Why do traders fail?

[coyotte]

Rereading Douglas's book for around the fourth time -- this is a must first read for anyone who thinks creatively.

To basically Quote in a nutshell from pages 95 to 97:

"There is a top notch T/A Analyst who goes broke from trading --- lands a job as a Analyst with a NY broker --- he is showing the boss who is a retired Pit Trader what T/A is about when the SP hits a bottom trend line --- the boss says so this is the absolute bottom --- the Analyst - "Absolutely!".

The boss -- " That's Bull****" as he hits the SELL button." End Quote


As Douglas keeps reminding the reader "Anything can Happen".


Cheers

[Wysiwyg]

Rereading Douglas's book for around the fourth time -- this is a must first read for anyone who thinks creatively.

To basically Quote in a nutshell from pages 95 to 97:

"There is a top notch T/A Analyst who goes broke from trading --- lands a job as a Analyst with a NY broker --- he is showing the boss who is a retired Pit Trader what T/A is about when the SP hits a bottom trend line --- the boss says so this is the absolute bottom --- the Analyst - "Absolutely!".

The boss -- " That's Bull****" as he hits the SELL button." End Quote


As Douglas keeps reminding the reader "Anything can Happen".


Wily matey.....Do you think that anyone can be targeted to trade at a loss? For example.... by their stop losses being hit, share price languishing, a sell off after entry, negative posts/press etcetera? Or do you think that it is all random and an even playing field? :run:

[Realist]

Most traders fail, much like most astrologers fail. Prediction does not work.... Yes!! Anything can happen.

Brokerage, taxes, and inflation reduce winnings, stop losses pull traders out of good stocks, trailing stop losses bring tax debt and brokerage fees to otherwise good holds. And charting is Astrology, it does not work!!

Shares should be bought for longterm dividend income. :p:

[coyotte]

The point Douglas is making is similar to Guppy.

That all analyst F/A T/A Gann etc is only probability.

Wavepicker hits the nail on the head when he/she says about EW "if the wave count fails" then the count is invalid.

IMO the very first thing a Trader must accept and learn to live/trade by is probability/odds --- it's no use applying it only to Trading -- you must let it become ingrained into your everyday thinking, then and only then will you apply it naturally to trading.


Cheers

[coyotte]

Most traders fail, much like most astrologers fail. Prediction does not work.... Yes!! Anything can happen :p:

Exactly why you would excell as TRADER Realist!


Cheers

[wayneL]

Most traders fail, much like most astrologers fail. Prediction does not work.... Yes!! Anything can happen.

Brokerage, taxes, and inflation reduce winnings, stop losses pull traders out of good stocks, trailing stop losses bring tax debt and brokerage fees to otherwise good holds. And charting is Astrology, it does not work!!

Shares should be bought for longterm dividend income. :p:

Not again!

I don't believe you are a simpleton, having to go over the same ground over and over and over again.

Therefore you are obviously agitating... give it a miss.

[It's Snake Pliskin]

Most traders fail, much like most astrologers fail. Prediction does not work.... Yes!! Anything can happen.

Brokerage, taxes, and inflation reduce winnings, stop losses pull traders out of good stocks, trailing stop losses bring tax debt and brokerage fees to otherwise good holds. And charting is Astrology, it does not work!!

Shares should be bought for longterm dividend income. :p:

Hello Realist. Long time no speak. I see you fail to recognise that fundamental types try to predict the future with their value buys. What are your feelings on this?

[coyotte]

Wily matey.....Do you think that anyone can be targeted to trade at a loss?For example.... by their stop losses being hit ,share price languishing,a sell off after entry,negative posts/press etcetera? Or do you think that it is all random and an even playing field? :run:

Don't know about individuals being targeted --- but there used to be a poster on Kitco who claimed to be a employee of one of the large US trading banks -- he claimed the Banks had the same trading programmes as the Hedge Funds (which was programmed trading) -- they could see where the Buys/Stops/Targets were and would at the right prices just swamp the market manually -- he claimed the funds just kept falling for it time and time again.

Cheers

[Wysiwyg]

Okay, thanks for your reply....waaay out of my league that one. :)

[ducati916]

Pretty much anyone with a comprehensive Level II screen can see where the orders stack up and are by default "retail", and you know the MM's can see them, and will "gun them" ...............happens everyday.

Just look at the chart for defined technical support/resistance levels, and compare them to the *static volume* on Level II..........hey presto, stoploss orders.

Scalpers will follow the MM's on a gun run, and pick up ticks on the momentum thus generated.

jog on
d998

[ducati916]

Market participants who fail, fail on the basis of two reasons;

*lack of knowledge with respect to markets
*leveraged by, psychological impairment, when due to lack of knowledge, they start to lose.

Knowledge of the markets is rather an imprecise and broad term therefore;

*understanding their position [strategy]
*understanding competing strategies, that can damage their strategy.

jog on
d998

[ducati916]

Further to placement of stops, what you may find also, and this is where you'll be guessing, that when I place a live market order [volume] as bait for the MM, it's an exit volume [profit target]

I'm sure much static volume on the Level II screens are exit volume [profit] rather than exit volume [loss] in respect to larger players.

Stoplosses tend to be mental, and executed immediately.
Trailing stops, when they can be automated however, are an example of laddering volume, but are again, exit volume [profit]

jog on
d998

[spitrader1]

Further to placement of stops, what you may find also, and this is where you'll be guessing, that when I place a live market order [volume] as bait for the MM, it's an exit volume [profit target]

I'm sure much static volume on the Level II screens are exit volume [profit] rather than exit volume [loss] in respect to larger players.

Stoplosses tend to be mental, and executed immediately.
Trailing stops, when they can be automated however, are an example of laddering volume, but are again, exit volume [profit]

jog on
d998
ducati are you talking about the cash market here not options?? and are you referring to MM's as market makers or the facilitation traders??

[ducati916]

ducati are you talking about the cash market here not options?? and are you referring to MM's as market makers or the facilitation traders??

Correct cash market.
Facilitation traders [as an estimate]
Retail [as an estimate]
Excluding MM's [GS etc]

jog on
d998

[Pager]

Traders fail for many reasons, the main reason IMO is a lack of Discipline.

No Discipline and everything else will start to fall apart as well, no matter how good your approach be it technical fundermental or looking at tea leaves :) .

Others that are significant are lack of confidence in your Method/System and lack of confidence and the ability to accept and be happy with your inevitable losses.

Cheers

Pager

[ducati916]

Traders fail for many reasons, the main reason IMO is a lack of Discipline.

No Discipline and everything else will start to fall apart as well, no matter how good your approach be it technical fundermental or looking at tea leaves :) .

Others that are significant are lack of confidence in your Method/System and lack of confidence and the ability to accept and be happy with your inevitable losses.

Cheers

Pager

Discipline, confidence................all flow from understanding, which is a derivative of knowledge.

jog on
d998

[Realist]

Hello Realist. Long time no speak. I see you fail to recognise that fundamental types try to predict the future with their value buys. What are your feelings on this?

