Warning , Warning , Warning , Will Robinson ....Guru Alert

@Alex Straker said:

That sounds similar to one of my old systems which was essentially a top down model.

Determine the overall trend of the market, then strongest sector(s) then stocks within the sector. I used Metastock scans to do this. I was a software programmer so that helped. Relative strength and volume indicators etc were used to determine momentum. Add to that charting pattern analysis which I spent years studying to help fine tune entry. The usual money management, position sizing rules and stop loss were used. I would then pyramid in on certain signals as the trend was confirmed.

I also used Fibonacci Trader (multiple time frames software) and Trade Station for futures trading.

I knew one extremely successful futures trader who started educating me in his multiple times frames systems which he used to trade the SPI and commodities but we moved overseas and we needed to use capital to buy a home for my wife's ill father before I could take take full advantage of his education / mentoring.

Of course all this takes time and study to master (a lot) but as you say most will fail. After many years I decided I didn't have the psychology to handle it. Especially futures trading which given the high leverage is definately not for the faint hearted. And believe me I studied and tried to master psychology starting with education from Van Tharp and numerous others. Add to that meditation and NLP. I could have stuck with it but decided priorities lay elsewhere.

The best thing I ever did was give up trading then go back to Dividend growth investing for income in stocks and LICs. With LICs periodic buying at a discount to NTA, participating in discounted capital raisings, taking advantage of dips and sensible use of leverage particularly in bear markets and crashes has given us a level of dividend income we never dreamed possible. In early retirement now we continue to marvel at how magnificent dividend investing has been for us. Simple, requires bugger all time and is stress free. Pure bliss. I wouldn't recommend trading to anyone nowadays.

 

@Alex Straker said:

Thanks for sharing your story. The following is a honest question not intended to be seen as being an ar*ehole:

Genuinely in those 25 years of searching for the fundamental / TA trading holy grail what would your wealth be right now if Instead you had just used a simple long term dividend investing approach right from the start?

I would suggest you'd likely be be much wealthier than you are now. I know I certainly would have been!

 

I traded SPI futures in the 90s.
This means trading against all the major finance institutions and fund out to take your $$.
As a small trader you need to take a long term view or devise a method of taking crumbs that fall as the big boys battle for their food.
Tuff gig, made some lost some...doubt i came away with much.

None of that TA garbage you find in the books works.
The most profitable TA I ever used was a couple EMAs.
But not as entry or exit, just as an indicator.
And using only one time frame (as you read in the books) is suicide.
You have to trade across multiple time frames or get whipsawed.

Forex was a little less rigorous and options easy in comparison.

 

Agree on the multiple times frames especially with Futures trading where there are a lot of technical traders. There was very little in books available on this method at the time I was trading. The software I used was the first available with Multiple Timeframes:

Fibonacci Trader - The First Multiple Time Frame Software for Traders

But for the vast majority trading is a mugs game including me in hindsight. Except for one Futures trader who was very successful the only others I knew who made substantial money did it through selling books and running courses on the subject. People assume if you've written a book you're a guru.

Come to think of it I've written a small booklet on LICs (see attached). So that makes me a guru. Best I get started on my future course tour schedule where I can make a motza.

Mawhawhawhahaha

 

Thanks for taking the time to write this up and share it, austing - very generous of you and much appreciated.

 

If you cross your eyes while looking at those pictures they join together and turn 3D

 

Having spent the last 9 odd years trying to make a buck trading forex & stocks using TA I would be reasonably confident in saying that 99% will not make it profitable enough to be worthwhile. Before that I traded for a top tier investment bank reasonably successfully - its so much easier trading for a bank.....
I still trade a long term system that rebalances every month based on moving averages (Mebane Faber;s work, nothing original of mine), but this really just controls drawdowns, and does not outperform the indexes massively.

Pretty similar path to Austing, and am firmly on the dividend path now.....

 

Shut up and take my money!!!

 

I was being sarcastic

 

A long time ago I used to trade this system and similar multiple timeframe analysis systems in the futures markets using the NinjaTrader platform. I found, out of all the trading approaches, MTF systems seemed to have the best results, at least for me it did. It was very time consuming though and the returns/emotional capital I dispensed was simply not worth it when compared to other business/ investing ventures.

Three Ducks Approach:

The 3 Duck's Trading System

Also I found the Wycoff theory of how markets work, the 'big player' loading up on stock when the majority are dumping due to fear, then they test the market to see where supply and demand is before they take prices up again, only to then offload at the peak when the herd are buying... then they test for demand.. and when there is no demand and they have forced as much as they can into the market they let it crash... only to buy at the bottom again and fill their warehouses.

Also according to Wycoff the 'Smart Money' totally use media headlines as key times to make major moves in their plans. It made sense to me. They need to buy at cheap prices otherwise they cant make money, and they need to sell when prices are soaring in order to make the most profits. That's why most traders lose.

