The physics behind trading and technical analysis

[ForexEagle101]

Great for skimming currencies

Do I detect a HA thrown into the mix there GP?

[gp00053]

Do I detect a HA thrown into the mix there GP?

You do. I like them better on the shorter time frames, not as many false signals

[mihk]

Do I detect a HA thrown into the mix there GP?

What an eagle eye!

[jutawan]

Hi. I am Jutawan. I have few ideas to contribute concerning Price Action and technical trading. I have learned the hard way of trading few years back and did search for few guru’s in technical trading and fundamental trading. I’ve decided to master technical trading more compared to fundamental, still knowing both proves to worthy of knowing. As JRC mentioned…its not a pure science well, I will agree to that, because, for me the is no standardise trading technique can be applied with 99.999% perfection. What I have come out with is quite simple, 1st i must decide what sort of trader I wanna be, scalper or swinger. 2nd my equity strenght, how much can I afford to lose if the market really kick me out, 3rd- tools that works for me (so far, I am using MA and EMA plus standard indi like MACD, RSI for deviation before I trade).

It is a discipline which cost me hundred of hours exposure to multi charts, back-test and forward test my strategies, along the way, it nearly hampered me to nearly give up technical trading. By surprise, I didn’t need to search further than my MT4 terminal , where Moving Average (lagging) and MACD (lagging) plus RSI did make some sense of price directions. I also equiped my understanding with candle formation like engulfing, outside bar, doji and few tricks, on how to apply engulfing when others don’t see it happening, how to group candles during trending up or down and side ways, how to trade during does moments, and many more technique. Now day, I made it short and simple, just pick 3 to 4 MA setup, MACD, look for divergence(regular and hidden) and convergence, and control my MM as tight as possible but, at the same time giving space for flexible decission making if I see better opportunity. The most important trick I learn, well with expensive accounts blow out is, find a pair that works for me. Mine, is EU, and I choose to do BUY trade most of the time, if MACD does not giving any good signal, I just relax and wait, if I chase after the market it will definitely run away with my money…just wait for the right setup…either be it price action or my lagging indicators, I just need to wait…and …I am very pleased with the result so far…continue later…

[ramack]

Physics is a science not related to the markets. There’s no physical place, no gravity, no boundaries…
But psychology is another story. Price is remarkable influenced by behavioural aspects, sentiments, wishes and fears.
Probably it resembles in some way the science of movement but I don’t think so…

I agree! No physics or engineering it in. The closest science topic would be psychology or statistics. Wilder (sp ?) was a mechanical engineer which did a lot of work to make mathematical analogies between mechanics and tech analysis. I haven’t read much of his work, but that might be a place for you (JRC) to start. He developed a lot of indicators, ADR, ATR are a couple I believe.

[JRC]

[B]I’m not sure how you came to a conclusion I don’t use indicators.[/B] Like I said, I do use them but only to confirm my analysis not make an analysis from them. In addition to tech analysis, I use fundamental and trader sentiment. Example, trend. a trend has to have 3 higher highs, 3 higher lows or vice versa. I do that with support and resistance lines, But when I’m skimming threw currencies looking for setups, I make use of fundamentals and traders sentiment and a zig zag indicator to quickly point out trends.

Supply and Demand is what moves the pair up or down. You use major Support and Resistance to draw your supply and demand zones Here is a thread on baby pips that will help you with supply and demand. You can also get some pretty informative videos on utube as well.

To answer your question in regards to concrete principles. Here’s 4 that will put the balance of probabilities on your side more times than not. 1. Trade the trend, when momentum is on your side, enter at the beginning of an up or down leg and verify entries with support and resistance. Apply proper money management to your trading and excercise patience and discipline. Lastly the more you practice and try to learn, in most cases the better you’ll be at all of the above.

You said that you do not use indicators as part of your analyisis - rather, only to confirm your analysis. My question to this was “if you don’t use indicators [B]as part of your analysis[/B], what do you use?”.

[JRC]

I agree! No physics or engineering it in. The closest science topic would be psychology or statistics. Wilder (sp ?) was a mechanical engineer which did a lot of work to make mathematical analogies between mechanics and tech analysis. I haven’t read much of his work, but that might be a place for you (JRC) to start. He developed a lot of indicators, ADR, ATR are a couple I believe.

That sounds very interesting. I’ll buy his book at some point