will go up or that it will go down, and are they likely to convert them beliefs into trades. However it doesn't really matter that much because you wouldn't be able to trade using any of it because of your judgmental heuristics and biases. The information will be eliminated by your selective perception

There are so many biases that non professional traders (even some profession traders) have. For example the lotto bias... which is about the increased confidence people have when they, in some way manipulate data, as if manipulating that data is somehow meaningful and gives them control over the market. Because you think the candle chart is the best method for trading toy manipulate the chart in some way until you feel confident enough to trade it.

People think they can make money by buying/selling at the right time and they simply want to know when to buy or sell. The average person here wants to know what to buy/sell right now to make a boat load of money. Most people would rather have someone tell them what to do....

Non professional traders who try and make it on their own become fascinated by entry signals that they perceive to be synonymous with a complete trading system, thats because you get a sense of control. Unfortunately the market is far more complex than that. Like i say, look at what happened to the dotcom day traders. I'd like to see how many people here will still be trading in 7-10yrs, but only a couple....

When i look around on the internet from time to time and see what systems people are trading etc, i'm shocked that a lot of people think that they're 'systems' For example for all the tech guys, who think thats all they need, how many of you have considered probability rate information in developing your TA trading system? Probably not, i've never met a non professional that has. The majority of people haven't even tested their system properly, they think they have, but they haven't, i would say the majority couldn't post accurate data on the expectancy of their system

You need to overcome the biases that are affecting you or you will never be a good trader. Like i've said, making a couple of million off a candle chart doesn't make you a good trader. You need to consider biases such as

representation bias - people assuming that when something is supposed to represent something, that it really is what it's supposed to represent

reliability bias - people assuming that something is accurate when it may not be

lotto bias - people wanting to control the market so they get all hung up on indicators and entry signals and all that rubbish

Conservatism bias - once you believe you have found such a pattern and become convinced that it works, you will do anything you can to avoid evidence that it doesn't work (i think of you w in particular here....)

randomness bias - people like to assume that the market is random and has many tops and bottoms that they can trade. The markets are not random at all. Distribution of prices who that markets over time have infinite variance, or what statisticians call long tails at the end of the bell curve. People fail to understand that the even random markets can have long streaks, and as a result, trying to trade tops and bottoms is the most difficult type of trading there is

Then even once you accept these, then you need to integrate stuff such as degrees of freedom and postictive errors

I'll say it again, look at what happened to all the dotcom day traders, making millions a year from their bedrooms. They boxed themselves in and failed to truly understand the fundamentals of what they were doing in every aspect. They had something that worked... yeah it worked then for a few years tops and gave them a false sense of security that they actually knew what they were doing. Where are they know? I read an article about a dotcom day trader working in mc donalds....

Market conditions are reflected by the people trading them, now days the day traders from their bedrooms are gone and the massive majority of the financial markets are professional city traders. There's few places at the top and if you really want to make it in this game you need to pull out all of the stops and fight to stay. Yeah you might have something thats working now for you, but it won't last, and how many of you will make enough money in a 2/3 years to never have to work again?

Like i say, look at the dotcom traders....

Boost!

[firewalker]

Originally Posted by 86834 Put all these factors together and you have two different class of traders that are worlds apart, and like i say i stand by my statement that 'professional' traders in the form that i described above are not gonna be posting on forums for the reasons above. If i caught one of my traders messing around on a forum during market hours i would fire him.

Well... one has to wonder what you're doing right now then...
Unless a trader is scalping, there is no reason to stay glued at the screen every second of the day.

But I'm afraid we are deviating from the topic, whether traders are retail, institutional, professional is irrelevant. What matters is that the information you need to trade profitable is in the chart.

PS: Note again how today economic news was bad (manufacturing index at 28-year low), but the market somehow mysteriously found a way to digest that and is currently trading well above the previous day's closing price.

Originally Posted by Hlm P.S. It would be great if those that do trade fundamentals start some threads on the topic.

It would be even greater if those that do trade funnymentals come to the chatroom and explain what the market is doing in real-time

[86834]

Originally Posted by firewalker Well... one has to wonder what you're doing right now then... Unless a trader is scalping, there is no reason to stay glued at the screen every second of the day. But I'm afraid we are deviating from the topic, whether traders are retail, institutional, professional is irrelevant. What matters is that the information you need to trade profitable is in the chart. PS: Note again how today economic news was bad (manufacturing index at 28-year low), but the market somehow mysteriously found a way to digest that and is currently trading well above the previous day's closing price. It would be even greater if those that do trade funnymentals come to the chatroom and explain what the market is doing in real-time

I'm here posting because i'm not trading, i take december and the first half of january off. How often do i spend time posting on these forums?