No, value types do not predict. They protect.

They try and buy a company for less than what it is CURRENTLY worth.

[Pager]

Discipline, confidence................all flow from understanding, which is a derivative of knowledge.

jog on
d998

That’s true depending on your approach, also the timescale you trade, for a short term trader knowledge of the instrument they trade has far less relevance than to a longer term or position trader.

Discipline on the other hand (or lack of) will be the traders undoing no matter what his/her timeframe, knowledge, understanding or resources available.

Cheers

Pager

[tech/a]

Traders fail because they follow "Plans" or "Rules" that are flawed,methodologies that are logical paths to success in the traders mind yet doomed to failure when executed.

Nothing more nothing less.

[ice]

Most wouldbe traders start out woefully underfunded.
Makes any small business startup a high risk proposition and trading is just another small business.


ice

[stevo]

In a recent interview in S&C (Nov. 2006) Van Tharp stated;

I think it is harder, for example, for a certain personality type that makes up 75% of the population to be successful at trading because they are not into theoretical stuff. They are into facts, so they are going to do well maybe trading from what they read in a newsletter, or getting advice from someone, as long as that person could give them the facts about why they should take the trade. But they will have trouble grasping the theoretical concepts I have been talking about that are involved in designing something that fits you. They would not even be interested in that.
I have to agree that there are some people that will understand the "theoretical stuff" and others that won't or can't. A fellow approached me about trading and when I mention understanding some basic concepts I get blank looks. I am not sure if it is too hard or if it is too much work or his brain works in different ways or what! But he is happy to use a tip sheet.

The other point in the Van Tharp's interview is the concept of designing something that fits you. It is surprising the number of people that want to trade short term that work full time! If a trader sits down and thinks through what their objectives are, and how the rest of their life will impact on their trading they could learn something.

[swingstar]

No, value types do not predict. They protect.

They try and buy a company for less than what it is CURRENTLY worth.

And as Douglas also mentions, fail to take in an important factor: The fact that the variable most causative of price (traders), couldn't care less about fundamentals.

[theasxgorilla]

This is an interesting thread.

I would tend towards a more "Van Tharp" explanation. Since Van Tharp has tested some random entry systems and shown them to be profitable when applied in conjuction with suitable position sizing I would suggest that over-emphasis on any analysis (tech, fund, astro...whatever) at the expense of money management and psychology is a key factor in why a lot of budding traders continue to be unprofitable.

I suppose this ties in with Realist's statement that prediction does not work. Once you accept that to be the reality your emphasis must shift towards money management (protecting your capital from loss) and psychology (protecting you from yourself).

[IFocus]

My own experience of why traders fail is that they simply don’t carry out enough testing or none at all.

From testing extensively comes to some degree a little more preparation for the psychology issues plus perhaps formation of an actual plan that may mean something.

Then there is the account that’s too small with the positions too large……

Focus

[coyotte]

My own experience of why traders fail is that they simply don’t carry out enough testing or none at all.

From testing extensively comes to some degree a little more preparation for the psychology issues plus perhaps formation of an actual plan that may mean something.

Then there is the account that’s too small with the positions too large……

Focus


This is the point i think Douglas is referring to --- our Analyst in question apparently had a plan --- But could not accept the fact that "Anything can Happen" --- probably realized it on a intellectual level but not on a deep seated personal level.
Holders of GYM on the Xmas day their Coal mine flooded could attest to this.


Cheers

[It's Snake Pliskin]

In a recent interview in S&C (Nov. 2006) Van Tharp stated;

I have to agree that there are some people that will understand the "theoretical stuff" and others that won't or can't. A fellow approached me about trading and when I mention understanding some basic concepts I get blank looks. I am not sure if it is too hard or if it is too much work or his brain works in different ways or what! But he is happy to use a tip sheet.

The other point in the Van Tharp's interview is the concept of designing something that fits you. It is surprising the number of people that want to trade short term that work full time! If a trader sits down and thinks through what their objectives are, and how the rest of their life will impact on their trading they could learn something.

I am happy for fulltimers to want to trade Stevo. Without the sheep can the abattoirs survive?

Your approach Stevo is a good one.
Regards
Snake

[It's Snake Pliskin]

No, value types do not predict. They protect.

They try and buy a company for less than what it is CURRENTLY worth.
So are you saying they buy to keep at their buy price? That is for it not to go up in price?

[michael_selway]

Most traders fail, much like most astrologers fail. Prediction does not work.... Yes!! Anything can happen.

Brokerage, taxes, and inflation reduce winnings, stop losses pull traders out of good stocks, trailing stop losses bring tax debt and brokerage fees to otherwise good holds. And charting is Astrology, it does not work!!

Shares should be bought for longterm dividend income. :p:

Astrology, what does Yogi think about that?

thx

MS

[spitrader1]

Correct cash market.
Facilitation traders [as an estimate]
Retail [as an estimate]
Excluding MM's [GS etc]

jog on
d998
so yK u are saying you can bait a facilitation trader?? Im not sure I agree with you on this. If I take on a line of 200k BHP how are you going to bait me with 2k or 5k BHP?

[theasxgorilla]

This is a good thread. Summarised so far, the key reasons why traders fail according to the ASF crew...

1. Absence of an actual trading plan

2. Applyinig the wrong method/system/strategy eg. having a plan that lacks positive expectancy or one that does not fit your personality or life situation

3. Lack of understanding of the method/system/strategy you are applying.

4. Not realising that inspite of having an actual trading plan anything can still happen (there are no absolutes in trading only probabilities)

5. Trading a plan that uses obvious entries and exits and falling prey to larger (smarter? better resourced?) institutions/hedge funds etc.

6. Lack of understanding of competing strategies that can damage your strategy (ties to point 5 above I believe?)

7. Over-emphasis on analysis at the expense of money management or psychology (some estimate proportions should be 10% analysis, 30% money management, 60% psychology, Van Tharp says 100% psychology).

8. Lack of discipline

9. Lack of confidence in your method/system/strategy

10. Not enough testing carried on a particular system (which can lead to insufficient confidence/discpline/understanding)

11. Too small an account size (undercapitalised)

12. Too large of a position size relative to account size (how many losses can you sustain before you're out of the game? a 50% loss means you need a 100% win to get back to break even.)

13. Inability to be happy with (do you have to be happy withlosses?? :eek7: ) and accept inevitable losses

14. Inability or unwillingness to understand the "theoretical stuff" (prefer to be tipster/broker/ramper fodder).

[Freeballinginawetsuit]

As a society we constantly seem to require complicated answers or a process that seeks justification for decisions made.
The more complicated the process/justification>the more educated/valid the decision made!.

On a daily basis newspapers regularily provide a complicated analysis to what is a very basic scenario (more often in the Business section). Lets face it, many seem to feel the need to justify their income, this thread is no different :D .

[Kauri]

We are taught/conditioned to believe that being right equals success...
For me it is how you accept and deal with being wrong possibly/probably more than 50% of the time that determines your overall success.

