Re: XAO Analysis
I feel compelled to chime in:
1. TH, I believe what you identified via AD vrs XAO analysis is a discrepancy caused by the market-cap weighting of the index. BHP, RIO and until recently the financials leading the charge and pushing the index to new all-time-highs.
2. All, people who use indicators are not in technical analysis kindergarden. It is not a forgone conclusion that the evolution of a technical trader is via simple tools like moving averages toward exotic technical analysis techniques like Elliott Wave or cycles analysis. No one knows how the markets work, but at the core of every successful trader I bet you will find a belief that they have something that works. Belief in the paradigm is key, not necessarily the paradigm itself. Many things work. Some intellectuals can't believe that it can be simple so they find a complex paradigm through which to view the markets.
3. All, people who do not appropriate indicators like you do are not lesser traders. I know two traders who appropriate the same toolset differently. One is an intellectual, the other is a multi-millionaire and the person who developed the toolset they follow is dead. Who does it the right way?
Hello ASG,
Firstly there is no right or wrong toolset. In the end it’s all up to your interpretation and then application.
I am basing my comments on my personal experiences using lagging indicators over the years. I have had very mixed messages from using such indicators like MA’s and that is not to say I have completely abandoned such concepts as I still will use a MACD on occasion in combination with other methodologies. There are individuals that swear by the use of certain indicators and then there are those whom if you gave tomorrows newspaper still would not be able to trade profitably. Use what works for you CONSISTANTLY, for me I was unable to be consistent with such tools, and had more success and less distractions simply by looking at price.
Most traders using a simple MA’s for example don’t even know what the MA is representing, it’s strengths, its limitations, not to mention that they using it plain wrongly. An MA is probably the most useful indicator one can use if used correctly. Ask yourself what is an MA representing?? It’s representing the sum of the cycles greater than the span selected for that average. But there is a catch; the last data point for example in an MA is not representing the average of the span of the last X amount of price points. To do this one has to displace the average backward in time by the span/2 such that it’s in phase with price and now you have a leading indicator.
In terms of being simple, well that depends on the individual doesn’t it?? What is exotic about Gann or EW?? With EW for example it comes down to pattern recognition more than anything. The key is to first learn about trends, types of trends and patterns as well as how markets move. This is paramount IMO. Gann, EW, Cycles, time studies can then me integrated within this if one desires.
The market is a complex beast, and whether you use exotic/complex tools or even just simple ones such as a simple MA is up to personal preference. In the end it boils to deciding 3 things:-
-deciding when the market is trending
-participating in that trend
-recognizing when that trend is at risk of ending
Using an MA to determine this IMO just does not do the trick for me, especially when trading derivatives where TIMING is paramount.
If I had to start all over again, I would just focus on price and the patterns of the trends. That is simplicity ASG
Cheers