TA Strategies

Paladin · 23 July 2008

Hey all.

I've been trying to buff up on various types of TA strategies, and am really interested in hearing what people here like.

At the moment, I've been researching a lot on candlesticks, which the wannabe zen-master in me finds appealing. Anyone want to critique this as a tool for looking at trades that will span months rather than days? I'm also reading up on moving averages etc. Basically, I'm interested in knowing what TA stuff you guys would recommend getting my head around first.

Thanks! Really looking forward to people's thoughts. I've learned so much here already.

subaru69 · 23 July 2008

Paladin said:
the wannabe zen-master

I'm no masta but try this link, it helped me to understand a fair bit of the basics.

http://www.investopedia.com/categories/technicalanalysis.asp

Wysiwyg · 23 July 2008

Have you looked at `chart pattern recognition` software?No I don`t have any but if you want to save time then software like this does.

This from someone else.

When analyzing chart patterns, technical analysts generally categorize them in two groups: (1) patterns that predict trend reversal and (2) patterns that predict trend continuation.

Aussiest · 23 July 2008

But then you would have to subscribe to the data wouldn't you?!

Paladin · 24 July 2008

Wysiwyg said:
Have you looked at `chart pattern recognition` software?No I don`t have any but if you want to save time then software like this does.

This from someone else.

Thanks! I may well look into that a little down the track. At the moment, I'd like to get my head around charts and trends etc manually, so I know if I should be trusting what the software tells me or not

Paladin · 24 July 2008

subaru69 said:
I'm no masta but try this link, it helped me to understand a fair bit of the basics.

http://www.investopedia.com/categories/technicalanalysis.asp

Thanks Subaru! Seems like a nice dictionary of terms.

Still keen to hear how people would go about designing their own research program around TA. I have a bunch of books now, but am fascinated to hear what is working for the more experienced traders here, and what would nicely compliment a candlestick approach (or the flaws in that approach).

I can't remember who posted this (I think it might have been tech/a - and apologies to the author for not directly quoting them) but have it in my notes as a system to check:

"CLOSE>Mov(CLOSE,175,EXPONENTIAL) AND H>Ref(HHV(H,2),-1) AND CLOSE>OPEN

Translated into plain English it has 3 components;
1. Stock is trading above a long term moving average (= long term uptrend)
2. Today's high is the highest in 3 days (= short term uptrend)
3. Today is an up day.

That's all.

I trade the ASX300 on EOD data and use a 6.5 ATR stop."

Maybe I'm asking too much in terms of people giving away their secrets, but like I said - any comments on personal approaches or what fundamental tools I should be boning up on are valued.

professor_frink · 24 July 2008

Paladin, the poster you are quoting is MichaelD.

If you want a book that will give you an overview of TA, John Murphy's technical analysis of the financial markets will give you a run down on pretty well every type of TA available. Can't hurt to get at least a basic idea of what's out there so, you can go on and do some more detailed study of whatever you find interesting then.

MRC & Co · 24 July 2008

T/A seems to have some mythical esoteric reputation, when in all acuality, it is a piece of cake.

Intro to T/A:

http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:introduction_to_tech

Support and resistance:

http://www.investopedia.com/articles/technical/061801.asp

Cheers

Put it into context with set-ups to trade, including entires, exits and money management (search anti-martingale techniques), and you are well on your way. Just need to ensure the entire system actually results in profits and gels with your personality. That is my belief. Ultimately, you will be trying to let winners run and cut loosers short, unless you can find a very high % trade, though not many of them around.

Paladin · 24 July 2008

professor_frink said:
Paladin, the poster you are quoting is MichaelD.

If you want a book that will give you an overview of TA, John Murphy's technical analysis of the financial markets will give you a run down on pretty well every type of TA available. Can't hurt to get at least a basic idea of what's out there so, you can go on and do some more detailed study of whatever you find interesting then.

Thanks, prof. That's exactly what I'm trying to do. My 'to read' pile by the bed is getting pretty top-heavy at the moment

Paladin · 24 July 2008

MRC & Co said:
Ultimately, you will be trying to let winners run and cut loosers short, unless you can find a very high % trade, though not many of them around.

Cheers muchly for that, MRC. What you've quoted here is exactly what I'm hoping to be able to achieve - to have a portfolio where the runners are held and the loosers are stopped out. Easier said than done, eh?

Does your own style rely on moving averages as opposed to, say, stochastics or buy signals based on daily/weekly patterns that you're making your own inferences on (a la a pure candlestick approach)? Or is it a deftly balanced mix?

MRC & Co · 24 July 2008

Hey mate,

I don't use MAs AT ALL. I did for a quick glance of trend direction, but found I didn't take anything from it anyways so have since removed it.

All my trading comes from support/resistance, trends and micro-patterns from price action and volume spread analysis (VSA). You can get a free online PDF book explaining this (VSA), you may have it already. I will also look for divergences between price and RSI. Only candlestick pattern I use is hammer or shooting star reversals on high volume.