[stevo]

On a daily basis newspapers regularly provide a complicated analysis to what is a very basic scenario
I always thought it was the other way around! They often oversimplify a complex situation to get the story across. One of the rules when writing a media release is to put the story in the first paragraph - that's often all we read. It may depend on what papers you read.

It's important to understand why traders fail if you are one of the failures, or you are trying to sell something to traders to help them succeed. The psychology of traders is very important to the marketing department!

[coyotte]

Interesting that most would seem to agree that mental attitude is of importance if not the most important aspect of trading -- yet it is probably the least discussed topic on any forum.

Wonder why this is so?

I have in hindsight been fortunate enough in the past to have spent a couple of decades involved in thoroughbred racing, to naturally now think in probabilities --- rather than insisting that a particular view should play out and blaming everything from my own analyst to a rigged market if it does not, just accept what the SP is telling you and act accordingly.

Although I didn't realize it at the time, developing this attitude can take years and is something that creeps up upon you as it becomes part of your everyday approach to life.

Probably wrong, but I don't think you can just switch your mode of thinking to suit the occasion -- when the pressure is on it's that deep down attitude that takes over and we are simply unaware of it --- this is the bit I feel that must worked on over the years --- they used to say it took a bookie 10 years until he KNEW the market, beginning to see what they really meant by that statement.


Cheers

[theasxgorilla]

Great post Coyotte, very insightful. Why is mental/psychology so under-discussed?

[Freeballinginawetsuit]

I always thought it was the other way around! They often oversimplify a complex situation to get the story across. One of the rules when writing a media release is to put the story in the first paragraph - that's often all we read. It may depend on what papers you read.

It's important to understand why traders fail if you are one of the failures, or you are trying to sell something to traders to help them succeed. The psychology of traders is very important to the marketing department!

Would tend to disagree on the media issue although at times space constraints could lead to a compressed version of misrepresented facts.

As for the flogging of books by marketing departments, well thats not rocket science. A bit like Macca's putting a free toy with their happy meals>traders reading a colorful book.
This year for Maccas its healthy meals>A couple of years time it might be a new book teaching how to trade the Chindia market.
To little......to late :)

[coyotte]

In the early part of his book Douglas points out that after a string of failures the first thing a new trader will do is try and learn more about the MARKET -- this includes everything from the actual markets to the variuse analyst techniques only to find that again he is setting himself up to failure -- Think most of us have been down this road repeatedly.

It is at this point hopefully it dawns on the trader that the problem may lay within rather than outside, else he is doomed to go through the cycle again.


Cheers

[Naif]

I believe that traders should have experince in fundamental + technical analysis and have good experience in risk and money management to help them to make profits cause traders always lose but successful traders should cover their losses.

[steven1234]

One thing i was recently told was "in the current market if you can't make money its best you not trade/invest in shares at all".

I think you need to loose some money before you start to learn about trading sucessfully. The once bitten twice shy principle applies. There are many in the market who are up due to the current bull run.

To answer the question posed we must define failure. In defining failure we must define what is sucessful trading? Is it making money? Is it making a return greater than interest? Is it making more than the index or is it making a return of 50% on investment?

I have noticed myself at times looking at some profitable holdings i have and being disappointed they are not making gains of at least 50% per month. If others can do it why can't i? Its only when you loose money that you will appreciate your gains made and invest wisely.

[Temjin]

One word, psychology.

Most people would dismiss that their psychology is affecting their trading results though. That's why most people fail at trading.

[jammin]

One word, psychology.
Temjin, I agree with you but would have put it thus: The 3 most important parts of trading are 1) psychology, 2) psychology and 3) psychology.
I find it very dificult to be honest and objective when analysing my trades and my performance in comparison to my trading plan. I have particular difficulty with exits. I tend to move my stop loss around due to conflicting feelings of fear and greed and end up stopping out too early (stops are too tight) thus not letting my profits run.

[tech/a]

THIS


I find it very dificult to be honest and objective when analysing my trades and my performance in comparison to my trading plan. I have particular difficulty with exits. I tend to move my stop loss around due to conflicting feelings of fear and greed and end up stopping out too early (stops are too tight) thus not letting my profits run.

IS CAUSED BY THIS



Traders fail because they follow "Plans" or "Rules" that are flawed,methodologies that are logical paths to success in the traders mind yet doomed to failure when executed

Nothing more nothing less..

If you hade a methodology with PROVEN positive expectancy with a blue print of method performance over years of testing and even Montecarlo analysis you'd NEVER I tend to move my stop loss around due to conflicting feelings of fear and greed

Youd have no need to you would KNOW that the way you trade would result in a positive expectancy of X.

You can have the discipline of a Monk and still fail if your discipline is based around a flawed concept.

Which MOST ARE.

[jammin]

Thanks for the insight Tech/A.
My trading plan is flawed. I need to perform more comprehensive back testing that includes exit strategies, to come up with a plan which has defined entry and exit parameters. With the expectancy levels produced I would have the level of confidence, as you have stated, to stop playing with the stops. My current plan is very focussed on entry criteria with "motherhood statements" refering to the exit, a flawed plan as you have said.

[hongwong]

I also think day to day trader fail because they are depending on money from selling and trading shares. Therefore they have to sell or buy to make money.
Other companies live off the commissions

Economist around the world says
Economist can determine if a price of a stock is going up/down and they can determine the time of a stock moving, but they can’t match this with each other.
(Take from Alan Greenspan).

Most people are trying to do this. So if the worlds best minds and computers can’t work this out. I go hmmmmm.

I believe this best method is to do your homework on the share and wait for the rewards.

Warrant Buffet and Benjamin Graham seem to have done well.

Just an option.

[nizar]

Agree wholly with tech.

So much talk about psychology, but the best psychology in the world is not useful if your plan does not incorporate sound money management, and has not been tested and is not proven to trade with a positive expectancy.

[Slothhead]

Tech/A has hit it pretty solid.

The adage of "practice makes perfect" is a lie. If you practice your golf swing 15 hours a day, and then go and hit the ball, you will find that you are perfect at that swing, however, this may correlate with a ball in the bushes through a 30 degree slice.

So in order to be "perfect" you must practice perfectly. Thus if you practice the correct thing , you will ultimately become better at it, so long as your noggen allows it.

No offence, but i dont think that we can even be mentioning Warren Buffet in any of these conversations. I often have a chuckle when people talk about the Warren Buffets, and how the buys for long term and fundamentals and blah blah blah.

Firstly he isnt a trader,
Secondly, he isnt an investor of the share market either.

Buffet is interested in business, that is it. He buys based on the business.
I am sure he doesnt sit down behind the computer, and say "gee that looks good, i might put in a buy for a million shares" so he logs onto commsec and off he goes. He buys considerable portions of businesses. To produce cashflow.


My belief why so many people get trading wrong, is because they treat it like a hobbie. If you want to make a go of it, like any job, you have to do the work required.

