Improving Chart Analysis

[barney]

Barney may I suggest you dispense with the fundamental element of your analysis. A chart will tell you more than you could imagine. Remember though, analysis is only a small part of it.

The short term is exciting and the long term is smoke blowing in the wind - hence your use of "patience".

Cheers Snake, I understand what you're saying re the "fundamentals". They are simply represented in the price/volume action on the chart.
The short term is where I prefer to tread also, but due to so many poor past decisions,the short term "excitement" is now often replaced with "nervousness". Now I understand "scared money never wins" (one of my favorite quotes), but I am still coming to terms with my past losses ........... phsycological I know, but I still reckon physycology is at least half of what this "game" is all about ..... I'm pretty sure Mag would agree with that?? Thanks, Barney.

 

[It's Snake Pliskin]

Cheers Snake, I understand what you're saying re the "fundamentals". They are simply represented in the price/volume action on the chart.
The short term is where I prefer to tread also, but due to so many poor past decisions,the short term "excitement" is now often replaced with "nervousness". Now I understand "scared money never wins" (one of my favorite quotes), but I am still coming to terms with my past losses ........... phsycological I know, but I still reckon physycology is at least half of what this "game" is all about ..... I'm pretty sure Mag would agree with that?? Thanks, Barney.

No worries Barney. Forget you lost the money and start small until you are proficient.
Snake

 

[It's Snake Pliskin]

Well said Snake, those that are not in sink with the evolution of resent manifestations will lose.

Actually Bob, that is well said! I like the word "evolution".

 

[barney]

No worries Barney. Forget you lost the money and start small until you are proficient.
Snake

Patience (ie trading small) has unfortunately not been one of my better attributes ..... gets me into tight situations, but I'm working on that!

Well said Snake, those that are not in sink with the evolution of resent manifestations will lose.

I agree Bob, The market is in constant change/movement, and often mutating into different formations. (Mutant! ..... sorry its late.)

PS Re the PSA chart earlier in the thread Snake; What is your take on its current position. I realise you probably don't use B/Bands etc, but is the fact that they are tightening noticeably, plus 50 day MA is well under the mid B/band any indication that the next move will be up?? The sp has been bouncing around $2.60-$2.70 on fluctuating volume for a while, so my guess is that until we see some volume action, the stock is in limbo (ranging). Cheers, Barney.

PPS Can we learn anything from the Accum Distribution chart relative to price from the last few months?

 

[It's Snake Pliskin]

I agree Bob, The market is in constant change/movement, and often mutating into different formations. (Mutant! ..... sorry its late.)

PS Re the PSA chart earlier in the thread Snake; What is your take on its current position. I realise you probably don't use B/Bands etc, but is the fact that they are tightening noticeably, plus 50 day MA is well under the mid B/band any indication that the next move will be up?? The sp has been bouncing around $2.60-$2.70 on fluctuating volume for a while, so my guess is that until we see some volume action, the stock is in limbo (ranging). Cheers, Barney.

PPS Can we learn anything from the Accum Distribution chart relative to price from the last few months?

Barney,
It is doing nothing at the moment. My P/F chart is a sell at $2.58 if it breaks down that far; the bar chart confirms the uncommitted.

B bands don't use them or read them, and the averaged Accum/Distribu is unexciting, just like the share price.

Regards
Snake

 

[barney]

Barney,
It is doing nothing at the moment. My P/F chart is a sell at $2.58 if it breaks down that far; the bar chart confirms the uncommitted.

B bands don't use them or read them, and the averaged Accum/Distribu is unexciting, just like the share price.

Regards
Snake

I'm pleased thats how you described it ("confirms the uncommitted") cause thats kind of how it looked to me as well (confirmation is good) .... my "technical" term was "limbo"
Mata ai masho, Barney.

 

[It's Snake Pliskin]

I'm pleased thats how you described it ("confirms the uncommitted") cause thats kind of how it looked to me as well (confirmation is good) .... my "technical" term was "limbo"
Mata ai masho, Barney.

Barney san wa jouzu ni natta. jaa, mata yoroshiku onegaishimasu.

