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Re: Learning Technical Analysis Q&A

Ok I don't really have time to do this justice and demonstrate with some chart examples (just really busy ATM).

So I'll type it out and if Tech has the motivation he can chart it up.

My methodology has similarities and differences to Tech's. The similarities are that the attributes I choose to determine my exits are based within a rules system, but act a bit discretionary with an if/then statement. I decide to lock in profits or determine my exit point based on a couple of factors. The main difference is that I do use targets...because I use an optimal F calculator. If you don't know what this is google it. This ensures that I enter a position with positive expectancy. Another difference is that I'm generally not looking at small caps, I play in the medium and large cap spaces.

My use of targets doesn't limit my upside potential very often. Whilst I find that I frequently get my target correct, I would exit the position around my target about 20% of the time when specific exit criteria are triggered. These specific criteria have to do with the reference points that Tech refer's to, specifically pivot points. I class pivots as either soft or hard. When deciding whether to exit a position I will do one of the following:

1. Use a 5% trailing stop
2. Use a momentum line with a 5% band and adjust my stop daily.
3. Use a hard pivot reference line with a 5% stop band.

What's a pivot point? A pivot is a minimum three bar structure where the middle bar (the pivot bar) has a higher high and higher low than the bar on either side. (For a high turning pivot - the reverse is true for a low turning pivot).

What is a soft pivot point? This is where the bar to the right of the pivot closes within the high low range of the pivot bar. This is normally accompanied by a volume indication and is indicative of a consolidation pattern (the stock moves sideways instead of retracing). The stock merely "rests" before continuing the established upward trend and is frequently accompanied by outside and inside bars. I frequently see a lot of traders exiting at this point, depriving themselves of valuable upside potential.

What is a hard pivot? This is where the bar to the right of the pivot closes outside the high low range of the pivot bar. These kinds of bars give a higher quality reference point for a retracement pattern as opposed to a consolidation pattern. I use a bollinger band with only a two day sample size to determine the size of the deviation from the pivot bar. Simply put, the higher the deviation from the pivot bar, the more likely the retracement pattern will emerge.

How do I decide to use my three stop loss methods? I need to distinguish a probability for a retracement pattern as opposed to a momentum pattern. Lets take the example of an upside break-out movement. If the price movement is not contained with a 12 period MA I will use a 5% trailing stop. (The price is running very hard and I will be looking to lock-in a nice short-term profit by using the trailing stop. On a weekly chart this will create a very large engulfing bar and the stock will take time to consolidate - it's better for my system to just take the quick profit and re-examine on a break of the engulfing bar). If the price movement is contained within a 12 period MA I will use either a momentum line or a hard pivot line as my stop. (The hard pivot line is generally at some distance to the current share price). The stock runs up and then pauses as the buying pressure eases.

If this is a momentum move it will have a statistically higher number of soft pivots. In these circumstances I will refer to my hard pivot line. I will also use a 12 26 MA crossover indicator to confirm the pattern. IE no cross in the MA = momentum pattern.

If this is a retracement pattern it will have a statistically higher number of hard pivots. Once again a 12 26 MA Crossover is used to confirm the price action. IE A cross in the MA = retracement pattern. (And I'll be looking to short on a break of the hard pivot line).

Cheers

Sir O

<blockquote data-quote="Sir Osisofliver" data-source="post: 692399" data-attributes="member: 20188">Re: Learning Technical Analysis Q&amp;AOk I don&#039;t really have time to do this justice and demonstrate with some chart examples (just really busy ATM).So I&#039;ll type it out and if Tech has the motivation he can chart it up.My methodology has similarities and differences to Tech&#039;s.&nbsp; The similarities are that the attributes I choose to determine my exits are based within a rules system, but act a bit discretionary with an if/then statement. I decide to lock in profits or determine my exit point based on a couple of factors. The main difference is that I do use targets...because I use an optimal F calculator.&nbsp; If you don&#039;t know what this is google it. This ensures that I enter a position with positive expectancy. Another difference is that I&#039;m generally not looking at small caps, I play in the medium and large cap spaces.My use of targets doesn&#039;t limit my upside potential very often. Whilst I find that I frequently get my target correct, I would exit the position around my target about 20% of the time when specific exit criteria are triggered. These specific criteria have to do with the reference points that Tech refer&#039;s to, specifically pivot points.&nbsp; I class pivots as either soft or hard. When deciding whether to exit a position I will do one of the following:1. Use a 5% trailing stop2. Use a momentum line with a 5% band and adjust my stop daily.3. Use a hard pivot reference line with a 5% stop band.What&#039;s a pivot point? A pivot is a minimum three bar structure where the middle bar (the pivot bar) has a higher high and higher low than the bar on either side. (For a high turning pivot - the reverse is true for a low turning pivot).What is a soft pivot point? This is where the bar to the right of the pivot closes within the high low range of the pivot bar. This is normally accompanied by a volume indication and is indicative of a consolidation pattern (the stock moves sideways instead of retracing). The stock merely &quot;rests&quot; before continuing the established upward trend and is frequently accompanied by outside and inside bars. I frequently see a lot of traders exiting at this point, depriving themselves of valuable upside potential.What is a hard pivot? This is where the bar to the right of the pivot closes outside the high low range of the pivot bar. These kinds of bars give a higher quality reference point for a retracement pattern as opposed to a consolidation pattern. I use a bollinger band with only a two day sample size to determine the size of the deviation from the pivot bar. Simply put, the higher the deviation from the pivot bar, the more likely the retracement pattern will emerge.How do I decide to use my three stop loss methods? I need to distinguish a probability for a retracement pattern as opposed to a momentum pattern. Lets take the example of an upside break-out movement. If the price movement is not contained with a 12 period MA I will use a 5% trailing stop. (The price is running very hard and I will be looking to lock-in a nice short-term profit by using the trailing stop. On a weekly chart this will create a very large engulfing bar and the stock will take time to consolidate - it&#039;s better for my system to just take the quick profit and re-examine on a break of the engulfing bar). If the price movement is contained within a 12 period MA I will use either a momentum line or a hard pivot line as my stop. (The hard pivot line is generally at some distance to the current share price). The stock runs up and then pauses as the buying pressure eases. If this is a momentum move it will have a statistically higher number of soft pivots. In these circumstances I will refer to my hard pivot line. I will also use a 12 26 MA crossover indicator to confirm the pattern. IE no cross in the MA = momentum pattern.If this is a retracement pattern it will have a statistically higher number of hard pivots. Once again a 12 26 MA Crossover is used to confirm the price action. IE A cross in the MA = retracement pattern. (And I&#039;ll be looking to short on a break of the hard pivot line).CheersSir O</blockquote>

