Trading Indicators Are Useless

[tech/a]

Not quite tech/a. There were quite a few non lagging cycles projections that warned of this from as far as 2 months ago. Although EW has been quite handy, most EW analysts were not as close to the mark as for example Magdoran and few others....

EW and or Vol Analysis on its own is sometimes is not enough......

A lot of the fundamental boys had an ALERT pegged as well.
Lots of alerts which as I said above for those who are trading in the shorter timeframes would have been enough to soften positions.

For longer timeframes its just another day.

Trade-it
You cant predict the magnitude of anything.(although Elliot analysis can give likely areas of a move AFTER the move has begun.You can and its been done by many here fundamentalist and technical---alert to situations.
how you trade them is of course the key.
Conventional analysis gave/gives no clue when looking at the XJO.
Perhaps divergence. But as a conventional (divergence) technical tool divergence isnt any more reliable(in isolation) than any other technical indicator.

Notice anything on this 5 min chart?

 

[Pat]

Plenty of risk....agreed, but if you had been a follower of that train of thought the last few years well...
I'm split in two ,funds for trading (never changes) that I move profits into my long positions.
Prepared to risk my trades and sit on my longs. After 3 years at it I've been fortunate enough to have been in a lucky marketplace........the Risk? is all relative now.

If you were in the marketplace for the last couple of months,funds limited and holding as of yesterday..... I'd be looking at all my options and especially not making any rash decisions.

I'm only sitting on longs at the moment, lucky. Yesterday I was laughing at my mate from work who trades between tasks.... He's not here today so I'm not sure how much was lost or gained.

 

[tech/a]

Still watching??

Whats it saying??

 

[Magdoran]

A couple of guys were picking a pullback on the XAO analysis thread from about 7 Jan, citing the divergence of the RSI and MACD from the chart. Also, the movement away from the 200d ma was a signal of a correction to be due.

I must note, a 'correction' as has been bandied about is not a 3% blip. A 'correction' is about 8%. We've got some room to move yet.

https://www.aussiestockforums.com/forums/showthread.php?t=4888&page=3

Hello Kennas,


Well done for being aware that a pull back of some kind was due. Calling this in mid January demonstrates that you were with the savvy technical analysts. You were one of the minority that saw that the market was looking toppy, and said so. You even started to map out possible scenarios of how far down the market may move, which is commendable. In my view this was the appropriate action to take, and one I fully share with you.

The fact that you stuck to this interpretation right through to the move demonstrates that you clearly grasped the strong potential for a pronounced bearish move.

However, while I salute your dedication to this position which I shared, would you accept that there is a qualitative difference between someone broadly saying “we’re due for a correction”, “it’s coming” and trying to map out how far down the major indexes may move, compared to actually identifying a specific date and a specific index level for the top in advance?

I called the 24th of Feb as the key date with Feb 23 as the most probable date for a high, on January 22. I also called the index level of 6025 for the XAO on Feb 17.

I shot over a set of musings over to wavepicker (and others) from December to around mid January with a set of possible scenarios for some kind of pull back ranging from a small corrective move to a full correction. I did have a longer term cycle heads up in weekly and monthly charts, but these are way to inaccurate to call a specific day, hence the pattern in the daily had to play out before I could get a more precise time and price level.

Interestingly there were a couple of times we thought a significant move may have been on early in January, but this wasn’t lining up with the work I was doing. Hence by the time I put my first post out on January 22, I actually had a key time point that had a high probability from the work I had done which was Feb 24 with Feb 23 as the most likely date followed by Feb 26.

With all due respect, how would you compare all the other comments along the lines of a correction is coming to actually identifying and calling a specific date with a +/- 1 trading day tolerance more than a month out from the event?

Add to that calling an index level a week out from the event when I identified two target levels with 6025 as the most probable one on Feb 17.

I decided not to make a big song and dance about it till I’d winded out my longs and had set up shorts hence my warnings became stronger on the 26 Feb, about as strong as I thought appropriate.


I salute that you saw it coming too, and posted to that effect, well done.



Regards


Magdoran

P.S. Here are the relevant posts, well in advance:

• 22 January 2007 see post 645 in “Zinc the metal for 2006",
• Then on 01/02/07 post 4 in “Trading The SPI - Gann Techniques”,
• Clear comments on 23 and 26 Feb on “Can we quit job and invest in stocks full time?” post 99, 106, and 112,
• I gave the actual high target of 6025 as my first choice in "ZFX – Zinifex" post 1408 on 17 Feb.

