# What is the study of technical analysis?



## tech/a (8 March 2007)

A question I'll pose and one I feel most miss.

Is it?
(1) The study of the relationship between Time and Price?
(2) Is it the combination of Oscillators and indicators that confirm price.?
(3) Is it the combining of all the above into a methodolgy that returns a positive expectancy?

Is it something more?
I believe the Core is none of the above.
The above are a consequence of that core---the heart if you like of Analysis.
It is also the reason why I NOW prefer some styles over others.

The core what is it---to you?


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## tech/a (8 March 2007)

*FURTHER * 

The core---I believe is

(1) Is the REASON most people find trading Small Caps profitably so difficult.
(2) Why Experts like Prechter get very long term analysis so wrong.
(3) Why certain forms of analysis will be more accurate.
(4) Why all forms of analysis WILL get it wrong from time to time.
(5) Why understanding the Core will improve discretionary trading results---Id go as far as saying Dramatically.
(6) Why I believe and it seems so do others that miners approach to Elliot (as an example) is better.
(7) Why YOU NEED technical analysis!!!


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## CanOz (8 March 2007)

tech/a said:
			
		

> *FURTHER *
> 
> The core---I believe
> 
> ...




Interesting ponder Tech...FWIW my opinion is that at the core is supply and demand, and price action shows it. Whatever form of T/A that i have studied so far (Not sure about Gann as i know nothing) all links back to supply and demand.

Cheers,


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## explod (8 March 2007)

In my little experience and humble opinion it is the big picture that has to be taken in.   Too many indicaters put too much wood before the trees.  A  trend is a trend wether it be an hour chart or a yearly.  Most of you will know it but a great book to clear the head is "Trend Following" by Micheal Covel, Prentice Hall 2004.  However finding stocks is the easier bit, getting out the toughy.

regards explod

I do not know the publisher or author


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## coyotte (8 March 2007)

As in all forms of Analysis --- F/A, T/A or what ever.

Instead of throwing darts, it makes us feel more in control -- gives you something to focus on.

Cheers


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## mrWoodo (8 March 2007)

My (noob) opinion :

It's the study of past emotions (namely *fear *and *greed*) of the market place for a given stock. It is based on the premise that trends exist, and is the attempt to *quantify *these emotions/trends in order to profit from them.


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## Novski (8 March 2007)

Trends


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## CanOz (8 March 2007)

mrWoodo said:
			
		

> My (noob) opinion :
> 
> It's the study of past emotions (namely *fear *and *greed*) of the market place for a given stock. It is based on the premise that trends exist, and is the attempt to *quantify *these emotions/trends in order to profit from them.




Greed = Demand = less supply = higher price

Fear = less demand = more supply = lower price

Cheers,


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## motorway (8 March 2007)

At it's core is the concept that there are many differences between mkt participants..

This is a very old and a very new concept (For a long time in the middle everyone was assumed to have the same time frame and the same Knowledge
and the same resources. It was called efficient Market Hypothesis.. And was supposed to mean that all analysis was void  = An Index Fund)

Some of the most significant differences are that there are the more informed and the less informed.. And that there are stronger hands and weaker hands..

Other differences are time frames and size of ones wallet.. etc etc
Risk tolerance etc..

Most importantly is the recognition that all markets are manipulated.

Everyone is withdrawing demand and supply at various times.

There is demand and supply and contingent demand and supply..


One of the most valuable groups to follow is those who can move the mkts with both their Knowledge base and their financial resources.

"That those who know more about it than the observer cannot but conceal their future intentions regarding it. Their plans will be revealed in time by the stock's subsequent action. "

1930 Victor De Villiers

This is in Price and Volume action.

At it's core is the recognising of accumulation and distribution

Everyone is trying to sell without pushing the price down while they are doing it... Everyone is trying to buy without pushing the price up while they are doing it..

Accumulating and distributing...selling and buying RISK.. under the cover of Return...

Trading ranges are about change of ownership and the building of contingent demand  (just look at the volume when price leaves a trading range).

Trends build a following because Why are you going to sell something that is going up?

However those who know more are always revealing their intentions by their buying and selling. So trends end in ranges and ranges are the start of trends.

Across all time frames...

motorway


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## CanOz (8 March 2007)

Very well said Motorway.

Cheers,


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## theasxgorilla (8 March 2007)

I'm not sure that I 100% understand the question.  Is it, what is technical analysis, OR what does it mean to me?

To my estimation the markets attract a whole stack of very smart people, and people who are less smart, but don't know it yet.  These people read, measure, research, explore and deliberate on whether the _fundamentals_ (the reality) of said company, commodity, country, central bank, government indicate that the instrument is worth owning at it's current price, or some future price that they're waiting to hopefully arrive.  Their decisions to buy, sell, or stand aside mash together in a cesspool of trading activity (or lack of) and this activity shows up as tick data (price and volume).

Technical analysis extrapolates what this tick data infers regarding supply and demand and the trend of price moves over time.

What does it mean to me?  It means that I can get as good (or often BETTER!) returns on my money than many fund managers by spending just 5-10% of my day (maximum) doing what takes them 8-10 hours a day (sometimes more).

The ASX Gorilla.


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## tech/a (8 March 2007)

tech/a said:
			
		

> *FURTHER *
> 
> The core---I believe is
> 
> ...




To be a little clearer.
When answering (and there are some thoughtful yet not succinct replies)
Can your definition answer these questions above?
I feel some but not all are answered in those so far.


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## sam111 (8 March 2007)

New poster here but not newby to the market.
To answer your question Tech;

The core of technical analysis is the analysis of historical price and volume information to give probabilities to extrapolation of same. (future price/vol direction)

Cheers


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## ezyTrader (8 March 2007)

Using indicators, whether it be MAs, patterns, price analysis, etc....
as a measure of comfort...

The KEY, or core is, the study of probability (and positive expectancy), and trade efficiencies.

Just my two bobs' worth from one who hasn't completed a trading year yet...


