Articles on Technical Analysis

The Evil of Plenty and other fables

पोथी पढ़ पढ़ जग मुआ, पंडित भया न कोए |
ढाई अक्षर ट्रेंड का, पढ़े सो पंडित होए ||

“People read many many books in their lives, but none becomes any wiser
One who understands the little word, “trend”, only becomes wisest”

I have stopped reading all blogs forums lately. Not because of any fancy reason, but simply because all of them denounce technical analysis, as anything worthwhile. Although publicly, even I would maintain the same, but since this is a private blog I could admit the truth here.

Yes it’s true to a great extent, that I have an inexhaustible supply of wits, but sometimes I grow restless and bored, and that is when I want to confess nothing but the wits.

I may blog about 1001 different techniques and trading system, but the truth is that one doesn’t require an ample supply of divergent ideas to trade. One could yield to the habit of driving forward, the temptation of wearing clean clothes and still make money trading.

Also the esoteric secret of success in trading, is to buy high and sell higher, and vice-versa. But I feel that general public should not come to know about this, so I wouldn’t talk about it publicly ever. Promise.

Also I feel, that SEBI should ban the word “Trend”, never to be used in a public place, electronic media, internet or a public blog. Detecting trend is tantamount to insider trading. It should be banned in all forms. Also, computer programs that could draw straight lines over a picture, like Windows Paint, should be declared illegal, and people using them to identify trends should be booked under MRTP Act Sec 36A sub-section 5, which reads as, “permits the hoarding or destruction of goods, or refuses to sell the goods or to make them available for sale, or to provide any service, if such hoarding or destruction or refusal raises or tends to raise or is intended to raise, the cost of those or other similar goods or services.” Serious Crime, huh,

I guess Vision Books India should also be booked under the same act for distributing information as to how to grow rich even without thinking! Poor Napoleon Hill, had he known about trading, he might have foregone the idea of writing books, or might have written, the unwritten classic, “Idle and Grow Rich”

This is indeed Callyug, the black era according to Indian Traditions. Failed traders give trading calls to new unsuspecting traders, who can’t seem to think straight, leave alone draw straight lines.

Trading is not for intelligent types, the kind who have advanced degrees, and high profile jobs, beautiful fair skinned women as their wives and friends wives and co-office workers, as they would spend their lifetimes, searching for secret complex algorithm and in turn loose all their wealth and their savings.

It is for those, who wake up, late in the morning, have poor power supplies in their towns, have Sempron based systems, use Samsung Guru for a cellphone, and don’t understand maths or science much. Could I be the one? I’d try!

Articles on Technical Analysis

Holy Grail written in Braille

“The secret indicator, which accurately forecasts market prices, and that one dreams of having for his personal use only, is so obvious, that it is inobvious. Contrarily, the secret indicator is not secret at all, but rather, it is the indicator that is best known and most widely used by the majority of participants who are currently trading in the market. The indicator may also be a group of indicators which are in coincidence.”

This is the only truth in the market that no one tells…because everyone knows it…

Issue 25, MTA Journal 1986, Printed Page 26.

“Everyone who has ever been involved in a market, whether it is real estate, the stock market, the futures markets, or whatever, has at one time or another dreamt of the secret market indicator or tool that tells you when to buy and sell… and that only you are privy to! Contrarily, this elusive wonder is not secret at all, but rather, it is the indicator or tool most widely used by the majority of participants who are currently involved in that particular market. It may also be a group of indicators or tools that are in coincidence. It can’t be anything else, because the market moves in concert with the action of the participants. If the majority believes the market is going to move higher, they are buyers; and as a result of their action, prices move higher. It is so obvious that it is inobvious. Prices will continue to move in the direction favored by the majority of market participants and can seesaw through a number of cycles without a Contrarian situation developing. However, once approximately 70% of the market participants are of like mind, either bearish or bullish, a Contrarian situation is present. As the majority rises above 70%, a change in the direction of prices becomes more imminent and the probability increases that the change in prices will be large. “

Issue 25, MTA Journal 1986, Printed Page 30.

Articles on Technical Analysis

The objective of technical analysis

  1. The purpose of technical analysis is not to predict where and when
    the market will go, as many traders think. The main goal of analysis is
    to define in advance the critical points or levels (PIVOTS). Then, based on this
    research, you can build a trading strategy for the next trade
  2. So here is a serious attempt: The Objective of Technical Analysis is ,
    1. To Understand and Identify the Overbought and Oversold price levels as derived from using all the historical data available;
    2. To Identify reversal patterns that might occur in overbought or oversold regions, so as to profit from contra trend trades;
    3. To maximize the gains from all sorts of trading activities, and minimise risk and losses arising from such activities;
    4. To identify the price levels where chances of a profitable trade are less, and recognize ‘price-patterns’ in and at such levels if and when they occur to avoid such trades;
  3. I hope I have been able to put things in right perspective