 

[Magdoran]

Boys and girls

see attached charts

DJI was easy to see holding any long positions was not looking good 4 consecutive weak days with a break in the trend line, 12600 would have been my stop. Also there was major divergence on the MACD with the dow rising but the MACD weakening with the break in the trend and a smart stop you would have came out of that trade missing most of the drop of yesterdays fall.

XAO was a little more tricky but i was holding 2 X 5525 call options on the xjo till this morning and i did take most of the hit. (wish i had a cfd on that no stops!)

the main problem i saw was yesterday when it closed under the trend with OBV dropping I saw this coming for a while and warned no stopped my girl friend from opening any long positions in the last 7 days!

as you can see the XAO ran into a major top at 5950 and just managed to get to 6000+ with the dow dropping which worried me we where running on vapors in my opinion.

this all gave me the feeling that opening any new long positions on the xjo was not a great idea.

on the short side i now use all my strengh not to short the market during a bull market.

but the dow was a golden opportunity to short XAO not enough evidence to back that decision

Please note i had no idea that the china sell off was happening or did happen till this morning when i saw a 400 pt loss on wall street and had to slap myself to make sure i was a wake!

what i am saying is i sore weakness but i had no idea that would happen!

from today i see a possible bounce of the trend under 5800 on XAO and another possible entry on the long side coming soon, as long as it stays above 5800 trend.

please people let me know if u see holes in my thoughts.

Trade It,


There are alternatives to using lagging indicators and oscillators. The technical analysis style I use doesn’t use any of these.

If you care to sweep back through my posts on technical analysis I suggest that these kinds of indicators actually obscure “seeing” the market, and McLaren characterises them as “trading shadows on the wall” (unless you use them the way wavepicker does with his cycle analysis/FFT style).

Just a bar chart and volume to the trained eye will tell you a lot if you know what you are doing without any tools or indicators at all. Pure charting and knowing how to interpret the data is central in my opinion to improving your analysis.

Key concepts like understanding trends and more importantly counter trends is central – especially pattern of trend, wave structure, divisions of range (retracement and extension). Add to that time cycles and knowing how to use these effectively can be very powerful.

Anyone with any kind of solid grounding in technical analysis was able to see the probabilities increasing for a pull back of some sort recently, and many posted to this effect well in advance, some even calling fairly accurate time and price level windows, so the capacity to do so is there.

The current methods you are employing are highly unlikely to identify these patterns; hence you will have to accept the limitations of your chosen style of trading, and live with it, or consequently decide to embark on some research into alternative methods. It’s your choice.



Regards,


Magdoran

 

[Sean K]

Hello Kennas,
Well done............. well done.

Thanks Mag, but what we were saying wasn't rocket science, it was pretty bleeding obvious IMO. The bulls just didn't want to admit that the market does correct sometimes. In my opinion it's still got some to go.

As far as calling precise point levels and dates, I am am not, and never will, call precise dates and numbers as this is impossible IMO and fraught with danger. If you claim this is possible and don't get it right EVERY time then you have limited credibility in my mind. T/A is probabilities, not certainties.

I am very impressed that you got it right this time. It will be interesting to see if you can repeat this feat into the future to validate your theories. I look forward to seeing how you go.

Well done!

 

[tech/a]

Moggi.

Do you need recognition??

To some of us it is and was just part of trading.
Different strokes for different methodologies.
Taken (currently) over the past 4 yrs is but a blimp.

Decisions now are no different yet analysis will pop up buys and sells (Shorts)/covers.

Is it really about being right to the day or being able to trade your method,wether you get it right,wrong,or partiailly right and wrong?

Infact is trading about being right?---Think about it.

I certainly think that ANY business---this is no different---is about being profitable---sure at times more so than at others and sure some business owners will be better at business than others.

Business isnt about singular events,and my veiw is that sound un stressful business is structured in such a way that singular events even catastophic or a string of events are catered for.

Mate you know your stuff---thats evident in your postings more so than your calls.

 

[Magdoran]

Thanks Mag, but what we were saying wasn't rocket science, it was pretty bleeding obvious IMO. The bulls just didn't want to admit that the market does correct sometimes. In my opinion it's still got some to go.

As far as calling precise point levels and dates, I am am not, and never will, call precise dates and numbers as this is impossible IMO and fraught with danger. If you claim this is possible and don't get it right EVERY time then you have limited credibility in my mind. T/A is probabilities, not certainties.

I am very impressed that you got it right this time. It will be interesting to see if you can repeat this feat into the future to validate your theories. I look forward to seeing how you go.

Well done!

