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| Market dynamics. Nonlinear phenomena. I've been intrigued by the movement of markets for a long time, and along the way I've gleaned a few facts about them. For example:
1) It doesn't matter how much you want the market to go your way, it will absolutely exhibit contrary behavior before the main trend is established. You have to think in terms of a fooling someone, what would it take for you to give up your position? More often than not, the market is an excellent test of psychology. 2) Indicators that look like detrended price action are essentially useless. Many technicians like to go on and on about how things show "bearish divergences" or "oversold" and "overbought" conditions. Problem is, the indicators they are looking at tend to get flatlined when a major trend is established. "Oversold" to someone else is really just price moving higher. There is no such thing as "too high" or "too low". 3) Trend lines, except in the most general examples, are really no use at all. At the worst they provide psychological "support" and "resistance" where no such thing exists. Price doesn't care about your line, or your multitude of lines. Problem is, if you do a "gunshot" approach to trendlines, you will get random reinforcement of them, and believing they have anything to do with price is extremely misleading. 4) Cycle research and other periodic approaches... Really, you've got to be kidding me. Some traders like to use moon cycles. Others go through the computationally intensive task of fitting sinusoidal waves to detrended market action. This approach assumes that there is a cycle that is periodic enough to predict future market moves. In a very long-term sense, this can be true, however -- the inherent nature of markets in general is contradiction. What has been proven to be useful in the past is frequently voided in the future. Cycle traders risk much in assuming that steady periodic behavior wins out over the nonlinear characteristics of day-to-day trading. 5) Buying trading systems are really a fancy version of throwing your money out of the window. If it was really of any value, why would anyone sell it? I've seen interesting explanations of this by many vendors who just claim to sell to a "limited amount" to keep the system's uniqueness. Good try - what this really means is it wasn't good enough to keep to one person, so they had to market it to make some real money. 6) Market truisms. I suppose you could include the above, but I try to give more than the insipid "Buy low, sell high" or "Let profits run, cut losses short" drivel. Really? I'm supposed to reduce losses? How friggin intuitive. I suppose there is more, but the overnight markets are going to open in a few hours, and I need to check my positions. Perhaps more in the future, good trading to you (for those who participate). desiato_hotblack @ hotmail.com |
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