imported post
links and an essay from tt:
http://jessel.100megsfree3.com/DowLT.png
I’ve only been viewing this board for a couple of days, but I'm happy to have stumbled upon it and I am very impressed by the level and quality of analysis being presented here. I’ve seen chart analysis based on price, indicators, waves, etc. I am impressed, however, by the effort and detail imparted upon these beautiful pieces of art, rather than by the product which these presentations are intended to produce.
I’ve been in the business for over a half-century now and have had experience with all of the above mentioned tools and methodologies. I began trading and investing in stocks at the age of 14 (I guess I’ve given away my age!). My father was a broker for Whitaker & Co. and I began to take great interest in his work at that age.
After many stumbles during my first 10 to 15 years, which were mediocre at best, I’ve had what I would like to consider to be great success in the business, and, without giving the impression that I’m boasting, have been able to compound my personal wealth by 25 percent per annum fairly consistently through the trades and investments I have make in the markets over this time period. I’ve had my share of loosing years, but fortunately, most of my years trading, and investing, especially over the past 40 years, have been winning years. I have also started or co-headed nearly a dozen investment and trading related businesses during this time period.
I bring up my experience so that I can at least have an ounce of credibility in what I am trying to relay.
First, indicators, whether they be RSI, MACD, CCI, ABC, XYZ, or what have you, are very ineffective tools and will fail you terribly in the long-run (over the course of 10 years or longer, or even in less time than that at market turning points). Candlesticks have never been proven to possess some type of collective wisdom, and will do you even worse quicker. ‘Divergences’ upon which you may rely to make trading decisions will fail you in the long-run because they can continue on and well outlast the balance of your account. When a technician sees a divergence and places a trade based on the expectation that price will follow that divergence, and it doesn’t, he tends to hold the belief that the strength of the expected move will be even stronger. This creates a psychological trap which not only prevents him from relinquishing the position, but may lead him to increase it. When, as often is the case, the divergence is eradicated by a strong move in price accompanied by strong or weak (depending on the direction of the move) internals, the trader is severely underwater and will be forced to sell much lower than he intended, or cover a position at a much higher level.
Next, I must address pattern recognition methodologies such as Elliot Wave. Excuse my French, but (and I spent several years studying and applying it with some success) in reality, Elliot Wave is the most elegant piece of hogwash ever incarnated. Elliot, to his credit, did discover the fractal nature of the markets, and that trends tend to unfold in three or five wave sequences, but that is all. He merely uncovered some of the possible patterns that may play out in a market. How one presumes that he can take a set of keys and determine the combination (order) of keys that will open the next 10 doors that appear with even a 20% rate of success is beyond me. A better example would be, if you were to see a set of buildings on one block, would you surmise a guess as to what type (height, width, number of windows, etc.) of buildings would appear around the corner on the next block ahead of time? I think not, and trading with Elliot Wave is just as silly. I throw Trident and other such methodologies in this pile as they require a great deal of consistent luck to not only make you money in the long-run, but to save you from blowing your account’s balance.
Lastly, those who are relying on the movements of the planets upon which to base their trades are sadly misguided by how chance may at times enables markets, which are subjects of chaos as all things in this universe, to move in synchrony with some derivate of planetary position or movement. Forget about it, and save yourself years of frustration and money. If it wasn’t taken so seriously, it would be perhaps the most humorous form of market analysis!
To sum up, indicators, divergences, Elliot Wave, Fibonacci, patterns, and other such voodoo (all of which I have tried and tested over the course of a decade earlier in my career), are the incorrect methodologies by which trading and investing should be approached. Also, there is not necessarily always a clear set of answers to which way the market may move. Sometimes, there is simply insufficient information, and saying on the sidelines until sufficient information presents itself. Those who trade based on patterns and indicators tend to have their money on the line nearly all of the time because of what their methods are suggesting to them, when in reality, the market itself has no clear direction yet. This introduces additional risk to this type of trader.
I would like to impart the following keys to trading success onto the members of this board. You can rest assured are presented to you after 53 years of investment and trading experience. These are the undisputed truths which line the road to trading and investment success, and anyone who disputes even one on the list does so only until he and / or she accepts it. In other words, time will teach that individual that this list is correct and comprehensive. The following is an ordered list of the most important factors upon which to base a trade:
1. Price
2. Breadth
3. Trend
4. Leadership
5. Sentiment
6. Volume
The following is an ordered list of the most important factors upon which to base your investments:
1. Buy Strength, Sell Weakness
2. Buy Leaders in their Sector (top 2 or 3 at most)
3. Mind Liquidity
4. Mind Seasonals and Large Timeframe Cycles
I present these here because I am concerned and disturbed by the direction in which a majority of those who are posting here appear to be headed. Like all crafts, the next trading and investing generation should be more capable and wiser than the last, not the other way around.
for dma and technition:
http://www.maui.net/~mauiben/june22dow2005.swf
be sure to turn up vol.