$5000 to $50000 in two years - let the odyssey begin

[rex]

Sure michael, but my opinions on the reasons is nothing new.

A list of reasons in no particular order

- ego, there is no place for ego. The pilot thought he was a hotshot cause he flew for qantas, the market didn't care that he flew for qantas.
- Having no plan. Many people simply have no plan, which is idiotic.
- People often move to derivatives before they have even been successful just buying and selling stocks, this basic attribute needs to be attained before stepping up.
- too many orders. Overtrading is a killer. Traders need to be patient and wait for good set-ups to come through.
- boredom, I really think many people are bored and they thus just take trades to lighten up their day.
- news, many try to trade on news, which is very hard, i have only ever seen a couple people actually succeed with this method.
- Dual accounts. Partners trading together, mixing opinions, rarely succeeded.
- education, people try to bottom fish too much, bottom fishing just doesn't work.
- complication. people think the more complicated the better. The accounts I watched grow and grow were just people who did the same thing over and over again, they didn't stray from this.
- personality: people shouldn't follow anyone elses system just cause that person may have been a success. A system needs to suit someones personality, this is very important.
- Human contact: the best traders we never heard from, they just never needed anything from anyone. The worse traders would be calling up every few minutes wanting to ask stupid questions.
- perserverence: many traders would wipe out an account and that would be it. Others (very few) would wipe out an account and then realise that they didn't know what they were doing. so they went away, studied and came back. People who came back for a second time usually did very well, they were committed and didn't give up.
- stop losses. successful traders are often wrong, they admit this and take small losses. and then they sit with winners
money management: I often saw people with a $10,000 account take on for eg a $50,000 position (margin). very stupid.

I could go on but that covers some of them

Hope that is what u were after.

 

[tech/a]

Great stuff REX.
Particularly as your commenting from experience,having had personal contact with many.

It seems the Old adage of 90% of traders end in failure isnt to far off the mark.

 

[MichaelD]

The accounts I watched grow and grow were just people who did the same thing over and over again, they didn't stray from this.

Others (very few) would wipe out an account and then realise that they didn't know what they were doing. so they went away, studied and came back. People who came back for a second time usually did very well, they were committed and didn't give up.

Fantastic info, rex, all of it. As Tech/A said, it looks like there is indeed truth to the 90% of traders fail adage.

It's so simple to succeed...and yet so hard.

Thank you for this - it's rare to get an insight from "the inside".

 

[nizar]

Great stuff REX.
Particularly as your commenting from experience,having had personal contact with many.

It seems the Old adage of 90% of traders end in failure isnt to far off the mark.

I second that

Great post rex,

Thanks

 

[Freeballinginawetsuit]

- complication. people think the more complicated the better. The accounts I watched grow and grow were just people who did the same thing over and over again, they didn't stray from this.

.

The most accurate comment I've observed on the forum.

 

[bunyip]

Excellent information Rex. I hope you keep posting to this forum. Don't be put off by people who try to discredit you.

Talking of brokers and losing traders, I once had an interesting conversation with a former futures broker who spent five years in the industry.
What you've said about share traders is similar to what he told me about his futures clients...most of them lost money, usually for the same reasons you've outlined. Topping the list of losers were his SITM clients who tried to trade by using Gann analysis to forecast the markets rather than react to them.
Running a close second in losses came the Elliott Wave fanatics.
He said his winning traders were almost invariably those who hitched rides on trends, controlled their losses, and jumped off the trend after it finished.
The simpler their methods, the better their results.
He gave me all this information without any prompting from me. He was quite adamant that people invariably wrecked their accounts if they thought they'd trade consistently well by forecasting the market.

Bunyip

 

[Luke6450]

damok

I don't want to rain on your parade, but if you can possibly do it I'd advise returning the Starter Pack for a full refund. Four grand is highway robbery for a system that simply buys dips during uptrends, and shorts rallies during downtrends. Not that there's anything wrong with such a system, it's just that you can learn it for less than 10 bucks.
How? Go to 'Pro Trader' website and purchase Frank Watkins booklet 'Darvis Box Trading'....it'll cost you about $8.
I don't know if SITM's 4 grand deal includes software, but even if it does, it's still a rip off. Good trading software can be bought for prices ranging from about $300 to $900.

