Improving Chart Analysis

[barney]

Barney:

Sorry -- it's NOT about prediction ---- it's about understanding what the
" chart " is saying


Cheers

Yeah I appreciate that Coyotte (I am trying to understand), I was only trying to "predict" so to speak, because I am fairly new to reading charts, and just trying to get a bit of a handle on what I have learnt so far........ (and I wanted to put myself on the "chopping block" by "getting in early"....certainly would not have put money on at that stage...) I realise there is a lot to learn about all this stuff, but I was just happy that, with my limited understanding, I MIGHT/maybe not have been seeing something that was worthwhile doing more testing on.........(and maybe I just got lucky, and what I thought I could see wasnt even there!!)
All I can do at this stage is study/read up on what the different indicators are likely to be telling me and try and incorporate that into a broader look at what the market/a particular stock is doing in general (Tell me if this is not the right way to go about it cause I need to know.)

In saying that; from a totally "no knowledge" point of view, I reckon that my "interpretation" of charts is improving............but if you can recommend any good reading material to kick me along a bit, that would be appreciated. Cheers.

 

[tech/a]

There is a million things that could be said about what you are doing as a Tech/analysts.
Infact your description of price action on CSR is really a commentry which most people new to analysis seem to write up.

(1) Trade in the direction of the trend.
(2) Dont try to pick reversals before they occur.Wether that be a high or a low.
(3) Dont formulate your analysis to support a "Feeling" you have.In the case of CSR it appears you believe its a prime candidate for a buy---you think its cheap.You have found analysis and interpreted in a way that supports your veiw.(((Interesting that it still managed to reverse after the 25% drop in sugar prices......???---------my initial "gut feel" on ------etc)))

All technical analysis can do is supply a possible entry and or a possible exit,stop level.Wether it is accurate is dependant of future price action.
However analysis,technical or Fundamental or both is only a very small part of the business of trading.Ive seen brilliant Technical Analysts fail and the same with Fundumental analysts.
Jack Shwagger wrote many books on analysis and failed miserable trading futures.

 

[coyotte]

Barney :

Read Guppy's " Share Trading " --- for a background.

Wilson's " Bussiness of Share Trading " & " The Next Step " ----- for a how to approach.

Then the Bible Edward's book " Technical Anaysists of Stock Trends " ---- for Patterns.

Try the incredible charts forum --- heaps of info there and a helpful crew.

Read and understand the above and thats really all you need --- the rest is either "window dressing" or stalling tactics on your part.

Cheers

 

[barney]

Thanks Coyotte for the reference books, appreciate that and will get on to it.........and Tech, I should stress I wasn't looking to buy CSR at a low price, I was kinda "testing the water" since I purchased Incredible Charts, to see if what I was "seeing" was going to happen.........I thought that it might be ready for a reversal ( I was actually trying to "pick it " before it happened", which I realise its "not the correct" way of doing it, but I was just experimenting with a "theory"......What I see now (and again I could be totally wrong) is a stock in "limbo land " for a short period, but with what has happened in the past months, it does look like the general trend would more likely be downwards than upwards....... I realise I am only at "entry level" chart analysis, but I figure by "making a statement" on the forum, I will be subject to "judgement" by those that know, and that actually "teaches" me more about my choices than just "telling myself" ......hope that makes sense.........PS I am determined to "get better" at all this stuff and atm I am experimenting and learning; Thanks for the comments/advice, Barney

 

[coyotte]

Barney :

When it all boils down a stock can only be doing one of two things -- either it is in a TREND or it is moving SIDEWAYS .

From the above there is then 3 basic trading methods


1: Trend Trading --- Trending

2: Breakout ----- Sideways but can also be within a trend

3: Reversal ---- Trending

The first is the easiest method to learn and can last for years , also contained within the tread will be other two methods .


Breakout Trading is harder and more concerned with patterns ---- more suitable to short term 1 to 5 days .