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## It's Snake Pliskin (8 March 2007)

Anything to the right hand side of the page, chart etc. is a void. Now I believe EW can help here at least with expectations and possible targets. No other analysis does this that I am aware of (oh the gann gang) ans some other tech methods try. Fundamental tries but fails in the short and long term. 

If price goes up where and when will it go?


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## professor_frink (8 March 2007)

Apparently, technical analysis(on charts) is exactly where all share prices go. Furthermore, it can be used to trade shares for the extra cream off the top.

Nothing more needs to be said on this matter


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## theasxgorilla (8 March 2007)

Tech/a, the suspense is killing me here...


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## sam111 (8 March 2007)

I'd like to add a little to my previous answer (so much for succinctness)

The core of technical analysis is the analysis of historical price and volume information to give probabilities to future price/vol direction and thus assess risk at any given point in time. 

Trying to cover all the bases here


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## ducati916 (8 March 2007)

> What is the study of technical analysis?




The theory [or philosophy] of **Determinism**
jog on
d998


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## tech/a (8 March 2007)

*ASX*
OK.

*I believe * there are 2 parts one *seemingly* well known and one I believe largely over looked.

I'll use the questions above to demonstrate (Hopefully in greater depth) the seemingly simplicity of my beliefs,---based I'll add from 12 yrs of study of various technical forms.

*Part (1) Technical Analysis is the STUDY of Crowd Behaviour/Thinking/Action/Reaction
Part (2) Is the Application of the Crowd STRUCTURE,Formation/Constituents*.

So when reading my explainations you'll see where both (1) and (2) cross.

*(1) The reason most find trading Small caps profitably so difficult.*

Crowds come in various sizes and I would argue that the larger the crowd the more predictable that crowd will be.
Often in small caps there will be as little as 25 trades,the crowd is 25 (Maybe less if participants bought or sold more than 1 trade). If we have a crowd of 2 then its highly likely that the actions of one will effect the actions of the other.
In a crowd of 2000 the actions of 1 will more than likely go un noticed.(Unless that constituent is one of the leaders) It takes more action from within the crowd to move the crowd as a whole.
It also takes more effort from outside of the crowd to effect the crowd as a whole.
With a Small cap a sudden reaction from a larger than normal number of participants within the Crowd will have a greater effect on those in it.
Further an increase in numbers from outside into the crowd will move those in it along with their view,and when they exit--same applies.

The participants in the crowd in a small cap will generally have ON AVERAGE a very differing veiw within the crowd. Where as in a larger crowd there will be more who hold a similar view.

IN GENERAL technical analysis has trouble in larger timeframes tracking and predicting future crowd behaviour.---IN SMALL CAPS.

There is no point photographing a fast moving object with a 1 sec frame speed--which is what most Small cap traders do.

Those who buy for future growth generally make up the minority of those who will move in and out of the crowd---until it swells with like minded members the crowd will be less predictable.

As an example Ill use a small cap again. If the average number of trades is say 150 a day and all of a sudden 3000 buyers storm the share pushing prices wildly higher---You can be sure that 3000 of them *WONT* wish to be longterm holders.

*(2) Why Experts like Prechter get very long term analysis so wrong.*

Crowds change.In the Micro (Shorter timeframe) in a Larger cap perhaps not all that much (Small caps massively)---but over 10s of Years the Crowd changes DRAMATICALLY.
As the structure of a stock or index matures so to will the participants.
Those involved in the WAVE 1 of the All Ords super cycle back in the 30s arent trading today.There were no baby boomers then,20 yrs ago there wasnt Compulsary Super Annuation,I'll argue that traders werent as savvy as they are now. Computers---sorry I dont have a building!
Funds werent as rich and banks didnt have control of as much money.

As the crowd gets bigger and their wealth and knowledge expand the harder it is to have it change direction---either way but the more predictable and easier to analyse it becomes.

*(3) Why certain forms of analysis will be more accurate.*

Crowd *ARE* predictable.The bigger the crowd the more predictable it is.
In the example of the Running Small cap above the crowd goes from small to large very quickly---it DOES become easier to read.
The theory of Large numbers applies here as well.*Take fibonacci * as an example---Fib works in my view as the levels (Without prior thought) fall at areas where the crowd will decide that appropriate action will take place.Take a Strong moving trending(Long) stock which falls in a market where its generally percieved to be healthy.Often that retracement is at a shallow level,here people either want a bigger share than others in the crowd or wish to join it at a better than normal entry level.

At 50% level the crowd has thinned to a point where new or old members see the instrument as great value again.I'm sure that you can apply "What the crowd is DOING" in all analysis
The smaller the crowd the less predictable.---A large influx of new crowd members makes it MORE predictable.

*(4) Why all forms of analysis WILL get it wrong from time to time*

My view is because *MOST* analysis doesnt identify the constituents/Structure of the crowd.
A sudden sell off by a large stake holder in the crowd can spark a downturn which will generally go un noticed by MOST analysis. Its in ability to measure whats happening IN the crowd.

*(5) Why understanding the Core will improve discretionary trading results---Id go as far as saying Dramatically.*

By understanding that its the crowd--or lack of--the likely constituents of the crowd and that their behaviour is similar time and again--everytime you use a technical tool to LOOK at that crowd---will give you a large edge.Youll look at the analysis in a different light.---I sure do. It wont be long and you'll become very intuitive to crowd behaviour and to the DIFFERENT structures of Crowds.

*(6) Why I believe and it seems so do others that miners approach to Elliot (as an example) is better.*

Elliot/Steidelmayer/VSA and I'm sure some other forms of analysis are based around this premise (Crowd behaviour and structure).The structures and Levels are repeated time and again by crowds. Nearer term analysis (3 yrs or so) are more in touch with the Populance that make up the crowds. They inherently know that if a crowd generally does one thing like reach a level (Even un consciously) that if exceeded it is likely to advance or fall to the next level.
It can and does measure the CROWD and some those that populate it.

