Improving Chart Analysis

[Magdoran]

A question here is, do we see what we want to see or can we discern repeatable patterns in a deterministic manner that is consistently repeatable?

The computer between our ears is very powerful and by learning and understanding market behaviour and the ability to identify patterns that are immediately discernable is within its capabilities. We have natural inbuilt neural network, we just need to learn to use it effectively. The more we look at something the more likely we are to run the risk of seeing what we want to see. What we see in the first couple of seconds (or less) of looking at a chart is most likely the correct interpretation.

The more we study patterns enables us to determine their reliability as a method for determining, which way the market or an individual stock might move. We can gather information, which we can use to develop a probalilistic mathematical model to reduce the guess work. Afterall, probability is a mathematical approach to dealing with uncertainty. We can refine and monitor the model through time, as there are no gurantees that a particular pattern will not fail through time or at particular times due to changes in market behaviour/dynamics.

Hello Les,


This is my first cut at responding to your “epiphany” in post 155 on this thread (155!!! Wow, we must have been busy posters. Barney will be pleased he kicked off a monster!).

Psychology:

To what extent do we “colour” what we see in a chart?

Douglas goes into the psychology underlying the way people impose a view on a chart. He gives the example of two different hypothetical situations where a child for the first time meets with a dog, child “A” meets a friendly dog, while child “B” meets with a vicious dog.

A’s first experience is pleasant, and the child associates the nice feeling of the dogs coat, and the joy of patting it, instilling a positive emotional memory.

B on the other hand is bitten and attacked by the dog, and associates dogs with an unpleasant experience and danger.

In both cases any future dogs each child meets is perceived in the emotional framework established from the first experience. Of course Douglas goes into much greater detail, but this line of thinking I think has a lot of merit, and that the experiences that we as traders/investors have will unconsciously affect the way we view the whole process let alone our view of a chart.

Gann made some interesting observations here too. He writes about each individual having an innate bias when looking at charts, either bullish or bearish. The idea is that we all have a bias, and tend to read our bias (bullish or bearish) into a chart.

McLaren talks about different trading dispositions too. Some people are greedy, counting how much profit they have made while the trade is still active, hoping for that extra few point to bring in enough profits to buy that new car… so they tend to overstay positions. The fearful trader tends to get “nicked” out of positions, often setting stops too close, or not being confident enough either to pull the trigger, or to stay long enough in a winning position.

So, I suppose you can have a greedy bull, a fearful bear, a greedy bear, or a fearful bull, if you mix the various psychologies together…

So I agree, the aim is to precisely set up a “probabilistic mindset” ala Douglas, which equates with your comment on a mathematical model. The key process though is to try to compensate as much as possible for innate psychological influences from colouring our view in the chart.

The Psychology of Chart Analysis:

Now, I do agree that in the first few seconds when looking at a chart, a portion of the mind intuitively takes stock of the situation and makes an immediate judgement. Sometimes this can be spot on, but sometimes it can be heavily influenced by the propensity to impose a view on the market.

In my experience, you also need to study both markets in general, and the actual underlying you are looking at to determine its nature.

Based on this bedrock of experience, by going through a series of technical analysis steps and really examining the chart in detail, all sorts of clues can present themselves, but you have to know what to look for.

When it comes to time cycles, the more you do it, the quicker you get at seeing the “3D” like picture behind the obvious bars. But I find this takes a little longer to get your eye in, and I’m still really an intermediate player doing this. The best practitioners I know have been doing it for well over a decade ranging up to decades.

Assessing Probabilities:

To really come up with a consistent approach to assessing probabilities in the market, I’d tend to argue that it is through the process that Douglas ventures in “Trading in the Zone” that this can be achieved, either through a mathematical algorithm, or through a combination of well developed charting with the Douglas axioms and checklist in place (and maybe add some custom criteria – especially a set of requirements if using options).

While I agree that mathematics can aid in estimating risk, and ascribing probability, I would argue that while there are some aspects of the market that can be quantified, that there are some elements where all any of us have is a guess, some more educated than others.

It’s kind of like an actuary in an insurance firm trying to assess the probability of a hurricane hitting a part of Florida, and trying to work out what premium to charge to cover the potential losses in the context of the chances of a hurricane hitting.

You can’t really predict this with an iron clad algorithm. There is a degree of pure speculation and “guesstimation” involved. Executives fudge all the time, and try to hide it behind techno-jargon and gobbledegook. Same is true for risk management in quoting on an IT implementation when a whole range of unknowns will only be unearthed once the project is underway. Half the game in any kind of implementation I’d suggest, whether it’s in the building game, IT, or other commercial activities, is being able to guesstimate well.