Your 40% per year return is unfortunately an unrealistic expectation for a new chum trader. You'll be far above average if you can achieve half that return in your first couple of years.
Once you learn your craft then yes, 40% is achievable, but you have little chance of achieving that sort of return initially.

Bunyip

Couldnt agree more... Darvas trading is the way to go... I use the protrader software and nothing more then darvas scans and I have had a great start in such an average market.

 

[Wysiwyg]

True.....there`s prolly a million reasons on WHEN to get in and WHEN to get out.

 

[coyotte]

Hello coyotte,


Interestingly I spent the day charting and researching derivative instruments… while responding to the odd comment (I’m actually looking at Brent crude as we speak!).

Now, as to your comment on “price action”, in my school of T/A, time is sometimes more important than price. Think about it!

Sometimes I’d argue you have to look at the pattern, as well as the price action… Interestingly I day traded warrants for a long time, but found I was a much better position trader, and that sometimes price action didn’t matter at all when there is an arbitrage on… so there are many horses for courses, aren’t there?

Indeed researching charts from the past probably taught me more than trying to day trade ever did… but that’s just what I found…

How about you coyotte?


Regards


Magdoran

As REX points out : A simple method used consistantly will usually win out for the long term.

The point I was trying to get over is ( with a SMALL $$$ AMOUNT ) that the pressure of DAY TRADING consistanly over a month , accelerates the learning process , so that after that period is up you can settle down to the style of trading that is suitable ---- most things that are applicable to med/long term trading can be found within a 5 min chart -- but on top of that you are also finding out the best TIMES of the day/ week to be placing orders --- one myth that may have been true at one time is " the pros come in near the close " would seem to be utter nonsense now --- last week for example , the day before Copper took off , the miners where being dumped in the last hour of trade


Cheers

 

[happytrader]

As REX points out : A simple method used consistantly will usually win out for the long term.

The point I was trying to get over is ( with a SMALL $$$ AMOUNT ) that the pressure of DAY TRADING consistanly over a month , accelerates the learning process , so that after that period is up you can settle down to the style of trading that is suitable ---- most things that are applicable to med/long term trading can be found within a 5 min chart -- but on top of that you are also finding out the best TIMES of the day/ week to be placing orders --- one myth that may have been true at one time is " the pros come in near the close " would seem to be utter nonsense now --- last week for example , the day before Copper took off , the miners where being dumped in the last hour of trade

Hi Coyote

Great post however, you say that "the pros come in near the close" would seem to be utter nonsense now --- last week for example, the day before Copper took off, the miners were being dumped in the last hour of trade.

Your example sounds like a singular event. The real question is, has this happened enough times to discount and nonsense that particular observation?
In the market there are no absolutes only probabilities.

It is human nature to put far more emphasis on a singular negative possibility or reality, than ten positive ones.

Cheers
Happytrader

 

[coyotte]

HappyTrader
No not a isolated event at all .
eg: last Friday OXR opened down , then rose to a range bound , then from around 1 to 3 made a steady decline, from 3 (when the pro's are supposed to be in ) it made a steady advance to around 3.45 with a mild decline , but still up on the hour/day (put this down to weekend setteling ).

As I had gone SHORT OXR on Thurs ,I took particular notice of this , but took the lead from the 1-3 time frame and held over the weekend --- the rest is history.

Today ( Tues ) closed the Short as it became obviouse around 2pm that OXR may have hit support @ 2.75 , with an exhuastion gap and Doji forming .

Last hour of trade the Pro's ?? Sold off

Cheers

 

[happytrader]

Hi Coyote

I see what you mean about OXR price action last Friday. That appears to be an indecisive, consolidating day with no clear direction for an entry. With that low volume, are you sure the pros were even in there or do you think they might have waited for clear direction like the breakout on Monday to make a move which the volume might suggest? Just looking at hourly charts over the last 10 days - are you sure they are getting in at 3 or do you think they might be slipping in there just a bit earlier?

