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Best combinations of indicators...

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Percentage Price Oscillatorcolin_twiggs08-Jun-11  06:08 am
         

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deca
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Username: deca

Post Number: 3
Registered: 05-2004

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Saturday, December 10, 2005 - 09:08 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



I'm a new player. My target is the romanian stock trading. To avoid the common mistakes, please can you share (as much and fair as is possible) me your experience?

I try to understand why are so many indicators when many of them represent a small variation of others.

In fact, when you open the soft to analyse the situation what are you doing?

My soft has:
%R
AD
CCI
ChO
MACD
MFI
MTM
NVI
OBV
POS
PVI
PVT
ROC
RSI
STS
TRD
TRIX
ULT
VLT
VOS
WAD
and Bollinger(dd), SMA (three days), Candlestick and so on...

Please answer.
Thank you!


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david_louisson
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Hi Deca

If you send me an e-mail (david_louisson@hotmail.com), I will give you a link to all of the best free Technical Analysis material on the Internet, that's been brought to my attention, during my 5 years of research. I won't post the reference here, because it resides on a competitor's forum.

The link contains several essays, and more than 150 links to data on indicators, what they measure, and how to use them.

Good luck with your trading.

Best wishes
David


ASX Stocks 20-minute delayed





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dug
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Username: dug

Post Number: 717
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Wednesday, February 01, 2006 - 09:42 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi David,
I'm probably a simple and lazy kinda guy but I prefer to read my fellow forumers opinions and angles rather than,well anything else.
Anyway,I read in another thread your chat about RSI and understanding the methodology/maths.I was wondering if you,David,would give me a few words on MACD?
Seems to me some on the Forum are giving it 'Mythtical' or at least definitive powers so if you could give your straight forward,no nonsense views of
What it Measures?
Is it a Lagger like most?
and well stuff MACD related,it would be appreciated.
regards,
jr


Dig for it.

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ann
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Username: ann

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Wednesday, February 01, 2006 - 05:19 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Dug, if you are about to come the sneer about me saying traders are in or out depending on the MACD. I say this only because it appears to be a very popular indicator used most often by traders. That is my only reason for personalizing it.

Here is a definition for you.....

There are three common methods used to interpret the MACD:

1. Crossovers - As shown in the chart above, when the MACD falls below the signal line, it is a bearish signal, which indicates that it may be time to sell. Conversely, when the MACD rises above the signal line, the indicator gives a bullish signal, which suggests that the price of the asset is likely to experience upward momentum. Many traders wait for a confirmed cross above the signal line before entering into a position to avoid getting getting "faked out" or entering into a position too early, as shown by the first arrow.

2. Divergence - When the security price diverges from the MACD. It signals the end of the current trend.

3. Dramatic rise - When the MACD rises dramatically - that is, the shorter moving average pulls away from the longer-term moving average - it is a signal that the security is overbought and will soon return to normal levels.

Traders also watch for a move above or below the zero line because this signals the position of the short-term average relative to the long-term average. When the MACD is above zero, the short-term average is above the long-term average, which signals upward momentum. The opposite is true when the MACD is below zero. As you can see from the chart above, the zero line often acts as an area of support and resistance for the indicator.

This is the site from which it was drawn........
Edit. http://www.investopedia.com/categories/technicalanalysis.asp

(Message edited by ann on February 01, 2006)


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ann
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Wednesday, February 01, 2006 - 05:23 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Let's try that link again...

http://www.investopedia.com/categories/technicalanalysis.asp


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dug
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Wednesday, February 01, 2006 - 05:50 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Sorry Ann but this is not about you,you got plenty of reasons to get sneered at but this isn't one.
If you absorb a Rampers Thread it often runs a scenario-
I don't do charts but the MACD is positive.A ramper always pulls out the MACD.
I Suppose to maintain momentum as measured by a somewhat complicated equation of maths befuddling to a vegie-maths graduate.
So princess unless you wanna jump to the defence of vegie-mathamaticians? you ain't in it,OK?
Can you let David not be Anticipated,Ann? OK?
Happy Trading
etcx3

Vote Vite'n'Often Msparks[see back pages]


Dig for it.