 

[tech/a]

Barney,
It is doing nothing at the moment. My P/F chart is a sell at $2.58 if it breaks down that far; the bar chart confirms the uncommitted.

Thought this example of a chart that interests me may help.

Ive traded this was in at .037 and out yesterday at .040.
Its currently back on the watch list.

 

[Magdoran]

Cheers Snake, I understand what you're saying re the "fundamentals". They are simply represented in the price/volume action on the chart.
The short term is where I prefer to tread also, but due to so many poor past decisions,the short term "excitement" is now often replaced with "nervousness". Now I understand "scared money never wins" (one of my favorite quotes), but I am still coming to terms with my past losses ........... phsycological I know, but I still reckon physycology is at least half of what this "game" is all about ..... I'm pretty sure Mag would agree with that?? Thanks, Barney.

Hello barney,


For a long time I’ve stated in various forums that in my view psychology is the cornerstone to successful trading, and it really does separate the pack.

So, yes, in my view Psychology rates as number 1 over analysis, system and strategy.

If you have the wrong mindset your chances of success are poor.

Many people invest the majority of their time into analysis or system building. These are key factors in the process, but far too often many neglect psychology. Some are lucky and develop a successful mindset by trial and error, but works like “Trading in the Zone” by Mark Douglas, and “The Phantom of the Pits” are the best works I’ve come across so far.

Combine this with good T/A, an effective system, and a sound strategy, then you stand some chance of succeeding…

It sounds like you would really benefit from reading these psychology books to me. It may help to address some of the psychological damage done by your recent heavy losses.

(By the way, I note some posters who dismissed psychology have never read Douglas. I’m quite happy to debate the different techniques on their merits, but I’d suggest barney that anyone who discounts these works who has never read it should be ignored – they don’t know what they’re talking about. It makes no sense to me to listen to the ignorant who haven’t even bothered to read the material before dismissing it.)

I know this is digressing from pure chart analysis methods, but in my view it is integral to effectively using analysis.


Regards


Magdoran

 

[barney]

Thought this example of a chart that interests me may help.

Ive traded this was in at .037 and out yesterday at .040.
Its currently back on the watch list.

Thanks Tech, I've been watching a few of your charts on the other threads. Would Nov 6 have been a valid entry point as well, (price gapped open and continued to rise on the day), or is it better to wait for double confirmation (gap open 7th and 8th).

Just for the point of the exercise, what are the final "indicators" for you to pull the trigger ie Did you simply "feed" off the Depth on the 8th after open to confirm your entry, and did you exit the position on the way up to, or the way back down from the high of the day? ie what was the entry and exit strategies? These questions probably seem a bit "obvious" to experienced traders, but these are the kind of things that would give someone like me more confidence in this type of trade. I assume with that kind of volume it was a day traders paradise, (which can be a "novices" nightmare!) thats why I am still a bit hesitant to have a go at these.
Thanks, Barney.

 

[barney]

Hello barney,


For a long time I’ve stated in various forums that in my view psychology is the cornerstone to successful trading, and it really does separate the pack.

So, yes, in my view Psychology rates as number 1 over analysis, system and strategy.

If you have the wrong mindset your chances of success are poor.

Many people invest the majority of their time into analysis or system building. These are key factors in the process, but far too often many neglect psychology. Some are lucky and develop a successful mindset by trial and error, but works like “Trading in the Zone” by Mark Douglas, and “The Phantom of the Pits” are the best works I’ve come across so far.

Combine this with good T/A, an effective system, and a sound strategy, then you stand some chance of succeeding…

It sounds like you would really benefit from reading these psychology books to me. It may help to address some of the psychological damage done by your recent heavy losses.

(By the way, I note some posters who dismissed psychology have never read Douglas. I’m quite happy to debate the different techniques on their merits, but I’d suggest barney that anyone who discounts these works who has never read it should be ignored – they don’t know what they’re talking about. It makes no sense to me to listen to the ignorant who haven’t even bothered to read the material before dismissing it.)

I know this is digressing from pure chart analysis methods, but in my view it is integral to effectively using analysis.