*(7) Why YOU NEED technical analysis!!!*

Technical analysis is the ONLY medium I know of that can CONSISTENTLY measuer and PREDICT crowd behaviour,in a way that we can take advantage of it in ANY given timeframe. Without it it really is hope that the crowd OR a new crowd will agree/or join you to make your opinion of some value.

*In Summary*

This is to me what analysis is ALL about.
How you use it and how good you will be at applying it to the market will be determined by the experience of the practitioner.
Get this right and then running your business like a business (Money management principals) will become much easier.

All of the answers above most very relevant can and should be seen in this context.One which I believe is SUCCINCT.

My views only and written by a Duck! Do with them as you wish.


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## constable (8 March 2007)

This opens up a whole new dimension for me anyway. Thankyou for sharing tech!


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## Pager (8 March 2007)

What is the study of technical analysis?

It’s something different to each and every one of us, if using T/A we all choose to interpret or read the future direction of a particular stock or market based on this Method, that oscillator or indicator or a combination.

Give 100 people the same chart and the same indicators and each and everyone of them will see something different, many maybe very close but others the very opposite, some will be bullish some bearish.

Like the market itself we all interpret the market in a different way, any market, stocks, futures, fruit and veg, if we didn’t there simply wouldn’t be a market.

Some say its absolute Bull****, others say they would not do without it and make good money following there particular method.


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## Mofra (8 March 2007)

"The effect of information on the psyche of a (preferably) large crowd resulting in the graphical display of their reactions to said information"


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## coyotte (8 March 2007)

Actually the whole thing boils down to that the hours/cost spent on analysis (any form) would be far better utilised on learning how to trade:

No 1: Psychology

No 2: Money Management

Way down the list No 3: Analysis --- bought, borrowed or your own.
It doesn't matter -- if you have not got the first two parts right, then if you're good at analysis you would be far better off starting a service.


After all,  just pick a stock at random and if you have 1 & 2 right, the rest will fall into place.


Cheers


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## bean (8 March 2007)

---NUMBERS - the market and stocks trade in numbers - technical anaylsis works on the numbers.
Then it uses numbers from the numbers as probabilities
and like everything out there it works to a degree, and can give an indication or a trend - better than nothing.


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## chops_a_must (9 March 2007)

ducati916 said:
			
		

> The theory [or philosophy] of **Determinism**
> jog on
> d998



I disagree, but understand. Interestingly, both sides of the coin are Popperarian in nature.

In a way, charting is a form of applying determinism. But, as we know, there is poverty in historicism. And that is why charting/ analysis isn't always/ ever correct. History provides no guarantee for future outcomes. And as tech pointed out before, the behaviour of crowds change. That's exactly the same reason why social sciences and their inductively based theories are invalid.

So, what are we left with? An attempt to look at probabilities perhaps? Limiting risk for entries/ outcomes? And to me, that is what it is about. Working out probabalistic outcomes.


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## barney (9 March 2007)

tech/a said:
			
		

> *ASX*
> OK.
> 
> *I believe * there are 2 parts one *seemingly* well known and one I believe largely over looked.
> ...





Good insight Tech,  Can I ask your opinion regarding the "crowd" ......... 

Obviously when trading the small-caps (which I don't do nowdays) there will/may be a higher percentage of "regular punters/traders" in on the action, whereas the mid-large caps are driven predominantly by the big players/mutual funds etc, so trading either would have its own "brand" of crowd behaviour. Therefore a different strategy is required for each?? .......... maybe that is why lots of us have trouble; because we are trying to trade small caps like big caps?? ........... Thats kind of what you are saying isn't it??? .............

Agree with Coyotte above, which is an extension of the same idea ......... understanding the psychology of both ourselves and the other punters, is paramount to good trading (and investing!!) in the long run (still working on all this stuff .... it doesn't happen overnight thats for sure) ............... Cheers.


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## ducati916 (9 March 2007)

tech/a said:
			
		

> *ASX*
> OK.
> 
> *I believe * there are 2 parts one *seemingly* well known and one I believe largely over looked.
> ...





*tech/a*

Your basic premise is flawed.
It matters not how many in the crowd, what matters is how much money flows from the crowd.

If there are 1000 sellers, each selling $1000 of stock = $1M
But 1 buyer, who is buying $20M of stock, which way do you think price will go?

This is why information, or analysis is more important than just pure sentiment.

jog on
d998


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## ducati916 (9 March 2007)

chops_a_must said:
			
		

> I disagree, but understand. Interestingly, both sides of the coin are Popperarian in nature.
> 
> In a way, charting is a form of applying determinism. But, as we know, there is poverty in historicism. And that is why charting/ analysis isn't always/ ever correct. History provides no guarantee for future outcomes. And as tech pointed out before, the behaviour of crowds change. That's exactly the same reason why social sciences and their inductively based theories are invalid.
> 
> So, what are we left with? An attempt to look at probabilities perhaps? Limiting risk for entries/ outcomes? And to me, that is what it is about. Working out probabalistic outcomes.




*chops*

Determinism as a function of chart analysis is utter tosh, so we are in agreement. 

Determinism as a function of Fundamental Analysis has a much better record, and thus I accept for the most part a deterministic probability.

Crowds are almost invariably the *peanut* in regards to financial markets.

jog on
d998


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## barney (9 March 2007)

ducati916 said:
			
		

> *tech/a*
> 
> 
> If there are 1000 sellers, each selling $1000 of stock = $1M
> ...




That is a good point.  Perhaps therefore observing the ratio of actual trades made and the dollar average of those trades could act as some kind of filter as to whether a trade should/shouldn't be taken as well.  Of course there could still be scope for manipulation by a big player in a small stock??


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## tech/a (9 March 2007)

> tech/a
> 
> Your basic premise is flawed.
> It matters not how many in the crowd, what matters is how much money flows from the crowd.




No its considered.

*All part of STRUCTURE*---IE who makes up the crowd.
10000 small investors and 2 Funds holding as much stock as the 10000,when they start selling-----


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## theasxgorilla (9 March 2007)

ducati916 said:
			
		

> *tech/a*
> 
> Your basic premise is flawed.
> It matters not how many in the crowd, what matters is how much money flows from the crowd.
> ...