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fibonacci
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Ann,
Re; No. 2

Yes it does, at least 10 out of every 3 worthwhile reversals.

Sorry Dug but I didn't have to dig too far.
Thought of signing "David" but knew you'd be sus.


John

You've got to
know when to hold 'em
know when to fold 'em.

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ann
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I shall let you get on with it then Dug.....


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ann
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Wednesday, February 01, 2006 - 07:28 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Sorry John,

I missed your post.

That wasn't me being clever and explaining the MACD, that was a cut and paste from the site I linked.

You said....Re; No. 2

Yes it does, at least 10 out of every 3 worthwhile reversals.


Could you possibly put that into different words? It sounds like you are getting 10 out of three!

I am seriously mathematically challenged so please keep it simple.

Thanks
Ann


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fibonacci
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Ann,
It's not Maths that is the problem, it's divergences.

Sure they can be helpful but more often than not they call for a top and if a correction occurs, it's not worthwhile trading.
XJO

The numbered divergences show examples that were of no earthly use to me.
The letters show useful examples.
The "OH!"s show occasions marking the last peak before worthwhile corrections when it totally missed it.

My Maths was wrong. I should have said 14 out of 3!!!

One has to be substantially more careful than Dr. A. Elder asserts. I love reading the commonsense parts of his books but even his own charts show multiple divergences but only focus on the one that works. About six months ago he sent emails all around the world suggesting a massive short trade on GOOG before it hit $300??? No stop either!

I do acknowledge that some traders make them work, but I'm not that good.


John

You've got to
know when to hold 'em
know when to fold 'em.

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david_louisson
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Username: david_louisson

Post Number: 193
Registered: 02-2004

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Hi Dug

For whatever it's worth here is my take on the math behind MACD.

First though, I want to discuss what I mean about 'leading' and 'lagging'.


LAGGING indicators are generally the result of a summary or summing process (or averaging, since an average is obtained by summing a series of values, and then dividing the result by the number of values). For those of us who can remember back as far a 6th form math (becomes more difficult as each year goes by!), summing is akin to INTEGRAL calculus. The summing process causes inertia and lag. Here are some examples of 'laggers':

1. Moving averages. SMAs are hopefully self-explanatory. EMAs also lag because each data point includes properties of its predecessor, which includes properties of its predecessor, and so on, ad infinitum back to the first data point. However, as we move back in time, each prior point contributes less weight to the current point. Thus if today is day N, then day N-1 contributes more weight than day N-2, which contributes more weight than day N-3, and so on. Perhaps a good analogy is a man standing with a mirror in front of him, and a mirror behind him. Each mirror spawns an image of another image, with the images fading (getting smaller) away to infinity. (I go into some detail here about EMAs because MACD is actually the difference of two EMAs more on this below).

2. Weekly (or monthly) price bars each bar is a summary of individual price bars. Same principle with 15 minute, 30 minute, hourly bars for a day trader.

3. Heikin-Ashi candles each candle averages itself and its predecessor, and so on (rather like EMAs).

The greater the number of values being summed (e.g. in a SMA) or summarized, the smoother the result (i.e. less false signals from the bumps and wiggles), but the greater the lag (i.e. lateness of signal). For example, a 20 period SMA will be smoother, but lag more, than a 10 period SMA. Some R&D work has been done recently in moving away from linear math, in an attempt to provide MAs that remain smooth, but lag less. Examples include DEMA, adaptive moving averages, Tillson's T3 indicator, and JMAs (Jurik MAs http://www.jurikres.com/catalog/ms_ama.htm#top)


LEADING indicators are generally the end result of taking the difference between two values, which gives RATE OF CHANGE (or what traders seem to loosely call "momentum" but not really in terms of strict Newtonian physics, where momentum = mass x velocity). If one plots rate of change against time, then the steeper the gradient, the greater the acceleration. This should bring back fond high school recollections(!) of DIFFERENTIAL calculus, i.e. it is the inverse function of summing.