Regards


Magdoran

Good advice as always Mag. I haven't got onto any of the phsyc books as yet, but certainly will, as I agree that it is important. I still remember that sick feeling of staring down the barrell of a multi (actually more like Mega) thousands of $ loss on one trade, and pressing the sell button. Initially it was a relief to "get out", but the remorse sets in quickly when you realise you just wasted about 10 years of your life savings virtually overnight. Thats when you realise what the phsycology of trading pressure can do to you. I admit to stupidity for getting in the position in the first place, but it is important for new players to learn how to cope with a pressure/losing situation before actually getting into the situation in the first place (and have steps in place to minimise that loss.) Thats why education, including chart analysis is important ............. building confidence in the way we trade. On basic knowledge of trading I reckon I'm about 20% of the way there, but from a phsyc point of view (being in control of my trading strategies and sticking to them no matter what) I reckon I'm about 2% Its interesting that even through the pages of a forum you can tell how much more "relaxed" lads like youself and Tech are in your trading approach, whereas someone like me who is really not confident in my approach just yet, still has to battle with every decision ..... (but improving!!) All the best, Barney

PS Hey Snake thanks for the Japanese! Took me a while to decifer it cause I don't actually speak J. My daughter speaks a little. Its an interesting language/culture. Suki desu

 

[tech/a]

I reckon I'm about 2% Its interesting that even through the pages of a forum you can tell how much more "relaxed" lads like youself and Tech are in your trading approach,

Barney

An interesting observation. Ive been following a few stocks in the fundamental forum and constantly see from most of the contributors the whole range of emotions talked about.The roller coaster ride that occurs when your on a stock it rises 100% or more in a few days then crashes back to the initial buy area it started from.

Have a look at GDN as a good example.

This is one of the problems with fundamental analysis.Its really for the longer term and when used for short term trading the majority of the time it leaves the exponent with little skill to read the SHORT term price action.
Often when a 100% plus rise comes along its years before you see that high takn out.

With tech analysis as a tool in your trading tool box you have the ability to make a decision about NOW or about the FUTURE.
Stage one to relaxed trading.

Stage 2Trading is a business.All decisions are for the benifit of the business--there is no place for emotion.

Stage 3
Trade within your comfort zone.Manage risk FIRST then position size.
Profit comes to those who understand the value of small fish to nibble on while the big fisk get hooked a few times a year.
Just like in business youll have 30 average sales and then in will walk a Kerry Packer and buy half the store. Doesnt happen often but if you stay in business long enough it will happen.

 

[ducati916]

tech/a

This is one of the problems with fundamental analysis.Its really for the longer term and when used for short term trading the majority of the time it leaves the exponent with little skill to read the SHORT term price action.
Often when a 100% plus rise comes along its years before you see that high takn out.

Fundamental analysis, an interesting, yet flawed evaluation.
It would illustrate the common perception, or definition of Fundamental analysis being simply the identification of an undervalued, or overvalued security, and taking a directional trade, [long or short]

A more perceptive definition of a Fundamental analysis, which would negate your time based definition, would be an arbitrage, calculated on, price, or return.. This definition of a Fundamental analysis would include all timeframes inclusive of daytrade scalping.

jog on
d998

 

[tech/a]

Duc accepted.

However scoot over to the GDN thraed and you'll see what I mean.
The Fundamental skills employed GENERALLY within this forum are limited to "Valuation".The psycological skills are limited to (Generally) emotive reaction.
The resultant Trading skill is less than evident.

 

[ducati916]

Duc accepted.

However scoot over to the GDN thraed and you'll see what I mean.
The Fundamental skills employed GENERALLY within this forum are limited to "Valuation".The psycological skills are limited to (Generally) emotive reaction.
The resultant Trading skill is less than evident.

I have had a brief read through the GDN thread.
There are no Fundamental valuations that immediately make themselves apparent on the thread. From the brief look, it would seem that GDN has zero revenues currently, which simply means that it is a pure speculation, and has no intrinsic value.

Therefore by definition it becomes sentiment driven, which is the model that technical analysis is based upon. A sentiment based model not infrequently overwhelms the user, with, sentiment.

jog on
d998

 

[tech/a]

Exactly.

