Improving Chart Analysis

[bingk6]

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

While we are on the topic of psychology, I am curious as to how a trader's trading plan is in any way affected by the fact that the ASX200 and DOW are now at or close to their historical highs. Do people continue to implement their trading plan without question (and therefore without emotion) or do they make adjustments to the manner that they trade given the historical highs (tightening stops etc) ??

 

[barney]

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

I think I'm pretty much with you on this Mag, and promise I will get onto the psych books pronto ......

1) I understand the significance of each persons "own psychology" .............. we are all different and react differently to stress/pressure ..... and need to be able to a) accept our weaknesses and b) take steps to eliminate them from our decision making ........... I notice that Tech mentions emotions have no place in trading ......... I understand that, but would say that Tech can now say this because he has harnessed his (if any) psych. shortcomings ..... ie He feels no emotional attachment because he devised a trading system he is confident with, and feels totally in control (well done)
Could I ask Tech, was there ever a time early on when this wasn't the case, and assuming it wasn't what was the catalyst/light bulb moment that changed you into a totally confident trader?

2) I no longer look at fundamental analysis unless looking to hold a stock long term...........

3) I am starting to look at charts with simply price and volume, but I still like the indicators for confirmation (give me time)

4) I like the music analogy ......... I am self taught/ play 3 instruments all by ear ...... so I'll put some thought into that last comment .......... How much of the "inspirational music" of trading should be classed as "gut feel" just out of curiousity? ...... I am guessing that experience improves the gut feel substantially (as with music)

Appreciate your comments as always. Thanks, Barney.

PS Believe me Mag I have no deep seated desire to fail at this (already done that one ...... wasn't a lot of fun!!!) Success is what we want!! Success to me now is very relative .... I will be happy in a few years to get back square ..... Anything better than that will be a bonus .... At this stage I feel hopeful but not yet confident .... Still time though.

 

[tech/a]

Could I ask Tech, was there ever a time early on when this wasn't the case, and assuming it wasn't what was the catalyst/light bulb moment that changed you into a totally confident trader?

Absolutley!!!

catalyst/light bulb moment

Continued and sustained losses.

You know humans (I was one Im now robotic) are stupid creatures--they do the same thing day in and day out and EXPECT A DIFFERENT RESULT.

Therein my friend lies the Blinding light of inspiration!!

 

[barney]

Absolutley!!!




Continued and sustained losses.

You know humans (I was one Im now robotic) are stupid creatures--they do the same thing day in and day out and EXPECT A DIFFERENT RESULT.

Therein my friend lies the Blinding light of inspiration!!

Good onya Tech! ...... Actually, working on that advice, I feel a bit better, cause I think I've halted the continued and sustained losses part (atm anyway) There may be hope yet. Cheers, Barney

PS Now that you are a Robot I guess your favorite album would be "Spark Side of the Moon" (Yeah not funny I know, but its not my joke....)

 

[MichaelD]

Continued and sustained losses.

Was there ever a defining loss for you, tech? There was a defining day for me about a year back which I talked about on another thread where I lost $2,500 in 10 minutes which made me wake up and take notice of risk management. I've never looked back again.

Barney, take heart on the psychology front - I've been trading a new short term system for a month or so now (after paper trading for long enough to get about 60 completed trades under my belt and proving the positive expectancy of the system). For the first two trades I broke my system rules and promptly lost 2.5R which I shouldn't have. 'Twas my psychology getting the better of me - I so much wanted to start the new system with wins that I ignored my stops/moved them down. Thinking about it, I just didn't have enough confidence in the system to trade it according to its rules because it hadn't proved itself to me with real money yet. Lesson on psychology duly learned and paid for.

 

[tech/a]

Was there ever a defining loss for you, tech? There was a defining day for me about a year back which I talked about on another thread where I lost $2,500 in 10 minutes which made me wake up and take notice of risk management. I've never looked back again.
.

Hahaha no not really.