If you look at the math behind some the momentum-based oscillators (RSI, stochastics, price ROC, etc), you can see the "difference between two values" calculation embedded somewhere in the formula.

"Divergences" signpost decelerations in a trend. When price is rising, but then starts to rise less steeply (a "loss of momentum"), the differences between successive price values get less. Oscillators plot these differences, hence the oscillator decreases in value. So we have price rising while the oscillator is falling, i.e. a divergence. Given that every trend must decelerate before it can reverse (i.e. change from a positive to a negative gradient), a divergence may precede a reversal. But just because there is a deceleration doesn't mean that a reversal will definitely occur it may just be a temporary lull, before the price starts to accelerate away once again. That's why divergences don't always point to reversals.

So, in summary, lagging indicators are reliable in that they record reversals after the event, while leading indicators signal decelerations along a trend, which can point to reversals ahead of time. (In a nutshell, that's why there is no holy grail indicator).


I've explained all this because MACD is a "hybrid", in that it contains both leading and lagging properties. Guppy MMAs are another example of a hybrid indicator.

MACD (solid black line in the charts below) is the difference between two EMAs, normally a 12 period (faster yellow line in the charts below) and 26 period (slower white line in the charts below). As outlined above, EMAs lag, but the effect of taking the difference is leading. In calculus terms, we are taking a first-degree differential of a first-degree integral, so the overall degree of 'lag' or 'lead' is zero. When price begins to rise, the fast EMA (yellow) will pull away (upward) earlier than the slower one (white), hence the difference between the two will increase. When price falls, the fast EMA will pull away (downward) before the slower one, hence the difference between the two will likewise increase. Allied to the zero lag, MACD will move upward or downward pretty much in harmony with price (which IMHO means that it adds little informational value to a chart).

Often a 9 day EMA is taken of the MACD, and plotted on the same chart as a signal line (dotted black line in the charts below). This is quite a common practice with other indicators also. Then signal line, being an MA, will lag the MACD itself. Thus we obtain crossovers (just like when price crosses an MA of itself). The MACD histogram (black bars in the charts below) is usually plotted as the difference of the MACD and its signal line. So when MACD is above the signal line, the histogram is above the zero point (x-axis), and when it falls below the signal line, the histogram bars have negative value (fall below the x-axis). Because it is a difference, the histogram indicates a rate-of-change, i.e. as the distance between the two black lines increases (acceleration), the bars move away from the zero point; and when it decreases (deceleration), the bars move toward the x-axis.

[insert MACD #1]
a1

The chart above hopefully illustrates what I mean. Note how the 12 day EMA (yellow) moves away from the 26 day EMA (white), both as the downtrend gathers momentum at the left of the chart, and the uptrend on the right. Note how these cause down and up movement in the solid black MACD line, and how this movement virtually mirrors the price movements. The vertical white lines show where the MACD crosses its signal line, and the histogram bars move from above to below the axis, and vice versa.


I don't use MACD. Because MACD is derived solely from closing price, it tells even less of a story than OHLC. Apart from its lack of informational value (see my reasons above), I find that its signals occur way too late to be of any value to a short term trader.

The chart below illustrates all of this. As a swing trader, I am attempting to capture moves between the peaks and troughs shown by the thick white daubs. The MACD crossovers are shown by the thin white lines. As can be seen, the MACD crossovers are frequently late, and in any case pick up only 4 of 8 possible trades.

[insert MACD #2]
a2


If you want to know how to use MACD's signals profitably for longer term trading, you will need to ask somebody else. I expect that Colin's explanations (http://www.incrediblecharts.com/technical/macd.htm and http://www.incrediblecharts.com/technical/macd_histogram.htm) are as good a starting point as any.

David


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ann
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Thursday, February 02, 2006 - 08:29 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



David and Dug, please forgive John and myself speaking across you.

Thank you John, I see what you are telling me now.

When I started charting, I tried to see what the chart was reflecting as in the actions of the people behind the trade.

I didn't bother too much with what the 'experts' said in their books as most of it didn't appear all that reasonable to me or they appeared to make the simple very complex.