[DbPhoenix]

Originally Posted by Hlm P.S. It would be great if those that do trade fundamentals start some threads on the topic.

If they do, I hope that they will define "fundamentals" accurately and not as "news" or "information". Fundamentals have nothing to do with what is being discussed here, and beginners who confuse a focus on news with anything having to do with fundamentals is going to end up in a lot of trouble.

Beginners should also note that "technicals", at their core, have very little to do with 868's characterization of them. See the Price Action thread.

[86834]

PS: Note again how today economic news was bad (manufacturing index at 28-year low), but the market somehow mysteriously found a way to digest that and is currently trading well above the previous day's closing price.

There you go again with a conservitive bias.... I'm not going to explain how to trade these figures because there's nothing that you're gonna learn from me typing a post, and there's no simple clean cut answer that you always seem to be after. Skill and experiance.... it's an art, yeah you don't want to hear it and think it's a cop out, but thats just the fact. All you're going to do anyway is try and disprove anything that is said

Thats why you will only go so far sitting at home trading on your own. If you want to learn about stuff like this then try and get yourself into a trading enviroment where you can learn from the best. Either that or accept reality mate.

[Hlm]

Originally Posted by 86834 Put all these factors together and you have two different class of traders that are worlds apart, and like i say i stand by my statement that 'professional' traders in the form that i described above are not gonna be posting on forums for the reasons above. If i caught one of my traders messing around on a forum during market hours i would fire him.

You are right, if you are a "professional" trader that works in a firm or a prop shop there would be no reason to be on the internet during market hours because you are chatting and hanging out with your fellow traders in person. However, those "professional" traders that work at home and aren't affiliated with such an environment can find their fill of like minded individuals via the internet.

Originally Posted by 86834 At the end of the day if people on these forums were that good 90% of them would go to a firm in the city and go 'hey look this is my trading record and pnl, i'm hot stuff' and you would get hired if you can prove you can do it, then you wouldn't be risking any of your own money, and you would have massive rapid potential to the upside in terms of earnings. When i started in the city with three other grads, it took us about a year to be a clip size that was earning us 1m a year. Plus once you're in the city you're learning for the best of the best, have the best tools on the planet at your finger tips, and have massive networking opportunities.

I am curious, where do you get that 90% figure from? There are alternatives to not going to a firm. If you are indeed that good, it's not very hard to find OPM that isn't attached to a firm. Depending on the specifics of both, going private can give your more freedom and bigger payouts. If you are already that good why would you want to deal with a firm and have dozens of eyes watching your every move. Now, I am not putting down trading firms at all. They can be very advantageous depending on ones situation. However again, all of this high percentage quoting or absoluteness just leaves a bad smell in the air.

Originally Posted by 86834 Non professional traders who try and make it on their own become fascinated by entry signals that they perceive to be synonymous with a complete trading system, thats because you get a sense of control.

Well of course, because they aren't professionals yet. Joining a firm doesn't automatically make you a professional.

Originally Posted by 86834 I'll say it again, look at what happened to all the dotcom day traders, making millions a year from their bedrooms. They boxed themselves in and failed to truly understand the fundamentals of what they were doing in every aspect. They had something that worked... yeah it worked then for a few years tops and gave them a false sense of security that they actually knew what they were doing.

What they were doing was no more technical than fundamental. The fact is that you could buy anything blindly (get out the dart board) and make money. This is comparing apples and refrigerators.

Originally Posted by 86834 Market conditions are reflected by the people trading them, now days the day traders from their bedrooms are gone and the massive majority of the financial markets are professional city traders. There's few places at the top and if you really want to make it in this game you need to pull out all of the stops and fight to stay. Yeah you might have something thats working now for you, but it won't last, and how many of you will make enough money in a 2/3 years to never have to work again?

Do I really have to pull out the list of so called professional funds/mangers that have gone belly up within the last year?

As for as the other information scattered throughout your post about bias and such...good stuff. Those are big ticket items that can destroy a trader that is starting out. However non of that removes from the fact that one can be consistently profitable and make a very healthy living trading purely off of technicals/price.