Oh and one last thing, buying shares, as an "investment" is not investing. basically all you are doing is placing your money into an interest earning bank account called BHP or TLS. This bank account will pay you some percentage with the possibility of growth valuation.

Maybe this is just me, i consider investing in shares in order to produce cashflow to build capital. i.e. you invest in BHP to write options, to produce cashflow etc. and the cycle goes on.

ok that is enough of my rambling

[wayneL]

Agree wholly with tech.

So much talk about psychology, but the best psychology in the world is not useful if your plan does not incorporate sound money management, and has not been tested and is not proven to trade with a positive expectancy.
So turning the question around: Why do traders succeed?

1/ Find a positive expectancy method.

2/ Employ sound money management.

3/ Manage your psychology so-as to faithfully implement 1/ & 2/

Simple really, but not easy.

[wayneL]

Tech/A has hit it pretty solid.

The adage of "practice makes perfect" is a lie. If you practice your golf swing 15 hours a day, and then go and hit the ball, you will find that you are perfect at that swing, however, this may correlate with a ball in the bushes through a 30 degree slice.

So in order to be "perfect" you must practice perfectly. Thus if you practice the correct thing , you will ultimately become better at it, so long as your noggen allows it.

No offence, but i dont think that we can even be mentioning Warren Buffet in any of these conversations. I often have a chuckle when people talk about the Warren Buffets, and how the buys for long term and fundamentals and blah blah blah.

Firstly he isnt a trader,
Secondly, he isnt an investor of the share market either.

Buffet is interested in business, that is it. He buys based on the business.
I am sure he doesnt sit down behind the computer, and say "gee that looks good, i might put in a buy for a million shares" so he logs onto commsec and off he goes. He buys considerable portions of businesses. To produce cashflow.


My belief why so many people get trading wrong, is because they treat it like a hobbie. If you want to make a go of it, like any job, you have to do the work required.

Oh and one last thing, buying shares, as an "investment" is not investing. basically all you are doing is placing your money into an interest earning bank account called BHP or TLS. This bank account will pay you some percentage with the possibility of growth valuation.

Maybe this is just me, i consider investing in shares in order to produce cashflow to build capital. i.e. you invest in BHP to write options, to produce cashflow etc. and the cycle goes on.

ok that is enough of my rambling

Oh! Agree wholeheartedly.

What is equally amusing, if not irritating, is the Buffet minions bagging trading in shorter time frames.

I posted an article somewhere that "day" trading in fact may have the best "Sharpe Ratio" of all. (presuming positive expectancy of course)

[nizar]

Tech/A has hit it pretty solid.

The adage of "practice makes perfect" is a lie. If you practice your golf swing 15 hours a day, and then go and hit the ball, you will find that you are perfect at that swing, however, this may correlate with a ball in the bushes through a 30 degree slice.

So in order to be "perfect" you must practice perfectly. Thus if you practice the correct thing , you will ultimately become better at it, so long as your noggen allows it.



No offence, but i dont think that we can even be mentioning Warren Buffet in any of these conversations. I often have a chuckle when people talk about the Warren Buffets, and how the buys for long term and fundamentals and blah blah blah.

Firstly he isnt a trader,
Secondly, he isnt an investor of the share market either.

Buffet is interested in business, that is it. He buys based on the business.
I am sure he doesnt sit down behind the computer, and say "gee that looks good, i might put in a buy for a million shares" so he logs onto commsec and off he goes. He buys considerable portions of businesses. To produce cashflow.


My belief why so many people get trading wrong, is because they treat it like a hobbie. If you want to make a go of it, like any job, you have to do the work required.


Oh and one last thing, buying shares, as an "investment" is not investing. basically all you are doing is placing your money into an interest earning bank account called BHP or TLS. This bank account will pay you some percentage with the possibility of growth valuation.

Maybe this is just me, i consider investing in shares in order to produce cashflow to build capital. i.e. you invest in BHP to write options, to produce cashflow etc. and the cycle goes on.

ok that is enough of my rambling

Agree.
Buffet is NOT an investor.

He buys businesses, and usually his stake is enough so he has an influence on how the business is run, improvements/cash flow etc, can be made.

But if your buying $5 or $10k parcels, then Hmmmm..... ;)

And every1s probably saying, but i bought and hold the last few years, and its worked for me.
Yeh - its called a bullmarket! :)

And also agree with your previous points, its fact that most traders ruin their systems by trying to turn a good system into a perfect one.

[Bronte]

We prefer: "Practice makes Progress" :)

[hongwong]

intresting, what about peter lynch, what stlyle does he trade at ?


Quote --

Buffet is interested in business, that is it. He buys based on the business

I would say that would be the best reason to buy and trade in a stock ! after all you are investing into a bussiness and not lines, that appear on commsec.

Kind of makes me chuckle to myself. I draw some lines on a piece of paper and you can predict the way it going to move?

If there one thing I have learnt from stock trading/investing and I would assume I started this when I joined these forums;

NEVER EVER WALK INTO A ROOM when a charist and fundamental person are debating the best method to trade.(unless u have popcorn).

If i may bring attention upon a book
"A fool and his money, the odyssey of an average investor" by John Rothchild.

Made me laugh when reading it.

[wayneL]

intresting, what about peter lynch, what stlyle does he trade at ?


Quote --

Buffet is interested in business, that is it. He buys based on the business

I would say that would be the best reason to buy and trade in a stock ! after all you are investing into a bussiness and not lines, that appear on commsec.

Kind of makes me chuckle to myself. I draw some lines on a piece of paper and you can predict the way it going to move?

If there one thing I have learnt from stock trading/investing and I would assume I started this when I joined these forums;

NEVER EVER WALK INTO A ROOM when a charist and fundamental person are debating the best method to trade.(unless u have popcorn).

If i may bring attention upon a book
"A fool and his money, the odyssey of an average investor" by John Rothchild.

Made me laugh when reading it.
[sigh] such a tiresome argument.

This has been gone over countless times in countless places. Fundies try to disparage technical traders with the use of satirical phrases such as "Kind of makes me chuckle to myself. I draw some lines on a piece of paper and you can predict the way it going to move?"

It show utter ignorance of the premise of technical trading and an intellectual slovenliness that makes discussion futile.

Another one for the "not to take seriously" list.

[professor_frink]

NEVER EVER WALK INTO A ROOM when a charist and fundamental person are debating the best method to trade.(unless u have popcorn).


How true. The same could be said of posting on an internet forum when they are debating.

Hang on, I just did that.:sly:

AND I HAVE NO POPCORN:eek:


Kind of makes me chuckle to myself. I draw some lines on a piece of paper and you can predict the way it going to move?

I had a chuckle to myself too hongwong:)

[tech/a]

Stage 2

When you have a positive expectancy method

Traders think its all about the method.
When its all about the APPLICATION of the method.

Example.
Techtrader---although I had a great deal of input into its design
In my veiw is a pretty average method.
Has returned 20+% year in year out for nearly 5 yrs now.

