OT: Asking a Favor and Making a Plea

Thanks a lot Arindam. Yes, I tried to play around with it a bit to get a feel for the different metrics. Thanks again for doing this.

Charlie

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Charlie,

Are you a fly-fisherman? At some time, someone probably tried to show you how pick line up off the water, throw it back behind you and then shoot it toward a target, maybe a rising fish 30’ 40’ feet from the boat. When he (or she) did it, it looked so graceful and easy. But when you tried it, if you didn’t nearly hook yourself, or pop the fly off, or wind-knot your leader, the line certainly didn’t lay out gracefully on the water, but splashed down, spooking the fish.

Charting stocks ain’t no different. I’m fast and fluent, because I’ve done this stuff hundreds of hours. Same-same with Quill. The good thing is that this charting stuff isn’t impossible to learn. It just takes practice, practice, practice, all the while keeping this thought in mind. “Is this chart just a bunch of jumbled lines, or do there seem to be patterns in how prices are printing themselves across the page?”

Spoiler Alert: Some charts really do have nothing to say. Therefore, don’t torture them unil they confess to what you want them to say, but isn’t really there. If a chart isn’t drop-dead obvious, go to the next one. OTOH, when you find a stock or ETF that seems to trend well, then is the time to start experimenting to see how much can be varied, changed, eliminated.

Here’s a simple example. MACD --the Moving Average Convergence Divergence indicator-- is just that. It’s just a plot of the moving average of the difference between two moving averages, a shorter/faster one and a longer/slower one. By default and custom, the short avg is 12 bars. The longer is 26 bars. The diff between the two is plotted with a 9 bar avg.

Now, here’s where variations can arise. All of the MAs can be SMA or EMA or whatever MA type you please that the charting program allows. Same-same with the (12, 26, 9) parameters. What’s the mathematical relationship between them? If 26 is bumped up to 27, then the formula becomes (4x, 7x, 3x), right? In the default version, X = 3. But it needn’t, and faster MACDs can be constructed, such as (9, 21, 6) or slower versions, such as (20, 35, 15). Same-same with evey indicator. All of them can be taken apart and changed, as can every part of a chart.

For sure, sometimes the changes are merely “aesthetic”. Sometimes, the changes are material. The killer combo is charts that look good and that quickly say what they have to say. In time, you’ll develop a feel for charting and be able to see that most charts shown on the business news are ugly, useless junk created by people who think they understand technical analysis, but don’t use it themselves in their investing/trading, or else their charts would be a lot simpler and a lot cleaner.

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Thanks Arindam. I think I am slowly getting it, which is definitely something that I am grateful for. I am closely following what you and Quillpenn are posting on these topics, and trying to learn as much as I can.
Thanks again,
Charlie

Charlie,

Thank you for your ‘thank you’, though I’d again say that I’m the one benefiting most from these posts and exchanges, because it’s forcing me to review and re-think my methods and goals.

It’s no secret that the Gardner brothers, Tom and Dave, hate Technical Analysis (TA). Just read their books, which, by the way, really are well written and are fun to read, but ultimately not very useful, no matter whether one intends to "invest’ or to “trade”, because the G BoyZ are clueless on two things: #1 how to manage risk. #2 how to maximize one’s entries and exits. Those two things are related, of course, which is why TA is needed and why the “proper” way to invest is this:

FA (Fundamental Analysis) + TA (Technical Analysis) = RA (Rational Analysis)

Arindam

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[quote=“jhawker85, post:16, topic:86900”]

You just need to use SPXS and SQQQ for when you would be otherwise out. [/quote]

I’ve played with that idea for years. I always decide not to because you’re subject to the same whipsaws you get trying to time going long. So, you’re just upping your chances of losing more money. If could discern a real, sustained trend change from a mere head fake I’d do it.