Cheers
Happytrader

 

[Magdoran]

Has anyone been wondering about what kind of information brokers are privy to? I was not aware that any in-depth studies were being done by online brokers to find out what kind of systems their clients were using. I’ve been pondering this one for a while, and I must say, I’m quite concerned about privacy issues.

Specifically, how would online brokers gain access to privileged information sufficiently to draw valid conclusions about the behaviour of their clients, especially about the reasons/methods used by their online clients for how and why they traded the way they did? Especially if they only had contact with people when there were problems, and not related to trading/investment approaches?

The online brokers I use have never issued any questionnaires to my knowledge, and I only ever had contact with them when there was some technical problem to be rectified, otherwise I just put my orders in and nothing more. I didn’t register as one kind of trader or another either. So, how would they know why I traded the way I did?

Perhaps where an organisation has a relationship with a broker, and funnels clients into that broker (probably with a pecuniary incentive), then maybe a pattern may emerge, but that raises some questions about propriety too, doesn’t it?

Otherwise, surely brokers would be more interested in the commission/brokerage wouldn’t they? I’m kind of concerned about how they might be going about finding out precisely which analysis style/package/system their clients are using without their consent. Isn’t this a breech of the privacy legislation if it is going on?

Also, the feedback I have received from the full service brokering/financial fraternity that I know is that it is primarily the unprepared Mum’s and Dad’s that lose the most. But how representative is this observation? I don’t know – it could be true, it could be false... without a comprehensive study, how can we be sure of any generalisation?

Most of the brokers I know don’t even comment about such things as Elliott or Gann, and certainly not SITM (although this may have changed in the last 6 months for all I know). They may talk about technical and fundamental analysis, but that’s about the depth of it. So how do we get a statistically viable sample to draw conclusions from? Surely one conversation is insufficient to draw solid conclusions about behaviour that is meaningful isn’t it? - It’s just one voice out of many.

If you asked enough people, you’d have hundreds of different opinions wouldn’t you? And that’s about it, isn’t it? It is just opinions, and there are many of those, aren’t there?


Magdoran

 

[rex]

Magdoran

You are exactly right. Privacy standards are quite low and you are correct in questioning it.

Some big firms get smaller firms using their platform etc, so sometimes things are pretty obvious. Yes deals get exchanged, but I am no expert in the details behind them, business is business. I suppose the answers are always sitting next to the honey pot.

Of course some brokers have access to account details, what they do with this is an ethical issue which I am not going to waste my time on, except to say that humans in general are not to be trusted, although you seem like you are pretty switched on, so I suspect you already are thinking this.

Most brokers are completely clueless, this is why they remain brokers for ever instead of becoming traders. But there is the odd interested switched on one that will ask questions, interview people, do what it takes to find stuff out etc (these are usually the ones who intend to quit one day and trade their own account).

There is no way for a broker to know your strategy without either studying every trade you make and making correlations, or just calling you(pretending to call for one reason and slipping in the old so what is your strategy question?)

Most people love talking about themselves, I always found if I just asked the person a question and gave them a compliment that they would get a dose of verbal diarrhoea and it would usually be me making an excuse to end the conversation.

Most brokers don't blink an eye at a trader unless they are trading parcels in excess of say a mill consistently, then they may get curious. This is just human nature, if one wants to be successful they must associate themselves and learn from successful people.

Over the years brokers also meet thousands and thousands of traders at trading expo's and the like, information just gets accumulated.

Yes most brokers are interested in just commissions, unless they intend to quit soon and trade (maybe 1 in 100)

Yes you are dead right, every1 has their own opinion, but all in all I think the majority of experienced traders or brokers etc will pretty much give you the same story, but thats just my opinion.

I hope this answers some of your questions, I need to stop spending so much time writing posts, I'll never get any work done.


Regards
Rex

 

[Magdoran]

In defence of forecasting approaches to Technical Analysis:


Just because many traders fail in the market does not necessarily invalidate the trading style they have adopted. That includes people failing with Guppy, Wilson, Bedford, and other moving average/stochastic/MACD/Oscillator based approaches in addition to Elliott Wave, Gann, and even Darvas approaches. You have to look at why they failed, not just the technique they were using. There can be a range of reasons for failure (many have been listed on this thread and on this site).

