[Kiwi]

Defn: TA = the analysis of price or price and volume to determine probable future price movement (note avoidance of the predict, all, and is words sometime used in such definitions).

Defn: TA Trading = trade entry and exit management based on understandings gained from the observation of price or price&volume. Filters such as indicators, market profile etc may or may not have been applied depending on the sect of the analyser.

Note: Your TA is voodoo if its not what I do. But your voodoo may work even if it isn't what I do.

Note: Intermarket analysis may or may not be considered TA depending on individual preference ... personally I favour regarding IMA as a fundamental because movement in another market is like a fundamental change, it provides a force on a market but the market may or may not respond to that force: and TA is the observation of the primary market to decide if it is (probably (probability always)) responding to the forces.

[dalby]

kiwi, great post. i think that puts it very well

btw, i can't understand people who won't hold a stock for more than 2-3 days?

there are so many wonderful INVESTMENTS out there. sure, i scalp YM for a living, but i INVEST for the longterm.

[Horus]

Originally Posted by PivotProfiler »

Let's move back to Auction Market theory. The sole purpose of the market is to find that place where there is a disagreement on value and an agreement of price.

If there are some traders that know something and are thus bullish, PRICE WILL reflect that bullishness. We are talking about traders IN THE MARKET. And if they are in the market then their bullishness creates a disagreement on value, but that disagreement on value is matched at a point where the bear agrees on price.

There is a buyer for every seller. So if the bulls know more than the bears, it must be reflected in price even before the information is known to all.

What does that mean?

* There is no such thing as Bullish/Bearish consensus. Price already reflects the values of the bullish traders in the market and the bearish traders. So all those reports on such are simply bogus. Any number that states the bullish consensus is 85% simply has not asked enough bears. It must be 50%/50%

* There is no such thing as overbought or oversold. Each price is a two sided transaction. The market functions to find that place where the two come together. By definition this is an equilibrium. Certainly not stable , but equilibrium none the less.

So using TA to find overbought or oversold conditions is felonious from the start. One is attempting to measure something that does not exist. Price is where it is at, because it is supposed to be there; and price is supposed to be there because that is where it is at.

Price is king. Hence whatever says price should be doing something else is irrelevant (note necessarily wrong, just irrelevant). Price may head down from point x, but it has nothing to do with the fact your Fibonacci vortex said it should. Price simply does not move down because RSI is in "overbought" territory. INDICATORS DO NOT DRIVE PRICE.

* There is no such thing as "price over-reacting". Price is where it is at because it is supposed to be; and it is supposed to be there because that is where it is at. Those that say, "the market over-reacted and moved too far..." are speaking in code. What they mean is," Price has moved further than I thought it would......"

Does the market at times move 100 points in one day and then move back down 100 points the next? Clearly. BUT EVERY PRICE ALONG THAT WAY WAS A VALID PRICE BECAUSE A TRADE WAS FACILITADED THERE. That's the definition of price.

Those that embark on TA to tell them what the market should do, rather than the reality of what it is doing, are walking on a tenuous path. Indicators are derivatives of price and therefore have lag. Lag does not have to be a bad thing. But as indicators are derived from price, they cannot Drive future price action. Herein lies where most people come into trouble.

Price is reality.

1. Price is not driven by Technical

2. Price is the best instrument for gauging future price direction. That is, what price is doing now is the best "prediction" of what price will be doing in the future.

What is price driven by then? Its not driven by price itself!! Its driven by technical, fundamental, emotions and news.

I dont even need to look at the price of SP to trade it... Nor do I need the volume. So I guess your assumptions are not entirely true. OddBall System is proof of the fact that you do not need to look at charts to predict direction in a consistent manner to make money.

Overbought and oversold (Bullish/Bearish consensus) conditions do exist, and are driven by fear and greed. Emotions and news drives price which cause these conditions. And can be measured to an extent which provide a statistical bias one way to other.

Price is an important factor in any analysis style, however not key to making consistent profits and Profits are the goal of any trader. (at least it should be!!)

[Anonymous]

Originally Posted by Horus »

What is price driven by then? Its not driven by price itself!! Its driven by technical, fundamental, emotions and news.

SUPPLY AND DEMAND.

Technical are derivates of price and can not therefore drive price. They are calculated on past prices so how can they lead future price?

Emotions and news drive trader's actions. That is buying and selling. But buying is Demand and Selling is Supply.

Originally Posted by Horus »

Overbought and oversold (Bullish/Bearish consensus) conditions do exist, and are driven by fear and greed. Emotions and news drives price which cause these conditions. And can be measured to an extent which provide a statistical bias one way to other.

