Technical Analysis: Why it Works and its Limitations. Francis Hunt, a technical analysis trader and coach comments. If you've found this video useful, please click the like button and share it with your friends and remember to SUBSCRIBE to remain up-to-date!
Do you really believe that technical analysis can help traders? In what ways? How can a chart help forecast future prices if they are based on the past? Do you base your trading solely on technical or do you also use fundamental analysis? Can technical analysis by itself be the mainstay of an investment strategy? We know that in practice what happens in reality is that one piece of real news can blow up months of small technical gains. Please comment.
Technical analysis works for me but I've selected the elements that work for me and there are limitations. There are a number of concepts that I feel don't work and which I avoid. Traders are taught indicators and moving averages; many of which are lagging the price action. I think there is too much fascination on indicators and too many traders get caught up trying to seek price tops or bottoms. I think price action is often de-emphasised. I do value volume and things like bollinger bands. I also use chart patterns as these capture people's footprints and DNA of a crowd's response to certain impulses.
I am a finance major as well. I am huge on FA & TA. To think technical analysis doesn't work is absurd. Think i'm lying? look thru any small or large cap stocks. I can guarantee you will find many many sup. & Res. , moving averages (50)(100)(200), pivot points, candle stick patterns etc... getting respected throughout the chart. Looking at level 2 and volume is extremely important. I would never go in a trade with high spreads and manipulation. I have ridden stocks over 400% in a day thanks to TA.
Moving averages are useful as an aid as well as Fibonacci retracments, again as an aid. Don't think they should be the primary driver on whether to enter a trade or not, but if they line up with all other factors in your system I think they can be useful.
I have found, telling people what you do and how you do it never affects your profits. People either do not believe or implement what you say wrong, or try short cuts and sometimes they can not be bothered. Use what works well, never stop learning something new ;)
A few handy visual aids that complement a chart, but Im perplexed by people who use technical analysis exclusively, I guess its a manifestation of a compulsive addictive personality. From a value investors point of view Im glad there are so many of them though!
What do you think about the MACD indicator? I use thinkorswim and I'm considering using MACD, 2 lines, with fast at 15 days, and slow at 30. Looking over its historical accuracy, It seems mostly spot-on, but it does look like there can be some moments of obscurity at times (fast hitting slow, then bouncing back up, or both hovering around the same value).
I'm just now getting into serious, analytical trading, and I'm new to indicators as a whole (previously, just taking a kind of fundamental approach, and protecting with stop orders). Are there any indicators that could help with the shortcomings of the MACD?
Amen on the explanations of the Indicators. Since my start in FX trading I have always thought "what are you supposed to see/know or anticipate from these indicators. They are in fact an indication of something that has already happened. Yet many instructors of FX only talk about the 50 EMA and MACD and RSI and if these things happen then do that. Love the sniper analogy as well.
this was really interesting. I use technical analysis, and I use a combination of S/R lines I draw in myself, price action at those levels to find reversals. Then I use volume to see if the trend is in good health
Technical analysis indicators can be used to get informations , it doesn't mean you can trade based on indicators , some are really helpfull , based on the informations you should derive your trading system and not on the indicator that gives information....
Agree with this gentleman to a large extent. Most over-bought and over-sold indicators are distractions and are detrimental to successful trading. They only indicators which are useful are trend indicators like moving averages and Parabolic SAR.
+Supreme Illuminator Many traders and market professionals swear by Fibonacci levels (percentages). I have personally back-tested it and found that the market does not give a damn about these supposedly sacred numbers. Same is the sorry situation with Elliot Waves. However, many professionals use it religiously. Well, good luck to them. I never use these and am quite successful. The only time market slaps me around is when I over-trade. LOL
In other words the Market is a lagging, not a leading indicatOR.
Hi mitchell, I have created a simulation chart based on random numbers, resultant chart look very similar to our real market charts, there will be trends small, major and all kind of, now seeing that trends also form in randomized charts and today most trading happen by algo hft machines, which are not following trends in most cases rather selling buy to capture the spread, so it confuses me whether the trend formation happen due to conviction of many tradors or some other reason behind it.
Excellent article Cory Mitchell, thank you for sharing it. It has been really helpful.
ES is probably one of the best markets. I really like it and it is one of the better ones to trade. But make no mistake, the person who fills your order to get into a trade does not want to lose either.
Money Management is a crucial element of trading the financial markets especially in times of volatility. It is a defensive concept that keeps you in funds so you can trade another day and underpins profitable performance. On a basic level it tells you if you have enough new money to trade additional positions.
Our trading, like our training, covers both short and long term financial trading on a wide range of instruments.
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Opportunities for Afghan money traders as Iran sanctions loom.
A driver in the western Afghan city of Herat, he crosses the border regularly, taking passengers in his transit van to Mashhad in Iran and carrying thousands of dollars to a country desperately starved of foreign exchange.
As the threat of renewed U.S. sanctions starts to bite, Tehran has become increasingly desperate for dollars and neighboring Afghanistan, with a loosely regulated, dollarized economy and a border with few controls, is an obvious source.
No official figures exist for a trade which is conducted largely out of sight of the authorities, but money changers in Herat say there has been a clear increase since Trump pulled out of the nuclear accord.
A shortage of dollars hurts importers and inconveniences Iranians who travel, study or do business abroad.
The lawless regions of Farah, a remote and sparsely populated province south of Herat whose main city was briefly overrun last month by Taliban attackers, are already one of the main smuggling routes and dollars are also crossing the border.