Effective forecasting is about estimating probabilities, and assessing how the market has moved in the past, and evaluating how it might unfold in the future, and looking at a range of patterns and concepts to make a defined assessment to prepare a detailed plan of action.

Let’s use the analogy of how blitzkrieg was used in France in 1940 when both sides had similar numbers of men and equipment, but used different techniques. The old trench warfare (“simple approach”) was ineffective against the co-ordinated method of blitzkrieg (fully developed forecasting).

Using concepts such as patterns – especially trends and counter trends, looking at patterns of trend, using concepts such as division of the range for price (price extensions and retracements), wave structure (such as Elliott Wave theory), examining market cycles (including a range of time cycle approaches) can be used as aids to estimate probabilities for trading, and form the bedrock for developing detailed trading plans with specific profit and capital protection objective clearly defined. – Essentially probabilities overlaying established risk and reward.

Contrast this with a moving average crossover/histogram approach, or a breakout entry and exit system, and you have a rigid inflexible approach as opposed to a more fluid adaptable plan (much like the French Maginot line vs the Germans blitzkrieg).

When it comes to Elliott Wave theory and Gann principles, it’s like flying a sophisticated jet fighter plane. As a complete novice you can’t expect to just saunter up and jump in the cockpit, turn on the ignition and fly the thing straight off the runway. Obviously you need to have sufficient training and experience, and an understanding of aerodynamic principles, and are psychologically fit to do so, don’t you?

The same is true for people who get into derivatives – some people go to a CFD meeting and expect to instantly use them to trade with a very limited understanding. This kind of approach might explain why many people fail trying to use any kind of analysis techniques or instrument when they can’t trade successfully in the first place just using bar chart and volume with shares.

Elliott Wave analysis and Gann are certainly involved disciplines to learn and require in my view at least 3 years of solid work to sufficiently master to trade effectively (and then even this might not be enough – also, some people just aren’t cut out for this kind of approach). But to assert that because they require more application to learn initially and that a person can trade immediately with a “simple approach” because it is easier to understand is a short sighted viewpoint.

So called simple approaches may well return mediocre or even negative results, and certainly in the long run when compared to seasoned traders who are able to become proficient at forecasting styles – but this is impossible to measure. There are no reliable statistics available, and essentially, everyone must find what they are most comfortable with. Hence with beginners I’m happy to say, “Look at all the different approaches, keep an open but discerning mind, and find what works for you, then modify and evolve it when you’re ready”.

The point I would make though is when you have become a veteran flying the (Elliott/Gann/derivative) jet in the market for real, the equation changes significantly in terms of performance against many of the rigid inflexible approaches. I’ve worked with rigid players who got stuck on moving averages, and I’d be in and out of positions long before their indicators told them what was obvious in the chart – when to get in, when to take profits/losses, when to add, when to take partial positions off. I had time/price targets, they waited for moving average crossovers… But this is just my experience, and I’m sure there are many forms of effective charting systems out there that work well.

My suspicion of why some people “crash and burn” initially using forecasting approaches like Elliott and Gann is because, like flying a jet, you have to learn a lot of concepts in theory, and then successfully implement them in practice. Not an easy thing to do. No wonder many who jump straight in fail – there are so many things you have to get right – psychology (discipline), analysis, strategy (which market/instrument), System (entry and exit rules & money management/expectancy). But this is to some extent true of trading generally with other so called “simpler approaches”. Just because many fail using any system does not necessarily lead to the conclusion the approach is wrong if people are not using it correctly.

But there is a chasm of difference in using a so called simple system in that it may not be adaptable to different market conditions. When I talk about market conditions, I’m referring to market situations such as accumulation and distribution consolidations which may be part of long and medium term economic cycles that effect wider trends in markets, and that trading and investing in smaller time frames in part is affected by the major trends in the longer time frames.