Hello Kennas,


Oh how right you are about probabilities, you’re preaching to the converted here, I assure you (this is one of McLaren’s key concepts). Fully agree with you here, and if you read through my posts you’ll see that it is an ongoing theme in them.

And very true, being able to repeat this kind of analysis has to have its pit falls like any other approach. There is no such thing as 100% accuracy… I believe in Douglas’ axiom “anything can happen” and “Every moment in the market is unique”.

As for time and price points, I’ve been doing this for a while now, and am getting better at it, and also with campaign planning too. But it, like EW has its limitations I assure you, and is only applicable in specific circumstances…


Regards



Magdoran

 

[Magdoran]

Moggi.

Do you need recognition??

To some of us it is and was just part of trading.
Different strokes for different methodologies.
Taken (currently) over the past 4 yrs is but a blimp.

Decisions now are no different yet analysis will pop up buys and sells (Shorts)/covers.

Is it really about being right to the day or being able to trade your method,wether you get it right,wrong,or partiailly right and wrong?

Infact is trading about being right?---Think about it.

I certainly think that ANY business---this is no different---is about being profitable---sure at times more so than at others and sure some business owners will be better at business than others.

Business isnt about singular events,and my veiw is that sound un stressful business is structured in such a way that singular events even catastophic or a string of events are catered for.

Mate you know your stuff---thats evident in your postings more so than your calls.

Hello tech,


Thanks for the vote of confidence, much appreciated.

My recent posts are not an issue of personality, but of trading style. Remember in the “Improving Chart Analysis” thread when you and Lesm were questioning the potential for accuracy in time and price using cycle styles last year? So yes, in a way I think the technical analysis style warrants recognition…

For quite a while you guys wanted some real time demonstration of the time cycle techniques in action. Well, here is an example.

There are still people that are trying to discount this style, and when an example like this occurs, some are claiming it was an “each way bet”, or that it was a fluke…

The point I am trying to make is that there is a qualitative difference to identifying the potential for a significant move broadly, to identifying time and price points more precisely, and weighting the probabilities effectively. I just feel that many are missing the point here, and are trying to rewrite history.

And YES being able to make precise forecasts when using derivatives makes a huge amount of difference to the bottom line.

It is about maximising returns and minimising risk consistently, and good technical analysis is critical to this.

I would just like to see some honest objectivity and balance in this area. What’s wrong with that?


Regards


Magdoran

 

[tech/a]

Nothing.

 

[Dr Doom]

Hi mags,
So how does your system handle a correction like yesterdays, as so far as being able to look forward and identify the next major 'event' either way, up or down. That is, is it predisposed to pick major events the longer a trend continues or is it less effective now that some of the steam has been let out of the market?. I've tried doing basic time anlysis but it gets a bit too mathematical for me as it's obvious there is usually a parabolic component as the trend continues. Is this correct? Do you have to be a maths professor to do this?.
DD

 

[Magdoran]

Hi mags,
So how does your system handle a correction like yesterdays, as so far as being able to look forward and identify the next major 'event' either way, up or down. That is, is it predisposed to pick major events the longer a trend continues or is it less effective now that some of the steam has been let out of the market?. I've tried doing basic time anlysis but it gets a bit too mathematical for me as it's obvious there is usually a parabolic component as the trend continues. Is this correct? Do you have to be a maths professor to do this?.
DD

Hi doc,


A bit busy right now… so will try to respond later…

Read through all my posts on T/A and you’ll get the idea – a lot was ventured in the “Improving Charting Analysis” thread (although I’ve done a LOT of work since then).

As for this down move, sure, have a full campaign already mapped out with decision making points and contingencies…

Just read through my posts and you’ll see the key dates I’ve already posted on this campaign if it pans the way I think it will…


Mag

 

[It's Snake Pliskin]

People,

Markets are irrational and destructive - simple.
If you can trade around that then good work. China flapped its wings and it reverberated- coincidental the resultant action? Maybe.

Magdoran good work with the calls. It is dangerous heading down that path of believing in calls though. The above dictates my attention to the markets without the need to pick whens and wheres.

Basically it could have been going to happen anytime, be prepared - simple.

Just some thoughts.

 

[Magdoran]

Hi mags,
So how does your system handle a correction like yesterdays, as so far as being able to look forward and identify the next major 'event' either way, up or down. That is, is it predisposed to pick major events the longer a trend continues or is it less effective now that some of the steam has been let out of the market?. I've tried doing basic time anlysis but it gets a bit too mathematical for me as it's obvious there is usually a parabolic component as the trend continues. Is this correct? Do you have to be a maths professor to do this?.
DD

Doc,


Not an easy question to answer fully or simply. But I’ll try my best…

The forecast I made in the system was about as valid as you can get, hence the confidence to call it on the ASF. It projected 6025 for the XAO with 23 Feb the highest probability. The time was evident in the forecast mid January. The price in this case was the harder of the two, and was only reliable about a week and a few days before the time point (I had a range of possibilities, and needed to eliminate the majority to arrive at the most probable).