I think you both continue to be right.

In your example Duc, it depends on market depth.  If there is a sell order sitting at the offer of $20M in value it would be half filled in the first example and fully filled in the second but in either case the price doesn't move.

I believe that this is why tech/a made the distinction between small-caps and large-cap companies.

What you touch on with regards to money flows brings me to the only point I can add to tech/a's post regarding why I believe longer term forecasting with things like Elliott Wave is so difficult...the relative value of the underlying currency that is used to measure price can shift.  Therefore so can factors that affect sentiment such as the purchasing power of that currency within the local or world economy (due to inflation, deflation, exchange rates etc.).  Over long enough periods of time I believe that these shifts in the underlying  distort the charts we use to measure sentiment.

So my response to point 2, yes, crowds do change, but more importantly the potency of the currency that constitutes the money flow that Duc talks about changes.  This can reduce the long term effectiveness of Elliott Wave price targets and the like, but it all still shows up on the chart one way or another...the charts can't lie.


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## ducati916 (9 March 2007)

tech/a said:
			
		

> No its considered.
> 
> *All part of STRUCTURE*---IE who makes up the crowd.
> 10000 small investors and 2 Funds holding as much stock as the 10000,when they start selling-----




Not in the quoted example it's not. 
So unless you have a part two to rectify the omission.

Cashflow makes any security move, the number of participants is purely incidental.

Studying market depth............
Hmmmmm, most big buyers or sellers will not telegraph their intentions.

jog on
d998


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## tech/a (9 March 2007)

> If there are 1000 sellers, each selling $1000 of stock = $1M
> But 1 buyer, who is buying $20M of stock, which way do you think price will go?




I would argue that initially not that far.
Large buyers dont buy at market.
They will instruct buying at a price level and in smaller parcels.
They will wish to buy in over a period of time at a price.
20mill @ 10c is worth the wait.

The case you present in isolation is very much on the extreme outlier of price movement.

While its true that the "Crowd" will be influenced by big holders,feel safer, more confident,it will be reflected in price---initiated by either a change in crowd behaviour or Crowd structure.


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## ducati916 (9 March 2007)

tech/a said:
			
		

> I would argue that initially not that far.
> Large buyers dont buy at market.
> They will instruct buying at a price level and in smaller parcels.
> They will wish to buy in over a period of time at a price.
> ...




I have exaggerated the somewhat to illustrate the point.
Large buyers will tend not to buy @ market I agree, however the net result is the same, $20M worth of shares are removed from the free float.

That WILL effect a change in the supply/demand curve.

jog on
d998


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## tech/a (9 March 2007)

Take VSA analysis it indicates where volume and selling relative to price alerts of possible change in price.It cares not how many are doing what.
In your case it wouldnt be long before the crowd noticed positive price action and volume.The crowd would be predictable.



> That WILL effect a change in the supply/demand curve.




Yes by altering the structure of the crowd.The Crowd now has a 20million holder with in it.If structure is not considered and this holder is likely to be a short term player then those that "Follow" the crowd may get caught buying his sells.

Seen it on a smaller scale often with small caps.
Someone buys 5 million and loads sells of 500,000 all the way up.


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## ducati916 (9 March 2007)

tech/a said:
			
		

> Take VSA analysis it indicates where volume and selling relative to price alerts of possible change in price.It cares not how many are doing what.
> In your case it wouldnt be long before the crowd noticed positive price action and volume.The crowd would be predictable.




That may well be.

The point is that the minority of the crowd [in number] dominated the majority of the crowd [in number] because of having deeper pockets.

Money talks.
All else walks.

jog on
d998


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## ducati916 (9 March 2007)

> Yes by altering the structure of the crowd.The Crowd now has a 20million holder with in it.If structure is not considered and this holder is likely to be a short term player then those that "Follow" the crowd may get caught buying his sells.
> 
> Seen it on a smaller scale often with small caps.
> Someone buys 5 million and loads sells of 500,000 all the way up.




But we have just agreed that you are very unlikely to *see* the big-guy in the crowd........he won't advertise by sitting in the que will he?

Sitting in the que is for muppets.

jog on
d998


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## tech/a (9 March 2007)

ducati916 said:
			
		

> That may well be.
> 
> The point is that the minority of the crowd [in number] dominated the majority of the crowd [in number] because of having deeper pockets.
> 
> ...




Yes and thats the way THAT crowd is structured and behaves in that instance.*Thats why you will get outlier moves.*

*Simply explained by Crowd behaviour.*


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## ducati916 (9 March 2007)

> (5) Why understanding the Core will improve discretionary trading results---Id go as far as saying Dramatically.
> 
> By understanding that its the crowd--or lack of--the likely constituents of the crowd and that their behaviour is similar time and again--everytime you use a technical tool to LOOK at that crowd---will give you a large edge.Youll look at the analysis in a different light.---I sure do. It wont be long and you'll become very intuitive to crowd behaviour and to the DIFFERENT structures of Crowds.




Studying volume tells you little to nothing of the *crowd*.
Studying T&S will tell you little of the crowd.
Studying 8Q's will tell you about the structure of the crowd.
Studying the 10Q's will tell you about the structure of the crowd.

Technical analysis is a 50/50 proposition.
Always has been, always will be.

jog on
d998


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## coyotte (9 March 2007)

Actually Tech , as far as small caps go your only repeating what Guppy was saying a decade ago in "Share Trading " and why he generally advises against using US methods with Oz stocks .

Cheers


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## tech/a (9 March 2007)

ducati916 said:
			
		

> Studying volume tells you little to nothing of the *crowd*.
> Studying T&S will tell you little of the crowd.
> Studying 8Q's will tell you about the structure of the crowd.
> Studying the 10Q's will tell you about the structure of the crowd.
> ...




Dis agree.

Lets take your case.

What is the crowd likely to do and how is the structure going to alter in these 2 case scenario's.