I found it totally fascinating how the big players really work and how well planned and methodical they execute their buying and offloading campaigns. Usually on bad news they will buy, and sell on good news, when the herd is buying more and more.


Something like this according to Wyckoff:

 

To me one of the greatest mysteries ever is how you can spend months designing and backtesting a system that appears very successful , and as soon as you go live it turns to crap, go back refine/redesign the system, spend months backtesting, go live again, turns to crap, and on and on you go like a hamster on a wheel. I know its all psychological, have also been on a couple of Tharp courses etc - it's very very tough to do successfully, and the shorter the timeframe the tougher to do.

 

I was using hand drawn swing charts and a couple EMAs on my trading screen.
Did it so much that I still see those swings just looking at a chart. And I still find them very useful.

I decided life is too short and the SPI was too expensive a game for me and started playing Oanda early 2000s with small amounts.

Now I've been slowly pulling out my funds from FX and it will go to stock trades.
I did ok but I was really just playing and not willing to risk enough to bet on doing it again.
I'll be back in (only 10-20k) when the AUD is below 60c or above $1. Till then just like playing video games with church change.

Still waiting for this TA strategy from @Alex Straker

 

Thanks for sharing journeys I can empathise with a lot of what is being said and it is absolutely true that many who attempt to go down the path of active 'trading' find it extremely tough going.

@austing Thanks and I'm glad you asked. This is a very good question and I can appreciate why you ask it. Happy to answer as best I can....

Please bear in mind what I have already mentioned in prior posts that I do not worship short term trading as the only approach. As some PC members are already aware I am also the developer for a highly sophisticated and specialised piece of software specifically for cash flow based accumulation strategies (in particular debt recycling). This software is currently used by many professional financial planners throughout Australia including under major institutional licenses and is based around modelling complex financial structures for steady long term accumulation along the lines of what @austing is speaking of and advocates on here (and of course so do I). In fact @austing (or anyone else for that matter) I would be happy to give you a personal demo of this sometime.

Now back to the question....for the first 10 years of the 25 the answer is yes @austing you are correct, I wish I had more structure, a simpler approach and better quality mentorship (or perhaps I did and was not listening?). This was before I joined the financial services industry and I still had many of the typical misconceptions of an inexperienced beginner.

Following that period, over the next 15 years the answer is quite different in that TA has contributed significantly to the portfolio results and greatly enhanced what I would have achieved otherwise, particularly since taming the dual headed beast know as money management and leverage.

To expand on this: for the first 10 years of the 25 years I was more focussed on property accumulation. Although TA was a passion I did not have a large enough account or the spare cash flow to make significant progress in the journey. Like most TA enthusiasts I wanted to try and learn different things and was on the search for knowledge but was not able to gain consistency. I was frankly too aggressive in my approach and unrealistic about what could be achieved.

I was teaching music as a profession up until 2005 and did not really understand the power of long term accumulation at this time. @austing is right that if someone had of shown me a simple accumulation pathway I would have been more likely to establish wealth more quickly during this phase as my TA skills and general financial knowledge were underdeveloped at this time. Although I did not outperform the market I did learn a LOT from that period and continued to accumulate solid property holdings.

Since starting to study and join the financial planning industry in 2003 my whole thinking changed and fortunately for the last 15 years the majority of my wealth building focus has been on an extension of the type of approach @austing and other wise heads advocate on here: my core strategy has always been debt recycling and constant accumulation in to a quality income producing portfolio is a big part of that strategy.

However as well as that accumulation based core strategy, since meeting my main TA mentor at around the same time I joined the industry and 'making the turn' as a trader around 6 months in to his mentorship I have found the addition of TA skills to be invaluable in:

a) Increasing the strategic outperformance of the core accumulation strategy through a more targeted approach to DCA and lump sum market entries plus using relative strength and sector rotation to de-weight/re-weight the portfolio.

b) Consistently using a small subset of overall wealth to establish a small account specifically for rapid compounding and then upon reaching set goals, immediately moving the realised profit down the scale of risk in to other core assets. Alternatively using the proceeds to fund the deposit needed for a major asset purchase or to fund another life goal.

In reality anything that helps us gain a sense of true market value is worthwhile considering in our decision making and for me TA (although difficult to master) is one of the best tools for this purpose.

 

Hi @Alex Straker,

Thanks for that. We've admittedly been very tough on you. Unfairly so in some cases I believe. It's tough for Financial Planners on a forum heavily dominated by self-directed investors. We're a suspicious lot especially of new Business Members. Despite this the fact that you have politely responded to questions in a difficult environment says a lot. I look forward to your future participation here On the forum. Diversity of views is important.

 

@Alex Straker. Do you use a similar system for International investing? Eg ETF rotation based on region / sector.

Thanks in advance.