So, how does this work in the recent scenario? Having this kind of precise forecast to work with would be a distinct advantage wouldn’t you say? Hence wound out all my longs into the high (all done by lunchtime on Friday 23 Feb), and looked to go short just before this as the index neared the price target with fully worked campaign of projections in time and price for a range of bearish models with contingencies built in. Wound out all positions yesterday morning waiting for the likely bullish counter trend looking to re-enter short. Like Kennas, I have time and price targets built in.

But to accurately project from this point with minimal bearish price data is problematic. Sure I have price and time targets, but these need to be validated by the pattern of trend as we go along. At key points the reliability improves dramatically as the campaign unfolds if the original work is validated, and if not, it is either adjusted accordingly, or discarded. But I need to see specific things happen at key points to remain confident in the forecast. Sure, there are long term projections, but these cover a broader area in time and price, and are much less accurate, but can be used in conjunction with daily charts at the appropriate point in time.

I must also recognise the collaboration with wavepicker over the past few months since we started to cooperate after we exchanged ideas on ASF (sounds like a dating service doesn’t it? Ha!). His EW work, straight charting, and his cycle work have been very helpful in tandem with the work I have been doing.

The market though will do what it want to do, and anything can happen in it, hence no forecast is reliable, but is in essence a “best shot guess” with failure criteria inbuilt into the trade planning. When it works, it is freaky how accurate projections in time or price can be, or on some occasions like this one where time and price are “on the money”. McLaren has spent a lifetime on this approach, and if you’d done all his course work, and much outside it, it’d make a lot more sense, but it is very involved, and takes years to master.

No you don’t need to be a maths professor. It is nice if you have one in the pocket for specific things, but being a maths professor qualifies you for some aspects of the market, and may actually disadvantage you in other areas.

Have a look at the posts I’ve made over the last year on technical analysis threads rather than have me try to regurgitate/retype it all here, then maybe generate specific questions and clarifications if you can wade through it all.

Hope that helps, Doc.


Regards



Magdoran

 

[wayneL]

People,

Markets are irrational and destructive - simple.
If you can trade around that then good work. China flapped its wings and it reverberated- coincidental the resultant action? Maybe.

Magdoran good work with the calls. It is dangerous heading down that path of believing in calls though. The above dictates my attention to the markets without the need to pick whens and wheres.

Basically it could have been going to happen anytime, be prepared - simple.

Just some thoughts.

EXACTLY

That is really the message of the bears, it is not necessarily to not go long or to go short, but to be prepared for any possible contingency. The message is frustrating, annoying, downright infuriating to some.

Economies are so leveraged, so precariously balanced that the poo can hit the propeller at anytime.

Preparation for some can be their normal plan with predefined exits etc, ah-la Tech/As' mech system, for others like me it could be options, diversifying into soft commods etc.

But cognizance of these sorts of possibilities ensures financial survival.

Good Trades

 

[wavepicker]

People,

Markets are irrational and destructive - simple.
If you can trade around that then good work. China flapped its wings and it reverberated- coincidental the resultant action? Maybe.

Magdoran good work with the calls. It is dangerous heading down that path of believing in calls though. The above dictates my attention to the markets without the need to pick whens and wheres.

Basically it could have been going to happen anytime, be prepared - simple.

Just some thoughts.

So true Snake. It's amazing how irrational a lot of the folk are even in this forum. For months(years even) people have been performing what Prechter calls "Linear Thinking". In other words, projecting the current trend into the future. Anyone who has been around markets knows that this is a false sense of security. When every man and his dog starts buying the dips because they think prices will just keep on keeping on, then that trend has just about gone as far as it will go. What seems logical is what usually does not happen in the market.


Having been around in the 87 crash and dot.com crash days really woke me up becuase I thought just like them.

As for this move how far down?? Well, if the market has not topped, and it does go further, it won't be by much at all. If this is the case, consider this a big warning. If it has in fact topped and I think that is the case, then we have to be prepared for a multi month correction back to sub 5000.

65, 34, 17 week cycles in the market have topped and are all pointed down.
160 and 90 day cycles are curently hard down and therefore we will probably see a decline for the next 2 weeks when they start approaching a low.