How about you Les, what is your perspective on this?


Regards


Magdoran

 

[Magdoran]

A question here is that in performing analysis and developing methods aren't we attempting to move from the purely subjective approach to being more objective or if possible more quantitative, within reasonable bounds?

The more highly subjective the analysis is the more likely we have increased the risk of failed trades. Our testing should remove an element of the subjectiveness. Monitoring going forward should enable us to better quantify and confirm whether we have positive approach or not.

But in real terms, the analysis is only the starting point, as it is how we conduct and manage the trade once we are committed that is important.

I recall a comment from a well-known and respected trader on another forum along the following lines. For a system he developed he stated that he couold train a group of traders how to use is system and expected the following outcome:
1. One subgroup would trade the system better than he could
2. One subgroup would trade the sytem at the same level as he could
3. One subgroup would trade the system worse than he could or make a loss.

A lot of time is spent on the initial analysis and time needs to be spent in looking at the overall approach, as analysis is not necessarily the point where we may lose the game. We can have a winning system, but still lose money.

Hello Les,


This is my second cut at responding to your “epiphany” in post 155 on this thread.

I agree that by constructing a trading/investing regimen that we are trying to compensate for our subjective nature, and striving to be as objective as possible. What I’m saying though at the philosophical end of the equation that we are necessarily limited (by time, resources, upbringing, innate capacity, emotional disposition etc), and that once we have developed approaches to minimise our own bias, that often it become increasingly difficult to make more than marginal improvements. Not always though, and this is where the idea of a paradigm shift can revolutionise an approach, and allow all sorts of benefits to become possible which were previously unlikely with the former paradigm.

On the flip side, Ducatti has argued on other threads in the derivative area, that emotions are integral to making financial decisions, and in fact are a key element in the mix of success, but configuring a holistic approach is necessary to achieve this. I tend to agree with this notion. The devil in the detail is that we are dealing with highly complex individuals with a plethora of talents, preferences and dispositions. So, the solution for one person may be totally inappropriate for another.

While I agree that having a positive expectancy system is a cornerstone to success, that there are a myriad of ways of achieving this if you look beyond the nuts and bolts. Being a believer that the sum of the whole is often greater than the parts (you’ve got to wonder about some people though!), a harmonious blend of techniques and approaches may require different configurations within established systems, and this is more relevant with custom approaches.

So I’m saying, all the components, not only the system need to be working in a constructive fusion if you will. Having the system alone is not a guarantee of success. Sure, it constitutes an edge of sorts, but even the best system in the world will not ensure a successful result as your comment about the respected trader indicates. Hence we agree here. So my conclusion is that to give yourself the edge requires both a strategic outlook, effective reappraisal, and an ongoing education process.


Regards


Magdoran

 

[barney]

Hello Les,


This is my first cut at responding to your “epiphany” in post 155 on this thread (155!!! Wow, we must have been busy posters. Barney will be pleased he kicked off a monster!).

Now if only I could pick stocks with the same "volume" ..........Thanks for all your help again guys........kinda feel like the light bulbs are starting to come on :screwy:

 

[wayneL]

An aggressive contrarian could be long here.

So, being an aggresive S.O.B., you're long? (me too )

Cheers
The Count

PS Nice to have a window into what this Gann stuff is all about...TKX

 

[tech/a]

kinda feel like the light bulbs are starting to come on

Invest in utilities.

 

[MichaelD]

Barney,

There's lots posted here, both beginner advice and advanced advice, but I'll add a few more points for you to ponder on, much of which seems to have been glossed over.

1. You've indicated that you do not have a written down, backtested, robust trading plan AND that you've blown 25% of your life savings to date trading AND that you are using CFDs because you don't have sufficient capital to take non margin positions. This is a guaranteed recipe for the rapid destruction of your remaining capital - not enough capital, unknown expectancy, and the destructive psychology of revenge trading. You may wish to give serious consideration to ceasing trading and re-evaluating.

2. Don't waste your energy on the perfect entry. Entries don't make you money. The exits + money and risk management make you money and that is where you should be concentrating your efforts.

 

[tech/a]

2. Don't waste your energy on the perfect entry. Entries don't make you money. The exits + money and risk management make you money and that is where you should be concentrating your efforts.

Worth repeating.