But there was 28/10/97 when I was attending a private group tutorial with Nick Radge and I lost $7000 odd that day. I thought he could have warned me---only to find he to was caught.

I had continued and sustained losses for about 3 yrs.
About 99 things slowley changed.

Radge taught me (sort of directly but in directly). that its not the Analysis that makes the Profit---when that actually stuck things started to change.

 

[MichaelD]

I had continued and sustained losses for about 3 yrs.
About 99 things slowley changed.

In hindsight - why did it take this length of time to change to being profitable? i.e. what stopped you from realizing or accepting what you needed to do to become profitable sooner?

I ask this in the context of the current market conditions - there seems to be a lot of amateur money around at the moment again along with a dramatic rise in bull market champions. (I reckon a great contrarian indicator of market peaks is the posting of "watch me turn $5,000 into $50,000 in 12 months" threads - it always seems to be the same amounts involved for some reason.) What will it take for these folks to realize the folly of their ways and become profitable?

 

[tech/a]

Michael.

I was stuck in the same rut everyone gets into.
I had a rudimentary understanding of risk management but no idea how to implement it PROFITABLY.I was doing what everyone does,trade without knowing what my "Plan" would return. Plus the plan was discretionary so it altered with the analysis.

There was no "Blueprint"----no basis for verification that how I was trading could have any chance of being profitable.

I had---like the majority here 100s of theories and no idea if they could be profitable---but hey they had to be everyone else believed in the same theories!!
Worst of all I traded them!!!

Radges wisdom and ITS APPLICATION in Systems testing and design---debunked pretty well ALL my theories and most of everyone elses!!

T/T turned the tables and was the first---slow but steady---now its like a hare with a duracel battery in it. (Over $10k a week from a starting capital of $30K---SWEET). The tortise is turbo charged!!

Discretionary trading can be mastered but is by far the hardest of disciplines.
More profitable in % terms over time in the market for smaller Capital bases.

But then you travelled the same road from what I have seen--thanks for asking.

 

[Freeballinginawetsuit]

In hindsight - why did it take this length of time to change to being profitable? i.e. what stopped you from realizing or accepting what you needed to do to become profitable sooner?

I ask this in the context of the current market conditions - there seems to be a lot of amateur money around at the moment again along with a dramatic rise in bull market champions. (I reckon a great contrarian indicator of market peaks is the posting of "watch me turn $5,000 into $50,000 in 12 months" threads - it always seems to be the same amounts involved for some reason.) What will it take for these folks to realize the folly of their ways and become profitable?

I have read a few of youre posts Michael and firstly I'd like to say that you seem to be pretty much on the ball as a trader, good on ya!, then again this is a forum I don't know you from a bar of salt and ........... . I agree with everything you say about risk measures, totally!.

In regard to your'e comment from Amateurs/Bullmarket to Profesionals/tried and tested trading the market. You sound like a bank manager/school teacher or workerbee quoting the statistics pumped out by some university learnt 'stastic'. Are these the Kerry Packers etc or any big business starter of our world, are you trying to tell me these people didn't go outside the box and take risks to get wear they are. Get real!

If the poster of $5000 to $50000 bucks sounds outside your'e reality,no drama's. If he's on the ball, makes educated decisions, minimizes his risks and has a go, well good on him. He could lose his 5 grand or he could make whatever, or he could put it in the bank, keep saving his wages, pay off his Mortgage in 20 years and take no risks.

As for trading a bullmarket, well how many times have the experts called this bull run of the last few years wrong. ****loads. How many times have the Insto's and experts got on stocks way after the ship has sailed the port, ****loads. Any market can be traded, a bull/bear or a sideways one, you just have to adjust your plan!.