I see the divergence as the 'sentiment' of the trader. A period of greater volatility will reflect in a larger divergence range. It is easy enough to see on my chart why the greater range divergence, as I have circled because it was drawing closer to the critical level of the 200dEMA or pulling away from it.

Equiped with this knowledge, a trader could quite comfortably enter and exit with a knowledge of what were the critical points of exit and entry. It would all then come down to the traders preference for a re-entry/exit. ie above or below the zero point on the MACD.




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dug
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Thursday, February 02, 2006 - 09:13 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Sorry ann,
Your Kenny Rodgers Fan can feel Free to answer you,sure but,well,It's only because I have sacred memories of Ruby don't take your love to town that i won't advise fibbo old mate to be sure to include some words about hindsight in ya 'critique'.
Anyhow David.Brillant as always.All you got to do to be Publishable is to adopt a viable writer's personality.

and maybe consider these paltry points.
a]I don't agree that SMA's in the Short Term[21>] are beneath EMA's.I base it on Psychology that yesterday's Buyer still has a Glow unlikely in a 10day outer.

b]this thread was started by what is classified as a newbie[Hi deca,feel free to butt in/pull ya forelock/whatever any time you choose,OK?]

Anyway,David during one of my travails on IC,this Ol' Hand like founding member put in this line about how he was sick of new indicators blahx3 and that d'LATEST was trend lines subjucated to ya Horizontals ie Support RESISTANCE.

I was wondering on your thoughts re this Push of d'High Faluting Indicator at the expense of the good old lines anyone could draw on paper.Meself was plotting share prices from,Crikey 12yo would be over stating it but I wouldn't want my father thought of as a Flouter of Child Labour Laws.

So David should one search amongst the New or get a true feeling of the Tired but True?

regads,
jr


Vote Vite'n'Often-Msparks[see back pages]

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hilarius
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Thursday, February 02, 2006 - 09:39 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Dug

Et Nova Et Vetera

Hilarius


I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

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fibonacci
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Thursday, February 02, 2006 - 09:47 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



dug,
Can't seem to help interrupting your thread. Hope you're OK with it, but I know David has also read this previous post of mine.
http://forum.incrediblecharts.com/messages/9/690187.html#POST84227

Hope my thoughts are reasonable starters.


John

You've got to
know when to hold 'em
know when to fold 'em.

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david_louisson
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Hi Dug

Personally, I find indicators useful only where they highlight phenomena that is not already apparent from OHLCV, which IMHO happens very rarely. All indicators are derived from OHLCV. If price accelerates upward with increased volume, every indicator that's ever been invented will rise. I frequently look at indicators on other people's charts, and find myself thinking stuff like "ah yes, RSI has fallen from above 70, but look that's because the price gapped upward sharply a few days back and has now settled down again". I don't find it necessary to see that ADX > 30 just to convince myself that a trend is strong.

However, my understanding is that many proficient traders use indicators to trade successfully. As has been said many times before, whatever works for you, keep on using it.

I like trendlines and patterns (e.g. triangles, wedges, head-and-shoulders). To me these express relationships simply and unambiguously. Support and resistance have obvious psychological significance, as do "round" numbers like 2000, 3000, etc. It's understandable that prices might sometimes reverse upon reaching these targets.

I need to do more reading on the likes of Fibonacci and Gann. Apparently prices are supposed to reverse at critical Fib retracement levels simply because they're patterns of nature that are somehow embedded into the human brain. I don't follow this. Instead, I think it's more likely that if enough "heavyweight" traders believe that a falling trend will reverse at a certain point, for whatever reason, then they will start to buy the stock, and make their prophecy come true, which perpetuates the belief system further. Again however, if reversals occur at certain points more often than not, then, the underlying reason doesn't really matter, let's just exploit them for profit.

There are some folk that use [a well-known charting package's] Gann facilities at our local TA group. This guy dropped a Gann grid (12 x 12 diagonally criss-crossing lines = 144 intersections) onto his chart, and moved it so that, in HINDSIGHT, five of the intersections coincided with previous price reversals. He was really excited about his discovery, while I was looking at the 139 intersections that nonetheless fell on empty space, not to mention wondering which of the dozens of future intersections would ultimately coincide with price reversals. As I said, I think I need to do some more reading, to grasp this. Given my dismal trading record, the least I can do is to give these folk the benefit of the doubt.

