Improving Chart Analysis

swingstar · 13 October 2006

This whole thing about finding a 'simple' approach is silly. Some of Mag's charts contain quite specialised knowledge or at least knowledge you won't find in any help file. Is it complex to him? Probably not. In fact it's probably very simple, and I think he's said that in the past.

Look at some of the options strategies Wayne posts... they look like they're in another language.

Some of the economic/fundie posts are complex to me. I don't know what the hell people are talking about some of the time.

The code of a mechanical system will look complex to anyone who hasn't programmed... and in fact could be the most complex path for many people interested in trading. Michael's 'simple' system isn't simple--because to quantify it you'd need to know how to code.

What's simple to someone may be complex to many, and vice versa. As long as you have an edge (positive expectancy), a plan, and can follow it, you'll have an uptrending equity curve.

tech/a · 13 October 2006

As long as you have an edge (positive expectancy), a plan, and can follow it, you'll have an uptrending equity curve.

Which in itself is simple.

swingstar · 13 October 2006

tech/a said:
Which in itself is simple.

Agreed, but to get there isn't. Whatever path one takes will take time, and will probably be hard.

wavepicker · 13 October 2006

swingstar said:
This whole thing about finding a 'simple' approach is silly. Some of Mag's charts contain quite specialised knowledge or at least knowledge you won't find in any help file. Is it complex to him? Probably not. In fact it's probably very simple, and I think he's said that in the past.

Look at some of the options strategies Wayne posts... they look like they're in another language.

Some of the economic/fundie posts are complex to me. I don't know what the hell people are talking about some of the time.

The code of a mechanical system will look complex to anyone who hasn't programmed... and in fact could be the most complex path for many people interested in trading. Michael's 'simple' system isn't simple--because to quantify it you'd need to know how to code.

What's simple to someone may be complex to many, and vice versa. As long as you have an edge (positive expectancy), a plan, and can follow it, you'll have an uptrending equity curve.

Hi swingstar,

Well said. I think you are very spot on with your comments there. What appears complex to one trader may in fact be quite simple for another. It just depends on how you look at things.

I'll give you an analogy. I like to fly. when I take up a passenger one of the first comments I get is "how on earth do you sacn all the gauges? Isn't it confusing?" I find it easy because I am used to it. But it wasn't always that way. It took me ages to develop that skill. However other people picked it up quite easily.

The same maybe said with trading for some people. Mag's knowledge is very specialized. I am sure he would agree with me in saying that it didn't come easy and took hrs of dedicated study and effort. But now it has probably become second nature. The skills people like him have are needed for the type of trades they take and the instruments they use.

Thanks Mag all the others for posting those charts and comments in this thread. More people should post their knowledge. Sure at times they may conflict with the approach of others, but any material regarding markets is invaluable in my opnion
So why don't all of us put our ego's aside and see what we can learn off each other, instead of getting the knives out everytime someone posts an interesting chart saying it's too complex or some other ridiculous comment.

It seems to me that there of us here that have made a few bucks here and there and we become instant experts.

Machi I disagree with you, making $$$ is easier than keeping it!! Knowing when to fold em is the key!!

Cheers

swingstar · 13 October 2006

wavepicker said:
So why don't all of us put our ego's aside and see what we can learn off each other, instead of getting the knives out everytime someone posts an interesting chart saying it's too complex or some other ridiculous comment.

Hi wavepicker, I agree. I've been posting some wave counts around in the hopes of other EW traders commenting, but besides you, Nick and Mag, there doesn't seem to be many. But nevertheless, I'd certainly welcome comments, as I feel myself being more suited to EW/Gann/Fib/etc analysis, and I still have a lot to learn.

Maybe when I have another count soon, I'll make a new thread for EW in this section.

MichaelD · 13 October 2006

barney said:
I had to work (real job!!) yesterday, and have a couple of trades in place, but everyone is covered by a tight stop loss setup

Barney,

Congratulations.

You don't quite realize this yet, but by doing this one seemingly small thing, you have finally separated yourself from the losing masses.

Well done!

Salute!

Keep it up.

:drink:

You will now see your trading change pattern. From henceforth, you will have lots of little losses, lots of little wins and the occasional huge win to make it all worthwhile. You will be able to survive long enough to get to the huge wins and to learn how the markets work.

wavepicker said:
Knowing when to fold em is the key!!

YES!

rex said:
How are you meant to see the support without a chart?

Hehe - ya got me! I should have said "Technical Analysis won't help you".

machi said:
The only way to become consistant is to learn to trade markets in all 3 directions.

Possibly true, but long term trend following done well will allow survival even in the leanest of times whilst developing other strategies, and makes plenty of money when there's even a whiff of a bull market.

swingstar said:
Agreed, but to get there isn't.

