W/S - Thanks for that great post. For better or worse, my mind seems to work somewhat similar to yours. I actually read every word and it made sense to me <vbg>.
I've been in the market since my teenage years and have tried a variety of approaches, ranging from listening to brokers and touts, to my latest of the past 4 years, microcaps with extensive due diligence. The past few years have seen my best returns by far, approximately 400% on my entire portfolio. Some of it was luck in picking a sector that was ripe for a comeback. But I also picked this group because of my belief that it would be easier to spot fraud and manipulation. I analyze businesses and make business decisions in real life and can cross examine principals in microcaps. It's tough to do that with an Enron or a Global Crossing.
I've been fascinated with TA and predictive analyses throughout all this. I have gone from being a total skeptic to now trying to learn the theories and the logic behind a tool. I hate memorizing and, instead, learn the "why's" both to decide if I like the tool and to understand why it reflects a statistical analysis of human behavior. So thank you for all that.
Given all that, I agree and understand how TA would work with something like DROOY, irrespective of the fact that we have 2 sets of investors/traders affecting the chart, i.e., those who trade currencies and those who trade gold miners (a simplification for these purposes.)
As I wish to diversify my trading from the world of microcaps to the larger world where my own research and ability to inquire will be more limited, I intend to learn more of TA and how it is predictive.
I've often participated in the debate (often with myself LOL)re whether TA is self-fulfiling and, thus, whether it can be manipulated. This is partially why I feel it doesn't normally work in the world of thinly traded, high spread, MM, tout and basher sector in which I primarily trade today. OTOH, I feel my analyses and my extreme diversification have enabled me to compete successfully over the past few years in this world with these scoundrels, and, at the same time, to give information to others who have successfully followed some of my picks.
In the larger world of investing, whether that be equities, currencies, commodities, etc., learning the tools seems more important to me now for many of the reasons Vendit mentioned in a recent post to me, and basically that nobody can do all the research necessary and still diversify as I've done in the microcap world.
I'm interested in seeing opinions of various tools and whether they are more appropriate to one market or another. I know in theory it shouldn't make a difference as we are talking about statistics. However, as computer programs evolve, is there a danger of something that works well being manipulated?
Would I have avoided Enron? (Fortunately, I was out of the market then LOL.) I can see that TA would have pointed investors away during the internet bubble collapse, but what about something like MCI? I read your analysis and comparison with the tsunami and I agree with you. However, I do read that many TA proponents claim that Enron losses could have been limited with proper TA, at least with respect to some of the tools.
To what extent does a tool become less useful the more that follow it and use the tool, particular now in the evolving world of computer analysis and execution?
Enough for today. Don't feel you have to answer this long winded post. My education continues over the next few years hopefully <vbg>.
More limited questions, and forgive me as I am late to this thread, deal with preferences for tools. I see Reid's predictive use of Williams & Stochastics and some of the reasons why they would work.
I'm having a harder time understanding the rationale behind candlesticks. Bollinger band analysis also tends to confuse me a bit.
I've also had lengthy discussion with friends who use TA and as we go through each approach, we often come up with many signals, some of which conflict. Often a good friend's advice is right slightly more than the proverbial coin toss, but there is enough cya language to make him believe the result is better than I think it is. The result is similar to the web pages which shows some buy signals, some sell signals, some hold signals (American Bulls, etc.). How useful is this? Do you recommend sticking with 1 tool, even if the rest of the "world" uses other tools? It's fairly rare when all tools show "buy" or "sell."
In long term analysis, I'm interested in how volume and major dilution affects the use of some TA tools. Is TA useful when the supply of shares has doubled? Is it just another wave shift? Which tools best incorporate volume moves? Even highly liquid stocks have periods of manipulation, e.g., after hours, painting the tape, MM phoney trades with each other, etc.
Enough - thanks for your help and have a great weekend. |