For instance, a 90 day correction may be a counter trend to a larger bullish drive in a 10 year cycle. The 90 days of downward trend is the dominant trend in the daily chart while it is trending, but it is a counter trend in the weekly chart for instance. Hence a swing trader would be successful using a bearish approach perhaps during this correction, but not once the secular bullish trend resumed, unless they were specifically trading counter trends (but would need to understand counter trends to do so).

Another example is a consolidation that may last for 90 days where the underlying trades sideways within a range for this period in a secular bear market in the weekly chart. Trying to use a bearish swing trading approach in these conditions with 30 day time frames would not be effective generally in these conditions, hence a non directional strategy may be a better approach in these circumstances. What is at the core is an understanding of the way markets trade, and determining the best strategy to suit the individuals market view.

This is where it gets interesting, because a breakout based system is limited to specific market conditions, and if the individual is not seasoned in a range of charting principles, may end up buying (or selling) false breaks (especially if they aren’t versed in recognising this approach), especially in sideways consolidations. McLaren goes into a lot of detail I can’t here about this style of trading as being high risk. This is where many lagging indicator/ black box styles come unstuck if the person can’t recognise this kind of market phenomenon that has been recurring right back to the earliest market records.

So, the so called “simple system” can actually be a trap for the inexperienced. It may work fine in the conditions it was designed for, but is effectively very narrow in charting terms, and certainly has severe limitations depending on the prevailing market conditions.

The straw man interpretation of forecasting is flawed. The reality is it’s horses for courses. Each person who wishes to participate in the market is on a journey of discovery, and the mission is to try to find what works for them.

What I’m saying is, the style I have found that works for me (and certainly a lot of the T/A concepts) would probably benefit a significant proportion of the readers on this thread. Some will find Guppy/Wilson/Bedford/Watkins really beneficial, and I say, if it works for you, and you’re can benefit from it, great!

But there are many who have the potential to become very proficient at technical analysis, and really develop strong capabilities to trade the market and prosper.

It is to the more serious traders and investors that I am appealing to. Those who don’t want to spend much time or effort on learning technical analysis should stick with the simpler approaches. I hope all budding technical analysts recognise the distinction being drawn here. The choice is yours!



Regards


Magdoran


P.S. A point of distinction – I’d rate the effort people like tech/a has gone to for instance, not in the category of a “simple approach”, although he may have boiled his trading system into “simple rules”, the system and it’s development are not simple – I’d rate this style as requiring significant effort, and in the same class as I’m referring to, just a different style, but just as valid.

 

[wayneL]

Note also the use of the term "forecasting" by Magdoran and not "predicting".

Quantum difference IMO

 

[Magdoran]

Note also the use of the term "forecasting" by Magdoran and not "predicting".

Quantum difference IMO

Hello Wayne,

Aren't they interchangeable? Perhaps we need to define this better? What do you understand by the two terms?


Magdoran

 

[Magdoran]

Magdoran

You are exactly right. Privacy standards are quite low and you are correct in questioning it.

Some big firms get smaller firms using their platform etc, so sometimes things are pretty obvious. Yes deals get exchanged, but I am no expert in the details behind them, business is business. I suppose the answers are always sitting next to the honey pot.

Of course some brokers have access to account details, what they do with this is an ethical issue which I am not going to waste my time on, except to say that humans in general are not to be trusted, although you seem like you are pretty switched on, so I suspect you already are thinking this.

Most brokers are completely clueless, this is why they remain brokers for ever instead of becoming traders. But there is the odd interested switched on one that will ask questions, interview people, do what it takes to find stuff out etc (these are usually the ones who intend to quit one day and trade their own account).

There is no way for a broker to know your strategy without either studying every trade you make and making correlations, or just calling you(pretending to call for one reason and slipping in the old so what is your strategy question?)

Most people love talking about themselves, I always found if I just asked the person a question and gave them a compliment that they would get a dose of verbal diarrhoea and it would usually be me making an excuse to end the conversation.

Most brokers don't blink an eye at a trader unless they are trading parcels in excess of say a mill consistently, then they may get curious. This is just human nature, if one wants to be successful they must associate themselves and learn from successful people.