2. Don't waste your energy on the perfect entry. Entries don't make you money. The exits + money and risk management make you money and that is where you should be concentrating your efforts.

 

[barney]

Invest in utilities.

Very Funny!! :


PS Michael, re above advice, I will take that on board and consider, Thanks.

 

[Magdoran]

At the risk of inciting a riot amongst EW practitioners by my approximate Elliott Wave labelling (wavepicker is much more advanced in this respect), here’s my current thinking on Crude Oil as the continuing example.

This is where the fusion of the two schools can be very helpful (wave structure is an element in McLaren’s approach).

Also just straight candlestick signals can be really revealing too. Just look at last nights bar, and it is a classic false break bar. You see these a lot around counter trend points or key reversals. Of course crude can fly up past this tonight, which could happen, hence I’d tend to wait to see it confirmed by a bearish bar.

There is a chance that some kind of consolidation will happen around this level. Don’t forget, the weekly chart is still quite bullish despite the strong bearish drive recently.

While the daily chart is bearish it is around this level that bullish price action may develop. If the 25th low is the end of a wave 3, then a wave 4 would probably be a complex wave, and consolidate at this level, and I’ve placed some unconfirmed number 4 labels at various areas you’d expect resistance (would you agree wavepicker??).

So, while last nights bar looks like it could be a false break, and even if the next day is bearish or a minor day (which I’d expect – a small inside day to the 27th), there is a possibility that the 25th low will hold. In which case you’d expect some kind of bullish impulse, or at least a sideways move.

A close below the low, depending on the bar may indicate at least an attempt at a marginal low (which would signal a low coming in potentially with a false break low), or a fast move down of similar magnitude to the existing drive down. This is where I’d look to go short again (rather than the aggressive short last night), but cautiously with a tight exit half. This is because there is a real prospect of a marginal low coming in (say around 25% extension of the bearish drive – maybe 33%) and the trend reversing.

An aggressive short from last nights bar (you would have entered at close this morning), would be vulnerable to the 25th low holding, or to a marginal break down and a reversal, so this is quite dangerous. There is an outside chance of a strong continuation, but the pattern looks to me like the fast move down has halted, and either a consolidation needs to happen, or a counter trend up around where I’ve marked the potential “4”s for the bearish drive to continue. There is also a good chance of a sideways pattern for a while now. A lot will depend on the next couple of days.

What we do have is a time cycle date of some significance coming up (Oct 30th), but until this little pattern plays out it is unclear how to use this for a trade. Once we have a direction, we then have the intermediate time point (but it is minor), and the major time point to aim for.

 

[tech/a]

Moggie.

Like your analysis looks good to me.

Ive always respected Elliot as an analysis tool,and use it in the limited understanding capacity from an eyebell perspective when taking short term trades---if its clear to me.

I wait with anticipation with regard to any further time calls.
Wether they pan out spot on or miles out they are an interesting tool.

 

[Magdoran]

So, being an aggresive S.O.B., you're long? (me too )

Cheers
The Count

PS Nice to have a window into what this Gann stuff is all about...TKX

Hello Dracula,


“Count” me out (hahahahaha!). No, I’m not long, I’m a “fearful bear” in my psychological disposition. I tend to wait for confirmation and forgo the extra crumbs at entry. Especially at tipping points like the one Oil is currently at. If I had gone long at the opening on the 25th, I’d be out as of last night’s bar, looking for a re-entry.

While I’m aggressive in options, I’m really cautious in T/A (I’ve found you have to be selective since the magnification of losses is definitely a factor – especially getting the timing right…).

Glad my little introductory to a particular style of Gann is of interest. Note though that there are many different “schools” depending on the interpretation, and which part of the knowledge you are looking at.

Glad to see that you rise from the crypt one in a while!

Regards,


Magdoran

 

[Magdoran]

Moggie.

Like your analysis looks good to me.

Ive always respected Elliot as an analysis tool,and use it in the limited understanding capacity from an eyebell perspective when taking short term trades---if its clear to me.

I wait with anticipation with regard to any further time calls.
Wether they pan out spot on or miles out they are an interesting tool.

Thanks Daffy,


It’s been fun, hasn’t it? Brent and Light Crude make good examples since the markets are bigger and harder to manipulate, unlike stocks which can do funny things due to specific events only related to them (and tricky things like dividends to contend with).

The other good thing is that since I’m not trading oil directly due to not liking the financial instruments currently available to me (working on this), I’m not vulnerable to a hostile move on an actual trade (look at what happened to that Hunter guy over at Amaranth).

