0.0.0.1 1st baby steps in investing:

John666

0.0.0.1 I bought some of the books recommended and going over https://school.stockcharts.com/doku.php

0.0.0.2 What else do you suggest I should do?

Cheers,

John666

markd

Choose a trade set up, any set up, and track how it works. For instance, choose a few stocks at random and set up a chart style with a 3 ma and a 10ma. Everyday after the close, or before the open, check for crossovers. Capture a screen print for each entry. The chart should end at the signal bar. Then follow those entries until an exit (3 crosses back below the 10, or some other exit of your choosing) and screen capture the exit and figure the profit or loss. Remember - you get in at the OPEN of the NEXT bar for entries, and you get out at the OPEN of NEXT bar for exits. The difference between those two prices is your (theoretical) profit or loss. Anything else is a fantasy. You can do this in real time, or you can go back and choose a start date from a couple of months ago. This process will give you a realistic idea of the profits and losses available if you took every trade. You take the screen prints so you know what the chart looked like at the time of the set up and the time of the exit. It looks a lot different if you can see the bars after the entry and exit points.

Then you can decide whether you can improve the results by picking and choosing trades. That part you would probably have to do in real time. If you use an indicator, be sure you read up on how the indicator is supposed to work first. Some of them are not obvious.

John666

0.0.3 The regular candles v. Heiken-Ashi:

which is better and why? I think most investors look at regular & ignore the ashi..

0.0.4 There's also the Renko 1 & point and figure? are they relevant and why?

0.0.5 There're a lot of variations on the ma people use.

Which 1s are better? You talk of 3/10 ma..

why not larger/smaller?

0.0.6 do they play well with other indicators?

markd

My personal preference is for more detail rather than less. HA, Renko and P&F all summarize data to some degree to reduce "noise". They all "work" or they wouldn't survive. I'm not aware of objective studies showing one better than the others. You need to try them to see which suits your cognitive preferences.

I picked 3/10 out of the air. You have to define (for yourself) what you mean by "better", and then try different combinations to suit your preferences. For some traders, 3/10 will be "better" because it produces more trades and therefore more opportunities to make a profit. For others, a 10/50 is "better" because it produces larger profits. Trader 1 will criticize 10/50 because you have to wait "forever" to get into a trade or take a profit. Trader 2 will criticize 3/10 because its too much work and the profits are too small. You can make or lose money with both of them, so which is "better"?

Asking which is better is a little like asking, which is better, a hammer or a saw? They are both good for their intended purpose and not so good for other things. Likewise, different charting methods and indicators better suit different styles of trading and different markets at different times.

John666

Cool.

Are there any studies about market analysis?

I saw a study that said that head-and-shoulders is more than 90% efficacy..

Do you use an excel spreadsheet to track your trades/Investments?

markd

There is at least one technical analyst who has compiled the statistical validity of Edwards and Magee patterns, but I can't remember his name at the moment - I will update if I find it.

Thomas Bulkowski - Encyclopedia of Chart Patterns

However, patterns are in the eye of the beholder, so even if you master the odds of each pattern, there is no guarantee the odds will apply to any specific instance you identify. Also, the odds for any pattern are likely to differ between analysts for the same reason. So I am skeptical about the 90% figure.

Due to the random nature of the market, most signals, of any kind - patterns or indicators - are about 50-50. Occasionally you get 55-45, and more rarely, maybe 60-40. Also, the better the odds, the fewer instances of the signal. That in itself may account for the better odds.

That said, buy signals are more likely to get better results in a bull market and sell signals in a bear market. The old adage that the trend is your friend is true. You just have to be sure you are trading in the same time frame as the trend in place.

I find excel and powerpoint extremely useful for identifying and evaluating entries and exits.

lmkwin

The best chart is going to be one that works with your system. If you can get a chart to speak to you, then you have found the right chart. All charts have their strengths and all charts have their weaknesses.

A great thing to learn is to only look at buying things when the "market" is looking up. Not when it is due to go up. Not bound to go up at some point. The market needs to be supporting higher prices. The market is whatever area you are looking at or thinking about. An index, a sector, an industry, no matter how great the setup, it's got a greater chance of failing if the market that the security is in, is not supporting higher prices.

@markd mentions MA crosses. You may like Price Channel breakouts. You have to think about what it is that you want to do before you do it. Look at a chart for a security that you like. A security that has done well. What characteristics are showing on that security that make you like it? When would you have liked to have gotten involved with the stock? When would you like to have removed your involvement? It's all there on the charts. Once you learn their language, then you can have a dialogue with them. All charts speak about the same thing, a consolidation of price data, it's just that they have different dialects to tell the story.

ALL charts summarize data, other than a tick chart. A 1 minute chart is a summary of data. A 1 month chart is a summary of data. As far as objective studies, there are all sorts of studies on different "objective" patterns and triggers. There have been numerous texts written. One of the encompassing ones is: https://www.amazon.com/Encyclopedia-Technical-Market-Indicators-Second/dp/0070120579

He found that Parabolic SAR might give an edge, over the basic above a trendline own, but it's all about finding the things that speak to you. Dynamic CSS Patterns on Point and Figure charts are pretty good at besting their mothership index but, if they don't speak to you, or... they do and you ignore them, then they aren't the ones for you.

If you are new to investing you need to take your time. Decide for yourself what it is that you want. Play the long game. Not the short game. EVERYBODY is trying to sell you something. For many, that's how they make their money. Not from investing, but from "teaching" how to invest. Look at everything with skepticism. You can't "win" 100% of the time. You will have losses. It's a beautiful thing. The key to me is to take losses and let winners be. Losses have value. They provide both a tax asset and also provide dry powder. Dry powder is cash available for the next ideas.

If you learn only one lesson from this post, let it be to invest where the market is supporting higher prices. Swimming with the tide is so much easier in the long term.

John666

Bought the Encyclopedia of Chart Patterns (Wiley Trading Book 347) 2nd Edition as a kindle book.

I'm willing to invest as much time and money as it takes to gain financial independence.

Currently, a freelance web programmer..

I noticed that it's better to use support & resistance zones v. lines, because probability vice when a security falls within the zone and/or break it is higher for it to point to a trend..

0.0.7 What's your take on that?

BTW, have a great weekend,

John.

PaulOregon

I have found that I really needed to have a discussion with myself about timeframes. To carefully define the different ways I want to be investing. That will answer your question about moving averages. Just play with them until you get the answers you like. I do think support and resistance are more important than candle patterns or chart patterns but those things often send a good message. Also as Imkwin said, don't give other people your money, invest it.