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To: Thomas Stewart who wrote (2830)	6/26/1998 9:35:00 AM
From: John Curtis	Read Replies (1) \| Respond to of 5827

Thomas: TA is just another example of the nature of this thing called the Street game. Call it stochastics, call it momentum indicators, call it MACD, call it candlesticks, hell, call it goat entrails. It all amounts to sophisticated guesswork, and not much more. As long as you don't delude yourself into thinking it's something more than this then you'll be just fine. So why the disparate analysis? It's the best guess any one person can come up with given the morass of data available. Good luck!! John~

To: Thomas Stewart who wrote (2830)	6/26/1998 10:37:00 AM
From: marketbrief.com	Read Replies (2) \| Respond to of 5827

Well, let's spend some time here to talk about TA and its premise. The premise of TA is that everyone who knows anything is acting in the market out of his or her own volition based on their view of where the stock will be in the future. If one thinks it is going higher, using whatever information or analysis one has on hand, one would be a buyer. If one believes that it will go down, then one will sell. So given that premise, everyone is voting with their dollars and the collective "wisdom" of the market is all reflected in the price and frequency of transactions. Random events and sudden discoveries (to a lesser extent) cause a large group of people to suddenly shift their perception and opinion of what a stock will do in the future. In the absence of those events, if there are more buyers, it goes up. If there are more sellers, it goes down. I know this sounds hokey to repeat all this, but I have come to the realization from answering questions on our site that most people don't even think of this. In this context, then, the present price and direction becomes the battle between the buyers and the sellers and the job of TA, either the art or science, it to measure who is winning and the job of the person trading with TA is to only fight for the winning side regardless of direction. If you accept this premise, then it is easy to trade using TA. I normally know some fundamentals about what I trade, but to me, price and volume never lie. Fundamentalists must acknowledge that given different market conditions, the same company is given different valuations. Also, fundamental analysts, who are given information by a company's management, don't really do much better at guessing that TA. That's why you see on TV, earnings and other "surprises", because of the limitations of FA. The bottom line is that the participants and their REACTION to news is what matters. It is not normally possible to predict the REACTION to news although many have tried. Just look at the non-farm payroll numbers and the bond market when the numbers come out. It is all a guessing game when it comes to FA. They may be able to give us some of the numbers some of the time, but I don't think their batting average is any better. So why use TA? First, there is the art of TA. Then there is the science. The art of TA is based on the interpretation of chart patterns, the ones who look at price and volume. Techniques related to this are line drawing based on the books written by Edwards & Magee, candlestick analysis, based on the books written by Nison, Elliot Wave and Gann. The science of trading is based on mechanical indicators, those derived from taking the price and maybe volume, and by plugging them into an equation, generate numbers to construct a line of some sort. 99 per cent of mechanical indicators are based loosely on a moving average, so by definition, because they use numbers from the past, will always lag the market. The other 1 per cent probably do cycles or something. Oscillators, like momentum and MACD, are good for cyclical action but they are not good for trends. Moving averages, RSI and the like are good for trends and not for trading ranges. One needs to use a couple of indicators in their bag to properly diagnose the market. Sometimes oversold becomes more oversold in a downtrend and vice versa. I don't think the computer can replace judgement. Those who practice the art are probably few in numbers compared to those who practice the science. You see lots of ads about trading "systems" which you don't even need to know anything about TA. The bell just goes "ding" when you are supposed to buy and "ding" when you are supposed to sell. It is not a bad idea, but I don't use it. Anyway, your question about the MACD is not as straight forward as it may seem. MACD is an oscillator and as such workS well trading range. I also don't know that time periods Rbarsom was looking at so I can't really comment. In any case, I practice the art of TA rather than the science of TA, so it is therefore subjective to some extent. One more piece of "shameless" promotion: The site that you saw is our big beta test and when it gets overhauled for the end of July, we will have an on-line TA manual there explaining our methods. Also, our mathematician will have a section on the science of TA. Each method has it's limitations. After reading the Market Wizards books, I came to the conclusion that each Wizard has his or her unique take on the market, and THE ONLY ONE thing that they all had in common were rigid rules for STOP LOSS. Without a defined exit point when a trade becomes a loss, no system or method can save us.

To: Thomas Stewart who wrote (2830)	6/26/1998 11:05:00 AM
From: marketbrief.com	Respond to of 5827

Greed and fear. I forgot to add that these are the two basic human emotions encountered when trading. The greed not not making enough money and the fear of losing money. This causes people to become irrational and not stick to their trading plan and therefore, being emotional is not too useful in the world of trading.