I’ve been an avid beginner trader for 3 years now. I wanted to share my knowledge of how i interpret and trade my strategy in the hopes of learning from you guys and girls on how I can improve. I have created a live account 14 months ago and have successfully been able to not blow it up yet. Anyway, let’s get started…
I think that support, resistance and trendlines are important because they create certain psychological perceptions about the market for people. To illustrate this, let me post a picture of what i’m talking about. Hopefully it is clear enough for all to read and understand.
From the chart above we can see a horizontal supply line that was broken and became a demand line. What you will notice is that the market touched this demand line about 3 times and bounced off it suggesting that it was strong support line. Then we have the second yellow line that is angled downward to illustrate lower highs and i noticed that the market did not come back to those previous highs so that people do not get the opportunity to place sell orders. Then once the market has a general perception that the market is long, we see a strong downward move.
So in summary, this strategy aims to figure out the general market perception using support resistance and trend lines and then make a trade opposite to that trend. I will post more examples if you guys and girls want.
Problem about pure technical analysis is the hindsight bias. Have you looked into what it is? You’re always going to see patterns in the past… but in my own experience when it comes to trading in the present, it just doesn’t work to only go with support / resistance / trend lines.
Yes i agree with you on the hindsight bias and I have not really looked into that. What would you suggest would be a good approach to avoid the hindsight bias?
Don’t worry about it, I don’t think you need to exhaustively catalogue all the examples of hind-sight bias for every available chart formation.
Your charts are fine and demonstrate quite well that TA does not show what is definitely going to happen next. TA shows what will more probably happen next rather than another thing. But far more useful than that, TA suggests very definitely what you could do about it.
So, for example, TA does not show that price is definitely about to rise because it is falling towards support. TA does suggest that price is more probably about to rise rather than fall further as it is approaching support. But TA definitely suggests where you could place buy and sell orders in order to take advantage of the two opposing possible outcomes.
Congratulations on not blowing up your account @tweeks. After 14 months live, thats a huge accomplishment! Looks like your on the right track and I wish you the best.
Don’t use TA to predict future price movement, use TA to identify low risk setups.
