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

To: HairBall who wrote (514)	12/5/1998 11:50:00 AM
From: Don Pueblo	Read Replies (2) \| Respond to of 99985

Analysis. Well, I'll be very truthful with you. I don't get into it too much. Here is why. I discovered some time back, after consulting several traders, that everyone is different. I know it sounds too simple, but let me explain. Every book that has ever been published, (IMHO), and every trading scheme, and every computer program, and everything else, has missed one vital point. If the trader/investor does not form his own conclusions, he's out of control from the start. I don't mean you can't use other ideas. I mean that if somebody asks me what TA filters I use, I say, "That's irrelevant. What do you use?" The truth is, anything can work, and anything can not work. I firmly believe that the person should be in control. This did not come easily, I've been studying TA for over 15 years. It started simple, got very complex, and then got simple again. For short term trades, TA is, IMHO, essential. If you have studied Stochastics, for example, and asked me to help you, I wouldn't say "Screw stochastics, start looking at candlesticks." I'd ask you a lot of questions about stochastics. I know a lot about stochastics. I'd get you to find some things about that TA filter that WORK, and then I'd get you to concentrate on that. I would show you different ways to look at different patterns, I'd suggest a couple of books, and I'd make you really study stochastics so that you really understood that filter. Then you would start seeing things that would help you succeed. If you were just starting out, and wanted to "learn about Technical Analysis", I'd tell you to pick something that makes sense to you. If trendlines make sense to you, then concentrate on that and learn it. I mean really, really learn it. You could spend 6 months studying information about trend lines, and if you did, I guarantee that you could come up with some very simple, workable, winning strategies. You would not need to look at anything else! This is not an easy game. It is not easy to make money trading the stock market. The more you know, the better. Finally, I'll offer this: most computer programs offer several different TA filters. Find one that plots out a trding range. For example, on Townsend Analytics, you can plot a 1% divergence on the trading range on a tick chart. What you see on the screen is a wavy line on the "top" of the trading range and a wavy line on the "bottom" of the trading range. Tweak the range percentage so that it fits the highs and lows on a tick chart on one particular stock (1% should work well for most stocks under 50 bucks and above 10 bucks), say for example a one day tick chart for position plays, or for day trades, 2 minute tick chart. Now decide overall where you think the stock is headed. (Not hard if it is on a trend.) If the trend is up, look at the trading range, and see what would happen if you went long every time the price backed below the lower line of the range, and sold every time the price went up past the upper range. The only time you get spanked is when the trend changes...but if it does, you have a much better entry point to get out than had you chased your entry.