I will forward my next instalment once I’ve sauntered into my “Dilernia” patented time machine so I can “curve fit” my next projection.


Regards


Magdoran (H.G. Wells)

 

[wayneL]

“Count” me out (hahahahaha!).

No, I’m not long, I’m a “fearful bear” in my psychological disposition. I tend to wait for confirmation and forgo the extra crumbs at entry. Especially at tipping points like the one Oil is currently at. If I had gone long at the opening on the 25th, I’d be out as of last night’s bar, looking for a re-entry.

Yes agree, I was disappointed that the mo petered out, and exited. Could be a more complicated bottom setting up here. I feel a good shot at the jugular could appear out of this though. Mwahahahhaha!

Cheers

 

[Magdoran]

Yes agree, I was disappointed that the mo petered out, and exited. Could be a more complicated bottom setting up here. I feel a good shot at the jugular could appear out of this though. Mwahahahhaha!

Cheers

Hello Count Dooku,


I did say that last night might present a quick short opportunity if you were an aggressive bear, but I did say this was a high risk activity, and not something I’d do or recommend. The time for a long is yet to present itself in my view, otherwise you’re scalping and playing against the odds.

My best shot guess out of all the possibilities is that the 25th low will hold, and we’ll get a higher low, and see a wave 4 move bullish drive before seeing a retest of the low (which may result in a new low). We could also see a failed 5th wave from a wave 4 (assuming a wave 4 eventuates), and that may be a springboard for a retest of the major high.

Ha! So you are really a “Morlock” in disguise huh? I suppose that makes the rest of us “Eloi” doesn’t it?

<sound of “TARDIS” like noise as Magdoran prepares to “curve fit” his next forecast stopping briefly to view the Morlock like “Dilernia” cave to “borrow” one of Frank's patented curve fitting tools>

Regards


H.G. Wells (aka Magdoran)

 

[wayneL]

Hello Count Dooku,

Well through a curious intersection of time precipited by "The Doctor" flipping about in time and space indiscriminately, I have managed to procur a parallel incidence of Tardis.

This means I can appear as any number of Christopher Lee characters:

Of course, Drac is my favourite....The women seem to like me in that form... even if they can be a tad violent.

But I've been meaning to put my Tardis in for service. The future I went to had a V-bottom in oil, a convenient terrorist attack in the US ( a respectable amount of time before the mid-term elections) and a nuke attack on Iran, just as I pressed the buy button. That bloody tardis took me to the wrong dimension!!!!!

I know one thing, I don't really want to be short oil from now on.

 

[lesm]

On the flip side, Ducatti has argued on other threads in the derivative area, that emotions are integral to making financial decisions, and in fact are a key element in the mix of success, but configuring a holistic approach is necessary to achieve this. I tend to agree with this notion. The devil in the detail is that we are dealing with highly complex individuals with a plethora of talents, preferences and dispositions. So, the solution for one person may be totally inappropriate for another.

Agree with Duc's overall notion, but there is a need to control the emotions. Being overly emotional can cloud our judgement and reduce objectivity. There is a need to be decisive regardless o fwhthere we are initiating or closing out a trade. A little too much emotion can reduce the reuired decisiveness.

A holistic approach is key so being successful in the markets, similar to what Brent Penfold describes as the 'Holy Trinity' in "Trading the SPI'.

Due to the differences and complexities associated with each individual only reinforces the necessity for each individual to develop a trading or even investment style that suits there individual psyche. One size certainly doesn't fit all.

While I agree that having a positive expectancy system is a cornerstone to success, that there are a myriad of ways of achieving this if you look beyond the nuts and bolts. Being a believer that the sum of the whole is often greater than the parts (you’ve got to wonder about some people though!), a harmonious blend of techniques and approaches may require different configurations within established systems, and this is more relevant with custom approaches.

Agree, but some people take longer to learn this than others and some will never learn it. The trouble is a lot of money will be lost and heartache experienced along the way by many. A large number will fall by the wayside having never really understood the basic building blocks, of what it means or is required to become a successful trader.

A well-rounded trader needs to understand a number of techniques and how to effectively apply them. Understanding the techniques in isolation is insufficient. It really doesn't matter if they are a mechanical, systems or startegy trader, especially if they wish to continually and effectively trade through different types/ranges of market conditions.

So I’m saying, all the components, not only the system need to be working in a constructive fusion if you will. Having the system alone is not a guarantee of success. Sure, it constitutes an edge of sorts, but even the best system in the world will not ensure a successful result as your comment about the respected trader indicates. Hence we agree here. So my conclusion is that to give yourself the edge requires both a strategic outlook, effective reappraisal, and an ongoing education process.