Cheers

 

[wavepicker]

Trade It,


If you care to sweep back through my posts on technical analysis I suggest that these kinds of indicators actually obscure “seeing” the market, and McLaren characterises them as “trading shadows on the wall” (unless you use them the way wavepicker does with his cycle analysis/FFT style).

In actual fact I am not using indicators as such at all. I am extracting groups of ranges of "dominant cycles" from the price data. These cycles are not easily apparent in the raw form of the price data because this data on many occasions is "trending" up or down. What has to happen first is for the data to be detrended. Thereafter cycles can be found more easily and represented as a trace by modifying MA's as we know them such that the lag is removed. These MA's are good represenatations of what the cycles are doing, but because the "response" of a MA is different, then the amplitude of the cycle may vary as well, but not the period or phase.

The key however is finding the groups of ranges of dominant cycles. From here it can be determined if a cycle is bottoming/topping or or in a trend that is not over yet. Futher to this,cycles can be extrapolated into the future to detrmine where prices will trend.

cheers

 

[theasxgorilla]

That is really the message of the bears, it is not necessarily to not go long or to go short, but to be prepared for any possible contingency. The message is frustrating, annoying, downright infuriating to some.

This is really trading or investing 101. Contemplate the worst case scenario, prep for it, then open the position anyway and pray you make a profit.

 

[Dr Doom]

Thanks for your time & answer Magdoran, I shall do my homework.

Wavepicker, how do you 'detrend' data?

 

[lesm]

Hello tech,

Thanks for the vote of confidence, much appreciated.

My recent posts are not an issue of personality, but of trading style. Remember in the “Improving Chart Analysis” thread when you and Lesm were questioning the potential for accuracy in time and price using cycle styles last year? So yes, in a way I think the technical analysis style warrants recognition…

For quite a while you guys wanted some real time demonstration of the time cycle techniques in action. Well, here is an example.

There are still people that are trying to discount this style, and when an example like this occurs, some are claiming it was an “each way bet”, or that it was a fluke…

The point I am trying to make is that there is a qualitative difference to identifying the potential for a significant move broadly, to identifying time and price points more precisely, and weighting the probabilities effectively. I just feel that many are missing the point here, and are trying to rewrite history.

And YES being able to make precise forecasts when using derivatives makes a huge amount of difference to the bottom line.

It is about maximising returns and minimising risk consistently, and good technical analysis is critical to this.

I would just like to see some honest objectivity and balance in this area. What’s wrong with that?

Regards

Magdoran

Hi Mags,

Your posts are as lucid as one would always expect.

There is no question about you knowing your stuff. Demonstrated many times.

Agree that honest objectivity and balance is required in this and many other areas. Good healthy debate and discussion, even challenging approaches is also a good way to learn.

The question in my mind is with respect to the precision that is implicit or alluded to in how time based analysis is presented.

If I can be a bit of a devil's advocate here.

One should question implying or inferring a high degree of confidence in qualitative approaches, unless other information is available to support it. This may mean that a level of quantification (or maybe knowledge based or experiential factors) is/are being applied. In this regard, +/- 1 day in market terms implies a high degree of confidence or that there is a low standard error on the forecast or prediction.

If we assume that the forecast or prediction is based on the information provided in the chart regardless of the technique used, then information or events that are out of scope of the analysis have not been considered.

If any external events later influence or alter the outcome then it cannot be concluded, in practical terms, that the outcome is necessarily valid based on the original analysis.

In experimental research this type of outcome would be referred to as a contaminated experiment, hence the outcome cannot be considered valid.

I assume that the analysis did not take into account recent events related to the Chinese market or Iran's nuclear activities or other factors that caused the latest correction besides normal market cycle activity.

It may also have just been a matter of coincidence, so unless we turn back the clock and remove the external events we will never really know.

With respect to your comment on rewriting history. History in the markets has show that various approaches work well in some time frames or cycles and not in others. In this regard, we should not forget the lessons learnt from history. We should also remember that as the market dynamics change that we need to change, modify or refine our approaches to suit the dynamics of the time. That is unless anyone can truly develop a method that suits all market conditions and the changing dynamics.

There are a number of areas of technical analysis and approaches that should be challenged, as too many players are still chanting a mantra that is potentially outdated and is inadequte for dealing with market dynamics. Bit like a one size fits all approach that is fundamentally flawed and no lateral thought processes.

Anyway, having said the above, I really like your work as well as wavepicker's. One area of wavepickers work that piqued my interest was related to his comments on detrending and his approach to cyclical analysis.

Look forward to your response and it was a good prediction.

Regards,
Les.