Over the years brokers also meet thousands and thousands of traders at trading expo's and the like, information just gets accumulated.

Yes most brokers are interested in just commissions, unless they intend to quit soon and trade (maybe 1 in 100)

Yes you are dead right, every1 has their own opinion, but all in all I think the majority of experienced traders or brokers etc will pretty much give you the same story, but thats just my opinion.

I hope this answers some of your questions, I need to stop spending so much time writing posts, I'll never get any work done.


Regards
Rex

Aha! So you’re the broker that rang me up the other day! (Just kidding – I don’t use e-Trade).

Hello Rex,


Yup, I know what you mean about typing up responses. Fortunately I can touch type… which helps.

Interesting perspective. You must have had some varied responses!


Regards


Magdoran

 

[wayneL]

Hello Wayne,

Aren't they interchangeable? Perhaps we need to define this better? What do you understand by the two terms?


Magdoran

Well, errr... hurrummphhh! The dictionary itself has destroyed my hypothesis as indeed they are interchangeable

Cancell that comment! (the difference in semantics appears to be a creation of my own mind)

See! I just can't think properly during daylight LOL!

 

[professor_frink]

In defence of forecasting approaches to Technical Analysis:


Just because many traders fail in the market does not necessarily invalidate the trading style they have adopted. That includes people failing with Guppy, Wilson, Bedford, and other moving average/stochastic/MACD/Oscillator based approaches in addition to Elliott Wave, Gann, and even Darvas approaches. You have to look at why they failed, not just the technique they were using. There can be a range of reasons for failure (many have been listed on this thread and on this site).

Effective forecasting is about estimating probabilities, and assessing how the market has moved in the past, and evaluating how it might unfold in the future, and looking at a range of patterns and concepts to make a defined assessment to prepare a detailed plan of action.

Let’s use the analogy of how blitzkrieg was used in France in 1940 when both sides had similar numbers of men and equipment, but used different techniques. The old trench warfare (“simple approach”) was ineffective against the co-ordinated method of blitzkrieg (fully developed forecasting).

Using concepts such as patterns – especially trends and counter trends, looking at patterns of trend, using concepts such as division of the range for price (price extensions and retracements), wave structure (such as Elliott Wave theory), examining market cycles (including a range of time cycle approaches) can be used as aids to estimate probabilities for trading, and form the bedrock for developing detailed trading plans with specific profit and capital protection objective clearly defined. – Essentially probabilities overlaying established risk and reward.

Contrast this with a moving average crossover/histogram approach, or a breakout entry and exit system, and you have a rigid inflexible approach as opposed to a more fluid adaptable plan (much like the French Maginot line vs the Germans blitzkrieg).

When it comes to Elliott Wave theory and Gann principles, it’s like flying a sophisticated jet fighter plane. As a complete novice you can’t expect to just saunter up and jump in the cockpit, turn on the ignition and fly the thing straight off the runway. Obviously you need to have sufficient training and experience, and an understanding of aerodynamic principles, and are psychologically fit to do so, don’t you?

The same is true for people who get into derivatives – some people go to a CFD meeting and expect to instantly use them to trade with a very limited understanding. This kind of approach might explain why many people fail trying to use any kind of analysis techniques or instrument when they can’t trade successfully in the first place just using bar chart and volume with shares.

Elliott Wave analysis and Gann are certainly involved disciplines to learn and require in my view at least 3 years of solid work to sufficiently master to trade effectively (and then even this might not be enough – also, some people just aren’t cut out for this kind of approach). But to assert that because they require more application to learn initially and that a person can trade immediately with a “simple approach” because it is easier to understand is a short sighted viewpoint.

So called simple approaches may well return mediocre or even negative results, and certainly in the long run when compared to seasoned traders who are able to become proficient at forecasting styles – but this is impossible to measure. There are no reliable statistics available, and essentially, everyone must find what they are most comfortable with. Hence with beginners I’m happy to say, “Look at all the different approaches, keep an open but discerning mind, and find what works for you, then modify and evolve it when you’re ready”.