(1) Over a 24 hr period Unknown to the market 1 buyer purchases 20 million stock and price moves only 9c up (Its a $5.20 stock) Its seen as 580 trades in a total volume of 28million.Trading finishes on the high for the day.

(2) Over a 4 hrs period in ours stock we see one buyer buy all available stock in one hit to secure 20million stock.Volume is still 28 million but trades are 55.This forces price to move 35c up to secure his purchase. Trading closes 12c off the high for the day.

Now ducster tell me how do you think trading is likelly to pan out in both cases---The same?

I'm not here to convince you Duc or anyone---this is what I have found.
Its a personal thing.

You feel comfortable looking for value companies to buy.
I look at crowd behaviour.

Coyotte.

*What are US methods?*


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## coyotte (9 March 2007)

EW , Gann, Fib Nos, Indicators and most patterns .

Guppy works off a small group of patterns / price action /GMMA for Oz Stocks 

Cheers


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## theasxgorilla (9 March 2007)

coyotte said:
			
		

> Actually Tech , as far as small caps go your only repeating what Guppy was saying a decade ago in "Share Trading " and why he generally advises against using US methods with Oz stocks .
> 
> Cheers




I've often wondered about this.  Does this infer that even our large caps, whilst big fish in our pond, in the context of global markets are still little fish?


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## tech/a (9 March 2007)

coyotte said:
			
		

> EW , Gann, Fib Nos, Indicators and most patterns .
> 
> Guppy works off a small group of patterns / price action /GMMA for Oz Stocks
> 
> Cheers





Coyotte.
The tools are identical for any market its simply the *interpretation*.

US stocks and the market itself is just bigger crowds.
And as such would argue that once the direction of the crowd is determined Long or short it will behave more predictably.Wether that be individual stocks or the full NYSE.

ASX yes most.

Most of ours wouldnt get a spot on the second board!!---if they had one.


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## theasxgorilla (9 March 2007)

tech/a said:
			
		

> US stocks and the market itself is just bigger crowds.
> And as such would argue that once the direction of the crowd is determined Long or short it will behave more predictably.Wether that be individual stocks or the full NYSE.




This is where I diverge from many pure chartists.  To me there is ALWAYS an underlying company, commodity, currency etc.  In the case of the NASDAQ the crowd is big, the money flow is massive, yet with many shares the moves are notoriousy erratic.  Similar issues arise in the biotechs sector.


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## coyotte (9 March 2007)

Tech/a

I beg to differ
the tools are for the market they where developed under.
in the same vein each stock can often have it's own price/pattern habits --- which apply to this stock only --- find that habit and you can trade in/out of this stock for ages.

Cheers


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## moses (9 March 2007)

coyotte said:
			
		

> in the same vein each stock can often have it's own price/pattern habits --- which apply to this stock only --- find that habit and you can trade in/out of this stock for ages.



Coyotte,

interesting; care to illustrate this with examples, or would that be giving the game away?


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## tech/a (9 March 2007)

Coyotte.

Actually I agree totally.I'm just looking at it from perhaps a different perspective.
I'm saying that each stock/Index/Commodity will have its own crowd.
Identify how that crowd moves its Stock/Index/Commodity and there you have it.

ASX as above.


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## theasxgorilla (9 March 2007)

tech/a said:
			
		

> Coyotte.
> 
> Actually I agree totally.I'm just looking at it from perhaps a different perspective.
> I'm saying that each stock/Index/Commodity will have its own crowd.
> ...




What can I say?  This makes sense...so it's all about 'the crowd'.


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## coyotte (9 March 2007)

moses said:
			
		

> Coyotte,
> 
> interesting; care to illustrate this with examples, or would that be giving the game away?




I began to illustrate this in another thread , several months ago but got shot down by the gurus on this site -- only problem was one of the stocks in question went on to repeat the same situation 3 times in as many months -- all in profit.

Have a look at the "potential breakout thread" --- FLX as a recent example (post 249)

Your looking for MAs, Simple Patterns, Trend Breaks, Bollinger Bands Breaks anything that takes your fancy  --- just ONE only of a repeating occurrence with the same tool ---


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## tech/a (9 March 2007)

Coyotte.

In defence of both your and my stance---it became pretty obvious how the crowd was/is moving in the XJO the trades that could have been taken as shown reflect the ability to identify with what and how the crowd reacts to different price levels ONCE SET by the crowd.

***You may have closed your position at resistance last night which would have been more the play.***


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## motorway (9 March 2007)

theasxgorilla said:
			
		

> This is where I diverge from many pure chartists.  To me there is ALWAYS an underlying company, commodity, currency etc.  In the case of the NASDAQ the crowd is big, the money flow is massive, yet with many shares the moves are notoriousy erratic.  Similar issues arise in the biotechs sector.




notoriously erratic = The absence of a campaign .. Of smart money....

Charts are only useful if they help give you perspective on what is happening RIGHT NOW..

With small Caps it is the RIGHT NOW that matters all the more.
Accumulation and Distribution happen at the breakout or the breakdown.
Most small caps do not have any campaign either. They are cat and dog stocks.... They sleep and sleep until they wake up and they only stay awake
if something real is happening..

(Here I mean Accumulative and distributive .. having the effect of moving price a certain way.. Small caps are out of time most of the time)

Mkts are about time frames and the time frame for small caps can be very long .. Sometimes only the smartest money can see that..

Mkts only will move if smart money moves it (That is moves that have a destination = trends)  

So the crowd is not just a crowd the crowd is made up of different groups
only one of which matters.. All the other groups follow along.

The smartest Money... Has all the money.. Has no time frame.. But  always acts in the moment.. Taking advantage of buy and sell liquidity as it arises and is Created..

Liquidity can always be created because the majority are always followers.

Price action moves in waves that attract a following.

Volume = Following.


All that matters is what is happening NOW.

The past is only context.

Time is relative.. Trends constantly are changing their speed...


motorway


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## tech/a (9 March 2007)

Motorway.

Good stuff.