So our starting capital at $30,000 compounded say 26% a year over 5 yrs
$97,273.---Not bad.

Yet as of last Friday its liquidated Equity is $350,000.

And people argue about the ANALYSIS!

So do you really think that its about the analysis?

People fail because they just dont know how to succeed.
Most have never been in the position to APPLY the basic principles of ECONOMICS.

They do the same thing day in and day out and expect a DIFFERENT result.

As is evidenced by most of the posts here!

[wayneL]

Stage 2
So do you really think that its about the analysis?

Yes!.....

.....or....

No!

Depends what you call analysis I suppose. Determining that the close has crossed the HHV(70) could be called analysis. Then again it might not.

For clarification, what do you call "analysis".

[tech/a]

"Kind of makes me chuckle to myself. I draw some lines on a piece of paper and you can predict the way it going to move?"

The line will do one of 5 things or a combination of most of them and cannot do anything more at any point in time.(we are talking about a line not a stock)
I will either be proven correct or incorrect.
I wont care which of one or combination of the things it does next.
I'm a technical trader.
I wont care how its drawn or what its drawn with,wether it was drawn well or the person who drew it was/is good at drawing lines.

I wont be predicting anything---I'm a technical trader I dont Predict!

[tech/a]

$97,273 Compounded BUT
is $350,000 as of Last Friday.

For clarification then do you think the massive difference is about the analysis?

Thought my point was/is clear---seems not.

[wayneL]

The line will do one of 5 things or a combination of most of them and cannot do anything more at any point in time.(we are talking about a line not a stock)
I will either be proven correct or incorrect.
I wont care which of one or combination of the things it does next.
I'm a technical trader.
I wont care how its drawn or what its drawn with,wether it was drawn well or the person who drew it was/is good at drawing lines.

I wont be predicting anything---I'm a technical trader I dont Predict!
Exactly. This is what some don't grasp. T/A is not about prediction. It doesn't matter how many times you point it out, they come back with the same (non) point.


$97,273 Compounded BUT
is $350,000 as of Last Friday.

For clarification then do you think the massive difference is about the analysis?

Thought my point was/is clear---seems not.

No it is not clear. That is why I asked you what you consider analysis. I am not having a go at you, but asked you for clarification, which you have not done.

I cannot respond until this is done. This may short-circuit your above question .

[tech/a]

Wayne.

In the case of any PROVEN methodology or if you like to call it a system you simply have a set of conditions which if met and applied as tested then you can expect a similar result.
No analysis just repetitive application.

You can improve upon profitability on any repetitive application of a proven method,well beyond that that can be gained by attempting (as Nizar says) to find the perfect system through tweeking analysis---often endlessly.

Fundamental OR technical.

[hongwong]

[sigh] such a tiresome argument.

This has been gone over countless times in countless places. Fundies try to disparage technical traders with the use of satirical phrases such as "Kind of makes me chuckle to myself. I draw some lines on a piece of paper and you can predict the way it going to move?"



If you can show me a method that works over the long run for technical. I would love to here about it.

Also point of a few successful traders that have been in the game for 20 years that do technical, I am sure I would love to get the book and read it.

It appears to me if you follow what was being said. I offer an option why traders fail.

I have not been rude or call the technical people names. Infact I would love to learn more about it.

I suggest you re-read what you have started, because I have never dismissed technical trading at all. I just have not found anyone that been in the game for 20 year+ in technical trading that has been successful like peter lynch or other name. As this is how long I plan to be investing/trading.

I express and option and it seems you chuckle to yourself over buffet minion’s ways.

Now I wonder who ignorance on the topic

At the end of the day we are here to make profit and some of us learn.

As pointed by alot of people Physiology seem to be the biggest pitfall.

So If you believe you are in a good stock and know you have invested in a good business. And the price of the stock goes up or down, I know invested in a good good company.
That has solid management
Solid revenue etc all that “fundies stuff”

But if the prices of a stock goes up or down and all I am looking at is a chart?
I would like to know if the market is not under reacting/ over reacting etc.

I am asking a question: Can a chart tell me this? …. As this would eliminated a big physiology part of share trading for the technical people.

Thanks

[wayneL]

Wayne.

In the case of any PROVEN methodology or if you like to call it a system you simply have a set of conditions which if met and applied as tested then you can expect a similar result.
No analysis just repetitive application.

You can improve upon profitability on any repetitive application of a proven method,well beyond that that can be gained by attempting (as Nizar says) to find the perfect system through tweeking analysis---often endlessly.

Fundamental OR technical.
OK, got your meaning now.

All clear.

[chops_a_must]

Oh! Agree wholeheartedly.

What is equally amusing, if not irritating, is the Buffet minions bagging trading in shorter time frames.

I posted an article somewhere that "day" trading in fact may have the best "Sharpe Ratio" of all. (presuming positive expectancy of course)
Fantastic thread guys!

Wayne and others, I'm wondering if the failure of traders is actually due to the failure to recognise the need to trade in various time frames?

When I first started out, I was looking at mid to long term strategies. Now as I am becoming more confident and more successful, I am looking to learn and increasingly trading in shorter time frames. But it appears as if some traders discard the longer term view in favour of increasingly shorter time frames... which looks a folly to me as you wouldn't be increasing the probability of success over a variety of time frames.

Also (and I was thinking of starting a thread about this), do you think people's occupation or training/ education, can have a positive or negative affect on their trading? And the reasons for this.

Cheers,
Chops.

[tech/a]

Fantastic thread guys!

Wayne and others, I'm wondering if the failure of traders is actually due to the failure to recognise the need to trade in various time frames?

Dont know that there is a need.But being able to trade long and short certainly adds a new and profitable dimension.Timeframes may have a lot to do with available time---is the case with me.


When I first started out, I was looking at mid to long term strategies. Now as I am becoming more confident and more successful, I am looking to learn and increasingly trading in shorter time frames. But it appears as if some traders discard the longer term view in favour of increasingly shorter time frames... which looks a folly to me as you wouldn't be increasing the probability of success over a variety of time frames.

I see this chops as more a diversification in trading application.
Wouldnt sayy its necessarily a pre requisite to greater success.


Also (and I was thinking of starting a thread about this), do you think people's occupation or training/ education, can have a positive or negative affect on their trading? And the reasons for this.

Cheers,
Chops.

Absolutely.
Those who HAVE to be right are at a great disadvantage.Those who are over analytical are just as bad.Those who are linear in thought process also at a disadvantage,as are those who avoid risk and dont have the capacity to understand it.

All can be overcome/learned and improved---by most---.

[Wysiwyg]

My personal account....

I don`t know why others fail,but my failings are purely emotional.I feel as if I`m taking someones money if I take a profit, and in return someone will take mine later on.I feel bad about it. It is my personality not to take from others.

Buying in at the right time I`m o.k. at, but when it comes to taking profit it seems like I`m taking directly from another person.In order for me to be a successful trader I need to be able to execute the sell when I know it is time.

[Julia]

My personal account....

