[Gav]

I am with Kiwi. He has done an excellent explaination. Just to add on.
TA doesn't fail a trader, trader fails himself. TA is useless, because the trader is not applying correctly, and unable to accept the fact that, it is playing with probability. We use TA to look for high probability entry/exit point. It is just that simple.

Have a profitable day.

[Anna-Maria]

Originally Posted by Gav »

I am with Kiwi.

We use TA to look for high probability entry/exit point. It is just that simple.

Ditto, Kiwi's comments. Especially the points made in the 4th paragraph of that post.

The entry/exit points Gav speaks of are merely the map & signposts of price.

Sometimes those signs get a little blurred & alter course along the way. But I'd sure rather have a reference point to check my direction & rest stops than no map at all.

[jperl]

Originally Posted by Soultrader »

Jerry, I want to ask you a question. Can you elaborate on your point of normal distribution? I would like to understand this concept a little better. Thank you

A good general discussion of the Normal or Gaussian distribution can be found here:

Normal distribution - Wikipedia, the free encyclopedia

This is the type of statistical distribution that most TA users assume their TA rules for entry and exit will follow when they do back testing of their rule based trading plan. Unfortunately, most TA users never check this. If they did they would be shocked to discover that their TA rules don't fit a NORMAL or Gaussian distribution of results. The reason for this is quite obvious. The data themselves used to generate the rules, don't follow a Gaussian distribution, so nothing derived from it will either.

The normal distribution is what also occurs on what MARKET PROFILERS call a NORMAL DAY. Market profile is a subset of the volume or price histogram. On a NORMAL DAY, the volume histogram looks like a NORMAL distribution function, hence the name NORMAL DAY.

One of the important characteristics of a NORMAL DAY is the symmetry of the trading volume about the peak in the distribution (the point of control or POC). You can easily tell when a NORMAL DAY is occuring, or when a day is approaching a symmetric distribution (Gaussian or not), by computing the Volume Weighted Average Price (VWAP). When

VWAP=POC we have a symmetric distribution of traded volume.
VWAP>POC we have a skewed distribution of traded volume data toward higher prices.
VWAP<POC we have a skewed distribution of traded volume data toward lower prices.

Knowledge of the VWAP and its dynamic then has some important consequences for price action even when the distribution function cannot be analytically written down.

I dont' have the room here to go into all of the consequences of the VWAP.
At some point perhaps I will contribute and article about it.
JERRY

[drk1t]

TA seems pretty valid to me, I watch the charts, the trends are established, then the stock breaks the trend or it doesn't. That's about it in a nut shell. You can watch the level II and see the bid and ask volume change as it nears the R&S barriers, if it goes through then it's a new ball game until a new trend is established. Think of it like poker, you are delt a hand and then decide what might be best to do with it, same thing when you buy a stock. Some stocks I follow will drop about a certain amount and present a buy or get ahead of themselves and that's a sell, usually, sometimes etc. I look for leading indicators for the sector to help me decide. Then there is Buffet..... if I had his brains and intuition I could be an investor instead of a trader.

[phil895]

I think TA is a very good trading system, for this I must also include concepts that are technical; historical patterns, and price distributions... not just price and volume alone. I used TA almost exclusively sometimes, and the results are much better than FA for short term tradings. For long term setups, it will be another different story. I also find that engineering and math backgrounds are better at TA and economics and accountants are better at FA. When you hear failure rates it's usually from those outside the two academic backgrounds, this doens't mean that engineers and business people are better but they can learn to trade faster, and the success rates are much higher than the rest...

[Soultrader]

Originally Posted by jperl »

A good general discussion of the Normal or Gaussian distribution can be found here:

Normal distribution - Wikipedia, the free encyclopedia

This is the type of statistical distribution that most TA users assume their TA rules for entry and exit will follow when they do back testing of their rule based trading plan. Unfortunately, most TA users never check this. If they did they would be shocked to discover that their TA rules don't fit a NORMAL or Gaussian distribution of results. The reason for this is quite obvious. The data themselves used to generate the rules, don't follow a Gaussian distribution, so nothing derived from it will either.

The normal distribution is what also occurs on what MARKET PROFILERS call a NORMAL DAY. Market profile is a subset of the volume or price histogram. On a NORMAL DAY, the volume histogram looks like a NORMAL distribution function, hence the name NORMAL DAY.

One of the important characteristics of a NORMAL DAY is the symmetry of the trading volume about the peak in the distribution (the point of control or POC). You can easily tell when a NORMAL DAY is occuring, or when a day is approaching a symmetric distribution (Gaussian or not), by computing the Volume Weighted Average Price (VWAP). When

VWAP=POC we have a symmetric distribution of traded volume.
VWAP>POC we have a skewed distribution of traded volume data toward higher prices.
VWAP<POC we have a skewed distribution of traded volume data toward lower prices.

Knowledge of the VWAP and its dynamic then has some important consequences for price action even when the distribution function cannot be analytically written down.

I dont' have the room here to go into all of the consequences of the VWAP.
At some point perhaps I will contribute and article about it.
JERRY

Thank you Jerry. I have never used this reference point but sounds very interesting. I will definitely look deeper into this.

[NoodlyJames]

Originally Posted by drk1t »

Some stocks I follow will drop about a certain amount and present a buy or get ahead of themselves and that's a sell, usually, sometimes etc. I look for leading indicators for the sector to help me decide. Then there is Buffet..... if I had his brains and intuition I could be an investor instead of a trader.

I'm new here (obviously), although I have a lot more experience as a value investor. I've (at best) dabbled in TA and that's what I'm here to learn. The thing with Buffett (yes, he's a genius and he he has great intuition) is that he has brass balls and he doesn't care what happens to the price. Somehow, he is able to turn off the part of his brain which most of us give into. That fear and emotion which occur when a stock price drops 50% prompting us to cut losses only to watch the price turn around in 10 minutes (or a year)

I can find good companies cheap (yay internet). I can even stomach losing money over the short haul in order to gain long term. (This isn't intended to be about me but that's where my diatribe is going.)

I think pure fundamental analysis is wasteful. I give away money when my "great company" loses 50% of its share price before turning around. How much more efficient would it be to find a great company and then use TA to find an appropriate entry point or exit point?This is where I hope TA will come in. I have no idea how mixing the 2 will work (hopefully better than beer and gin) but it'll be interesting to find out.

As I said, I'm at "dumbass" level in TA right now but this looks like a great place to learn.