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## nizar (9 March 2007)

coyotte said:
			
		

> in the same vein each stock can often have it's own price/pattern habits --- which apply to this stock only --- find that habit and you can trade in/out of this stock for ages.
> 
> Cheers




Agree.
I remember LHG you couldve made a living off its movements.
Everytime it got to about $2.75, a few weeks later $3.10.


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## nizar (9 March 2007)

tech/a said:
			
		

> Coyotte.
> 
> In defence of both your and my stance---it became pretty obvious how the crowd was/is moving in the XJO the trades that could have been taken as shown reflect the ability to identify with what and how the crowd reacts to different price levels ONCE SET by the crowd.
> 
> ***You may have closed your position at resistance last night which would have been more the play.***




Tech.
The 2nd "long" you have at 10am on 8/3, wouldnt you have gone long from before then ie. as in where it has bounced off previously? WHat wouldve made you wait ie. what made you expect further downside? And then you wouldve stopped out as it gapped down, yeh?

And dont have a go at me - im just an amateur trying to learn a few things.


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## tech/a (9 March 2007)

nizar.

No once a 3 wave move was confirmed then go long with a stop just below that low.


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## mikeg (9 March 2007)

I am a bit confused by your chart also Tech. Why were you stopped out  of your 1st short?


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## tech/a (9 March 2007)

Not stopped.
Closed.
End of 3 waves confirmed at Support out on close of the first 5 min bar heading long--swing trade it stop just below support for long trade.


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## mikeg (9 March 2007)

If that is the case then why would you be long still. Would'nt you have got stopped out after the first 3 waves when it double topped and then fell again?

Might seem like a silly question to you, but I am still trying to understand this wave thing.


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## tech/a (9 March 2007)

> ***You may have closed your position at resistance last night which would have been more the play.***




Yes I agree hence the note at the top of the chart.


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## mikeg (9 March 2007)

I was referring to the position at 11.30am. Double top, end wave 3.


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## tech/a (9 March 2007)

I would have only taken the position AFTER the 3 waves were complete.
as you can see the first trade wasn't taken until then (I didnt actually trade this).First long was at 1.00pm


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## mikeg (9 March 2007)

OK, understand now. What threw me was were you have marked the last long position at 11.30. From what you are saying, then it should be at the 1.00pm position?


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## tech/a (9 March 2007)

Hang on got you now.

You mean here!!

If thats so the resistance above wasnt reached so I would have held till stoped (and it came close or reached the Exit


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## coyotte (9 March 2007)

Now you're talking my short term language Tech.

But you don't need EW for this -- simple trend lines -- ma -- bollinger -- will all do the same trick --- just something to focus on.


Cheers


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## barney (9 March 2007)

coyotte said:
			
		

> I began to illustrate this in another thread , several months ago but got shot down by the gurus on this site -- only problem was one of the stocks in question went on to repeat the same situation 3 times in as many months -- all in profit.
> 
> Have a look at the "potential breakout thread" --- FLX as a recent example (post 249)
> 
> Your looking for MAs, Simple Patterns, Trend Breaks, Bollinger Bands Breaks anything that takes your fancy  --- just ONE only of a repeating occurrence with the same tool ---




Howdy Coyotte,

Thats true (on all accounts above   ), but the thing is, the cash is in your pocket, so you can sit back and  .......               Cheers M8.

Been an interesting thread this ........... well done lads.


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## wintermute (11 March 2007)

I won't add anything on what's already been said, but I will ask an additional question. 

Is T/A ever self fulfilling?  

That is, if a chart in general looks like a buy in enough T/A's minds, will that be enough to force the price up?? A few will get on board early, making the next lot a little more confident, that pushes it up a bit more, as more and more T/A's jump on more and more decide their analysis was correct and join the crowd....  Similarly if a chart is saying sell, will that perpetuate a down trend that may be going against all fundamentals, or for that matter cause a reversal because the stock looks overbought (even though there may be a damn good reason for the price to be going up)??

I guess to be succinct, how much of the crowd is using T/A??!!

Tony.


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## motorway (11 March 2007)

Most things are following something else.
Most people are following someone else.

Most things feedback into events as they are unfolding...

Tech/A has said TA is about the crowd and what it is doing..

Well crowds have a life cycle.. most things do.

Crowds become polarised and they become unified.

Do fundamentals move mkts or do mkts create fundamentals?

IF USA mkts tank would that be because of a looming recession?
Or would that be a cause of one?

Nothing Succeeds like success until it doesn't..


Buying generates selling .. Until it generates buying..

Selling generates selling until it generates buying..

A look at 52 week highs and lows show that mkts swing much more than the fundamentals would allow... 

But that is because of uncertainty and the act of following

What is not self fulfilling?
Even people who don't look at charts get swept along.

In all fields confidence is very effective.
Confidence builds confidence it leads to successful endeavour.

Until it leads to over reaching.. And then small doubts grow
that lead to failure and loss of confidence..

Trends arise because they gather a following a confident following.
Trends carry in them their own end.

Because it is only when you HAVE gone a bridge too far that you know for sure..

Mkts are a natural process of growth and decay.

All natural processes oscillate... But mkts also contain human reflection.

So the answer is Yes but even without charts and TA mkts would act in much the same way..

So it is about the crowd and the crowd will chase it's own tail
Until it catches it and then the trend evaporates.

Like those cartoon characters that find themselves walking in thin air..

But the crowd is also chasing real things too. But coming after.

Trends often don't have much trading volume.. holders are holding
and prices are being marked up by positive sentiment as much as buying and selling.. That is why The largest volume on a chart ( a day a week a month )

Is such an important flag... The crowd has lost it's unity .. The seeds of character of the next trend (reversal trading range) have germinated
The seeds sown by the previous mkt action itself..


A stock is overbought when on a time frame all have bought who want to.
selling (profit taking) will then take prices down to create liquidity.

If prices fall enough then buyers retreat to the sidelines  selling generates selling ..  When the volume surges then the selling has generated buyers
When all who want to have sold .. Then the fact that the new holders have a cost price = or below mkt means technically the position is strong. Buying now generates buying and prices rise to create liquidity..