I don`t know why others fail,but my failings are purely emotional.I feel as if I`m taking someones money if I take a profit, and in return someone will take mine later on.I feel bad about it. It is my personality not to take from others.

Buying in at the right time I`m o.k. at, but when it comes to taking profit it seems like I`m taking directly from another person.In order for me to be a successful trader I need to be able to execute the sell when I know it is time.

You're not "taking from others". You are offering someone else the opportunity to fulfil their wish which is to buy your shares. They have valid reasons for wanting to buy them. Presumably you have a valid reason for wanting to sell them, i.e. taking a profit.

You are not exactly holding a gun to some anonymous buyer's head and forcing them to buy or sell. Each buyer/seller is an entirely free agent as you are and they are willingly choosing to buy "your" shares.

Don't put any personal slant on it whatsoever. Next when you buy something you will be castigating yourself for stealing someone else's shares against their will!!!

Investing/trading simply has nothing to do with your personal philosophy of not wanting to take from others. There is just no connection.

[nomore4s]

You're not "taking from others". You are offering someone else the opportunity to fulfil their wish which is to buy your shares. They have valid reasons for wanting to buy them. Presumably you have a valid reason for wanting to sell them, i.e. taking a profit.

You are not exactly holding a gun to some anonymous buyer's head and forcing them to buy or sell. Each buyer/seller is an entirely free agent as you are and they are willingly choosing to buy "your" shares.

Don't put any personal slant on it whatsoever. Next when you buy something you will be castigating yourself for stealing someone else's shares against their will!!!

Investing/trading simply has nothing to do with your personal philosophy of not wanting to take from others. There is just no connection.

Good post Julia, as far as I'm concerned when you sell a stock to someone else there is as much chance of it going up as down. Maybe like Julia said you should think of it as giving someone else an opportunity to make money, not take it off them.

[Wysiwyg]

You're not "taking from others". You are offering someone else the opportunity to fulfil their wish which is to buy your shares. They have valid reasons for wanting to buy them. Presumably you have a valid reason for wanting to sell them, i.e. taking a profit.

You are not exactly holding a gun to some anonymous buyer's head and forcing them to buy or sell. Each buyer/seller is an entirely free agent as you are and they are willingly choosing to buy "your" shares.

Don't put any personal slant on it whatsoever. Next when you buy something you will be castigating yourself for stealing someone else's shares against their will!!!

Investing/trading simply has nothing to do with your personal philosophy of not wanting to take from others. There is just no connection.

Thanks Julia...I am becoming more comfortable with taking profit as time goes on.What you say makes a whole lot of sense.I will try not to casterate :D myself on future trades.Just my upbringing mindset needs to adjust to sharetrading.Thanks for your input.:)

p.s....also at times I could have more money than I have had in my whole life and that is scary too.I will get over this barrier.

[nizar]

Exactly. This is what some don't grasp. T/A is not about prediction. It doesn't matter how many times you point it out, they come back with the same (non) point.


Exactly.
TA is more about reaction.
See where the price is going, and react to it.

I think fundamental analysis is all about prediction.
Prediction is when you think a company is undervalued, and you predict that one day it will trade at what you reckon is fair value. If it doesnt ever go up to your value, then you think that the market is stupid (!) and because you dont like losing money and its not a loss until you sell ;) you end up holding a dog forever. Or it becomes bottom drawer until it at least breaks even. Or even better, buy on the way down to reduce average price :D After all, if it was cheap at $X then its even cheaper at $X-40% !!

Pretty much sums up fundamental analysis for me :cool:

[hongwong]

Question.

Has there been anyone doing the techincal trades that has proven success over the long run ?

If so, could you list him/her and what books they have written ?

Looking at a 10-20 year time peroid of trading.

Thanks !

[Slothhead]

Question.

Has there been anyone doing the techincal trades that has proven success over the long run ?

If so, could you list him/her and what books they have written ?

Looking at a 10-20 year time peroid of trading.

Thanks !

Are you asking has there been people that have traded for this long. I am not sure that i fully understand what you are asking. There are many people out there that have been trading for this many years.

Or are you asking, is there people buying shares (trading) with a 20 year forecast?

Yeah i got no idea what you mean, but then again it is getting past my bedtime

[hongwong]

Are you asking has there been people that have traded for this long. I am not sure that i fully understand what you are asking. There are many people out there that have been trading for this many years.

Or are you asking, is there people buying shares (trading) with a 20 year forecast?

Yeah i got no idea what you mean, but then again it is getting past my bedtime


Just asking if there are any good books ... for ppl who want to learn about techincal trading.

I am looking to read and understand their styles.

Looking to read about techincal traders that have had the test of time.

Techincal trading game for about 10-20 years.( doing well)

Good night and thanks

[wayneL]

Question.

Has there been anyone doing the techincal trades that has proven success over the long run ?

If so, could you list him/her and what books they have written ?

Looking at a 10-20 year time peroid of trading.

Thanks !
Nick Radge immediately springs to mind. Perhaps Weinstein, Wyckoff, Gann, Curtis Faith, Nick Darvas, Linda Raschke... thats just off the top of my head.

Lol, there are dozens!

[hongwong]

Nick Radge immediately springs to mind. Perhaps Weinstein, Wyckoff, Gann, Curtis Faith, Nick Darvas, Linda Raschke... thats just off the top of my head.

Lol, there are dozens!

cool thanks for this.

I will look into Nick Radge, since he lives in australia.

Here we go.

[wayneL]

cool thanks for this.

I will look into Nick Radge, since he lives in australia.

Here we go.
Nick is straight down the line, no BS, no embellishment. You will get the "real" picture from him.

[hongwong]

Nick is straight down the line, no BS, no embellishment. You will get the "real" picture from him.

WayneL, I dont doubt this. I am not here to say tech vs fund. Personally if it make money and the style suits u. I would say go for it.
READ this:
This is my outlook on the stock and I am telling you to buy/sell/hold.
I just want to give a fundamental outlook on the stock from my angle!


http://www.aussiestockforums.com/forums/archive/index.php/t-2694.html

Taken from the above:
It obviously skews the win/loss ratio the wrong way. You must remember that trading is about capital gain, not income growth. You never put your capital at more risk than is acceptable. Your mind will do everything it can to keep you in a bad trade and get you out of a good trade. Discipline is the core ingredient and there is no harm in having another go if prices go back again. But after 20-years of trading you will learn that sometimes prices will never go back. Look at MGW, PPX, PBG, IIN, WYL, PBB etc etc. These are top quality companies that kept diving and diving. I haven't even suggested HIH, ION, SGW, ONE, etc etc. From a trading perspective, holding these beyond reasonable risk will take you out of the game.

Here is what Nick has said.

I am going to take a look at MGW.
This is from what I can see.

MGW
The company is trading at P/E 70.26 now(BAD)
Revenues has been going up - good point
The EPS is good until 04/05. – investigate, could be once off cost or something.
Worrying factor:
This company has started to get into debt since 02
Inventory level has risen from 2003, therefore this shows signs that demand has stop and receivable is dropping. Too much stock in warehouse and a right off could be coming.