[QUOTE="Sir Osisofliver, post: 692399, member: 20188"] [b]Re: Learning Technical Analysis Q&A[/b] Ok I don't really have time to do this justice and demonstrate with some chart examples (just really busy ATM). So I'll type it out and if Tech has the motivation he can chart it up. My methodology has similarities and differences to Tech's. The similarities are that the attributes I choose to determine my exits are based within a rules system, but act a bit discretionary with an if/then statement. I decide to lock in profits or determine my exit point based on a couple of factors. The main difference is that I do use targets...because I use an optimal F calculator. If you don't know what this is google it. This ensures that I enter a position with positive expectancy. Another difference is that I'm generally not looking at small caps, I play in the medium and large cap spaces. My use of targets doesn't limit my upside potential very often. Whilst I find that I frequently get my target correct, I would exit the position around my target about 20% of the time when specific exit criteria are triggered. These specific criteria have to do with the reference points that Tech refer's to, specifically pivot points. I class pivots as either soft or hard. When deciding whether to exit a position I will do one of the following: 1. Use a 5% trailing stop 2. Use a momentum line with a 5% band and adjust my stop daily. 3. Use a hard pivot reference line with a 5% stop band. [B]What's a pivot point?[/B] A pivot is a minimum three bar structure where the middle bar (the pivot bar) has a higher high and higher low than the bar on either side. (For a high turning pivot - the reverse is true for a low turning pivot). [B]What is a soft pivot point?[/B] This is where the bar to the right of the pivot closes [B]within[/B] the high low range of the pivot bar. This is normally accompanied by a volume indication and is indicative of a consolidation pattern (the stock moves sideways instead of retracing). The stock merely "rests" before continuing the established upward trend and is frequently accompanied by outside and inside bars. I frequently see a lot of traders exiting at this point, depriving themselves of valuable upside potential. [B]What is a hard pivot?[/B] This is where the bar to the right of the pivot closes [B]outside[/B] the high low range of the pivot bar. These kinds of bars give a higher quality reference point for a retracement pattern as opposed to a consolidation pattern. I use a bollinger band with only a two day sample size to determine the size of the deviation from the pivot bar. Simply put, the higher the deviation from the pivot bar, the more likely the retracement pattern will emerge. How do I decide to use my three stop loss methods? I need to distinguish a probability for a retracement pattern as opposed to a momentum pattern. Lets take the example of an upside break-out movement. [B]If[/B] the price movement is [B]not[/B] contained with a 12 period MA I will use a 5% trailing stop. (The price is running very hard and I will be looking to lock-in a nice short-term profit by using the trailing stop. On a weekly chart this will create a very large engulfing bar and the stock will take time to consolidate - it's better for my system to just take the quick profit and re-examine on a break of the engulfing bar). If the price movement [B]is[/B] contained within a 12 period MA I will use either a momentum line or a hard pivot line as my stop. (The hard pivot line is generally at some distance to the current share price). The stock runs up and then pauses as the buying pressure eases. If this is a momentum move it will have a statistically higher number of soft pivots. In these circumstances I will refer to my hard pivot line. I will also use a 12 26 MA crossover indicator to confirm the pattern. IE no cross in the MA = momentum pattern. If this is a retracement pattern it will have a statistically higher number of hard pivots. Once again a 12 26 MA Crossover is used to confirm the price action. IE A cross in the MA = retracement pattern. (And I'll be looking to short on a break of the hard pivot line). Cheers Sir O [/QUOTE]

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