Yes, the journey is complex, but survival allows the journey to be taken.

wavepicker · 13 October 2006

I'll make a new thread for EW in this section.

Hi Swingstar,

There maybe a thread already in this section you may want to use:-

https://www.aussiestockforums.com/forums/showthread.php?t=3570

nizar · 13 October 2006

Michael D,
Do u trade full time and how long have u been trading for?

tech/a,
I recall u said that as a new trader dont expect to be profitable until year 3. Does that include even if u have trialed and tested a system through backtesting and paper trading? Do u mean the moment u start trading for $$ in realtime is year1 and then 2 years on from that can expect to turn a profit?

must be to do with psychology then...

swingstar · 13 October 2006

nizar said:
I recall u said that as a new trader dont expect to be profitable until year 3. Does that include even if u have trialed and tested a system through backtesting and paper trading? Do u mean the moment u start trading for $$ in realtime is year1 and then 2 years on from that can expect to turn a profit?

must be to do with psychology then...

I'd say expect longevity when you have...
* put in all the hard yards
* have a plan
* have a positive expectancy
* have capital, and
* have experience

How long till then will vary greatly amongst everybody. Could take months, years, or even decades.

nizar · 13 October 2006

swingstar said:
I'd say expect longevity when you have...
* put in all the hard yards
* have a plan
* have a positive expectancy
* have capital, and
* have experience

How long till then will vary greatly amongst everybody. Could take months, years, or even decades.

yeh capital is the main issue for me. i'll just read and learn and paper test until then i guess. the market will still be around in 1 year, or 5 years. or of course i can try and be a hero and blow my account in a few strokes trying to get rich overnite

swingstar · 13 October 2006

nizar said:
yeh capital is the main issue for me. i'll just read and learn and paper test until then i guess. the market will still be around in 1 year, or 5 years. or of course i can try and be a hero and blow my account in a few strokes trying to get rich overnite

The most valuable lesson I've learned is to have patience. I think tech/a said it: Patience can be very profitable.

Edit: BTW, money should be the least of your concerns. Getting money to start is the easy part, whether from family, banks, whatever. Generation and keeping it is the hard part.

nizar · 13 October 2006

swingstar said:
The most valuable lesson I've learned is to have patience. I think tech/a said it: Patience can be very profitable.

Edit: BTW, money should be the least of your concerns. Getting money to start is the easy part, whether from family, banks, whatever. Generation and keeping it is the hard part.

when i start working fulltime in a few years after i graduate and i start earning real money then i will have something to play with. I dont need a loan or wateva.

the plan is from until then i can learn a few things.

thanks for the advice.

barney · 14 October 2006

MichaelD said:
Barney,

Congratulations.

You don't quite realize this yet, but by doing this one seemingly small thing, you have finally separated yourself from the losing masses.

Well done!

Salute!

Keep it up.

:drink:

You will now see your trading change pattern. From henceforth, you will have lots of little losses, lots of little wins and the occasional huge win to make it all worthwhile. You will be able to survive long enough to get to the huge wins and to learn how the markets work.

MichaelD said:
Thanks Michael (Cheers back to you) :bier: , It was only two weeks ago that I entered a trade and did not set a stop loss (That will be my LAST trade ever that I do that in .... I promise) Guess what happened? Yeah, I'm still paying the bill for that one ....Lucky for me I've done the right thing since, and my "correct" trades are covering that "incorrect" one ............. You, and all the others who continually tell us "L' platers that money management/setting stop losses/ learning when to exit etc is the most critical aspect of trading are so RIGHT, yet, even after being told many many times previously, I still got it wrong the other week and payed dearly for it (NEVER AGAIN) ................... the "penny" has finally dropped .......... I'm a new man ......... all I need is my capital back

Also I appreciate what Tech and others have told me that all you really need is Price and Volume to get a handle on most stocks .... Thats true I believe. I personally get a kick out of trying to decifer charts etc, (even though it isn't important to many trades/traders) Its good that there are so many different opinions/styles etc. of trading to be found on this Forum cause it makes it all the more interesting................. Cheers to all, Barney.

MichaelD · 14 October 2006

nizar said:
Michael D,
Do u trade full time and how long have u been trading for?

No, I don't trade full time. I have a day job to pay the day-to-day bills until such time as I am able to trade full time, which is my goal. I expect to reach this goal within the next 3 or 4 years, and possibly sooner.

However, I currently spend 40+ hours per week on trading, trading education and trading research. I have a very rigid routine which I go through at the end of every trading day and some things which I do every weekend.

I am trading one positive expectancy system and trialling another at the moment.

I have dabbled for years in the markets but only started trading properly (i.e. with a plan) in about October of last year. The journey has been long and remarkable and I have a long way still to go.

barney · 14 October 2006

nizar said:
when i start working fulltime in a few years after i graduate and i start earning real money then i will have something to play with. I dont need a loan or wateva.

the plan is from until then i can learn a few things.

thanks for the advice.