Not sure how well I've (attempted to) answered your question, but that's my 2c worth.

David


Ann - absolutely no need to apologize, moreover the chart in your last post fills in the gaps in my previous one: how MACD's signals and divergences can be used to assist "position" (as opposed to "swing") traders.

(Message edited by david_louisson on February 03, 2006)


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cjb
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Hi Dug,

You have given no indication as to what type of trading you want to do. This is critical in the setup and selection of the indicator of choice. Also, indictors are only part of the equation. If you are an intraday trader then most are a waste of time. Short term there is some benefit as with long term but for the most part you have to be careful how you use them. You must also understand what the indictor is telling you and it is of some help to follow the maths as well. For me, an indictor may put you in the correct football park but price action tells you which way to kick.

CB


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dug
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Hi cjb,
I suppose Time is one of my chief tools or rather Percent Moves in a Time Frame.Has it run too far too fast?that's one of my first ponderings.
I know a forum expert has started sprouting this one as a Grand Revelation but Long Term Trades ARE Short term ones that don't hit Stop Loss.It's been said for Donkeys but you know how it is.sounds Dramatic if it's the first time you've heard it.

Anyhow I don't want to be a screen jockey but it is required that I do.I nursemaid my trades til they are at a satisfactory point for the next one to leave the Nursery,ie take another set-up.Basically I guess I'm just interested in the Stock Market.I prefer it to Gambling and Property.What can I say? I like to play the Stock Market.I've been interested in it,it's techniques,Sytems,characters and traps for over 40 years.It didn't make me a millionaire just provided entertainment to my increasingly jaded palate.

Anyhow I like trend lines and patterns because you can figure the Future from them.If it doesn't follow the trend line you've identified?Well YOU'RE WRONG,get over it.
Don't go 'A Famous Yank said this is suppose to happen if this maths formula indicator does this so the indicator did but the MARKET didn't so,well,think I'll wait around holding til the famous yank study by d'Guru comes True'

You got it WRONG,ditch it.

Anyhow,I'm not really crash hot on Calculus just Calculating things like percentages that are now described as ROAR and Stages and just stuff like that so if i couldn't work out MACD or even EMA on a desert island,I give them a miss.

CJB,you're probably a lot younger than me in years and other scales.You do what makes you happy.Don't pay attention to a relic like me,OK?

cheers,
jr


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dug
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Sunday, February 05, 2006 - 02:43 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Frankly David,I think Fibionacci and Gann study that brought out one of your dissection dissertations would take some fun away from d'Practioners.

So you're a OHLCV fan.Basic,Traditional.You probably won't believe it,but I'm intadat 2!!

I don't keep up with Modern Adaptions of traditional wisdom as much as I should.
Anything NEW and Insightful happening in Volume Analysis anymore?
Is there some published definitive list of Pivot Points?
Clearer Defining of Support/Resistance even just discussion?

Only if you've got the info at your finger-tips,Mr Louisson.
Don't go spending hours on it.I know of none such work,list,even chat,just haven't come across it mentioned.
I'm left just trying to work it out for myself and,well,just picking up current thinking would be waaaay easier than my tortuous thought process.

regards,
jr


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david_louisson
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Monday, February 06, 2006 - 08:11 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Dug

Sorry if I'm not much help. Some of my thoughts on volume in this thread:
http://forum.incrediblecharts.com/messages/10/649156.html

The basis of my trading system (still evolving, and I haven't had much success to date) is outlined here:
http://forum.incrediblecharts.com/messages/9/661297.html#POST82470
I'm still experimenting with exact timing of entries and exits.

Also some more ideas here:
http://forum.incrediblecharts.com/messages/12/655156.html#POST81788
There is a post of mine (#154) later in this thread where I look at some specific chart examples.

