I think I need to respond to this:
>>> interesting analysis ... but every example has a counter-example? <<<
Trading with TA is a process, not an event.
If we were playing baseball and the game was on the line, when a player goes up to the plate, he's looking for a pitch he can drive, to score the winning run. He may let several pitches go by, some even strikes, without swinging. He's looking for a pitch that he knows, from experience, that he can hit with a high probability of success.
That's what trading is all about. It's about the process of identifying low risk, high probability set ups. We need to let the counter-examples go by. We don't need to swing at them, even if they are a strike. We're looking for the set ups that provide us with a pitch we can handle. We still may make an out, but the odds, over time, favor our success.
The process of trading includes looking for low risk entries with a reward to risk ratio of at least 2-1. It includes setting a price target where you will take some of your profits off the table. It includes using an initial stop, a price point that tells you that your set up was wrong and the process of trading includes using trailing stops to maximize your gains and not give those profits back to the market.
Profit targets and stops can vary according to the length of time one wishes to hold a position, but they must be used to insure the process of trading has the ability to succeed.
dabum |
