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Trade The Charts - Reading Analysis Causes Bias

  • #1
  • First Post: May 9, 2006 9:36am May 9, 2006 9:36am
Well don't you think today is a prime example: -

All the commentry, various web sites, Bloomberg and others, talking about dollar correcting against major pairs. 'It has got to happen soon'

..............Cable has moved 150 + pips long towards years high since middle of London session.

The problem is the more analysis I read or listen to the more I tend to believe the market is going to go one way...............Better to just trade the charts and remove any analysis bias from my head. Also better not to start believing, in advance, what will happen, since we are playing a game of probabilities, in a random market.
  • #2
  • May 9, 2006 9:52am May 9, 2006 9:52am
I couldn't agree more with this one. I started out trading purely from charts, as I didn't come from an economic background and didnt have a clue what non-farm this and industrial that meant. So all I was worried about was interpreting what all these funny bars meant. The result was a solid year with reasonable results.

By then I had read enough around the traps to understand what the different economic releases were, and so moved to trying to encorperate news into my trading method, naturally with horrible results at first. I then decided I needed to read more from the "people that know", the experts so to speak, and read many analysts report on economic conditions and technical viewpoints on the different pairs. Slowly their ideas started to take over my decisions, before finally getting to point of doing what no-one should, removing a stop loss believing an analyst report that the sudden drop in cable was temporary and was bound to correct itself tomorrow. The result was a bankrupt account and a bruised ego, but also the best trading lesson I have received.

I now refuse to read any analysis on the markets, I don't even monitor upcoming news events any more, instead I rely purely on technicals, and let the charts tell me the story. If there is a big strong move that I have ridden for a day, then at the end of my day, I may look to see what was the cause (such as todays USDCAD drop I have just ridden, wonder what was the cause of that), but that is as far as it goes. I guess I am now a technical purist, just as I was when I started out.

An interesting sidenote is I have reverted back to the simple principals I used when starting out way back when, trend, momentum, support and resistance, and while my charts are little more colourful these days, the same principle remain (and work).
You can quit and they won't care, but you will always know.
  • #3
  • May 9, 2006 10:25am May 9, 2006 10:25am
I do seem to be treading (not sure of spelling) along your path akuma...
Good to know others are treading this path and leads to success...

As they say, there are a lot of routes to success, it's finding one that fits you that really counts... just rambling away...
  • #4
  • May 9, 2006 10:28am May 9, 2006 10:28am
Quoting Akuma99
(such as todays USDCAD drop I have just ridden, wonder what was the cause of that)
Dollar setiment is still bearish combined with oil rising a little bit. The "correction" yesterday was simply profit taking, so it was natural that all USD based pairs were going to see a negative USD bias.

You would have expected at least a minor dollar slide today using the sub-daily charts OR the news. The SIZE of the slide is a bit surprising, but then again, it just means life returns to normal for the dollar.
  • #5
  • May 9, 2006 2:07pm May 9, 2006 2:07pm
Quoting Akuma99
I couldn't agree more with this one. I started out trading purely from charts, as I didn't come from an economic background and didnt have a clue what non-farm this and industrial that meant. So all I was worried about was interpreting what all these funny bars meant. The result was a solid year with reasonable results.

By then I had read enough around the traps to understand what the different economic releases were, and so moved to trying to encorperate news into my trading method, naturally with horrible results at first. I then decided I needed to read more from the "people that know", the experts so to speak, and read many analysts report on economic conditions and technical viewpoints on the different pairs. Slowly their ideas started to take over my decisions, before finally getting to point of doing what no-one should, removing a stop loss believing an analyst report that the sudden drop in cable was temporary and was bound to correct itself tomorrow. The result was a bankrupt account and a bruised ego, but also the best trading lesson I have received.

I now refuse to read any analysis on the markets, I don't even monitor upcoming news events any more, instead I rely purely on technicals, and let the charts tell me the story. If there is a big strong move that I have ridden for a day, then at the end of my day, I may look to see what was the cause (such as todays USDCAD drop I have just ridden, wonder what was the cause of that), but that is as far as it goes. I guess I am now a technical purist, just as I was when I started out.

An interesting sidenote is I have reverted back to the simple principals I used when starting out way back when, trend, momentum, support and resistance, and while my charts are little more colourful these days, the same principle remain (and work).
I couldn't agree with you more on this. Simple is best, and technicals show you pretty well all you need to know. I do sometimes find it useful to know when major announcements are going to be made, but I don't take much notice of the predictions. It's always surprised me how sometimes the predictions seem to support the technicals that follow....
The framework is there; we just have to work on our frame of mind.
  • #6
  • Feb 16, 2007 3:53am Feb 16, 2007 3:53am
Quoting niceguy777
I couldn't agree with you more on this. Simple is best, and technicals show you pretty well all you need to know. I do sometimes find it useful to know when major announcements are going to be made, but I don't take much notice of the predictions. It's always surprised me how sometimes the predictions seem to support the technicals that follow....
Many times the news just reconfirms my technicals. LOL.
This is like chicken and egg scenario, which one comes first, fundy or techy.
  • #7
  • Last Post: Feb 16, 2007 8:21am Feb 16, 2007 8:21am
Excellent comments. Always remember that anything you digest from Bloomberg, IFR, etc., etc. is always priced in the market to the extent that everyone "knows" it. Your advantage or edge is knowing what others don't know. Personally, I think all the commentary from these major sources is completely worthless. If everyone already is thinking emotionally in a certain direction than it can not happen because it is already priced in the market. Trade on your own merits and trust your own skills.

Excellent points hagadol, Akuma99 and points that should be heeded by all of us.

DRT
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