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theArtfuldodger
21-09-2009, 05:23 PM
Hey guys! Just thought I'd post my TA questions in a seperate thread from my tax questions - might heighten of the chance of some replies =)

Thanks to Shasta for answering all my tax questions! You're a legend mate.

Ok, onto the TA:

Could someone please briefly explain each of the following technical analysis measures:

- RSI
- Bollinger bands
- Stochastics
- The significance of volume

And...

- Are standard deviation channels really that useful? Do the statistical assumptions hold true (95% of all values within 1.96 s.d., 90% withing 1.645 etc)? Surely they don't (line of best fit is not the average and can the movements really be assumed to be normally distributed)?

What would be simply excellent is if an experienced TA (Phaderus? I've read a lot of your posts and they are fantastically informative) can give me perhaps between 5 and 10 of the basic and most useful TA theories/techniques to focus on while I get used to all this sharetrading stuff. Personally, after reading some literature on the topic, I am planning on being primarily FA orientated, but I definitely want to implement some TA for trend identification purposes (the whole Fibonacci numbers things seems a bit far-fetched to me... but I'm a noob, so what do I know..? :D lol).

In summary: some basic advice on getting grounded in TA please!

Thanks guys! This forum is great (had it recommended to me by a Forsyth Barr senior broker when she realized I was simply too poor to pay her extortionate brokerage fees... >< ah the life of a poor lowly student). :)

Another MEGA NOOB Q:

I realize 'traders' trade for short-term gains, and primarily rely on TA to predict trends (profiting off the peaks, buying again on the troughs), but just how 'short-term' is short-term? The only charting software I have encountered updates awfully slowly (using downloads of Yahoo! Finance with Incredible Charts sometimes leaves me a day or two behind). I was under the impression that 'day trading' would involve identifying the smallest fluctuations in even the day-to-day, hour-to-hour patterns and buying/selling, profiting accordingly - but with the chart software I have, identifying them this precisely would be impossible (well, pretty much). Is my understanding fundamentally flawed? Or do I need to just not be cheap and actually pay for some decent software?

Thanks.

wbosher
21-09-2009, 06:25 PM
Check this site out - http://stockcharts.com/school/doku.php?id=chart_school

I'm sure Phaedrus will join us soon with some advice, he knows more than most of us will ever forget.

theArtfuldodger
21-09-2009, 06:28 PM
Thanks wbosher =)

Looks useful! I'll check it out while we wait for Phaedrus' sage counsel! =D

Phaedrus
21-09-2009, 06:52 PM
TAD, it would take half a textbook to answer all your questions properly. Here are a few more sites offering some introductory info that you should find helpful.
http://www.investopedia.com/university/technical/
http://www.meydan-forex.com/files/Introduction%20To%20Technical%20Analysis%20ENG.pdf
http://www.incrediblecharts.com/sitemap.php

This is a list of the 10 TA tools that I find most useful :-

Trend lines.
Moving Averages.
Support/Resistance levels.
On Balance Volume.
Relative Strength Index.
Momentum.
Relative Volatility Index.
Stochastic oscillators.
Directional Movement Indicator.
Candlesticks.

I'm happy to help with specific queries, but first see what you can find via Google!

theArtfuldodger
21-09-2009, 07:10 PM
Cheers big P! Yeah, I'm all questions atm >< . I'll get reading. I was hoping you could just clarify my final inquiry:

I realize 'traders' trade for short-term gains, and primarily rely on TA to predict trends (profiting off the peaks, buying again on the troughs), but just how 'short-term' is short-term? The only charting software I have encountered updates awfully slowly (using downloads of Yahoo! Finance with Incredible Charts sometimes leaves me a day or two behind). I was under the impression that 'day trading' would involve identifying the smallest fluctuations in even the day-to-day, hour-to-hour patterns and buying/selling, profiting accordingly - but with the chart software I have, identifying them this precisely would be impossible (well, pretty much). Is my understanding fundamentally flawed? Or do I need to just not be cheap and actually pay for some decent software?

What I mean is: is there actually software which will update in real time, as the stock is bought and sold and will provide detail down to the very sale, so you can see even the smallest fluctuations (on the scale of a few hours) and therefore make the biggest profits? Or is the only way to achieve this actually visting the exchange and participating in person? OR is this simply not the level of detail which is traded at?


What a 'mouthful'! I hope you get the gist!

Thanks a tonne. These resources look really great!


A.

AMR
21-09-2009, 09:06 PM
DON'T daytrade. Not until you have at least a few hundred hours of experience with non-leveraged instruments, a well backtested plan, knowledge of your emotional flaws, and something outside trading to keep you going if you run into a bad patch.

It's the insane amount of leverage which makes them profitable.

Phaedrus
22-09-2009, 08:49 AM
Just how 'short-term' is short-term? What's in a name? For some, anything less than 12 months would be "short-term", for others something less than a day. For me, maybe a week?