Reversal Trading is the hardest of all and requires experience ( CSR is a Reversal Trade )



You have really got to come back to what T/A is based on and that is "Crowd Phycology " --- you are trying to FOLLOW the crowd (not lead them) .
This where the add ons like Gann , Elliott Waves etc fall down , they are trying to get out in front of the pack .
This style of thinking is more suitable to Punters --- they must keep their knowledge to themselves in order to obtain higher odds -- with T/A it is exactlly the opposite the more the crowd agrees , the better for you .


Best to pick a sector you like eg: Materials, Financials and have a watchlist of around a dozen stocks in this sector ---- learn about the sector --- what F/A effect it ? --- learn the F/A of the selected stocks --- then go back and try and find how each of these stocks are traded --- some are quite simple and respond to M/A others Trend Lines ---- get to understand each stock, if a stock for eg : responds to Fiboncci numbers, well so be it , this is what this particular crowd is doing , so just follow


The hand full of traders that I personly know have all been down the same track --- started SIMPLE, went on to make it complicated , then came back to a few KISS methods , only then was a substanable profit possible .

What I'm about surgest was not possible when I started in the early 80s , but if I was kicking off now , I would :

1: Download Incedible Charts ( free software & data )
2: Same with Egoli

3: Open a $1000 account with IG-Markets ( $1 brokerage , no min balance )


Now treat this account as a fully fledged trading acount , with all the money managment principles both Guppy & Wilson surggest.


This means that basiclly:

1: Max Position Size of any one trade = 20% of Account
= $200 max amount of CFD position (not margin)


2: Max Loss = 2% of account
= Stop loss Max = $20

So if done correctlly you are actually only risking $20 (plus gaps etc)


This way you are putting " MONEY" at risk , which will bring out the flaws in your nature ---- these must be over come before you can procced .

The hardest thing most traders have to learn is to take a loss at the predetermined Stop ---- not easy when you are starting out

Start off Tread Trading --- Wilson lays it all out ---- and practice, practice practice .

Trading is really quite simple , don't get sucked in with all the add ons , though like most of us you probably will !




Best of Luck
Hope it goes well for you

Coyotte

 

[Bobby]

Barney :

When it all boils down a stock can only be doing one of two things -- either it is in a TREND or it is moving SIDEWAYS .

From the above there is then 3 basic trading methods


1: Trend Trading --- Trending

2: Breakout ----- Sideways but can also be within a trend

3: Reversal ---- Trending

The first is the easiest method to learn and can last for years , also contained within the tread will be other two methods .


Breakout Trading is harder and more concerned with patterns ---- more suitable to short term 1 to 5 days .

Reversal Trading is the hardest of all and requires experience ( CSR is a Reversal Trade )



You have really got to come back to what T/A is based on and that is "Crowd Phycology " --- you are trying to FOLLOW the crowd (not lead them) .
This where the add ons like Gann , Elliott Waves etc fall down , they are trying to get out in front of the pack .
This style of thinking is more suitable to Punters --- they must keep their knowledge to themselves in order to obtain higher odds -- with T/A it is exactlly the opposite the more the crowd agrees , the better for you .


Best to pick a sector you like eg: Materials, Financials and have a watchlist of around a dozen stocks in this sector ---- learn about the sector --- what F/A effect it ? --- learn the F/A of the selected stocks --- then go back and try and find how each of these stocks are traded --- some are quite simple and respond to M/A others Trend Lines ---- get to understand each stock, if a stock for eg : responds to Fiboncci numbers, well so be it , this is what this particular crowd is doing , so just follow


The hand full of traders that I personly know have all been down the same track --- started SIMPLE, went on to make it complicated , then came back to a few KISS methods , only then was a substanable profit possible .

What I'm about surgest was not possible when I started in the early 80s , but if I was kicking off now , I would :

1: Download Incedible Charts ( free software & data )
2: Same with Egoli

3: Open a $1000 account with IG-Markets ( $1 brokerage , no min balance )


Now treat this account as a fully fledged trading acount , with all the money managment principles both Guppy & Wilson surggest.


This means that basiclly:

1: Max Position Size of any one trade = 20% of Account
= $200 max amount of CFD position (not margin)


2: Max Loss = 2% of account
= Stop loss Max = $20

So if done correctlly you are actually only risking $20 (plus gaps etc)


This way you are putting " MONEY" at risk , which will bring out the flaws in your nature ---- these must be over come before you can procced .