How many times do you think Forrest was knocked back when he brought annaconda out of its debacle, formed MRE, built his heap leach plant and had a go!. The banks, Insto's and experts would have given him the same grief as you are giving " the amateurs". Imagine the grief he got when he first started FMG. The same goes for Borshoff with PDN, Robinson with KZL etc etc. This could apply to elite athletes achiving their goals, odds are against them too and pretty much any thing in the general economy that dosen't fit the 'Box' mentallity

These crew come to the market with their ideas, as a specky, raise their funds 'from like minded individuals' and achieve their goals. The so called experts miss the boat, then jump on the band wagon quoting their expertise after the fact. Who's laughing the, guys that believed in their goals, had faith became billionaires as opposed to the pleb experts who earn a salary for the company they are an a employee of.

Without dreamers no Company would exist, because they all started somewhere to become a producer. Sure not all make it, but thats the job of the trader/investor to weed out the wannabes from the real ones. However you trade the market, fundamentally/TA, short term/ long term, market outlook etc etc, is how we make our educated punts. In the end fundamentals will catch up and if you trade on T/A alone on a donkey and hold youre cactus.

Hence Risk measures are an essential part of trading but not necessarily on long term fundamental holds (unless something comes out of left field), a stop would probably be fallen through anyway!. If that happens well your portfolio should be spread over a few stocks anyway.

All the best with youre system/trades and all else, I hope you keep coming out in front

PS, I agree with Noira's quote ADI could return him 50k, but then again it might take a couple of grand off his position too, thats the problem with not much capital!, not much room to move sounds like a first home buyer with interest rates rising

 

[MichaelD]

If the poster of $5000 to $50000 bucks sounds outside your'e reality,no drama's. If he's on the ball, makes educated decisions, minimizes his risks and has a go, well good on him.

Why this outcome is extraordinarily unlikely;

1. One position at a time.
2. Insider stated in the "biggest investment blunder" thread that his biggest investment blunder was using a stop, so no stop will be employed.

Consider the risk mathematics of this trading style - this requires 4 100% returns in 12 months and the risk of 100% of trading capital on every trade.

Yes, we could see some lucky guesses for a trade or two, but sooner or later a trade will go the wrong way...and what's the exit plan to preserve both profits and capital? There isn't one.

It's like betting your whole stake on RED at roulette - there could be a few wins along the way, but sooner or later the bet will go wrong and wipe you out.

 

[Freeballinginawetsuit]

Michael,

Of course your'e right.

Insiders capital is against him, he has no risk measures, and has quoted he not the best at riding momentem and sold out in the initial profit takes on (DYL).

Certainly he could lose the lot. He has said he's paper traded for a year (thats good) and his capital is now 10k after his DYL trade. If he takes some time in evaluating his next trades (holds more than one) and margins, he could get their, who knows!.

Anyway I like the fact he's set some goals and is having a go. I certainly hope he keeps us posted on his progress and has success.

 

[It's Snake Pliskin]

And how many have traded it using Rabbit indicators...........

As for trading a bullmarket, well how many times have the experts called this bull run of the last few years wrong. ****loads. How many times have the Insto's and experts got on stocks way after the ship has sailed the port, ****loads. Any market can be traded, a bull/bear or a sideways one, you just have to adjust your plan!.

 

[It's Snake Pliskin]

I bet he doesn't use rabbit indicators....

If the poster of $5000 to $50000 bucks sounds outside your'e reality,no drama's. If he's on the ball, makes educated decisions, minimizes his risks and has a go, well good on him. He could lose his 5 grand or he could make whatever, or he could put it in the bank, keep saving his wages, pay off his Mortgage in 20 years and take no risks.

 

[professor_frink]

I bet he doesn't use rabbit indicators....

Snake,

What do you mean by "rabbit indicators"?

 

[Freeballinginawetsuit]

I bet he doesn't use rabbit indicators....

'Rabbit Indicators' WTF, are you having one of youre digs at me Snake?, another one of youre informative one liners!.

1) I believe the first time I came across you some months ago (when I first joined ASF), I was putting forward the view of the Zincers and Nicklers at that point in time being 'better than money being in the bank'. Reasoning was a belief in the commodities they trade and the fundamentals behind the Companies. The same goes for the U trades. Youre answer was risk, at which I stated my reasoning.

Well all these guys doubled in SP Snake, just like they did in the pre May run which I traded them.