Re Fibonacci and Gann, I've heard it said that "if you draw enough lines on a chart, then some of them will surely coincide with price reversals". However, I've yet to prove this one way or another, at least to my own satisfaction. :-)

Best wishes
David


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msparks
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Wednesday, February 08, 2006 - 09:04 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi David
Just like to complement you again on your posts.

Re- the fibonacci numbers on the charts, i think IC is introducing them which would be a great improvement.

I am constantly amazed at how often the numbers are hit as a support point for a rebound or just a point to exit "if" broken.
Probably just coincidence maybe or psychology, the 50 % level seems to be a common swing point too but no way of testing any of these theories and calculating manually is too slow and time consuming.
I always thought what a load of rubbish, but the lines just keep getting hit, especially when some support from previous price action.

When we get the atr stop lines and the fibonacci IC will be just the bees knees, but they need to HURRY UP.

Then, like you said, if we draw enough lines they are bound to be hit.






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msparks
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Thursday, February 09, 2006 - 11:20 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Lets see how this one plays out David.




Oops, the 26 should be 23.6 or whatever.

Colin, when are we getting fibonacci ?

(Message edited by msparks on February 10, 2006)


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david_louisson
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Friday, February 10, 2006 - 10:44 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Msparks

Many thanks for the compliment it's always gratifying to find someone who understands my way of thinking :-)

It is interesting how price often tends to retrace from the Fib lines. As I said, I don't want to be too critical, as I haven't really made a study of it, but I know that my eyes are always drawn to "what is" on the charts, rather than "what isn't" in other words, one enthusiastically sees the patterns that tend confirm one's methods, because they are conspicuous, and one is (consciously or otherwise) looking for them. It's quite possible that some waves retrace to approx half of their extreme, and the 38.2, 50, 61.8 values give them three "options" that are fairly close together. Also, it depends on whether one looks for retracement to the closing price, or the high/low, which doubles the number of possibilities. And then, does one set the 0 and 100 values that define the grid on the extreme closes, or on the highs/lows of the same bar (this can make a significant difference in some situations)? And if there are several zigzagging extensions of a price wave, which extremes does one choose?

There may be precise rules that define all of this perhaps I should shut up, and do some proper research! I guess the bottom line is an independent statistical study given all possible outcomes, exactly how frequently do the desired ones occur? If, over a large enough sample, there is evidence to suggest that these are statistically more significant than what could be obtained as the result of a random distribution then we have some real evidence. No doubt this ahs already been done I would be interested to see the results.

I'm not skeptical, it's just that (like with astrology in trading) I don't understand how or why it works but if it does work, then I certainly don't have a problem with anybody applying it to achieve profit!

Will be interesting to see what happens on the charts you posted.

Cheers
David


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ingot54
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Friday, February 10, 2006 - 11:59 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Deca

You asked about the best indicators for trading, and in my limited experience, I use weekly charts to work from. I do this because weekly charts show the strength of the trend more clearly.

Then I apply multiple moving averages, such as the Guppy or Hull examples.

Finally, I use ADX system - Directional Movement system, on weekly setting, 14 periods - no firm reason for the 14 periods - just a good starting point.

I notice you have CCI - I find that a 3 period CCI is a good oscillator which gives an entry point at a retracement in price. I do not use it though, because the chart can visually tell me the same information.

Too many indicators clutter my charts.

Kind regards, and good trading - Ingot54

PS: Ignore the arrow below the caption box in the chart below. It has to point somewhere, otherwise it would point back into its own box, obscuring the text. The low for the week of $15.75 refers to the low point of the last red bar, not where the arrow points.

Unfortunately this software can not place text where it is best suited.

pbl_weekly


Keep Smiling

Trading style :CFD's predominantly. Looking for ways to enter CFD trading over long term.

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efficiency
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Wednesday, February 15, 2006 - 05:14 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



MACD is nothing more than two high frequency filters. Lag rather than predict. Ed Seykota, who has more money than all of us combined, wrote a negative dissertation on the MACD in Futures Magazine around 1984.

The ADX is a remarkable indicator. I scan each day for issues breaking out from below 20. In other words, strengthening/emerging trend (whether up or down).

