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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: SR/WA who wrote (4552)	12/7/1997 5:34:00 PM
From: Thean	Read Replies (1) \| Respond to of 95453

Ken, thanks for pointing to an informative page on TA. In fact, there are so many threads in there I don't know where to start. Anyway, for my 2 cents on how to learn TA more efficiently so that one can practice it to one's advantage, I'd focus on: 1) Understand the conditions under which a TA indicator works. All indicators measure something and they all use some statistical principles. Understand some of those underlying principles. For example on my favorite drillers indicator Stochastics, one of the important conditions is stock prices have to behave in a normal range and there must be a fundamental trend (up in the case of the drillers). 2) Once a fundamental trend exists, Backtesting the indicator on the group (drillers in this case) using past data. Ask if the indicator can accurately predict each top/bottom cycle. If so, then the probability of its working is pretty high. If not so, find another indicator. If no clear winner emerges, then it's likely the stock prices are random without a fundamental trend. Examples of where TA generally fails include the penny stocks, high flying techs with no deep business trackrecord, and IPO's. 3) One can customize an indicator by adjusting the moving averages in a number of the indicators. For Stochastics, the variation on the way the moving average can be 5, 10, 13, 20 days etc. Find one that works. I personally like the IQC Stochastics for the drillers because time and time again it proves out to be the best. Honestly I don't even know the day moving averages it uses. But it doesn't matter because it works. 4) Understand the market sentiment as well. There are times TA is not king. We just have two periods of extreme sentiments so TA was not very helpful in locating the turning point. All they can do was to confirm things are as good/bad as yesterday. 5) However, when a turnaround is observed (like right now), then the odd of success going forward is now greater mathematically. That is how I like to use them in my decision making - an objective measure of risk/reward. If my gut feeling tells me to buy and the TA also tells me the same thing, I know the decision would be a good one regardless of the actual outcome. Stick to the practical aspect of TA. In general I feel the theory should be left to the academicians and let's not get hung up on it.