2) In fact all my trades and my logic behind them I have been happy to post on the forum since I joined. It's all plain to see and all have them have presented opportunities to make significant gains. I

3) I would think on ASF its goals is to share advice/opinion and market outlook with fellow traders. With all due respect to you as a Veteren member I have found nothing in youre posts that offer any of the above.

4) I'm an honest guy, up front and am happy to meet fellow traders. I have in fact posted on the site that I would be happy to meet fellow Perth Traders and even proposed a bit of a get together at my joint. I'd be happy to show my trading setup etc to others, I could be living in a humpy and trading on a typewriter, hmmmm

5) And finally I disagree with much that is said on ASF abot potential gains/trading methodology/unrealistic opportunities etc of posters, as per the topic of your'e quotes. The fact of the matter is I have outperformed the market for years. I believe that all that are trading and have been for the last few years the "Commodities Boom" are in a fortunate marketplace and would have to be dumb dumbs to lose money however those types will always lose money in whatever they do!.


So how about we just agree to disagree

 

[CanOz]

'Rabbit Indicators' WTF, are you having one of youre digs at me Snake?, another one of youre informative one liners!.

1) I believe the first time I came across you some months ago (when I first joined ASF), I was putting forward the view of the Zincers and Nicklers at that point in time being 'better than money being in the bank'. Reasoning was a belief in the commodities they trade and the fundamentals behind the Companies. The same goes for the U trades. Youre answer was risk, at which I stated my reasoning.

Well all these guys doubled in SP Snake, just like they did in the pre May run which I traded them.

2) In fact all my trades and my logic behind them I have been happy to post on the forum since I joined. It's all plain to see and all have them have presented opportunities to make significant gains. I

3) I would think on ASF its goals is to share advice/opinion and market outlook with fellow traders. With all due respect to you as a Veteren member I have found nothing in youre posts that offer any of the above.

4) I'm an honest guy, up front and am happy to meet fellow traders. I have in fact posted on the site that I would be happy to meet fellow Perth Traders and even proposed a bit of a get together at my joint. I'd be happy to show my trading setup etc to others, I could be living in a humpy and trading on a typewriter, hmmmm

5) And finally I disagree with much that is said on ASF abot potential gains/trading methodology/unrealistic opportunities etc of posters, as per the topic of your'e quotes. The fact of the matter is I have outperformed the market for years. I believe that all that are trading and have been for the last few years the "Commodities Boom" are in a fortunate marketplace and would have to be dumb dumbs to lose money however those types will always lose money in whatever they do!.


So how about we just agree to disagree

Well said FREE BALL.

 

[tech/a]

Barney!!! an update on WMT you been watching?

 

[barney]

Barney!!! an update on WMT you been watching?

Definitely watching thanks Tech, but no spare money to invest atm unfortunately (guess who was still holding Zinc today ....... starting to wonder whether I'm not cut out for this ..... frustrating when you're losing money when everyone else seems to be doing OK ......

I've learned a lot off your charts Tech ....... Price and Volume ... just about tells the whole story .......Will keep learning, but I think the cash might run out before the enthusiasm!! Cheers, Barney.

 

[It's Snake Pliskin]

Snake,

What do you mean by "rabbit indicators"?

Forget I said it Professor. I shall conform to the masses and speak appropriately.

 

[It's Snake Pliskin]

Definitely watching thanks Tech, but no spare money to invest atm unfortunately (guess who was still holding Zinc today ....... starting to wonder whether I'm not cut out for this ..... frustrating when you're losing money when everyone else seems to be doing OK ......

I've learned a lot off your charts Tech ....... Price and Volume ... just about tells the whole story .......Will keep learning, but I think the cash might run out before the enthusiasm!! Cheers, Barney.

Barney, just to impart some wisdom that some have been disappointed about; trade small until proficient. Then the cash will outlast the enthusiasm. It will even be there for when you trade the BEAR - proficiently. I like the way you help yourself in your pursuit. It is admirable.