Exits are the hardest to learn and in my humble opinion, probably THE most important aspect of learning to trade. It is a fine balancing act.

Daunting to learn everything at first, but also very exciting.

All the best mate.

Paladin · 24 July 2008

MRC & Co said:
Daunting to learn everything at first, but also very exciting.

Wonderful. Thanks so much for that insight into what you find useful. If I could get a handful of responses like that I'd be delighted! And you're right, I'm half daunted - there's so much I need to learn - but am having an absolute ball exploring all this. I'm an artsy-fartsy kind of guy, so all this is engaging my brain in ways I don't habitually use it. Loving that about it. My first real learning 'stretch' in a while.

MRC & Co · 24 July 2008

No problems.

My EOD (end of day) chart trading is pretty complete now.

My intraday trading is very much still a work in progress, except for the opening gap fade.

I am complete opposite of artsy fartsy, more of a finance type, but for me it is still fascinating! Trading obviously attracts all kinds and hence you get all styles, it's the beauty of the marktes. You have to find what you 'believe works' and what works for you. The quest to find that is long but fantastic, not to mention, always slightly evolving.

Cheers, enjoy!

It's Snake Pliskin · 25 July 2008

MRC & Co said:
Hey mate,

I don't use MAs AT ALL. I did for a quick glance of trend direction, but found I didn't take anything from it anyways so have since removed it.

All my trading comes from support/resistance, trends and micro-patterns from price action and volume spread analysis (VSA). You can get a free online PDF book explaining this (VSA), you may have it already. I will also look for divergences between price and RSI. Only candlestick pattern I use is hammer or shooting star reversals on high volume.

Exits are the hardest to learn and in my humble opinion, probably THE most important aspect of learning to trade. It is a fine balancing act.

Daunting to learn everything at first, but also very exciting.

All the best mate.

MRC and Co,

Do you only use the RSI for divergences? Or for other things as well?

MRC & Co · 25 July 2008

It's Snake Pliskin said:
MRC and Co,

Do you only use the RSI for divergences? Or for other things as well?

Hey Snake,

Only use it for divergences at the moment. But am looking at adding it to more of an intrday method, a cross down from overbrought territory as a bit of a buzzer to get out of a long position or vice-versa for shorts.

Either way, it's only really a bit of a help and some colour, don't ever use it alone, will simply be very careful if I am a long position and it shows a negative divergence or vice-versa for a short.

ESPECIALLY useful if the long is having a crack at new highs but RSI does not confirm. If volume was high on the previous high (distribution), RSI shows a negative divergence and price breaks the previous high and then retraces below the previous high, I find it a pretty sure fire shorting opportunity.

I should also add, I also trade gap plays and find them one of my most useful so far. They are great for support/resistance and it's always good to be careful of exhaustion gaps if you think you have just seen a breakaway or continuation gap. Not to mention, the closing of gaps, either at open on futures on in stocks when you see an exhaustion gap, no price confirmation following but price looking like it is going to roll over, will generally close the exhaustion gap, and if this does not act as support, then you can generally ride it down.

I should note, as you know, expectancy is all well and good, if you have opportunities. Unfortunately, some of the ones above do not come up often (I am very picky about my patterns), but if I do see them come up, I will trade them.

Cheers

It's Snake Pliskin · 25 July 2008

MRC & Co said:
Only use it for divergences at the moment.

Thanks for your reply.
I don't like the overbought oversold beliefs assigned to indicators.

Cheers.

julius · 26 July 2008

MRC & Co said:
Hey Snake,

Only use it for divergences at the moment. But am looking at adding it to more of an intrday method, a cross down from overbrought territory as a bit of a buzzer to get out of a long position or vice-versa for shorts.

Either way, it's only really a bit of a help and some colour, don't ever use it alone, will simply be very careful if I am a long position and it shows a negative divergence or vice-versa for a short.

ESPECIALLY useful if the long is having a crack at new highs but RSI does not confirm. If volume was high on the previous high (distribution), RSI shows a negative divergence and price breaks the previous high and then retraces below the previous high, I find it a pretty sure fire shorting opportunity.

I should also add, I also trade gap plays and find them one of my most useful so far. They are great for support/resistance and it's always good to be careful of exhaustion gaps if you think you have just seen a breakaway or continuation gap. Not to mention, the closing of gaps, either at open on futures on in stocks when you see an exhaustion gap, no price confirmation following but price looking like it is going to roll over, will generally close the exhaustion gap, and if this does not act as support, then you can generally ride it down.

I should note, as you know, expectancy is all well and good, if you have opportunities. Unfortunately, some of the ones above do not come up often (I am very picky about my patterns), but if I do see them come up, I will trade them.

Cheers

IMO you miss too much of the action if you wait for the RSI to cross back to confirm the swing. You're better off defining some level of excursion as an entry trigger, coupled with a stop loss.

RSI is a method of detrending - the lookback needs to be tuned to the cycle period to get effective turning points, then you need to look at some form of smoothing to reduce whipsaws...

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