For me I would have pulled out from 2003/04
Because of the debt level, increase in stock and slow down in receivables.

To confirm all this I would ring up a store like “Dan Murphy” and ask them
How sale are going for MGW or what wines/beers they sell.

This is what I have seen in the books.
All information has been taken from commsec.

I can take a look at PPX, PBG, IIN, WYL, PBB if people are really that interested, but u can all do this for yourselves.
Just need to ask Nick or anyone, what he saw in the charts etc during etc and what made him sell out ?

edit
This was a very quick over view of the stock and looking over the books.

[wayneL]

Just need to ask Nick or anyone, what he saw in the charts etc during etc and what made him sell out ?
Hong,

It's probably not even what Nick saw in the charts that made him sell. (I don't know I'm just guessing) It was probably the parameters in which he wants to be in a trade were breached, so trade exited, simple as that.

To understand the premise of technical trading, I recommend Nicks book "Adaptive Analysis For Australian Stocks" (http://www.******************/default.asp?d=0&t=1&id=5017&c=0&a=74). It is not expensive and the first few chapters explain how profitabilty is obtained in the technical setting as clearly as I have seen anywhere, without fluff and padding.

Cheers

[wayneL]

Hong,

It's probably not even what Nick saw in the charts that made him sell. (I don't know I'm just guessing) It was probably the parameters in which he wants to be in a trade were breached, so trade exited, simple as that.

To understand the premise of technical trading, I recommend Nicks book "Adaptive Analysis For Australian Stocks" (http://www.******************/default.asp?d=0&t=1&id=5017&c=0&a=74). It is not expensive and the first few chapters explain how profitabilty is obtained in the technical setting as clearly as I have seen anywhere, without fluff and padding.

Cheers

BTW, I would never advocate Tech over fundie or visa versa. It's horses for courses; both methods have merit and work exceptionally well for those who apply it properly.

It is good however to recognize the merits of others methods.

Cheers

[wayneL]

Fantastic thread guys!

Wayne and others, I'm wondering if the failure of traders is actually due to the failure to recognise the need to trade in various time frames?

When I first started out, I was looking at mid to long term strategies. Now as I am becoming more confident and more successful, I am looking to learn and increasingly trading in shorter time frames. But it appears as if some traders discard the longer term view in favour of increasingly shorter time frames... which looks a folly to me as you wouldn't be increasing the probability of success over a variety of time frames.

Also (and I was thinking of starting a thread about this), do you think people's occupation or training/ education, can have a positive or negative affect on their trading? And the reasons for this.

Cheers,
Chops.

It's a good point. Raschke and other advocate having systems in various time frames. Obviously it would depend on personal circumstances and the ability/opportunity to be able to monitor all the trades.

The challenge I had to overcome in this regard is having separate "mindsets" for different time frames. This wasn't easy to to do, for me at least.

For instance if I have a trend trade going that is starting to move against me having moved into profit, but well within my trailing stop, the swing trader in me is SCREAMING to take profit. This despite having started off as a trend trader. But to do so would sabotage the system... internal conflict.

I had to devise ways to manage my head...tough.

[nizar]

Question.

Has there been anyone doing the techincal trades that has proven success over the long run ?

If so, could you list him/her and what books they have written ?

Looking at a 10-20 year time peroid of trading.

Thanks !

Long-term trend followers that trade from purely mechanical systems include:
John W.Henry
Bill Dunn
Ed Seykota

They dont solely trade stocks though, also commodities, currencies, etc.

Its amazing, they do other stuff during the day. WHenever their computer beeps, one of the traders calls a broker to buy or sell. And they dont outperform the market by percentages, they do it by multiples.

A book called trend followers by Michael Covel will really open up your eyes to mechanical trading and make you see its potential - well, thats what it did for me.

[Temjin]

Nick Radge immediately springs to mind. Perhaps Weinstein, Wyckoff, Gann, Curtis Faith, Nick Darvas, Linda Raschke... thats just off the top of my head.

Lol, there are dozens!

Not to mention you missed Dr Van Tharp as well. His book will give you a whole new view on what it takes to succeed in trading. He mainly focuses on developing trading system for all markets which include the concept of R-distribution (VERY IMPORTANT), and money management and position sizing. He also focus alot on psychology as well in his Peak Performance course, how humans naturally DO EXACTLY THE OPPOSITE of what it takes to succeed.

I've read alot of books out there (including the ones already listed here) and it's only Van Tharp's work that truly gave me a whole different perspective on trading.

www.iitm.com (http://www.iitm.com)

www.mastermindforums.com (http://www.mastermindforums.com)

http://www.smarttraderblog.com/

[hongwong]

WayneL, I dont doubt this. I am not here to say tech vs fund. Personally if it make money and the style suits u. I would say go for it.
READ this:
This is my outlook on the stock and I am telling you to buy/sell/hold.
I just want to give a fundamental outlook on the stock from my angle!


http://www.aussiestockforums.com/forums/archive/index.php/t-2694.html

Taken from the above:
It obviously skews the win/loss ratio the wrong way. You must remember that trading is about capital gain, not income growth. You never put your capital at more risk than is acceptable. Your mind will do everything it can to keep you in a bad trade and get you out of a good trade. Discipline is the core ingredient and there is no harm in having another go if prices go back again. But after 20-years of trading you will learn that sometimes prices will never go back. Look at MGW, PPX, PBG, IIN, WYL, PBB etc etc. These are top quality companies that kept diving and diving. I haven't even suggested HIH, ION, SGW, ONE, etc etc. From a trading perspective, holding these beyond reasonable risk will take you out of the game.

Here is what Nick has said.

I am going to take a look at MGW.
This is from what I can see.

MGW
The company is trading at P/E 70.26 now(BAD)
Revenues has been going up - good point
The EPS is good until 04/05. – investigate, could be once off cost or something.
Worrying factor:
This company has started to get into debt since 02
Inventory level has risen from 2003, therefore this shows signs that demand has stop and receivable is dropping. Too much stock in warehouse and a right off could be coming.

For me I would have pulled out from 2003/04
Because of the debt level, increase in stock and slow down in receivables.

To confirm all this I would ring up a store like “Dan Murphy” and ask them
How sale are going for MGW or what wines/beers they sell.

This is what I have seen in the books.
All information has been taken from commsec.

I can take a look at PPX, PBG, IIN, WYL, PBB if people are really that interested, but u can all do this for yourselves.
Just need to ask Nick or anyone, what he saw in the charts etc during etc and what made him sell out ?

edit
This was a very quick over view of the stock and looking over the books.


Hey Guys Sorry to quote myself.

I stress I am not trying to prove Fund vs Tech, as I believe we are all in the same game.

I have just given a view point fomr a Fund, and would like to understand what a Tech see in the chart ?

I am hoping to get a better understand of the Tech way.

FYI. I gave a call to dan murphy, They have said it not selling at all, and there is an over supply of wine in their stores.