Technical trading of these instruments (speculative) will out perform.
The fundamental analysis seen on the thread is purley speculative and as such has no basis for a valuation as each "reading" will imply a different "Percieved" value to each reader often goverened by the position the reader is at the time of reading.

IE in the trade,waiting to buy,or having taken a profit or loss.

 

[Magdoran]

Good advice as always Mag. I haven't got onto any of the phsyc books as yet, but certainly will, as I agree that it is important. I still remember that sick feeling of staring down the barrell of a multi (actually more like Mega) thousands of $ loss on one trade, and pressing the sell button. Initially it was a relief to "get out", but the remorse sets in quickly when you realise you just wasted about 10 years of your life savings virtually overnight. Thats when you realise what the phsycology of trading pressure can do to you. I admit to stupidity for getting in the position in the first place, but it is important for new players to learn how to cope with a pressure/losing situation before actually getting into the situation in the first place (and have steps in place to minimise that loss.) Thats why education, including chart analysis is important ............. building confidence in the way we trade. On basic knowledge of trading I reckon I'm about 20% of the way there, but from a phsyc point of view (being in control of my trading strategies and sticking to them no matter what) I reckon I'm about 2% Its interesting that even through the pages of a forum you can tell how much more "relaxed" lads like youself and Tech are in your trading approach, whereas someone like me who is really not confident in my approach just yet, still has to battle with every decision ..... (but improving!!) All the best, Barney

PS Hey Snake thanks for the Japanese! Took me a while to decifer it cause I don't actually speak J. My daughter speaks a little. Its an interesting language/culture. Suki desu

Hello barney,


Let me repeat again the most important lesson I have learned about trading. Above all other aspects, your own psychology is paramount, even in my view above chart analysis and system approach.

I’ll say that again just in case you missed it - YOUR OWN PSYCHOLOGY IS PARAMOUNT.

From what I see you are investing a disproportionate amount of time (reads unbalanced) into analysis and system approaches over psychology. In my view this should be redressed if not reversed. Les posted a link to “Phantom of the Pits” – this is a great read. I have also suggested “Trading in the Zone” by Mark Douglas.

I have read a lot of books on the subject, and Douglas stands out head and shoulders above the rest in my view. It is the cornerstone of my success and ability to trade. I believe without it I would not be able to trade. Strong words, which I cannot overemphasise this point. It is THE point. In your case, bearing such deep mental scars, it is likely to be of even greater importance. Please read that line again.

barney, why are you resisting what needs to be done? You are, you know – resisting (on some deep dark subliminal level). I believe that most traders fail because they subconsciously sabotage themselves. They set themselves up to fail without realising it. Douglas addresses this. Success requires that you do what needs to be done to achieve your objective. Do you have the courage to really succeed or not?

You are frantically focussing on minor indicators, when I keep telling you to just learn to read the chart. Forget the moving averages, RSI, stochastics, oscillators, Bollinger bands, etc, etc, until you can learn to read a chart. The objective is to determine the trend, then what part of the trend the underlying is in (beginning, middle or terminal phase), then when to enter, and when to exit. Easier said than done. Once you realise that a significant element in this pursuit is about filtering your psychological bias, you will fare much better.

Just learn to read a chart without the gizmos first. In my view, there are very few people who know how to really use these effectively (people like tech for instance have pioneered a system and refined it – reads input of effective effort), and they have spent years working out how to use them.

In my view using indicators too early to the exclusion of learning how to read a chart obscures the process of perceiving the nature of trends. Look at tech’s recent charts, he’s essentially using straight bar chart and volume, and interpretation based on the bars and the volume. It is great T/A in my view, you can learn a lot from this. Try to understand what he is trying to tell you.

Why not try just looking at the chart without the indicators for a while and focus on the bars and volume. If you want to learn more, just ask the right questions, and start looking in the right places. Let your imagination do the work. Think of it like learning how to play music by ear. Really listen to the music, don’t just read it from the stave. You can hear when a note is wrong. You know how it feels when there is harmony. When you play, remember the joy of each phrase in the piece… Trading should be like that -Inspirational music. That can be your goal if you want it. Think about it.


