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
1 Like
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.
1 Like
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
2 Likes
[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.
Jumping in on this here is what my SimonSez4 looks like:
I’m wondering Quill what the MA5 and MAWEI 10 give me and are the colors right? Do the colors matter? Are these the short and longer trends to watch?
Below is SimonSez3:
Do the 2 look right above in what you evaluate for TA?
Thanks…doc
Doc:
The MATRI (5) and the MAWEI (10,0) are weighted Moving averages.
Now observe the above match the TSI as a confirmation.
Without the weighted Moving Averages.
1 Like
Quill,
regarding PARTP 15,2 and 20,2
SS4 with 15,2 is going to change quicker than the SS3 with 20,2 ? This will switch a red or green dot as the price changes direction based on the acceleration which is the 15 and the 20?
Is that correct?
The TSI is a confirming indicator?
I’m working on understanding the parameters for all this. I have been reading the tutorial on barchart and doing tutorials. Thanks for taking time out to explain and teach. You and Arindam get gold stars for your patience…doc
Doc,
As with financial statement analysis (FA), so too with chart analysis (TA). Nearly anything works some of the time. But nothing works all of the time. Why? Because markets aren’t equilibrium systems. They are complex --borderline ‘chaotic’-- dynamic systems that exhibit emergent properties. Thus, no matter which indicators are chosen and which parameters are used with them --on the basis of careful back-testing or just whim and aesthetics-- there are going to be losing trades. Therefore, a ‘middle course’ approach is most likely to ensure survival.
With PARTIP, pick a set of parameters that seems to work most of the time, well enough, for the markets you intend to trade and just accept the fact that the indicator will ALWAYS plot as you directed it to plot, but that the security to which you applied it might not have gotten the memo.
2 Likes
Thanks Arindam,
I was trying to figure out how the 2 differing sets of parameters impact what I am looking at so I could play with the numbers and test them…doc
Doc,
What you’ll find is that, as with any indicator, some sets of parameters do well with some sets of stocks/ETFs, and some do better with others. Also, how choppy or how well what you’re trying to chart trends or not makes a difference. In short, there isn’t just one variable, or two, or three, but many, each of differing importance under different market conditions.
Thus, if you try to optimize for one set of market conditions, you going to be out of synch in others. So take a middle approach and learn the nuances of a set of indicators and entry/exit rules that seems “good enough”, most of the time, and just accept the fact that you’ll have losses that need to be managed.
Suggestion: if you really want to do some serious back-testing, then StockAnalyze will be your lowest cost approach with the lowest learning curve.
Quill, is this correct about simplesimon3 and SS4? I’m playing with supertrend (Arindam) and also working with SS3 and SS4…doc
2 Likes
Doc,
That is correct.
Thanks Quill, I wanted to make sure I understood the difference since I do some day trading as well as short term swing trading…doc