The hardest thing most traders have to learn is to take a loss at the predetermined Stop ---- not easy when you are starting out

Start off Tread Trading --- Wilson lays it all out ---- and practice, practice practice .

Trading is really quite simple , don't get sucked in with all the add ons , though like most of us you probably will !




Best of Luck
Hope it goes well for you

Coyotte

Hello Coyotte,

Liked your post, but care to add that bit more for the many rabbits here

Bob.

 

[coyotte]

Bobby :

There isn't a great deal to add.
I've said it all before on this forum in various threads.

What amazes me it the difficulty people seem to have with trading now
with --- real time prices , real time volume ,market depth (up to L3) , instant transaction , top of the line charting software, multitude of books & courses,etc etc ------ the only thing I seem to be able to put it down to is information overload !

When I started out in the early 80s the only book readily advailble in Oz was small paperback put out by the Financial Review based on trend lines and POG.

Used a Lotus 123 SpreadSheet , TeleText for prices and a Phone Broker for trades (only gave the current Sell/Buy) @ around a days wage for brokerage
and that would probably be after a 20min wait on hold !


Went on to Purchase the Top line Software of the time MetaStock , done the courses , read the books and joined the sevices ----- 90% of it was a waste of time and trading capital.

Gann --- never left details of his method and ended up a pauper anyhow !

Elliott Waves ---- O/K where does the 1st Wave start ? -- every practitoner has their own subjective starting point .

Fibonacci --- have nothing against the mysteries , but get real --- this only works because a sizeable crowd believe it works .


But despite all the above disadvantages , the small trading group I was with managed to make better returns than the "buy & hold " F/A investors at the time --- Charting as T/A was called was looked on as being for weirdos.


Then along came Guppy , I had already read Edward's work , but this is not a "how to trade" in the sense that Guppy's " Share Trading " is .

At the time Money Manegment (stops, position size and targets) were only vague concepts ---- Guppy cleared all this up in detail ---- this was the turning point for T/A in Oz.


But now the real problems came to the surface ---- Exercising the Stop.
It was after reading Guppy that it dawned on me that the TRADE is the "2% of Capital" and nothing to do with the POSITION size.


The whole profit/loss calulations must be swung around that 2% --- which would be old hat now but not at the time.

But this was the turning point for me and I suspect a lot of other traders at the time --- mediocre profits turned to small but persistant & sustianable compounding profits over the long term.



As to stocks :

I have stayed with the Gold sector over the years along with the base metals, by doing this over time the sector becomes second nature to you --- far easier than trying to nut out a whole market .


OXR would have to be one of the easiest stocks I've ever traded , if you bring up a LOG chart the trading channels are just so obvious --- this is a stock that appears to be traded on LOG Trend Lines and Candle Rejection Tails --- MAs , Bollinger Bands are not really suitable .



PSV is one stock I follow but can not Short

excellent stock to learn from, with plenty of volitillity , heaps of patterns, Trending, Breakouts , reversals and retracements.

A log chart of PSV reveals a UP Trend Line going back over 3yrs BUT the key to this stock is the 20 d EMA , notice every time its breached to the down side the stock continues it's decline ---- use this along with a ADX -20d and the UP tread line and Count Back for a Long Position (must Close above C/B)

This is a Reversal Trade within a Trend.

Not really all that hard , just remember each stock has it's own character and what applies to it does not necessarily apply to another stock.

Have included a 6mth chart of PSV, don't know if it uploaded.

Cheers

 

[Bobby]

Thanks Coyotte,

Good stuff !

Regards Bob.

 

[Magdoran]

Yeah I appreciate that Coyotte (I am trying to understand), I was only trying to "predict" so to speak, because I am fairly new to reading charts, and just trying to get a bit of a handle on what I have learnt so far........ (and I wanted to put myself on the "chopping block" by "getting in early"....certainly would not have put money on at that stage...) I realise there is a lot to learn about all this stuff, but I was just happy that, with my limited understanding, I MIGHT/maybe not have been seeing something that was worthwhile doing more testing on.........(and maybe I just got lucky, and what I thought I could see wasnt even there!!)
All I can do at this stage is study/read up on what the different indicators are likely to be telling me and try and incorporate that into a broader look at what the market/a particular stock is doing in general (Tell me if this is not the right way to go about it cause I need to know.)