DMI is good, but I prefer Bollinger bands AT the boundaries, with the intent of "climbing" a widening band.

ROC has some leading qualities, but is not normalized.

Relative strength has predictive qualities. It will start to fade (or rise) BEFORE the underlying price does.

Volatility also has predictive qualities. A narrow range will eventually lead to range expansion (whether up or down)

Guppy moving averages, an improvement on Dawn Bolton-Smith's clusters, are also excellent. For entry, the short ones should be moving AWAY from the long ones (preferably tight). Short ones repelling off wide/stacked long ones is a weaker, but still valid, confirmation.

CCI, just a variation on a host of redundant oscillators including Stochastics, %R, RSI, DMI etc. Oscillators work in choppy markets but remain over-bought/over-sold for extended periods of time in a trending issue. Which..........brings us back to the ADX. An excellent trending filter.

Buying breakouts has better probabilities than trying to catch falling knives reversing. Paying up for proof is the opposite of the seduction of a "bargain"

Irrespective of the natural fascination with indicators, nothing beats good money management (position size and not exiting hard found proving positions too soon) and risk management (adhering to stops and pride in keeping losses SMALL).

(Message edited by efficiency on February 15, 2006)


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ingot54
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Wednesday, February 15, 2006 - 06:29 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Efficiency - nice post.

The ADX is a remarkable indicator. I scan each day for issues breaking out from below 20. In other words, strengthening/emerging trend (whether up or down)

The ADX is probably the only indicator I really take much notice of these days, in an evolving approach to Analysis. It's the weekly trends that do it for me.

But can you elaborate a bit on why you prefer breakouts, as opposed to buying in retracements in strong uptrends?

Buying breakouts has better probabilities than trying to catch falling knives reversing. Paying up for proof is the opposite of the seduction of a "bargain"

This would explain your liking for Bollinger Bands, which I am not qualified to discuss - always found them working after the bird had flown, similar to breakouts.

My thinking goes like this: Regardless of whether you enter on a breakout, or a retracement, you still have to exit on your stops. The problem for both approaches, is that :

1) The breakout will be a false one, and price will snap back to baseline

2) The retracement will be the beginning of a longer-term trend

However, the advantage of buying on retracements, is the quick move into profit as the trend resumes, as opposed to missing that profit while waiting for the breakout to be confirmed.

Your qualifying statement : Irrespective of the natural fascination with indicators, nothing beats good money management (position size and not exiting hard found proving positions too soon) and risk management (adhering to stops and pride in keeping losses SMALL)should be written in bold lettering above every trader's workstation.

I would appreciate any thought you might have on the place of VOLUME as an indicator, either alone, or in combinations such as VWAP or Equivolume.

I will sometimes take a glance at Equivolume history, when analysing small caps, but see it as a filter, as opposed to an indicator.

cfr_E

VCR_ax_E


Keep Smiling

Trading style :CFD's predominantly. Looking for ways to enter CFD trading over long term.

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efficiency
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Thursday, February 16, 2006 - 02:26 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Not mentioned was, in addition to technical analysis, I also maintain spreadsheets on all the stocks I follow. A better "feel" for the stock and I quantify what I see graphically. Another of many filters.

Actual entry is a buy stop based upon a spreadsheet price. I trail my stops at 2.5 ATR, When it reverses course I'm either stopped out (when long) OR entered (if set up and filters confirming). A matter of semantics, but you may consider that a re-tracement. I call 'em breakouts.

False breakouts at times occur, but, a (true)breakout that occurs before the apex of a drawn triangle tend to be more reliable.

I give NO credence to volume. A mere 100 shares can establish a price point. Unfortunately I've experienced this on less than ideally liquid stocks I have been short. Meaning, a mere 100 shares can bring the capitalization of the entire company up. Volume satisfies the basic instinct of safety in numbers. No predictive qualities.

But.....volume is nice to have when one wants to exit.


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stevo
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Thursday, February 16, 2006 - 07:08 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Rate of change (ROC) is a much under-rated indicator for detecting trends.

