TA help required, did I make mistake or just unlucky?

**STRAT** · 07-07-2009, 12:48 PM

Originally Posted by wbosher

That's what has me confused. Almost everything I have read online and in books says to plot an upward trend using the lows of the day and a down trend using the highs. The charts using closing prices seemed to signal a break below the trend line far earlier than the the bar chart. I'm starting to wonder if I should start to use closing prices to plot trend lines rather than the OHLC.

Obviously other indicators screamed stay out but my toolbox at present is pretty limited as I explained earlier.

This trade was based more on what I thought was a good chart pattern than anything else, and I though the support at 15c may hold.

Back to the drawing board. :o

Perhaps Phaedrus could comment on the merit of High/Low vs. Close for Trend Lines. I use close but would have wrongly read support into the number of days lows that touched on the horizontal line of your descending triangle but either way I would have waited till it a breakout occured before buying.

**STRAT** · 07-07-2009, 12:54 PM

Hey Dragonz.
Are you able to make the Auckland Share Trader pissup on Saturday?

**wbosher** · 07-07-2009, 12:56 PM

Originally Posted by STRAT

Perhaps Phaedrus could comment on the merrit of High/Low vs Close for Trend Lines but either way I would have waited till it a breakout occurs before buying.

Believe me...next time I will! So to sum up:

1. Don't trade decending triangles
2. Check for Bearish divergences in the preceeding trend
3. Use different types of charts to confirm trend.
4. Wait until breakout confirmed before depositing my money into someone elses pocket!

Looks pretty simple, eh.

**dragonz** · 07-07-2009, 01:06 PM

Originally Posted by wbosher

That's what has me confused. Almost everything I have read online and in books says to plot an upward trend using the lows of the day and a down trend using the highs. The charts using closing prices seemed to signal a break below the trend line far earlier than the the bar chart. I'm starting to wonder if I should start to use closing prices to plot trend lines rather than the OHLC.

Obviously other indicators screamed stay out but my toolbox at present is pretty limited as I explained earlier.

This trade was based more on what I thought was a good chart pattern than anything else, and I though the support at 15c may hold.

Back to the drawing board. :o

This came up on my watchlist as a possiple swing trade. But my overall indicators told me to stay out of the Market at the moment.

IMO TA works best in a Trending Market. Your win/lose ratio sinificantly decreases as the market flattens out. I use 10 SMA / 30 EMA crossover as a visual tool to indentify the strength of the trend. The 10sma crossed below the 30 ema last week (All Ords)and was a red flag for my style of trading.

I have set up a couple of accounts that I can short from if a strong downtrend developes. If not then I'll stay mostly in cash until I see a positive 10/30 crossover.

So in short I say look at the overall market 1st, then individual shares second when using TA.

Oh I might add that I did break my own rules and took smallish positions in 4stocks, only 1 of which is in positive territory at the moment. This was despite having the 10/30 overall market rule pinned next to my computer.

**STRAT** · 07-07-2009, 01:07 PM

Originally Posted by wbosher

Believe me...next time I will! So to sum up:

1. Don't trade decending triangles
2. Check for Bearish divergences in the preceeding trend
3. Use different types of charts to confirm trend.
4. Wait until breakout confirmed before depositing my money into someone elses pocket!

Looks pretty simple, eh.

Yeah mate. Simple as a slot machine at the Casino

Just wait till you get it all right and still loose some money

**dragonz** · 07-07-2009, 01:13 PM

Originally Posted by STRAT

Hey Dragonz.
Are you able to make the Auckland Share Trader pissup on Saturday?

I have a mate coming to stay with me over the weekend. I might see if I can meet him in Auckland 1st for a few drinkies.

**wbosher** · 07-07-2009, 01:26 PM

Originally Posted by STRAT

Yeah mate. Simple as a slot machine at the Casino

Just wait till you get it all right and still loose some money

Can't wait...

Would you buy the next day after a close above resistance, or as soon as it is breached on the same day?

Just a wild guess, Fender man?

**Phaedrus** · 07-07-2009, 02:04 PM

"I was under the impression that triangles differed from pennants in that triangles usually formed over a much longer time frame, months rather than days/weeks, where pennants were usually only days to a few weeks".
According to Bulkowski, flags, pennants and descending triangles are all short-term (up to 3 months) consolidation patterns. The salient point here is whether the bottom line of the formation is flat or not.

"I've never used the the momentum indicator, I'll check it out. Trying to keep the amount of indicators I use down to a minimum at this stage" It is essential that you have some sort of momentum indicator in your toolbox. There are plenty of others though eg RSI, RMI, Sto etc etc. You don't need a lot of indicators. I have a basic set of just 8 and rarely, if ever, use any others.

"We used different chart styles, you used the line and I used the bar. Both gave different results!" Not as far as your buy decision was concerned. You were looking for an entry, right? SDL was in a short-term downtrend and you were (should have been!) looking for a break of this trend. Your bar trendline and my Close trendline are both still unbroken.

"This has me a little confused as to what type of chart is more effective, and under what circumstances to use what type of chart."
Of the High, Low, Open and Close prices, which is the most important? The Close, no contest. So......which would be best to use for trendlines etc where you can only pick up one data point per day? Answer - a line chart of Closing prices. The plots are much cleaner and simpler as well. My advice would be to use line charts, unless you are interested in intraday data - in which case candlesticks are the way to go in my opinion.

"The charts using closing prices seemed to signal a break below the trend line far earlier than the the bar chart. I'm starting to wonder if I should start to use closing prices to plot trend lines rather than the OHLC."
Stop wondering! Would you really want to act on a buy or sell signal triggered by an intraday spike? Either way you lose.

WB, the bottom line here is actually the top line! Barchart, line chart, triangle, pennant, linear scale, log scale, divergences, oscillators etc notwithstanding, however the short-term downtrend line was drawn, it was not broken. It has still not been broken. The downtrend is still intact.

"My chart shows a bounce off the trend line on the 25/06 leaving the trend in tact for another day or so. I realize this one thing is not enough to change the analisis but was wondering if our data is different or the plot is different"
Strat, I think this is a function of chart size. With very small charts data points are often forced to jump pixels and at the micro level things can look OK but blown up to full size the picture may appear a little different. I can't see any obvious data discrepancies.