In saying that; from a totally "no knowledge" point of view, I reckon that my "interpretation" of charts is improving............but if you can recommend any good reading material to kick me along a bit, that would be appreciated. Cheers.

Hello barney,


Just thought rather than duplicating the many discussions on T/A approaches that you might find the following threads of interest. My comments in “testing a mechanical plan” may “resonate” with you since the analogy used is the process of learning music. Have a read and see what you think:


• “Books on Technical Analysis”,
• “Good TA books: Any suggestions?”,
• “Testing a mechanical plan”,
• “Is T/A based on hope?”
• “$5000 to $50000 in two years - let the odyssey begin”

Have a look at all the different views and make up your own mind. I suspect if you explore long enough you will find some works which will give you some solid grounding. Best of luck!


Regards


Magdoran

 

[Magdoran]

Hello coyotte,


While I have no issue with you talking with authority in the areas you are well versed in such as Guppy, Wilson, and Edwards, I do have an issue with you making sweeping statements which are both factually incorrect, and are flagrant misrepresentations of alternative approaches.

I have no issue with you logically analysing any method that you have studied and commenting on your observations of the pitfalls and limitations of different techniques. Just be thorough about it, and not sloppy - the wonky conclusions you draw from false premises beggers belief. You are so biased against Elliott and Gann, but is this based on a hunch, or is it based on actual experience using them?

I suspect you have never studied Elliott Wave theory or Gann in much depth if at all, have you? If you have, then a more detailed critique would be in order. Otherwise would you accept that you’re making emotional generalisations based on a gut feeling and not much more? Would you also accept that these bodies of knowledge are actually quite involved and that just like technical analysis as a field in itself, there are many competing schools even within these disciplines.

Gann --- never left details of his method and ended up a pauper anyhow !

Elliott Waves ---- O/K where does the 1st Wave start ? -- every practitoner has their own subjective starting point .

Fibonacci --- have nothing against the mysteries , but get real --- this only works because a sizeable crowd believe it works .

Gann:
According to the wise sage Coyotte, Gann never left details of his method. How then could an “add on” possibly be devised based on no method? Why do I have a library full of Gann originals detailing many techniques? This statement is just false.

Coyotte, please list precisely which works of Gann you have read, and then give a brief synopsis as to why you reject each method. Essentially which techniques have you researched, and why do you think that they don’t work? (By the way, I reject quite a few of the techniques myself, so you might find that I actually agree with your appraisal assuming you’ve actually read the works, and interestingly so did Gann as he developed. Don’t forget, the entire surviving works span a lifetime of rethinking and refining a perspective).

Elliott:
So, Coyotte, you are also an expert in Elliott Wave theory too. Can you please list which works on Elliott Wave you have studied, what you understand to be the core concepts of the theory, and then explain why you reject these concepts.

Fibonacci:
Are you really telling me that you don’t use any kind of retracement approach, or extensions? Fine if you don’t, but please outline why you think this approach doesn’t work.

You have really got to come back to what T/A is based on and that is "Crowd Phycology " --- you are trying to FOLLOW the crowd (not lead them) .
This where the add ons like Gann , Elliott Waves etc fall down , they are trying to get out in front of the pack .
This style of thinking is more suitable to Punters --- they must keep their knowledge to themselves in order to obtain higher odds -- with T/A it is exactlly the opposite the more the crowd agrees , the better for you .

Coyotte you seem to talk with significant authority about Elliott and Gann. Why then if you understand them do you misrepresent them?

The concept of forecasting (which is probably a misnomer) is like a project management discipline - you assess the risks with a risk management plan looking at probabilities and assigning risk mitigation approaches for contingencies (this is what you do with methodologies like Prince 2 or Rational Unified Process in IT implementations).

