Hi there LP

hello there!
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For stocks, what TA you use depends on what time frame you trade on
The most important things are horizontal support//resistance and multiple time frame analysis.
Less importantly, throw on some moving average and relative strength/weakness indicators as well.

Here's an example of a very simple system:
1) Use a chart on your primary time frame to identify short term support//resistance, long/short bias and a setup to enter a trade.
2) Use a chart of a larger time frame to identify longer term support//resistance, trends, long/short bias.
If your results for long/short bias and key levels in 1 and 2 both line up and your conviction is high, then either take larger position size or hold a wider stop (never risk more than whatever % of your capital you decide on as part of your risk management)
3) Use a chart of a smaller time frame to enter into the trade at as favorable of a price as you can accept
4) Create an exit strategy for taking profits (based on the next significant support // resistance level, or if none available then use trailing stop) as well as what to do when it doesn't go the way you expected.

sucks trading here in the philippines = no shorting, no stop loss, only 1% of the population and the total funds driving the market are mostly local and only the occassional foreign funds come here and there. its like playing in bodog poker now lol

Do you mean you're trading the Philippine stock market as opposed to the US stock market? Or do you mean the brokerage houses don't let you short or input automated stop orders?

If you're trading stocks on a Philippine exchange then the following is relevant:
I would imagine that the inability to short reduces the importance of key technical levels. There's no short squeezes and no new shorts coming in to amplify a downmove when a technical level holds or breaks

I'd assume that the small, developing Phillipine market is extremely illiquid compared to larger markets, and in that case I'd disregard everything but the most basic usage of TA (just support//resistance and nothing else). The reason is because TA is mostly a self-fulfilling prophecy and is only significant when enough people believe in it, and the smart money realizes the people believe in it. There's probably an undeveloped metagame as well, so basic trend following strategies are probably more likely to succeed.
http://www.offroadfinance.com/2012/05...-markets-and-random-efficient-markets
You should read this article, and use your own experience to determine the underlying conditions of the market you choose to trade and how to adjust your strategy to such conditions.

When I say stop loss, I don't necessarily mean an automated order (I interpret that you mean the brokerage services don't allow automated stops). You can have a mental stop loss that you use to signal yourself to get our manually.

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On June 25 2012 21:23 2c0ntent wrote: technical analysis is an illusion and you are wasting your time and money trying to use it, according to some pretty well respected ppl.. "data that scale can produce surprising patterns — patterns that, if you glance at them, you would swear are periodic, predictable, and bankable. Anyone studying the cotton price records could easily imagine he was seeing 'corrections,' 'resistance levels,' and the other signals that a technical analyst seeks to buy, sell, or hold. It is fool's gold." -benoit mandelbrot "I realized that technical analysis didn't work when I turned the chart upside down and didn't get a different answer." -warren buffet but feel free to waste your time. there are plenty of charlatans who will sell you technical analysis strategies etc. I'm not a super hero and I can't stop every ignoramus from jumping off a cliff with his children's future in tow

The funny thing is that I used to believe this too. Yes most technical analysis is an illusion. Yes there are many people who sell really shitty and outdated technical strategies. At the same time, people who completely disregard the importance of TA are as ignorant as the people who claim it's the holy grail and base their entire systems on TA alone. Again, the reason SOME TA is important is because traders believe in it. Most of the successful traders I know use TA as a helpful tool combined a lot of various other factors.
http://forumserver.twoplustwo.com/showpost.php?p=33189512&postcount=90
Here is a good summary of why TA is important from a successful trader and moderator of 2p2 BFI forums.

Warren Buffet is the last person you should quote on the matter, if you know what kind of strategy he uses. He is a deep value investor interested in holding periods of years if not decades. He also does not execute his own trades. He decides what to buy and when, and hires traders do the actually execution (most successful "pure fundamentalists" and fund managers hire inhouse traders or source it to prime brokerages). The traders that do execution of the trades use and manipulate technical patterns to get better fills and minimize market impact of large orders.

But you are entitled to an opinion, whether it be from your own experience or blindly citing other people.

trend following seems best but i dont know how what signals or filters
to employ. turtle trading is easy enough but i cant seem to understand
it. do u know of any charting software that i can do practice
trades and is easy to understand step by step along
with a book?

If you want to practice trading the US markets, you can use thinkorswim papermoney (accounts expire after 3months but you can create new ones indefinitely). Quotes are delayed by 15 minutes, but charts are live real-time. It's what I used when I first started. I wouldn't worry about signals or filters, or trying to emulate a strategy found in a book.

Everything you need to start developing your own trend following system can be found in my posts here. Identify trends in your primary time frame (the more obvious the better), verifying with longer time frame, executing entry on a shorter time frame trying to get the best price. The type of people who succeed at this game are the ones who have the ambition and patience to develop their own trading style, and the ability trust their own judgement developed from experience. At this point, there's really nothing that can help you get better until you actually dedicate some screen time. It's like theorycrafting all day vs actually playing a game of StarCraft. Execution is a huge part of the game.

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You haven't demonstrated you understand anything about market microstructure, and continue to blindly cite other people out of context (SMB capital is a training site for day traders on TA. Clearly they had some other reason to leave that blog post on their site for a reason other than discouraging customers.. HMMMM). Maybe you should read some of the comments under the blog, or even the actual post itself. The point of the article demonstrates that TA is nothing without risk management (which is the most important aspect of trading).