Every price where there is a transaction involves two parties: a buyer and a seller. No matter what the price, there is always somebody on the other side. Hence, how there is no such thing as overbought or oversold.

This is especially evedent in the indecies, where no contract is made until a buyer and seller come together.

Yes, Professional Money uses the retail trader's greed to get them to buy tops, but that has nothing to do with the felonious condition of overbought.

The Smart money uses the retail trader's fear and pain to get them to sell at bottoms, again nothing to do with the felonious notion of oversold.

Originally Posted by Horus »

Price is an important factor in any analysis style, however not key to making consistent profits and Profits are the goal of any trader. (at least it should be!!)

Price is not an important factor in most analysis styles, which is why most traders do not make consistent profits.

[Anonymous]

Overbought/Oversold or Bullish/Bearish consensus example:

We ask 10 people if they are bullish. They all say yes and they are long. Well, there is a bear on the other side of the trade (the seller). Therefore the amount of bulls and bears is equal.

Now we ask 10 more people if they are bullish and they say yes. But these 10 are NOT in the market. Their opinions don't matter. If they are not willing to "place a bet" based on their beliefs then they need to be discounted. Hence to say the market is overly bullish or overbought is incorrect.

To be sure, at this time there is a general euphoria for the market, as seen in the large number of "bulls". But the market is still evenly dispersed. If any of the second 10 want to go long, a as of yet un-asked bear must take the other side of the transaction. So any measure that comes up with either an overbought or bullish consensus, including those NOT in the market, simply has not asked enough bearish people.

But what do you really care about the opinions of those who are not in the market?

Now as soon as the other 10 enter the market (a bear lets them in), Price reflects that. That is, if the bulls are more enthusiastic about buying than the bears are about selling then price will rise. There will still be an equal amount of bulls and bears, however.

This also means that while the 10 new bulls may know something the bears do not, price must reflect that information. Price reflects it, even if all don't know it.

[Kiwi]

Awwww commmonnn ... the facts are getting fuzzy as hell.


"Technical are derivates of price and can not therefore drive price. They are calculated on past prices so how can they lead future price?"

Rubbish (to Horus too). Price can drive price (and thus so can derivatives of price) ... see the typical overreaction in the marketplace ... that's not just driven by fundamentals and news, its frequently driven by peoples reactions to what's happening to price.


"This is especially evedent in the indecies, where no contract is made until a buyer and seller come together."

Presumably you mean in futures contracts based on the future value of indexes. Still wrong really. Sure you need a buyer and seller (of kinds) to create the contracts in the first place but most day to day trading doesn't require the creation of new contracts.


"We ask 10 people if they are bullish. They all say yes and they are long. Well, there is a bear on the other side of the trade (the seller). Therefore the amount of bulls and bears is equal."

Here we go again. Frequently in a market move up the buyers are bulls but the sellers are not bears ... they are people who went long at a price they perceived as value and are now unloading positions for a profit. So they are hardly bears and in fact after a pull back and the re-establishment of value may be active bulls again. Come to think of it, substantial elements of an up move are driven by bears who sold too early and are thus buying back contracts as cascading stops are smashed. They may still be bears, just bears in pain.


There's more but that's enough from me.

[torero]

Originally Posted by dalby »

kiwi, great post. i think that puts it very well

btw, i can't understand people who won't hold a stock for more than 2-3 days?

there are so many wonderful INVESTMENTS out there. sure, i scalp YM for a living, but i INVEST for the longterm.

I don't trade stocks, it's why my holding is no more than 1 week. If I did trade them, it would be a better way to longer term. I gave up stocks a while back ever since I found eminis and cannot devote enough time to do all the homeworks (scans, calendar of earnings, etc).

[walterw]

Originally Posted by Horus »

What is price driven by then? Its not driven by price itself!! Its driven by technical, fundamental, emotions and news.

I dont even need to look at the price of SP to trade it... Nor do I need the volume. So I guess your assumptions are not entirely true. OddBall System is proof of the fact that you do not need to look at charts to predict direction in a consistent manner to make money.

Overbought and oversold (Bullish/Bearish consensus) conditions do exist, and are driven by fear and greed. Emotions and news drives price which cause these conditions. And can be measured to an extent which provide a statistical bias one way to other.

Price is an important factor in any analysis style, however not key to making consistent profits and Profits are the goal of any trader. (at least it should be!!)

Horus : can you explain what the odball does, never heard about it, thanks Walter.