Essentially extensions and retracements (such as the Fibonacci approach) are aiming to make estimates of where support/resistance in price is likely to be, and assess probabilities. All you’re doing is measuring statistical deviations with a tool. It isn’t that big an ask really. Add to this pattern analysis, and you use this as opposed to lagging indicators such as moving averages and oscillators used by the Guppy/Wilson schools.

Come on coyotte, they really aren’t that different. The trigger process is actually quite similar, but one looks primarily at the pattern and probability, the other uses lagging indicators for the entry and exit signals, that’s the core difference (Guppy does use patterns sure, but look at the trigger techniques).

Both approaches attempt to identify a trend, and trade it. The idea is once you’ve mastered looking at charts and patterns, you can use your preferred approach. If you want to use a moving average, wave structure, or a retracement system, trend lines, whatever, the key thing is to establish an entry criteria, and then determine a trading plan to establish exit criteria either on stop or profit, isn’t it?

Coyotte, while I have respect for your capability in trading using your method, I don’t think that you have ventured much out of this body of knowledge. I have a lot of Guppy books on my shelf, and trialled his methods, and found that they didn’t work effectively enough for me for what I was trying to do. But I recognise that it is horses for courses, and that it works for you.

I look forward to your in-depth response as to why each technique of Elliott and Gann should be rejected.


Regards,


Magdoran

 

[barney]

Hey there Coyotte and Magdoran, (Geez I hope I haven't "started a fight" here. :shoot: :badass: )

Seriously, I appreciate all the comments I get from those far more advanced than I am, and I try and take it all on board. I like the "KISS" theory that you put forward Coyotte (another thread) and you have obviously developed a successful trading plan, and anyone who has been able to do that should be respected by we "L" platers. I take note of, and will look deeper into all your advice/comments.
Magdoran, (I liked the "resonate" quip, you are obviously "switched on" to subtleties) Your knowledge of technical things is obviously far reaching and hopefully I can learn more about that. (Unfortunately I might be too old to put it into practice by the time I work it all out!!) I will follow up on those threads (have already been to one previously) that you recommend, and thanks for your advice.

Now dont you two get into a "scruff" over Gann or Elliott or anyone else, cause you have both helped me, so I'm happy (I'd be a lot happier if I picked "better" stocks of course All the best

 

[Magdoran]

Hey there Coyotte and Magdoran, (Geez I hope I haven't "started a fight" here. :shoot: :badass: )

Seriously, I appreciate all the comments I get from those far more advanced than I am, and I try and take it all on board. I like the "KISS" theory that you put forward Coyotte (another thread) and you have obviously developed a successful trading plan, and anyone who has been able to do that should be respected by we "L" platers. I take note of, and will look deeper into all your advice/comments.
Magdoran, (I liked the "resonate" quip, you are obviously "switched on" to subtleties) Your knowledge of technical things is obviously far reaching and hopefully I can learn more about that. (Unfortunately I might be too old to put it into practice by the time I work it all out!!) I will follow up on those threads (have already been to one previously) that you recommend, and thanks for your advice.

Now dont you two get into a "scruff" over Gann or Elliott or anyone else, cause you have both helped me, so I'm happy (I'd be a lot happier if I picked "better" stocks of course All the best

Hello barney,


Ironically your name seems quite prophetic, doesn’t it?

Just make sure you “duck” as the pool ques, beer glasses and bar chairs fly!

Coyote has a lot of valid points he makes, but I think I might have rattled his cage a bit too much recently… look what happens when he howls out of his kennel!

Wha hoooo Were-wolves in T/A-dom! Hang on a minute while I find that high pitched whistle to drive him nuts!

Seriously though barney, good luck in the search, I actually agree with coyote’s advice about finding approaches that aren’t too complex…

And no, you just asked questions, it’s just the nature of the peanut gallery (including yours truly – I’m a cleanin’ mah six shooter).

I’ll sign off now with a major 7th chord!


Cheers


Magdoran

P.S. Love the graphic!

 

[wavepicker]

Elliott Waves ---- O/K where does the 1st Wave start ? -- every practitoner has their own subjective starting point .

This depends entirely upon the degree of trend you are looking at.

Obviously you have not studied or practiced EW very much to make such a nonsense remark

Fibonacci --- have nothing against the mysteries , but get real --- this only works because a sizeable crowd believe it works .

