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

To: ahhaha who wrote (61641)	10/31/2000 1:31:42 PM
From: GraceZ	Read Replies (1) \| Respond to of 99985

What you need to know is the internal state of the market. Price action reflects that state after the fact. So how would you suggest that the market participant go about finding out what the internal state of the market is? Or are you suggesting that they can't know this so they might as well toss out their charts and go with fundamental analysis?

To: ahhaha who wrote (61641)	10/31/2000 1:42:30 PM
From: KymarFye	Read Replies (1) \| Respond to of 99985

"The universal experience is that when you rely on stock charts, you lose. The rate of loss is a negative expected return of about -10%. You're better off in Lost Beggas, or better yet, with a coin toss." I thought this board was missing a random walkist, but maybe we've got one. Now all we need is an astro-financier, a chaotician, and maybe a Marxist. If you're going to be precise and consistent, though, you have to admit first that there's no "universal experience." Indeed, the statement verges on implicit paradox, or at least a contradiction in terms: implying a universally consistent tendency that is at the same time "random" (or based on "random" data). If it were a universal experience, then you could theoretically get rich doing the opposite and utilizing sufficient leverage. I suspect we won't solve the random walk controversy here, but it must be said that other statistical surveys and methodologies applied to "rel[-iance] on stock charts" (loosely defined) produce other results. Another group of theoreticians would question the validity of any mathematical proof purporting a demonstration of total randomness in any selection of data, as any method of selection already implies non-randomness.

To: ahhaha who wrote (61641)	10/31/2000 2:27:46 PM
From: Wayners	Read Replies (1) \| Respond to of 99985

It all depends on how you analyze the chart. Depending on a stock's float and general investor interest and corresponding volume stocks are going to trade quite differently. My chart analysis doesn't look for the typical chart reading patterns but rather uses statistical analysis to identify the important characteristics of how that particular stock must be traded. The important characteristics to me are how often fluctuations in direction have been occurring, how much volume a stock has been getting, how much movement in range between high and low expressed as a percentage it has been getting and how where is the price relative to its standard deviation from the mean. There are areas where future movements are highly predictable but there are plenty of situations where future movements are not predictable. The key is to carefully weed out the unpredictable investment options and find those that have historically been predictable. Then you need to find fresh reversals in direction and go with the flow and exploit the market's efficiency weakness in that particular security. In a truely efficient market all prices move in sudden stairsteps that cannot be seen ahead of time and cannot be profited from because you can't make money AFTER prices have already moved. You'll notice that most charts do not look like this--they're curvilinear that can take several days to get to the higher or lower point with plenty of opportunity for entry and exit at a profit. The key is to have the tools available to find fresh reversals (that takes real time price and volume information--not necessarily news but it could cause it), take advantage of the historical inefficiencies of that security and only ride it for a single leg at a time or up to 3 legs maximum before taking profits. The frequency of the oscillations in price tell you when to take profits. Try to sum a lot of profits up and they add up fast. Using charts to nail exact tops and bottoms IMO does not work very well. Charts will help you capture the meat of each move, then move on to the next very high percentage play. I hope this helps enough to get you interested in learning more and testing it out.

To: ahhaha who wrote (61641)	10/31/2000 3:40:01 PM
From: eichler	Read Replies (1) \| Respond to of 99985

ahhaha Thank you for the reply. Frankly, I am not sure how to respond as we seem to view the market quite differently. My trading experiences have taught me to rely on the charts exclusively, ignoring news (media manipulations) and various external events seemingly influencing equity prices. I have concluded that charts and their associated tools (chart patterns, trendlines, candlesticks, stochastics, ADX, OBV, moving averages) do have predictive value (for me). I believe the root of our disagreement is your assertion that the stock market is a random walk. I've heard this before so I know it's not a new idea. But I couldn't disagree more. If price were a random walk, there would be no need for trendlines because there would be no trends. Toss a coin, price goes up. Toss it again, price goes down. Price would never move much as over the long run, price would go up or down 50-50. Centuries old Japanese Candlestick science would appear a fruitless development as a Maribozu for instance could have no predictive value with price up/down 50% chance. In a random walk situation, a White Maribozu should be followed by equal # of up as down. No one ever could have figured out such a stick is very bullish. Additionally, I would be interested to know more about "universal experience is when you rely on stock charts, you lose. The rate of loss is a negative expected return of about -10%." So far, my experience this year is I'm up over 100%. Perhaps I do not fit in the "universal"? set although I would expect "universal" to be all encompassing. Perhaps I am extremely lucky to defy the odds so. Somehow, I don't believe I could achieve similar results in "Lost Beggas" however. As far as I know, there are no charts to beat the one-armed bandit. One could learn to count cards and tilt the odds a bit in certain games, otherwise professional gamblers would not exist, only professional losers. I am not interested in starting a fight; I view the stock market much like any other game. There are rules (theory) to be learned, strategy, tactics, a forum where the game is played, players playing with/against each other. Winning/losing is merely the result of the mastery of the various components. If you can win without the use of charts, I say Power To You...If I can win using charts, I say it's more than luck, tossing a coin, random walk. I am just one person and this is just one person's humble opinion so you can take it with a grain of salt. Respectfully, Happy Trading Eichler