[Punter]

Traders maybe fail due to overexposing them to things/letting emotion getting in the way. Thats where I've made my losses and they can often be a bit too big. :o

But I must say there is no perfect way to trade the markets. Each human being is different and operates from their own unique personality.

I am not much of a trader meself..I am a gambler lol

[Slothhead]

This topic appears to be a little convoluted.

One thing that must be understood here, trading is not about analysing a STOCK. You aren’t looking at company XYZ and wondering what will happen with XYZ.

You are analysing the people that are investing/ trading the stock.

Perfect example here is ex-dividend days.

If you are buying that stock through fundamentals you are saying that the company if worth X dollars per share. But as we all know, x-div day comes and the share price drops, this doesn’t mean that now the company is worth less.

This is simply a sign of the people trading the share.

So basically what I am saying is trading is not taking a look at a company, you are looking at the “feeling” of the people and trading upon that.

This is where the fundamental (pardon the pun) difference lies

[Slothhead]

Having said that though.

Each individual stock wil have its own personality, and therefore each stock "should" be traded slightly different to another.

Thats what i have found anyway.

[nomore4s]

Hey Guys Sorry to quote myself.

I stress I am not trying to prove Fund vs Tech, as I believe we are all in the same game.

I have just given a view point fomr a Fund, and would like to understand what a Tech see in the chart ?

I am hoping to get a better understand of the Tech way.

FYI. I gave a call to dan murphy, They have said it not selling at all, and there is an over supply of wine in their stores.

To follow on from Slothheads reply, I think you are trying to look at tech trading as a fundie. What most tech traders are looking for in a chart is a pattern that is going to give them a buy signal. When that buy signal is hit they enter the stock with a stop loss in place to limit thier losses and protect capital. The exit strategy(after profit) is much the same, when whatever exit signal they use is hit they exit the stock.
What confuses a lot of fundies about tech trading is they think it's about analysing a chart and saying whether it's going to go up or down but it's not, all a tech is looking for is a pattern which will give a buy signal which puts the odds slightly in his/her favour. Hell most techs get it wrong more than right, techs can run at a 40%/60% win/loss ratio and still be profitable which is what it's all about. I suggest you read Nick Radges book as already suggested to get a better understanding of t/a (he explains it alot better then me).

[hongwong]

So basically what I am saying is trading is not taking a look at a company, you are looking at the “feeling” of the people and trading upon that.

This is where the fundamental (pardon the pun) difference lies

hmmm,

Is this how Technical people trade stocks, by looking at the "feeling" of people trading the stocks and then determine if you should buy or sell the shares.

Again I am not here to determine if method a is better method b. I am looking at how technical people trade shares.

I agree all shares are different and therefore to get a gut feel of the shares I believe you should ask questions about the shares.
Like go to the shopping centre and see if there are customer at the store etc is one method.

Therefore to check that the market is over reacting to a down mood, I would look at my fundamental "homework" and determine I have done the right thing?

As started in this thread the psychology seems to be a big part of trading.. Hence how do you technical people over come this, you are depending on the mood of the share market?

Thanks

[rub92me]

hmmm,

1) Is this how Technical people trade stocks, by looking at the "feeling" of people trading the stocks and then determine if you should buy or sell the shares.

2) Therefore to check that the market is over reacting to a down mood, I would look at my fundamental "homework" and determine I have done the right thing?

3) As started in this thread the psychology seems to be a big part of trading.. Hence how do you technical people over come this, you are depending on the mood of the share market?

Thanks
1) Some schools of thought are that the behaviour of people is reflected in share price movements (e.g. waves/patterns), which can be used to determine entries/exits.
2) A technical trader would test wether their 'edge' does indeed result in a positive expectancy and hence a profitable outcome; otherwise it's back to the drawing board.
3) By being disciplined and sticking to the tested plan, therefore taking the psychology out of the equation.

[Glenhaven]

I think that the way to sum up the problem of traders is that:

The biggest problem with achieving a big profit is a small profit; and

The smallest problem with achieving a big loss ia a small loss.

What this means is traders usually sell winners too soon (take a small profit), and hold on to losing positions waiting to get square and end up with a big loss.

This is one of the reasons why stop loss sales are a good protection against our own tendency to hang on to losers.

[hongwong]

1) Some schools of thought are that the behaviour of people is reflected in share price movements (e.g. waves/patterns), which can be used to determine entries/exits.
2) A technical trader would test wether their 'edge' does indeed result in a positive expectancy and hence a profitable outcome; otherwise it's back to the drawing board.
3) By being disciplined and sticking to the tested plan, therefore taking the psychology out of the equation.

If all shares and graphs are different, then how can you match one graph to other?

This is like saying head is going to come out on the next coin toss because the last one was tails?

thanks

[rub92me]

Just read some of the books recommended in this thread. That should clear it up..

[Slothhead]

I will second that, you need to do some reading.

There are reasons that we see support and resistance lines.
Just as there are reasons why people buy on P/E ratio

Yeah, do some reading

[hongwong]

I will second that, you need to do some reading.




It seems to me what I can explain pretty easy about a share and the story ..

For the techincal stuff I will have to read and read.

Just wish someone could tell me why they would sell out or buy from the charts ....

forward we go ....

[professor_frink]

It seems to me what I can explain pretty easy about a share and the story ..

For the techincal stuff I will have to read ....

Just wish someone could tell me why they would sell out, buy from the charts ....

forward we go ....

hongwong,

There are currently over 5 000 threads on ASF, many of which have charts and descriptions of what various people are seeing when they look at them. Instead of asking for it to be spoon fed to you via a written explanation on this thread, you could always start searching the forum for some examples of TA and go from there.

[wayneL]

It seems to me what I can explain pretty easy about a share and the story ..

For the techincal stuff I will have to read and read.

Just wish someone could tell me why they would sell out or buy from the charts ....

forward we go ....
There are as many different reasons as there are techniques and traders. This is an individual thing. One persons buy signal may be another persons sell. All that matters is that expectancy is positive:

Expectancy=((1 + reward/risk ratio) * win/loss ratio)-1

This is similar to F/A. There can be concurrent broker recommendations of "Buy" and "Sell" on the same stock. Who's right?

Doesn't matter so long as there is profit on the bottom line

[theasxgorilla]

All that matters is that expectancy is positive:

Expectancy=((1 + reward/risk ratio) * win/loss ratio)-1

...and at risk of being anal, that the method provides sufficient opportunity to sustain the profit your tested/traded positive expectancy suggests you ought to make, per dollar risked or however you quantify it.

[rowes]

It seems to me what I can explain pretty easy about a share and the story ..

For the techincal stuff I will have to read and read.

Just wish someone could tell me why they would sell out or buy from the charts ....

forward we go ....

You would buy because the chart has given you your buy signal (Using whatever methods you are using in YOUR trading plan) then you would sell once the reason/s you had for taking the position are no longer there, again using whatever methods you are using in YOUR trading plan.
Thats why i would buy and sell from a chart using MY trading plan. :)