Mkts have Human reflection .. So That automatically means they are manipulated.. Those who won't buy until it stops going down.. Those who won't sell until it stops going up.. Those who would buy if it was lower or sell if it was higher.. If it would just leave the trading range etc.

Everybody is withdrawing and providing demand and supply
contingent on something happening.. Manipulation..

Human Nature = manipulation. Nature itself is unmanipulated.

(Tides of the sea don't become self aware and change because of that reflection)

So trends emerge and gain a following.. TA is about tracking the crowd and identifying the various stages of its life cycle..


With or without TA human nature is the same.
TA is just another thing feeding into the mix.
Refection on reflection on reflection...

It takes time for everybody to buy.. Mkts create liquidity and prosperity so
expansion and trends persevere.. But at the end of the day it becomes like pushing string and if you push the string up into the air.. collapse

Corrections are healthy...They keep things on a firmer foundation.
Liquidity alone can not keep pushing string up into the air..

So I guess the answer is Yes.



> I guess to be succinct, how much of the crowd is using T/A




All of the crowd is using it... But in various ways and competencies.

Even those who wait to buy at the top.. The laggards of the crowd.
Even those who Buy all the dips on the way down the misfits out of step members of the crowd.

Anyone who follows.. Everybody..

TA itself has many levels and application.

The existence of false signals demonstrates and suggests that
There are always those who will take the other side.
You can not push string for long.. For a trend to arise some thing real has to be in existence.. When a trend does arise the diversity of the crowd at that time evaporates this happens with or without TA..

Maybe someone selling on an overbought signal is tempering the trend and making it stronger. On every time frame when the crowd becomes too one sided correction sooner or later arises..

Mkt is action reaction .. test response.. 



> Is T/A ever self fulfilling?




Mkts themselves are.. Now if We all stop buying until markets start going up We should very soon get some real bargains   

motorway


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## ducati916 (11 March 2007)

*motorway*

Pretty much agree with your previous post.

*Cyclical
*Reversion to the mean
*Overshoot

Is the precis version.
jog on
d998


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## tech/a (11 March 2007)

Motorway.

Seems 2 of the crowd have similar views!  

Possibly 3 with the Ducster.


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## ducati916 (11 March 2007)

tech/a said:
			
		

> Motorway.
> 
> Seems 2 of the crowd have similar views!
> 
> Possibly 3 with the Ducster.




I agree with the facts as presented.
It is in the measurement of those facts that we differ.
That however is no great thing.

jog on
d998


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## wintermute (11 March 2007)

Great post motorway   thanks!  and thanks to Tech/A for starting the thread and everyone else's contributions, it has been a great read  

I'm probably to a degree one of the misfits  I will sometimes buy before a clear reversal signal, on the way down, but only if I feel the fundamentals are right, mostly though I use TA to time entry so as not to buy at a peak.  More recently I have used it to try and time exit, selling when I think the stock is becoming overbought..... still very much a novice! 

Tony.


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## coyotte (11 March 2007)

I feel though if the main ingredient in your T/A is YOU .

Then you must determine how you think -- logically or creatively .

Someone thinking on Logical lines such as a engineer would surely perceive a chart or T/A, differently to how a architect would .

Likewise different schools of T/A would be based on either Logical or Creative thinking 


Which brings about a return of the style of debates Utzon and the Engineers would have , which reduced the Sydney Opera House to a shadow of the architects vision --- neither side was capable of  SEEING what the other was on about . 


Cheers


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## motorway (11 March 2007)

Thanks Tony

There was an interesting article on the expert mind and how to develop one
in the AFR a while back.

The key was effortful endeavour... Always trying things that are just outside ones competency... Not too hard not too easy.. Always stretching oneself..
With full attention..

Learning to drive a car .. One makes rapid impressive progress..  But then a level is reached that is good enough and then We no longer get better and we never will become an expert.. We Always need to push the boundaries and try what it is We are just not able to do... 

The article suggested it takes 10,000 hours of such practise to make an expert mind.. But practise of what is just beyond Us. Not just doing the same thing that is good enough over and over again..

With the market You have terrific feedback.. So We just have to be honest with our selves have reflection and keep trying in a effortful way..

Who can say what limit there is to How good We can become if We make that effort ..

motorway




> .......Figuratively speaking, therefore the small trader should imagine himself as a hitch-hiker in the market. For the ordinary hitch-hiker, someone else supplies the car, chauffeur, oil and gas. When he thinks the car is about to go in his direction, he jumps aboard and rides as far as he thinks the car will go. When he notices the machine has been stopped by a red light, or is about to turn a corner and go in some other direction, or that the car is running out of gas, or the brakes failing to work properly, he steps off and figures he has secured about as long a ride as he may expect. All he has supplied in this transaction is a modest commission and whatever brains were necessary to observe and recognize the opportunity when to get on and off.
> So it is with the market. The observer, whether a small trader or large operator, watches for his opportunity. When he sees a chance that offers reasonable odds in His favor, where the probability of profit far exceeds the risk, he buys, limits his risk and awaits developments.
> So long as the stock behaves properly, in accordance with the technical action that confirms his oringinal judgment, he maintains his position. As soon as he finds the stock has reached it's  indicated objective.... Begins to waver in it's stride, or passes through a set of maneuvers that clearly indicate supply is increasing, and a reactionary movement seems imminent, he acts on the information thrust upon his attention and gets out.......
> 
> Richard D Wyckoff




Here is a link to a crowd life cycle model

http://www.hankpruden.com/lifecyclearticle.html


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## coyotte (11 March 2007)

Hope Wyckoff had the decency to acknowledge Guppy with that view.

It's virtually word for word from Guppy 


Cheers


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## weird (11 March 2007)

Well he died Mar. 19, 1934, according to Time Magazine.


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## CanOz (11 March 2007)

weird said:
			
		

> Well he died Mar. 19, 1934, according to Time Magazine.




So Guppy should have acknolwedged him?

