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Strategies & Market Trends : DAYTRADING Fundamentals
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To: Teresa Lo who wrote (3941)9/14/1999 8:52:00 AM
From: TraderAlan  Read Replies (2) of 18137
 
T,

Good comments in regard to the art vs science of TA. I'm doing a series of articles on the interaction between patterns and technical indicators. My point of view is always that indicators support the pattern, not the other way around. The obvious test is trying to trade solely off a pattern vs trying to buy or sell because a stock is "overbought" or "oversold".

But the greatest limitation for traders acting only on patterns is the tendency of their minds to order and organize random information. This allows the eye to see structure where none exists. This is a terrible pitfall for new traders who have heard and read a little about TA and think it's easy. They trade the non-existent patterns and get their clocks cleaned.

It all goes back to the left brain/right brain thing. Most times, we need both sides functioning in order to reach sound judgements. Technical indicators filter out the mind's organizing function so real patterns and opportunities can be seen.

Of course, there are old crows, like the undersigned, who can generally trade patterns well without indicators. But that itself is deceiving. I've spent so much time learning and understanding the indicators that I usually know how a stochastics or RSI of MACD will look at any point just by looking at the pattern development.

Alan
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