Agree. Ongoing reappraisal and education or research is necessary to stay in the game. The dynamic nature of the market and the factors that affect it 'stays the same', yet 'changes through time'. The number of automated systems, as well as technical systems of varying forms also influence or impact on market behaviour. A range of events are triggered in some manner or form by the signals that are being generated by systems. Others are being triggered by events that influence the markets or other market participants. There are a whole range of events that are outside of our control, hence whatever approach we use needs to realise this. We need to be able to repond or manage these as they arise. This requires and objective mindset and the need to keep our emotions under control, so that we can be as objective as reasonably possibele

Cheers,
Les.

 

[Magdoran]

Ongoing Oil Example:


This is getting interesting. Friday night’s bar looks like it could be a false break, and a rejection of a bearish attempt, and could set up to be a higher low.

I have a suspicion now that a bullish impulse will eventuate, and be sustained till October 30th, if Friday’s low can hold. But this is with some reservation. You’d expect a retest of the 25th low to be a little longer than a one day false break, so, we really want to see a strong bullish bar on Monday night with some volume to confirm a potential long entry.

An aggressive bull may have gone long on this bar, but I’d tend to wait to see the 28th false break high taken out and closed above with some volume. If so the option target price would be $66.33 and the target time 30th October.

The price is a balance between 3 different chart price increments, taking the more conservative level looking for the second half to finish in the money if going long a call. Exit half at $68.45. Depending on volatility maybe a bull put might be a better strategy (or bull call), but then the profits would be capped…

The danger of going long here is that there may be limited upside, and that the move may be too small. This is not as good a prospect as the fast move down, and there is a chance the bearish drive may continue. Exiting with discipline is a must for this kind of position. The higher low in this case is not a good indication of a sustained key reversal, and only suggests a short term play. We need a better higher low to come in to suggest a retest of the major high at this point (although that of course may come to pass).

There is also an increment on Thursday 12th October to consider, but this is a minor date, and may be a minor counter trend point.

Let’s see how it pans out.


Magdoran

 

[Magdoran]

Well through a curious intersection of time precipited by "The Doctor" flipping about in time and space indiscriminately, I have managed to procur a parallel incidence of Tardis.

This means I can appear as any number of Christopher Lee characters:

Of course, Drac is my favourite....The women seem to like me in that form... even if they can be a tad violent.

But I've been meaning to put my Tardis in for service. The future I went to had a V-bottom in oil, a convenient terrorist attack in the US ( a respectable amount of time before the mid-term elections) and a nuke attack on Iran, just as I pressed the buy button. That bloody tardis took me to the wrong dimension!!!!!

I know one thing, I don't really want to be short oil from now on.

Love it Wayne!

I actually think you look the most handsome in the 3rd photo.

Your last fancy dress party no?


Magdoran

 

[lesm]

Hi Magdoran,

Some interesting points in your post.

The first thing I thought of, after reading the above, was with regard to a number of aspects of eastern philosophy as they relate to psychology.

One that readily comes to mind is 'to see things as they really are'. Another, which I will paraphrase is learning to step back from our emotions and focus on what we are doing and doing it well rather than on thinking about whether we may win or lose. Uncontrolled emotions cloud our thinking.

Western philosophy, beliefs and approaches to living whether everyday, sport or business really don't prepare people well for dealing in the market, as not all people are adept at stepping back from their emotions and remaining objective. A lot of people don't cope well with losing, but is something that they need to learn to deal with in the market.

Most successful traders have lost money in the markets, some more than once, but they have learnt from their mistakes and have gone on to be the success that they are. In real terms, how many traders are born and how many have learnt their craft?

The market is a mindless, emotionless and conscienceless beast that gives no regard as to how we may or may not feel. We need to be mindful of these characteristics and prepare ourselves to participate in this unfeeling environment. For a whole range of participants this will require a level of behavior modification. To cope or survive we need to learn the necessary survival skills and think about an approach that enables us to achieve this. We need to refocus the mind to consider performing the act of trading, without worrying about whether we will win or lose, but to do the best we can or to do the right thing, based on the information or knowledge we have. There is a need to bring our fears under control, otherwise we create our own errors or make our own mistakes, as the emotions are in control. Too much subjectiveness is detrimental to developing a consistent trading approach.