It's one of the few indicators that look at not only the direction of a move but also the strength. RSI, ADX, MACD, stochastics do not give you a comparison of trend strength with other stocks. ROC will tell you that one stock is up 100% whilst another potential buy is up 10% over the same period. Stocks can be ranked by % move using ROC.

It is also simple to understand - probably one of the simplest after price itself. If you want to get a little fancy you can do rate of change on a moving average, OHLC 1 day average, a linear regression line or use anchored momentum. Or you could use multiple ROC indicators looking back different periods to see how consistent the trend is.

I think volume can be useful, but it depends on the market you are trading. I find it more useful on smaller cap stocks than on top 100 ASX stocks.

stevo


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david_louisson
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Thursday, February 16, 2006 - 09:24 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Ingot54

Re: trading retracements versus breakouts, I see it as an entry timing issue:

1. In an uptrend:

[insert 1 uptrend]
a1

The 'early bird' trader seeks an aggressive entry somewhere in area "A", as the price is falling back into trendline (and/or other) support.

The more conservative trader waits evidence of a resumption of the uptrend, and enters somewhere in area "B".

The ultra-conservative entry option is to wait for the price to exceed the previous high, i.e. delaying entry until the price reaches area "C". This is effectively the equivalent to a breakout from a sideways pattern (see below). In this situation he is forfeiting a better entry price for what he hopes to be greater probability that the uptrend will continue.

Entering at "B" or "C" allows a protective stop to be placed just below the local low (which seems to be a popular method). Given this, entry at "B" offers a better reward/risk profile but increases the risk of being prematurely stopped out.

Of course one could invert the diagram in the case of a downtrend.



2. In a sideways pattern:

[insert 2 sideways pattern]
a2

Those who are looking to 'channel trade' the range enter at either "A" (anticipating the bounce) or "B" (bounce confirmed), while the 'breakout trader' waits for a breakout, entering at "C" (preferably on high volume).

Channel trading carries higher risk: there needs to be strong evidence of support at the lower channel boundary, especially as one is not trading with the backing of an established uptrend.

Just my (unconventional?) perspective.

David

(Message edited by david_louisson on February 16, 2006)


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davkell
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Thursday, February 16, 2006 - 11:00 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Effieciency; When you said you also maintain spreadsheets of the stocks... what did you mean? Spreadsheets of what? Just the raw data, or do you impose formulae in some way?

Curious!

Thanks.


"Trade Your Way To Financial Freedom" - Van K Tharp

"Manage the downside; the upside will take care of itself" - Donald Trump

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efficiency
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Friday, February 17, 2006 - 01:10 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



No big deal, another filter and a matter of style.

Date/close/True Range/Average true range/LLC 10 days

I trail the stop 2 days ATR from the close. When long, a stop goes up (but never down). When short, vice versa.

One could use OHLC instead. Or include volume.

IF I was going to go to that much effort, I would incorporate the following formula and run a cumulative total

((C-O))/(H-L))* V

I'm more concerned with getting the direction right, correct position size, riding my gains and cutting my losses.


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ingot54
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Friday, February 17, 2006 - 03:22 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



David - I would still enter during the retracement period of an uptrend, for the simple reason you mentioned - probability.

Regardless of where an entry is taken, we have no way of knowing where the price will go in the future. If you are going to be stopped out, you will lose the same % regardless of entry point, providing the formula calculating stops is constant for each method.

I would rather enter at the lowest point, with a probability of being stopped out, but the possibility of a rally, than entering at the breakout/confirmation of breakout, and the same chances, with one difference - the rally may have already run its course, by the time confirmation arrives.

We are getting on to strategy here. But the ADX will already have me in the confirmation stage anyway, so it is really academic.


ASX Stocks 20-minute delayed





Keep Smiling

Trading style :CFD's predominantly. Looking for ways to enter CFD trading over long term.

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msparks
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Sunday, March 05, 2006 - 10:18 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Check it out David L
How can these lines be so accurate ?
Close was right on the fibbo line.
Helps when it is a technical support/resistance as well

But why is it so,the twilight zone,the bermuda triangle,the x files,or just a simple coincidence

Update from previous posted chart of ctx.


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