The hardest thing I find is to
convince "traders" not to use technical analysis. Now I'm not saying its
useless, it can be used (very profitably) to time your entry into a
movement you are targeting. I have not yet seen anyone using any
technical analysis "setup,system,method" profitably consistently. I
think this forum proves that. Yes I have seen traders at the bank use
technicals but they don't use it consistently as entry exit method. They
use it more like a crutch. So they have a feeling to go long they look
if we are trading above the 200 ema and they go long if so...Next time
they will feel to go long look at the macd see a positive cross and go
long. The way other traders use it is to see: "ahhhhh, the 10 and 20
emas have crossed up so lets go long". This also gives rise to the idea
of "beginners luck" -while trading your demo account you make money but
as soon as you start live trading you start losing. The "beginners luck"
is just because you haven't done whatever you are doing for long enough
for the market to change character into a monster that wont work using
your technicals. (It is in part also because you stand impartial to
paper profit/loss as opposed to actual money on the line...but I have
said enough about that)
There are currently hype on many systems but if you go back in history you will see many systems starting quickly and then dying off just like the hot-ones at the moment are getting a lot of attention.
Remember -a technical tool is derived from the market price - without a market price there can't be any technical tool. Thats why technicals lag actual market price. Why do you need a technical tool to tell you to go long after a pullback if you can clearly see that the market is making a pullback and now you can go long. You don't need RSI or MACD or whatever to tell you what your eyes say. Remember the long GBP I spoke about earlier in this thread? That entry was so obvious when it pulled back to 2.0090'ish and then just spiked up to 2.03ish. Yes it took guts to take it at that level as it could pull back all the way to the figure (2) before bouncing BUT YOU DONT KNOW THIS AT THAT TIME. All you know is there was a new monthly/yearly high made and I am now not at it, at the moment I am pulling back from it. If you have a feel for your market you will know how many pips pullback you will be comfortable with before entering with the trend. Remember as a trader you don't get paid to "wonder" whether the pullback will go deeper, you get PAID for taking RISK! Now if the pullback went deeper you just cut a bit off your position until your 2.0 (perceived support) is reached and then you add when it starts going up again if it does... It takes some getting used to - to not add to a losing position - but everybody seems to be averaging down as the market goes against them. Do the opposite and get paid for taking RISK.
The real "trick" to trading is to mix your fundamental view with a good technical entry level. Intraday this is almost impossible as you wont know the overall bias for a specific day. The GBP will probably go and test the 2 level again (probably after making a double top) but I don't care about selling the GBP at the moment because I am in a long upward trend. Should it go back to 2 I will start doing something there - I don't know what I'll do there because the political/economical etc. climate could change by the time it gets there. If the climate is the same as now I will buy else sit on sideline or short. At the moment I am positioned (and positioning) so that I will make some cash as long as the GBP close above the 1.98 level on 31 December 2007. If you trade long term like this the stress is less and the probability of success increase slightly.
It takes many hours of reading and getting to know your market before developing a feel for it, the "feel for it" is subconscious i na certain way. Many people are unwilling to develop their reading skills because they want a technical tool that can quickly tell them what position to take when. Such a tool does not exist because if it did it would have been discovered by someone more clever than you or me very long ago. This makes me think of when options was still "unknown" and many traders made milllls out of it due to mispricings etc. It was a money cow. Nowadays everybody is clued up and its much more difficult to make money on options. So the holes were plugged just like it would be plugged should a magical technical indicator suddenly appear.
This is just my opinion and please remember that I am a statistician so it is very hard for me to accept that technicals is not the answer, its just a crutch.
There are currently hype on many systems but if you go back in history you will see many systems starting quickly and then dying off just like the hot-ones at the moment are getting a lot of attention.
Remember -a technical tool is derived from the market price - without a market price there can't be any technical tool. Thats why technicals lag actual market price. Why do you need a technical tool to tell you to go long after a pullback if you can clearly see that the market is making a pullback and now you can go long. You don't need RSI or MACD or whatever to tell you what your eyes say. Remember the long GBP I spoke about earlier in this thread? That entry was so obvious when it pulled back to 2.0090'ish and then just spiked up to 2.03ish. Yes it took guts to take it at that level as it could pull back all the way to the figure (2) before bouncing BUT YOU DONT KNOW THIS AT THAT TIME. All you know is there was a new monthly/yearly high made and I am now not at it, at the moment I am pulling back from it. If you have a feel for your market you will know how many pips pullback you will be comfortable with before entering with the trend. Remember as a trader you don't get paid to "wonder" whether the pullback will go deeper, you get PAID for taking RISK! Now if the pullback went deeper you just cut a bit off your position until your 2.0 (perceived support) is reached and then you add when it starts going up again if it does... It takes some getting used to - to not add to a losing position - but everybody seems to be averaging down as the market goes against them. Do the opposite and get paid for taking RISK.
The real "trick" to trading is to mix your fundamental view with a good technical entry level. Intraday this is almost impossible as you wont know the overall bias for a specific day. The GBP will probably go and test the 2 level again (probably after making a double top) but I don't care about selling the GBP at the moment because I am in a long upward trend. Should it go back to 2 I will start doing something there - I don't know what I'll do there because the political/economical etc. climate could change by the time it gets there. If the climate is the same as now I will buy else sit on sideline or short. At the moment I am positioned (and positioning) so that I will make some cash as long as the GBP close above the 1.98 level on 31 December 2007. If you trade long term like this the stress is less and the probability of success increase slightly.
It takes many hours of reading and getting to know your market before developing a feel for it, the "feel for it" is subconscious i na certain way. Many people are unwilling to develop their reading skills because they want a technical tool that can quickly tell them what position to take when. Such a tool does not exist because if it did it would have been discovered by someone more clever than you or me very long ago. This makes me think of when options was still "unknown" and many traders made milllls out of it due to mispricings etc. It was a money cow. Nowadays everybody is clued up and its much more difficult to make money on options. So the holes were plugged just like it would be plugged should a magical technical indicator suddenly appear.
This is just my opinion and please remember that I am a statistician so it is very hard for me to accept that technicals is not the answer, its just a crutch.
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