Hi Nizar, My daughter is in her first year of Uni at Q/Land. She doing a double degree of Arts/Law ..... (She'll hopefull be able to keep me out of jail if I stray off the straight and narrow ) What are you studying?

nizar · 14 October 2006

barney said:
Hi Nizar, My daughter is in her first year of Uni at Q/Land. She doing a double degree of Arts/Law ..... (She'll hopefull be able to keep me out of jail if I stray off the straight and narrow ) What are you studying?

Oh nice one...
Im studying Pharmacy

Michael D said:
However, I currently spend 40+ hours per week on trading, trading education and trading research

Michael D - Can u please elaborate in what exactly the above entails ie. trading education and research? Thats a lot of hours a week, hopefully at the end u will find what you are looking for.

Porper · 14 October 2006

machi said:
What actually is taking Elliott to extremes? Didn't know such a thing was possible. You just follow the rules. Simple. A move will either work out or becomes invalid.

Does it make someone more profitable? Who knows?. But it might give you a hell of an edge if used in the right hands. If you really would like to have your question answered Porper, then perhaps you should pit your skills against someone who uses one of these systems. Then you would find out huh?

Machi,

A lot of people, myself included use Elliot wave to distinguish the trend or wave.There are many different levels & teachings.To become a "Elliotician" is a lot different to what many people practice.

As for your second comment, I do not wish to pit my skills as you put it against anybody thanks, this isn't why I trade.As long as I have a reason to enter a trade, whether that be using an Elliot wave count or whatever and a valid reason to exit I am happy with my process thanks.

There are 5 or 6 very clever posters on ASF from which I still learn, I will probably never gain the knowledge and skill they possess, but it doesn't matter, anybody can be successful if they listen and learn.

Trading is not a competition.

tech/a · 14 October 2006

Nizar.
3 yrs is a rule of thumb and I have found it reasonably accurate in many things.
Trading proficiency,Business proficiency,Job or work proficiency.
But as Wave or Swing said it can vary from person to person. Think I was one of the dumbest.

Elliot is one of the very few analysis techniques I have any time for,as it has proven to be consistant in structure and form.While no expert its a discussion I would welcome here.For me I simply use it to identify roughly where the trade is.Wave1,3.5. Or if looking for a continuation in a move A,B,C or 2,4 waves. People like Radge have developed their own method around Elliot Wave analysis.
While it is handy its not necessary to have as a trading tool as in isolation everything else is not an absolute requirement.Yet in conjunction can be excellent tools.

Its the formulation of analysis,Position sizing,Stop placement and execution,Risk management plan,and adherence to the final "Blueprint" which takes the years.

Trading for a living
Why does everyone see this as a sign of experience. I for one couldnt think of anything more boring.I can do it from my desk now with no need to sell a Company returning me a more than adequate renumeration.

bingk6 · 14 October 2006

MichaelD said:
Barney.

Want a simple, highly profitable strategy for stocks?
1. Buy a stock which hits an all time high
2. Sell it when it breaches a long term stop, such as a wide ATR stop or a long term moving average.
3. Repeat 1 and 2 ad nauseum.

Hi Michael,

That is certainly a most interesting method of trading. What ever happened to the buy low and sell high philosophy ?? I suspect that Kerry Packer will be turning in his grave if James was using this investment technique.

BTW, I will be curious whether anybody has done extensive backtesting on this trading method to see what sort of results one would get.

Ultimately, you are correct in stating that the exit is much more important than entrance. With solid position sizing, money management, Stop Loss settings etc etc, one really could come up with a very solid strategy irrespective of where the entry is.

MichaelD · 14 October 2006

bingk6 said:
That is certainly a most interesting method of trading. What ever happened to the buy low and sell high philosophy ??

It doesn't work. You keep buying lower, and lower, and lower...and then the company's suddenly gone. At the very best, the company wallows in the doldrums for months/years before finally rallying. Buy high and sell higher works much better.

bingk6 said:
BTW, I will be curious whether anybody has done extensive backtesting on this trading method to see what sort of results one would get.

Yes, I have as have numerous others. Somewhere on the 'net a boutique US fund posted a detailed report on exactly this method of entry coupled with a 10.5 ATR exit - it's what they use to consistently outperform.

In fact, I've just quickly done a backtest on the strategy up to close of trade Friday. Backtesting does have many caveats which are beyond the scope of this post, but the results are;

Universe: Current ASX300
Trading: From 1-Jan-1996
Starting Capital: $100,000
Reinvest All Profits
No pyramiding of trades
Entry: Close at all-time high
Exit: 6.5 ATR

Finishing Profit: $2,638,159.39
Win %: 53.86%
Drawdown %: 10.96%

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