Ahhhh so you say this method works!!! Did you know that both EW and Fibs are interconnected? Estimations of future projections and retracements of wave structures are determined in large by fibonacci ratios. So here you are canning EW because it's too hard to determine a starting point and because it's subjective and on the other hand saying that fibs work, because the crowd follows them. Seems to me you don't know where your coming from Coyotte. Did you know that the EWT is graphic representation of mass mood. ie "The crowd" The impluse 12345 and corrective abc's are actually fibonacci multiples, did you know that??

It may be hard for you to see because simply don't understand.

Probably good for to stick to your lagging Moving averages and other lagging indicators if that works for you. In my opinion MA's are used incorrectly by most traders anyways. For that matter they don't even know what an MA is a representation of, let alone how to use it properly.

Coyotte, What you gotta realize is that it ain't the trading system that makes or breaks a trader. There are traders making and losing $$$ out there using many systems. The main differences between succesfull and not so succesfull traders are psychological. A system that generates a higher expectancy can give ou a better edge YES. But it ain't the deciding factor.

Cheers

 

[wayneL]

***pulls up a chair, six pack of Stella and a bowl of nuts***

This is getting interesting

 

[barney]

***pulls up a chair, six pack of Stella and a bowl of nuts***

This is getting interesting

Hey, I'm just new around here, and I take no responsibility for what may or may not be about to happen, but Wayne.............that was funny....... (I have had a couple of beers though!!!!) Geez this is a great forum :bier:

 

[wavepicker]

Glad to be helping supply the entertainment for your viewing pleasure!!
hehe

opcorn: ??

 

[barney]

Hello barney,


Ironically your name seems quite prophetic, doesn’t it?

Just make sure you “duck” as the pool ques, beer glasses and bar chairs fly!

Coyote has a lot of valid points he makes, but I think I might have rattled his cage a bit too much recently… look what happens when he howls out of his kennel!

Wha hoooo Were-wolves in T/A-dom! Hang on a minute while I find that high pitched whistle to drive him nuts!

Seriously though barney, good luck in the search, I actually agree with coyote’s advice about finding approaches that aren’t too complex…

And no, you just asked questions, it’s just the nature of the peanut gallery (including yours truly – I’m a cleanin’ mah six shooter).

I’ll sign off now with a major 7th chord!


Cheers


Magdoran

P.S. Love the graphic!

Major 7th, One of my favorites (when I'm in the mood to be sensitive!) Did you realise that Midnight Oil use quite a few Major 7th's ?? (I'm sure you did). Actually, some people do call me Barney in "real life" (not Barnsey) Believe me (or not) but my band (when I was younger) supported "Cold Chisel" and "Midnight Oil" and a host of others... ( I wont keep naming them cause you will think I am skiting) Musically, I can mix it with the best, but "Trading"....now thats another story.........(would you mind if I finished with a simple 7th chord....cause I am an old "Deep Purple" child of the 70's....and love the rock "Blues"...with attitude of course!! :guitar: ) Cheers.

 

[wayneL]

Major 7th, One of my favorites (when I'm in the mood to be sensitive!) Did you realise that Midnight Oil use quite a few Major 7th's ?? (I'm sure you did). Actually, some people do call me Barney in "real life" (not Barnsey) Believe me (or not) but my band (when I was younger) supported "Cold Chisel" and "Midnight Oil" and a host of others... ( I wont keep naming them cause you will think I am skiting) Musically, I can mix it with the best, but "Trading"....now thats another story.........(would you mind if I finished with a simple 7th chord....cause I am an old "Deep Purple" child of the 70's....and love the rock "Blues"...with attitude of course!! :guitar: ) Cheers.

Midnight Oil "Blue Sky Mine"

http://www.youtube.com/watch?v=srDfpziUewE

 

[wayneL]

Hey we got everything ready now... seating, beer, munchies, music....

lets get on with the show

 

[wayneL]

Question for wavepicker:

Do you think the wedge pattern on the SP500 from July This year til now, qualifies as an ending diagonal?



At least one E-Wave blogger I know thinks so.

Thoughts?