Regards


Magdoran

 

[barney]

Barney

An interesting observation. Ive been following a few stocks in the fundamental forum and constantly see from most of the contributors the whole range of emotions talked about.The roller coaster ride that occurs when your on a stock it rises 100% or more in a few days then crashes back to the initial buy area it started from.

Have a look at GDN as a good example.

This is one of the problems with fundamental analysis.Its really for the longer term and when used for short term trading the majority of the time it leaves the exponent with little skill to read the SHORT term price action.
Often when a 100% plus rise comes along its years before you see that high takn out.

With tech analysis as a tool in your trading tool box you have the ability to make a decision about NOW or about the FUTURE.
Stage one to relaxed trading.

Stage 2Trading is a business.All decisions are for the benifit of the business--there is no place for emotion.

Stage 3
Trade within your comfort zone.Manage risk FIRST then position size.
Profit comes to those who understand the value of small fish to nibble on while the big fisk get hooked a few times a year.
Just like in business youll have 30 average sales and then in will walk a Kerry Packer and buy half the store. Doesnt happen often but if you stay in business long enough it will happen.

Thanks Tech, Could I make the observation that Stage 3 above is probably the most important from a phsycological point of view. ie You can remain relaxed if your position sizes are comfortable ..... that in a nutshell is where I really went wrong ......... too much leverage on a stock that had more volatility than a "rabid dog" (just thought I'd throw in a little metaphor) ....

 

[Magdoran]

Barney

An interesting observation. Ive been following a few stocks in the fundamental forum and constantly see from most of the contributors the whole range of emotions talked about.The roller coaster ride that occurs when your on a stock it rises 100% or more in a few days then crashes back to the initial buy area it started from.

Have a look at GDN as a good example.

This is one of the problems with fundamental analysis.Its really for the longer term and when used for short term trading the majority of the time it leaves the exponent with little skill to read the SHORT term price action.
Often when a 100% plus rise comes along its years before you see that high takn out.

With tech analysis as a tool in your trading tool box you have the ability to make a decision about NOW or about the FUTURE.
Stage one to relaxed trading.

Stage 2Trading is a business.All decisions are for the benifit of the business--there is no place for emotion.

I partly agree with this, but would like to offer a slightly different perspective – Ducati posted some comments in some other threads regarding emotions, suggesting that emotions are actually vital to making decisions, and that in dealing with the market the suggestion was to essentially filter the emotions to minimise negative ones. Sure the idea is to think more objectively and take the negative emotions out of the equation.

Stage 3
Trade within your comfort zone.Manage risk FIRST then position size.
Profit comes to those who understand the value of small fish to nibble on while the big fisk get hooked a few times a year.
Just like in business youll have 30 average sales and then in will walk a Kerry Packer and buy half the store. Doesnt happen often but if you stay in business long enough it will happen.

Great analogy tech,


It is those “black swans” (4+ standard deviations – i.e. a big shift in your favour), that can really make a difference. It’s about opportunities. Once half is having the ability to recognise them, the other is in having the capability to act on them (and taking the action).

Really good points on managing the risk and position size too.


Regards


Magdoran

 

[tech/a]

Thanks Tech, Could I make the observation that Stage 3 above is probably the most important from a phsycological point of view. ie You can remain relaxed if your position sizes are comfortable ..... that in a nutshell is where I really went wrong ......... too much leverage on a stock that had more volatility than a "rabid dog" (just thought I'd throw in a little metaphor) ....

This is the analogy which helped me get this Idea in perspective.

(1) If your nett worth is $50K and you have a position of $50K and even worse its leveraged Then you'll be a babbling mess.(Most would anyway).

(2) Now same $50k position but your nett worth is $500k and your stop is a $2/3000 stop
How do you think youd handle that position?

Differently emotionally than (1)

Now once you get good at it there are times when you CAN move "Comfortably outside your comfort zone" and ways to do it.

Now is not the time for you to think about this and I can explain how I do it later if anyone interested. I'm sure my way isnt the ONLY way. But I dont have problems sleeping.

Moggie.

I have two emotions.


Happy that I made a profit---this can slip into really really happy.
Happy that I minimised risk---this can also slip into really really happy.

Neither influence the decision making process.They constantly confirm it.