an interesting twist if you've been doing this a while..
Within an email this morning, this short paragraph by John Dawe, caught my attention.
"What makes on-line day traders different is that, as a rule, they develop their own investment (read speculation) strategies and do not rely on advice from a traditional stockbroker. Their research techniques are usually informal and may include the use of pre-packaged, or customized, computer models. Some of these models produce 'technical analysis' cues which give buy and sell signals based on the direction, or size, of price and volume movements in the stocks they follow. The underlying idea being that there is so much trading volume taking place today that a careful observer can capitalize on the purchase and sale of stocks which fall outside of 'trading ranges' or pass through 'resistance levels'.
In a nutshell, the on-line day trader bets that he or she has a better read of the market than the person on the other side of the trade and can act fast enough to make an arbitrage profit from an 'abnormal' price movement."
The bolded portion seems obvious but is rather insightful as it highlights just what it is a stochastics, bollinger, MACD, gap fill, moving average confirmation or other type of TA trade really is. One's betting one has a "better read" than the persons on the other side and can act fast enough to make a profit as the stock returns to norm.
Occasionally abnormal movements, or recurring cycles break trend entirely, which requires traders to know their limitations.
Jim |