The point I would make though is when you have become a veteran flying the (Elliott/Gann/derivative) jet in the market for real, the equation changes significantly in terms of performance against many of the rigid inflexible approaches. I’ve worked with rigid players who got stuck on moving averages, and I’d be in and out of positions long before their indicators told them what was obvious in the chart – when to get in, when to take profits/losses, when to add, when to take partial positions off. I had time/price targets, they waited for moving average crossovers… But this is just my experience, and I’m sure there are many forms of effective charting systems out there that work well.

My suspicion of why some people “crash and burn” initially using forecasting approaches like Elliott and Gann is because, like flying a jet, you have to learn a lot of concepts in theory, and then successfully implement them in practice. Not an easy thing to do. No wonder many who jump straight in fail – there are so many things you have to get right – psychology (discipline), analysis, strategy (which market/instrument), System (entry and exit rules & money management/expectancy). But this is to some extent true of trading generally with other so called “simpler approaches”. Just because many fail using any system does not necessarily lead to the conclusion the approach is wrong if people are not using it correctly.

But there is a chasm of difference in using a so called simple system in that it may not be adaptable to different market conditions. When I talk about market conditions, I’m referring to market situations such as accumulation and distribution consolidations which may be part of long and medium term economic cycles that effect wider trends in markets, and that trading and investing in smaller time frames in part is affected by the major trends in the longer time frames.

For instance, a 90 day correction may be a counter trend to a larger bullish drive in a 10 year cycle. The 90 days of downward trend is the dominant trend in the daily chart while it is trending, but it is a counter trend in the weekly chart for instance. Hence a swing trader would be successful using a bearish approach perhaps during this correction, but not once the secular bullish trend resumed, unless they were specifically trading counter trends (but would need to understand counter trends to do so).

Another example is a consolidation that may last for 90 days where the underlying trades sideways within a range for this period in a secular bear market in the weekly chart. Trying to use a bearish swing trading approach in these conditions with 30 day time frames would not be effective generally in these conditions, hence a non directional strategy may be a better approach in these circumstances. What is at the core is an understanding of the way markets trade, and determining the best strategy to suit the individuals market view.

This is where it gets interesting, because a breakout based system is limited to specific market conditions, and if the individual is not seasoned in a range of charting principles, may end up buying (or selling) false breaks (especially if they aren’t versed in recognising this approach), especially in sideways consolidations. McLaren goes into a lot of detail I can’t here about this style of trading as being high risk. This is where many lagging indicator/ black box styles come unstuck if the person can’t recognise this kind of market phenomenon that has been recurring right back to the earliest market records.

So, the so called “simple system” can actually be a trap for the inexperienced. It may work fine in the conditions it was designed for, but is effectively very narrow in charting terms, and certainly has severe limitations depending on the prevailing market conditions.

The straw man interpretation of forecasting is flawed. The reality is it’s horses for courses. Each person who wishes to participate in the market is on a journey of discovery, and the mission is to try to find what works for them.

What I’m saying is, the style I have found that works for me (and certainly a lot of the T/A concepts) would probably benefit a significant proportion of the readers on this thread. Some will find Guppy/Wilson/Bedford/Watkins really beneficial, and I say, if it works for you, and you’re can benefit from it, great!

But there are many who have the potential to become very proficient at technical analysis, and really develop strong capabilities to trade the market and prosper.

It is to the more serious traders and investors that I am appealing to. Those who don’t want to spend much time or effort on learning technical analysis should stick with the simpler approaches. I hope all budding technical analysts recognise the distinction being drawn here. The choice is yours!



Regards


Magdoran


P.S. A point of distinction – I’d rate the effort people like tech/a has gone to for instance, not in the category of a “simple approach”, although he may have boiled his trading system into “simple rules”, the system and it’s development are not simple – I’d rate this style as requiring significant effort, and in the same class as I’m referring to, just a different style, but just as valid.

Geez Mag,

I've read novels shorter than some of your posts

I'm not quite sure if I just accused you of waffling on, or if I've just revealed to the entire world what kind of books I read
Anyway, I have a question-

What books/educational material would you recommend for a young professor type who is interested in getting his feet wet in a bit of Gann? Which one of his books would you say is good to start with?