Great link to a great article, i think the penny has dropped for me on Tech/As thread.

Cheers,


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## It's Snake Pliskin (11 March 2007)

coyotte said:
			
		

> Hope Wyckoff had the decency to acknowledge Guppy with that view.
> 
> It's virtually word for word from Guppy
> 
> ...




Coyotte,

I'm not sure where you are going with your comment. Wyckoff was a legend and Hank Pruden is a Wyckoffian. Guppy is good and respected by me but I have studied Wyckoff at length suggesting you may be wrong.
Wyckoff is far from the Holy grail, as is EW and all other TA methods.
Regards
Snake


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## coyotte (11 March 2007)

My mistake.

Thought the reference was to a reporter.
Maybe Wyckoff was clairvoyant.


Cheers


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## tech/a (11 March 2007)

Maybe Guppy followed/s Wyckoff


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## motorway (11 March 2007)

> Maybe Wyckoff was clairvoyant.




Maybe that explains His trading expertise  

The Holy Grail will be at bottom ourselves.
Wyckoff wasn't a Wyckoffian ... He was Wyckoff   


On the S curve... Humans have reflection.. natural systems don't.

That explains the  1 2 3 elliot overlay.

Or the Wyckoff test and response or shakeouts.

Modis (S curve) talks about precursors The smooth curve gets overbought and oversold and shakes weak hands off with false moves..


Wyckoff defined much of what TA is and has become.

He was born in 1873 .. His Method (The 1930 Course) is still taught today
and has an avid following both by those who have learnt it and those who have it second hand in the many TA books written since..

Bar charts, Point and figure charts, Comparative Relative Strength
trend lines and channel techniques.. Wave charts and on and on..


Only The course itself contains the Method and Snake I think that the reason
It seems like a best kept secret.. Is because it did and does work..


No ones fault when they were born.. But We do stand on the shoulders of those Giants (titans) who went before and in many ways the oringinal formulations are the best and often have the most benefit for our own journey.. In My opinion anyway ....

motorway

A motorwayian     

For example John Bollinger  (Of the Bands)



> Dead Horses?
> May 18, 2001
> By John Bollinger, CFA, CMT
> Capital Growth Topics
> ...






> In the October 2002 S&C, five historic figures were named as "titans of technical analysis": Charles Henry Dow, R.N. (Ralph Nelson) Elliott, W.D. (William Delbert) Gann, Arthur A. Merrill, and Richard Wyckoff.


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## tech/a (12 March 2007)

wintermute said:
			
		

> I won't add anything on what's already been said, but I will ask an additional question.
> 
> Is T/A ever self fulfilling?
> 
> ...




A question often asked.
In the landscape of market analysis I would say that T/A runs a dismal third.

(1) Guessing,tips,gut hunches,brokers recommendations,reading papers,and Newsletters etc I would say for the public runs no 1---many call this analysis.

(2) Those seriously Fundamental.

(3) Those seriously technical.
BUT.
While there are many who wade through technical analysis *VERY FEW * actually know how to IMPLEMENT Technical analsysis into a Trading methodology. Often used in isolation with no thought of wether the analysis has merit in the longterm,or even if a group of trades will be profitable---T/A is often given a cursory glance and when it fails to be 100% accurate is seen as voodoo.

There is a* VAST * chasm between knowledge and application of that knowledge.
Technical analysis demonstrates this better than most!


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## Wysiwyg (6 February 2010)

I don't think anyone singularly answered this question correctly but as a collection it was partially answered. What we end up doing is take a section of technical analysis to become proficient at. Maybe because the subject is too broad to know all the intricacies of. 

So technical analysis is a broad subject of which books and experience seem to be the main form of education. I don't know of any education course that covers the general field of T/A. This is disappointing. 

Wikipedia has a good description of T/A and to study these, though not all listed attributes, is the study of technical analysis. To know the precise workings of the various indicators alone would be part of T/A study.



> Technical analysts seek to identify *price patterns* and *trends* in financial markets and attempt to exploit those patterns. While technicians use various methods and tools, *the study of price charts is primary.*
> 
> Technicians especially search for *archetypal patterns*, such as the well-known head and shoulders or double top reversal patterns, *study indicators* such as moving averages, and look for *forms such as lines of support, resistance, channels*, and more obscure formations such as flags, pennants or *balance days.*
> 
> Technical analysts also extensively use indicators, which are typically *mathematical transformations of price or volume*. These indicators are used to help determine whether an asset is *trending*, and if it is, its *price** direction.* Technicians also look for *relationships between** price, volume* and, in the case of futures,* open interest*. Examples include the relative strength index, and MACD.





> Technical analysis employs models and trading rules based on *price **and volume transformations*, such as the relative strength index, moving averages, regressions, *inter-market and intra-market price correlations*, *cycles or, classically, through recognition of chart patterns. *


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## Wysiwyg (21 April 2010)

Wysiwyg said:


> I don't know of any education course that covers the general field of T/A. This is disappointing.



Well there is A.T.A.A. which is the Australian Technical Analysts Association
but for training I believe Kaplan Professional are the only company that offer a professional training course at $1550.00 for a Single Subject as well as Masters and Diplomas for more.
Single Subject course for Technical Analysis  ...


> Technical Analysis (FIN231) in 2010
> 
> This subject introduces the key concepts and tools required to perform technical analysis. With a wealth of examples and hands on learning features, the subject facilitates the development of skills in the construction, interpretation and application of charts to a variety of markets.
> Learning outcomes
> ...



* I think there is a way around the "assumed knowledge" requirement as highlighted below.


> Pre-requisites
> Students enrolling in a Masters level elective subject are assumed to have the pre-requisite knowledge in the four core subjects (FIN111, FIN112, FIN113 and FIN114). *This requirement can be* *waived where students* *are studying one or more core subjects concurrently with an* *elective, or they* *are studying single subjects and are not enrolled for the Masters, Graduate Diploma* *or Graduate Certificate courses*.




So there you go. Might be all that is required to assemble the T/A jigsaw puzzle anyone may have in mind.


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