I was under the impression that 'day trading' would involve identifying the smallest fluctuations in even the day-to-day, hour-to-hour patterns and buying/selling, profiting accordinglyThat's roughly it. Answer me this though, why are you so interested in day trading? Do you realise that day-trading requires the highest levels of knowledge, discipline, capital, skill and experience and that the majority of day-traders go broke? And you (a beanie!) want to START OUT on day-trading??? You'd be cannon fodder.


Is there actually software which will update in real time, as the stock is bought and sold and will provide detail down to the very sale, so you can see even the smallest fluctuations (on the scale of a few hours) and therefore make the biggest profits? Yes there is - it does all that and a whole lot more besides. Forget your timescale of a "few hours" - even a few seconds is unacceptably slow. For day-trading you need live streaming data, updating your charts in real-time with, for example, a new candlestick every 60 seconds. (That's not an update every 60 seconds - updates are live and appear in real-time as trades occur.)


.....OR is this simply not the level of detail which is traded at?Depends. The idea is to select a level of detail appropriate to your preferred investment timeframe.

theArtfuldodger
22-09-2009, 10:52 AM
Wow fantastic Phaedrus! Thanks. Great explanations. You and Shasta should write a book! =D

"Cannon fodder" lol. Yeah, I'm definitely going to get some experience first, I was just interested. Day trading sounds exciting - hopefully I'll be at that level in a year or two or so =)

Thanks everyone for your input. All very informative =)

wbosher
22-09-2009, 11:07 AM
You and Shasta should write a book!

I've suggested a few times that P should write a book...still waiting. ;)

shasta
22-09-2009, 02:40 PM
Wow fantastic Phaedrus! Thanks. Great explanations. You and Shasta should write a book! =D

"Cannon fodder" lol. Yeah, I'm definitely going to get some experience first, I was just interested. Day trading sounds exciting - hopefully I'll be at that level in a year or two or so =)

Thanks everyone for your input. All very informative =)

No point writing a book when there are so many good ones out there.

If you want to combine the best elements of TA & FA, i would recommend investing $60 (or whatever the cost is) & buy the book, "The Aggressive Investor", by Colin Nicholson.

Comes with a CD with case studies & filters for both TA & FA ;)

Along with "The Intelligent Investor", these 2 books are well worth reading.

Well worth the investment ;)

theArtfuldodger
22-09-2009, 09:39 PM
Thanks S. I went to the library today but some sod has already got the "Intelligent Investor" on hire AND there's already another in line for it after him. I'm next though! I'm looking forward to reading it!

I'm starting to put together a general system/process of analysis for investing. I'm thinking I'm gonna go for a hybrid of FA (for identification of opportunities) and TA (for entrance/exit strategy).

Here's what I've identified (noobishly) as being what I see as most relevant/important:

FA Qualitative techniques

- Company direction and ethos
- Management evaluation
- Future expansion prospects/pending projects

FA Quantitative techniques

- EPS + P/E ratio
- Debt ratios
- Cash flow analysis
- ROA
- *Attempted* valuation of pending projects

TA techniques (I've made a bit of a distinction here...)

RIDING THE TREND

- Support/resistance theory (standard deviation channels + candle sticks in particular).

(s.d. channels really seem relevant to me for some reason, given what I've learnt in stats... does anybody else favour these?)

TREND REVERSAL RECOGNITION (entry/exit)

- Volume analysis
- Still working on this...


I realize the volatility of various stocks varies greatly, but given the analysis I've done on NZO (NZ Oil and gas) I think I'll be looking a trading time frame of roughly 2-3 weeks (medium-term trends).

Right! Time to get paper trading!

I realize most of what I've said here is pretty random crap, but I'm excited about all this and I couldn't help but share. Tell me what you think.

Cheers!

A.

stone small green
22-09-2009, 09:52 PM
another important things in trading I guess is how you react to things,
don't get too excited when u earn
and don't get too sad when u loss,

theArtfuldodger
23-09-2009, 03:53 PM
Thanks AA. That chart is particularly good. I'll make a good effort of fully understanding it (not sure what a "Doji" is etc) a little later.

Just a question regarding this statement:

"not good to focus too much on Trading time frames you have to re-act to the market movements which means you wont know your position time frame until the market tells you."

When I said I've decided on a timeframe of 2-3 weeks, I meant based on the historical fluctuations in price. This particular 2-3 weeks i quoted was from looking at the price fluctuations in NZO's stock price (highs/lows seem to occur alternatively at roughly 2-3 weeks intervals). I realize that the volatility of other stocks will not be the same. EG - another stock may have similar fluctuations, but perhaps more frequently, maybe every week or so. Is this not a valid way of assessing roughly how frequently I will be buying/selling? I also realize that the techniques you mentioned will probably allow me to predict this fluctations even more accurately, but for a rudimentary analysis of volatitliy, is just looking at the graph like this sufficient to decide on timeframe?