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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Catman who wrote (13577)	8/15/2001 9:51:09 PM
From: Threei	Read Replies (1) \| Respond to of 18137

Scott, while I don't believe TA can be used to look too far into the future as some might I don't think TA can/intended to be used for this purpose at all. In my opinion (JUST my opinion, not necessary the one and only right), TA does not predict the future. What TA does is: 1. It puts odds in your favor when used properly as it says: in this and this situation most often (not always) that and that happens 2. It brings the structure into chaos as it says: this level is critical, this event is a trigger for that outcome in most cases (not always) 3. It allows you to work out IF-THEN scenarios as it says: IF this triggering event occurs THEN you do A; IF that event occurs THEN action A is invalidated and you do B (take stop); IF such event takes place THEN your action A is confirmed and you do C )trail your stop, or take partial, or liquidate entire position) etc etc. Let me cite brief example of how this chain works in trader's mind (just an example, there are endless variations of it): ABCD approaches 20, pulls back to 19.75, makes several moves between those two levels defining narrow range, approaches 20 again and flattens out there. First paragraph out of my three above works now: this is situation that most often leads to breakout. Second is now in effect: you got the structure. It looks like this: 20 is upper limit, 19.75 is lower limit, trading above 20 is trigger for going long on breakout, losing of 19.75 invalidates setup. Time for the third stage: IF stock never loses 19.75 and trades above 20 THEN I buy it. IF it jumps to 20.10 before I am able to enter THEN I let it go as my risk tolerance is .30 and I am not willing to buy that far from support. IF it drops under 19.75 after I enter THEN I take stop as support is lost. Somewhat oversimplified of course, this example still illustrates how we use TA at RealityTrader. Notice, there is no prediction made by TA in this approach. You just go with odds and let the nature take its course: give you profit or stop you out. If your trading system is valid statistics will work for you just like it works for casino which might lose any given bet but never loses THE GAME. Best regards, Vadym

To: Catman who wrote (13577)	8/15/2001 10:00:08 PM
From: Brandon	Respond to of 18137

that while I don't believe TA can be used to look too far into the future as some might, I do believe it is very valuable short term....the shorter, the more effective. Yes and no. For example, I find that a Tick chart and a 1 minute chart (the two shortest time frames) are nearly useless, while at the same time you can get some great information looking at quarterly or yearly charts, so long as you keep in mind that the chart is only a general guide and nothing is absolute. Brandon

To: Catman who wrote (13577)	8/15/2001 10:04:30 PM
From: TraderAlan	Read Replies (2) \| Respond to of 18137

cat, <and I would like to know how many of you not only survive, but adapt in this environment> Seriously, nothing has changed since the first day I started to look at the markets. You wake up, you look at the charts, you search for opportunity, it's either there or its not there. In my heart of hearts, I am extremely happy that the shoe shine boys and waitresses have gone on to other hobbies and that trading is no longer on the front page. I do have to separate the business side of my income from the trading side. In that regard, I have to stay humble since I am one of the few who has actually benefited from the bear market because of the success of my book. BTW that absolutely blows my mind. Many folks got hypnotized into thinking (upside) momentum WAS the market. It never was, it was only a phase in the cycle. Around and around she goes. Alan

To: Catman who wrote (13577)	8/15/2001 10:20:27 PM
From: -	Read Replies (1) \| Respond to of 18137

Yeah, the big thing that fundamentals can bring you is an ability to read the mind of the street (institutional investors). Not obtuse financial ratios but the basics - say if you understand the top-level business model/product mix of the company, financial position (balance sheet), what they're expected to earn next quarter/year, where their revenue/margin/growth is coming from (core technology/product/service), who their major competitors are or might be. Then when significant news hits the tape, you're able to gauge the reaction of the institutions much better. This is obviously not true for everyone, but I find that being able to read the reaction to news accurately can often be just as valuable (or more) than have a daily chart. News/fundamentals can either draw us in, or keep us away; however, we're still 95% technical on the entry/exit point. The importance of understanding what the street is thinking when various events occur, however is major - that's how the big $$ are run, which is what moves the stocks for the most part. For example, we have been confidently been shorting the daylights out of NVDA in the face of all the X-Box hype for months, because we have a handle on their product lines, operating ratios, product mix, chipset ASPs, current and potential unit volumes, etc. and as a result we know the stock probably is unlikely to run very far from here ($90 area). However, we know where the overhead is so if it breaks out we'll either be long or just out of it's way. With their earnings, we know that it's easy to stretch pro-forma earnings by two cents, so the key would be management's outlook on the call (they were very bullish). However we now know that their extreme bullishness makes them very vulnerable to any hint of a miss (like with JNPR earlier this year), which is something to tuck away. Often reading news works the other way, as price very frequently leads news... this morning we saw the mixed-signal networking semi subsector (PMCS/AMCC/BRCM/VTSS/etc) getting hammered which drew us in looking for short entries and sniffing for news... later in the session VTSS pre-announced. The smart money often knows this stuff a few hours to a few days in advance, of course. So the fundamentals are the backdrop, but the TA and price/volume chart setups are what get us in short or long at good technical risk:reward points. If substantial news is hitting an issue, then our ability to micro-analyze the probably impact gives us a further edge in anticipating what may happen next. e.g. with the X-Box delay thing yesterday on NVDA. And, just as often something touted as big news can quickly be (accurately) dismissed as irrelevant... which is often the case. But we're still basically pure technicians... since that's what gives us the entry points and once we're in, our technically-based money-management/trade-management (hybrid profit-taking & trailing stop) methodologies get us OUT at pre-defined points. But having a good understanding of what's behind a move will often modulate how aggressive (position size) or persistent (time frame) we get. Fundamentals+technicals are a dynamic duo when used synergistically! That's how the hedge funds & institutional money are run - most of them just won't own up to the technical side. I'm amazed that more short-term technical traders aren't onto this... one factor is, it takes a lot of elbow grease and time to get on top of each company this way... but you really only have to do the heavy lifting once. And you have to use some kind of a sector model limiting your universe, as you could never do this with "every" stock... there are too many fish in the sea. -Steve