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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: KymarFye who wrote (60723)	10/16/2000 11:16:58 AM
From: HairBall	Read Replies (1) \| Respond to of 99985

KymarFye: Lots of people seem to be imitating E&M, perhaps drawing from second-hand sources. The mere drawing of a triangle or diamond on a chart seems to give any analyst an aura of authority. I can't speak for others, but I don't recognize anyone as "the" authority on technical analysis much less Edwards and Magee. I am self-taught having discovering most of what I do on my own. I use tools developed by others and I also use tools I have developed myself. On occasion I come across someone that has studied a particular book and think that they have read the authority on TA, the Bible if you will. These folks often have an elitist attitude. The best technicians I have come across use a mixed bag of a few select tools that work for them. The mixed bag often contains elements and systems they have created themselves. One of the things we try NOT to do on MDD is ridicule others for contributing an honest effort at market direction analysis. There are folks that posts on MDD that are very sophisticated traders and or investors and there are folks just getting their feet wet, with a full range in between. All are welcome to contribute their views supported by analysis with the understanding contributions are up for cordial discussion and disagreement. Hopefully, we can all benefit... Regards, LG PS: From what I have read on SI by those that have recited E&M methods, my volume analysis approach is different from E&M. So far so good...<g>

To: KymarFye who wrote (60723)	10/16/2000 3:57:03 PM
From: bearshark	Respond to of 99985

Kymar: Here are a few thoughts. For a formation like an H&S, Edwards and Magee look for highest volume on the left shoulder, lower volume in the middle, and even lower volume on the right shoulder. Now look at what Edwards and Magee then explain: "Roughly estimated, about one-third of all confirmed Head-and-Shoulders Formations show more volume on the left shoulder than on the head, another third show about equal volume, and the final third show greater volume on the head than on the left shoulder." (p. 67) Basically, that is pot luck. Now look at this chart. siliconinvestor.com A symmetrical triangle with the correct declining volume forms from April through June with a false breakout on low volume, a fairly common test of the apex, and the real move. Here is the quote from Edwards and Magee. "But most Symmetrical Triangles--lacking an actual statistical count, our experience would suggest more than two-thirds of them--behave themselves properly . . . . Upside breakouts on high volume may be premature in the sense that prices return to pattern and do some more 'work' there before the genuine uptrend gets under way, but they seldom are false." That description fairly represents the above triangle with the exception of the breakout volume. There was none. However, the pattern came back to the apex, tested it, and then took off for real. Ordinarily, other things I do with volume and issues will light up when there is this type of retest of the apex. This time there was no confirmation. However, the pattern--on its own--worked. Edwards and Magee is the bible for technical analysis. However, it fairly points out a number of caveats. Additionally, the text explains that things change and some patterns are not seen as often as they once were seen. Another thing about their use of volume is what it represents--distribution and accumulation. Today's electronic charts provide information on this too. Dow Theory uses only closing prices and that is why I used the one I posted. However, the more significant information from Dow Theory is its trends. R. N. Elliot's work is based on Dow Theory with the goal of refining it. However, I am content to use the basics and watch for patterns of threes, twos, and fives. One of the greatest technicians--Edson Gould--was nearly flawless during the 1970s. I found that much of his work was of little value during the crazy 90s. Perhaps the parts that did not work are best suited for a different market. Few things are absolute. Few things stay the same. There will always be misreads and hacks. That is their problem--not ours. Our problem is to understand the knowledge gained before us, use that knowledge with what we learn ourselves, and prepare for the changes that the future will bring. This will be my last post for some time. I am just too chatty when I get started. Good luck.