Imposing a view on the market. The market really doesn't really care what view we impose on it, it's an abstraction created by humans. As participants we hold one of many views and unless we can control the market, which we can't, it's an exercise in futility. We may hold a view, as yet unproven, but only time will tell if we have the right view, at any given point in time. It is how we determine a view as to the potential direction of the market or the stocks that make up the various universes, realising that we may not always be right, that makes the difference. Including the further realisation that we are one of many participants and that there is an opposing view to whichever view we have.

Colouring the charts. We need to learn to see charts as they really are, no more no less. This takes practice and experience to develop an objective and unemotional interpretation of charts. This needs to become part of the subconscious, as more often than not the more people study a chart the more likely they are to see what they want to see. Yes, further study may reveal nuances or intricacies in the chart, but the basis for looking at the chart in the first place needs to have some foundation. If you have the capability, try doing and auto-display of the ASX 100 on a five (5) second display and only select the charts that are of interest to you for a more in-depth analysis. Of course there may be some that don't select that may do well, but who has time to examine and analyse each individual chart representing all the stocks on the ASX, or anything from the ASX 500 down to the ASX 50.

Bullish vs bearish. The predominant trait of most people is bullish, as it is easier for people to understand making a profit from rising prices. Some of the trading clichés, such as buy low sell high contribute to this. Clichés may sound good, but without understanding what they mean or how to apply them counts for nothing. It is a foreign concept for most people to be comfortable with making money from losing money. For those people, it is a skill or approach that they will need to learn. They also need to learn that simply converting a number of trading systems from trading the long side to trading the short side will not always work.

Knowing what to look for. In all probability is a learned skill and requires practice. Trend following is the easiest, but to trade in all sorts of market conditions people need to learn an effective approach to trading in different styles of markets or using different styles/approaches in a single set of market conditions, if they wish to fully exploit the market. In any given market only a particular percentage of stocks are trending. To simplify this the remainder of stocks will be ranging or in some form of consolidation pattern or moving sideways. To exploit opportunities requires the ability to use different trading styles in any given market, as well as knowing what to look for and how to apply it. It also about understanding the strengths and weaknesses of different approaches. For example, a number of trend following systems will start to fail and/or experience high drawdowns, as market volatility increases.

Prediction. Probability gives us an approach to dealing with uncertainty, but no guarantees, otherwise we might as well just use darts to select stocks. The quality and reliability of application has a dependency on the user of the method and how much work they are prepared to do to prove/disprove and refine their methods. Of course there will be an element of quesstimation, but whoever said trading was an exact science. There is a need to learn multiple skills, as well as to manage our own psyches, as well as to understand market behavior and how to apply those skills.

Some additional thoughts for you above.

Cheers,
Les.

 

[Magdoran]

Hello Les,


As you can see, I’ve attempted to continue our dialogue as best I can…

Agree with Duc's overall notion, but there is a need to control the emotions. Being overly emotional can cloud our judgement and reduce objectivity. There is a need to be decisive regardless o fwhthere we are initiating or closing out a trade. A little too much emotion can reduce the reuired decisiveness.

A holistic approach is key so being successful in the markets, similar to what Brent Penfold describes as the 'Holy Trinity' in "Trading the SPI'.

Due to the differences and complexities associated with each individual only reinforces the necessity for each individual to develop a trading or even investment style that suits there individual psyche. One size certainly doesn't fit all.

Actually, this is precisely the point Ducati was making, to utilise the right emotions and filter out the disruptive ones… easier said than done. So I think there is overall agreement here.

Interestingly I flicked though Penfold’s book on the SPI this weekend, but only in a very cursory fashion. It was interesting to see his T/A experience using Elliott Wave, then the move to multiple higher lows/lower highs – almost paralleling some of McLaren’s work. I must get around to reading the other parts of the book more deeply though (I gather you think it is worthwhile?).

Agree, but some people take longer to learn this than others and some will never learn it. The trouble is a lot of money will be lost and heartache experienced along the way by many. A large number will fall by the wayside having never really understood the basic building blocks, of what it means or is required to become a successful trader.

A well-rounded trader needs to understand a number of techniques and how to effectively apply them. Understanding the techniques in isolation is insufficient. It really doesn't matter if they are a mechanical, systems or startegy trader, especially if they wish to continually and effectively trade through different types/ranges of market conditions.

Yes, very true. I suppose time is of the essence, and that is why I think it is wise for many to paper trade or trade small positions for as long as it takes. I think we are in agreement here, this is the essence of good trading.


Regards,


Magdoran