Here's a thought experiment for you. Investment fund A wants to buy 100m shares of stock XYZ which has been rather flat. However, stock XYZ only trades an average of 10m shares a day. Investment fund A hires agency traders at Investment bank B to fill the orders.
The objective here is to get the best average fill for the 100m shares by
1) Splitting the buying across days//weeks
2) Disguising the buying as best as possible
3) Manipulate bad traders into selling into their buying
In accomplishing these objectives, they both create and manipulate charts (TA)
But still, an order for 10x average daily volume of shares is going to MOVE the price quite significantly
Are you telling me there's no way a smart trader can't take advantage of this?
Now one strategy a good profit-oriented trader can use is to spot institutional buying early on using TA, and benefit from the price being pushed up.

The same exercise can be done to demonstrate how market makers extract profits from the markets as well (their strategy is completely different but still utilizes TA to a large extent).

Now stop talking out of your ass

On June 25 2012 23:47 2c0ntent wrote: Also its funny that you discard what one of the most successful and well-respected market participants of all time has said on the topic of a specific category of market participation strategies because he discarded it as not being useful. That's like disregarding Phil Ivey's advice not to raise 73o under the gun, because since he doesn't use that strategy, what the fuck would he know?

I already explained why Warren Buffet's quote was taken out of context, any other icons you want to hide behind?

Out of curiosity, how many people do you PERSONALLY know who work in high finance? How much do you know about the world of hedge funds, proprietary trading desks, agency trading, market making firms and investment banking and how they relate to the market. How about dark pool liquidity, ECNs, and exchanges?

I'm just trying to give solid, well-founded advice to a fellow LPer and you come in thinking you know everything and I can call you out on anything you throw at me because I actually understand what I am talking about. Because I know and work with people who make money in the markets consistently

spicy about my question...
book to learn about trends following, position sizing, entry/exit signals. and any easier charting software not as complex as metastock but can help out a newbie like me.


been trading the past month, honestly ive made a lot of smaller bad trades than i did good ones. of course being a beginner i did not know half of the time what i was doing. my entries/exits were obv shit and my basis for picking stocks is worse. i was lucky enough to ride an ipo which gave me my "tuition fee" for free in learning this thing. sadly the funds i made thru that is almost gone to a lot of small but bad subsequent trades.


Info:
i usually day trade if i can, but market here is illiquid as you say, i dunno if daytrading is any good here. i like swing trading when riding trends but my criteria is just terrible so i end up always being late.

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the podcast is so damn funny :D rofl

^^ i stopped listening to all the other deathsquad crap and just listen to JRE and that one.
the bryan callen podcast when chris delia and will sasso are also funny. but now bryan has decided to just stick with tenminpod

@whamm
If you really must, pick up a book on tape reading, and probably avoid day trading Philippine market. Improve your stock selection criteria using experience and trial and error. You'll be glad you did.
Get a trading mentor if you can. I'm not sure what the status of the financial industry is in your country but find out if there are any reputable trading firms. Try to network with some successful people so you can pick at their brains.

@2c0ntent
You're confusing industry experience as an appeal to authority? I'm the one with the real world experience. You've demonstrated you don't know anything about the finance industry and admitted that you aren't even personally involved, having ZERO trading experience. Although I welcome you to break into it if you can, if you truly believe the game is soft because of people using TA. I'm sure an I-bank would be more than willing to pick you into their S&T division since you're so smart. But wait, TA is a part of their training programs for new traders. I guess you won't be able to do your job because you're so stubborn about its usefulness. Oh well they can also throw you into sales to cold call all day.

Saying a chart doesn't matter in stocks is like saying a yield curve doesn't matter in bonds, board texture doesn't matter in poker, or what map you're playing on doesn't matter in starcraft. It's a battleground that can affect what strategies people employ and how others attempt to counter those strategies.

You still seem to think that the purpose of a chart is to predict the future, so let me clear this up for you. The chart is best used as a tool to infer the positions that larger players may be holding, how other traders are acting at certain price points, and creating a roadmap for sensible risk management, and should be combined with other factors (fundamentals, catalysts, etc). Good traders never trade in a vacuum.

Here's a real world example of when TA becomes extremely important:
When there's a huge shift in fundamental value (due to something like earnings reports), a stock needs to go through a process of price discovery because it's hard for everyone to decide on a new valuation all at once. When this happens, the price gets driven by emotional buying//selling as traders scramble to charts to figure out the real-time price movement. Both volatility and volume increase, and all the traders start playing the game of TA until the stock develops some trading range in which people are happy with and supply roughly equals demand.

Again, I stress that I used to have the same beliefs as you before I got into the industry. When I didn't know anything, I used to make fun of technicians because I couldn't possible fathom the usefulness of a chart. I'd refer to investing academia or quote iconic fundamental investors without actually having critically thought about the way market interactions work. And that is why I'm spending effort into arguing with you, because you are basically where I stood years ago. This is also a good opportunity for me to get down some content for a future blog post.

for now i stare at the ticker for hours and do notice a certain improvement in my reads on how prices move. i guess tape reading would help me understand further what the hell is going on. would you advise i try learning basic trend following for now instead of losing myself in the clusterfuck world of TA? how about fundamentals? honestly dont have any access to company information so for now i cant really see myself learning shit from those.

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