 

@austing thanks so much for your kind words and encouragement, always a pleasure to be discussing my true passion! No offense taken by any of the 'sceptical' posts, the topics at hand are always controversial and sensitive.

In answer to this question yes I do as the methodology is universal across all markets and instruments. @austing need to chat with you privately sometime, I have a couple of ideas to discuss.

 

@Piston_Broke happy to give you some more detail on this, will just warn you that the full extent of my TA analysis and whole strategic approach is a very deep rabbit hole. I fully anticipate there are some members here who will struggle to believe that some of the more 'esoteric' looking techniques could actually work consistently.

Let me relate a story from my early stages of mentorship in TA - I remember trading futures live at market open in the US (late at night in Aus) being scared out of my wits that the guidance my mentor was giving me would fail and I would suffer losses as a consequence. Time and time again my mentor would call a level to get long with a very tight stop loss and time and time again I would fully expect this stop loss to be hit and a loss to result from the trade yet this rarely happened and I found myself growing the account consistently week after week simply through blind faith. I had no understanding or appreciation for the validity of his TA techniques (primarily Market Geometry) at this time and was astounded at the consistent accuracy of his market calls - major turns in the market to within a few points of the correct level. This was the time I was first awakened to the fact that despite being an exceptionally difficult task to master, TA can indeed be applied successfully at an elite level of skill. The problem is that the number of professionals or competent amateurs capable of using TA successfully is tiny compared to the amount of general public using TA poorly and losing money or only breaking even, hence the reason a long term simple accumulation strategy is best for the average punter. Capital allocation, leverage and money management are another whole story, even good TA practitioner can make a complete b*lls up of their progress with poor money management or inappropriate leverage. Then there's emotions, discipline, psychology, you guys know the drill.

I don't wish to add the link to my education site again here because last time I got lynched for it but please scroll back and you will find it. Watch as many of the videos on the site as you can and also check out the blog and trade journals where every specific investment/trade opportunity we have provided to subscribers over the past 6 months in stocks and more recently currencies (over past month only) has been called AHEAD of time in the market and accurately recorded in our trade journal (this can be verified by a well known and respected PC member who helped set up the site).

I have some questions for PC members who have some TA experience and would be fascinated to hear the responses:

1. What kind of TA method do you favour and why?
2. Have you ever been mentored in or studied Market Geometry?
3. If 'Yes' to Q2, who were you mentored by and what MG linage do you descend from?
4. Does anyone understand what I mean by the phrase 'squaring of price and time'?
5. Do you apply TA concepts currently in your overall decision making in markets?
6. In the context of a well developed trading plan/strategy, which is more important to long term success - TA skills or a proven Money Management system?

Look forward to hearing some more personal stories.

 

I will have a go
1 - Now I use a simple 10 Month MA for long term buy/sell signals (Meb Faber did a paper on this). Works well, and has proved profitably in line with expectations since I started using it 6/7 years ago, and simple is good.
In the past I have been into indicators(too many to list..), Elliott Wave, Support/Resistance, Price Action, and I'm sure there are more.
2 - No
3 - N/A
4 - Sounds familiar, but I dont understand it.
5 - In some strategies.
6 - Both, with poor money mgt you are going bust at some point, and without a profitable strategy you will never make it.

As a general question, may I ask what sort of returns you are looking at?
If they are well above market, my next question would be surely the big hedge funds have researched this in depth, and it would be arbitraged out of the market. Or does the system only work up to a certain size and then slippage becomes an issue.
Despite my scepticism, there is some part of me that still believes that TA can work, however I have begun to see it as an area where only the exceptionally talented can make it, like elite sportsmen, and unfortunately I cant put myself in that category.
Interested to hear more about your stuff.
gav

 

Absolutely true!!!.....and that's only the half of it My mentor traded silver in the Pitts before electronic trading came along and the stories he has relayed to me would make your hair stand on end.

Part of the reason it is so difficult to trade like the big players is that price spends very little time at the ideal price zones and a lot of time at poor ones so you need to have awesome TA anticipation skills to be front running the 'whales' consistently. 90% of traditional lagging indicators can't anticipate the market in any meaningful way, you need to be using the drawing tools to mark up the chart and these will extend past the recent price action in to the blank space on the chart known as the future, therefore providing anticipation. Hence the importance of Market Geometry as the pinnacle methodology of discretionary traders.

It is indeed a source of endless fascination once you see this in action.....time and time again I see a news announcement cause a violent market move that pushes the price of a stock/currency/whatever into the ideal trade zone and a short time later the entire sentiment reverses pronto. Without a refined method to correctly anticipate support/resistance you will struggle to achieve a strong holding position in the market by front running the smart money.

Market geometry combined with statistical volatility and old fashioned price action reading are the most effective edges (IMHO) to build an ability to anticipate where the whales are sitting ready to trade at support/resistance levels. Volume confirms their participation.