INSUBCONTINENT EXCLUSIVE:
During the course of a mentoring session, I told a trader recently that the purpose of looking at the lower timeframe charts is to unveil
the designs of the higher time frame chart
Not unusual.
Most new traders are focused on learning new methods, seeking new software, reading new books and discussing the latest algos
Many also come into this business of trading and investing by learning one specific technique or the other.
This student of mine was from
He had attended many courses by different people, read a couple of books, was aware of several techniques to engage the market and came to
various types tools in used in expensive software
He knew a lot of things about how to engage the market
Unfortunately, he did not know even one of them well.
This is the real problem
Most people see technical analysis as a means of cutting into the meat of the problem quickly
They put together a couple of elements, tie them in with minimal (mostly visual) back tests and, presto! they have a system!
Now they think
But the market teaches them otherwise
The real missing piece is the level of understanding of the methods that they are deploying
Whether it is a crossover of an X-Y moving average or breakout of a Kumo cloud, or some oscillator reading being recorded, there is a
complete lack of knowledge about what that tool is really doing in the market
When I quizzed another knowledge seeker (who was using candle patterns for trading) about candlestick some time back, he immediately flashed
out a laminated sheet with all candle patterns on it, saying proudly that it is at his desk all the time.
He completely overlooked the fact
that those patterns (and indeed their variations too) need to be in your head rather than on your desk!
Then, you have this issue with
With a click of the mouse, you can move through timeframes in a second
Charts look the same no matter what the time frame is
But the value of the signal is very different
This again is far from the truth.
No doubt, there is considerably more information in a 5-minute chart compared with, say, the daily chart
But what is overlooked is the fact that the 5-minute chart does not carry perspective.
And herein lies the crux! Analysis is composed of
For both, technical analysis provides the answer.
However, technical analysis is a series of tools, a huge set of signals and nothing more
It is you who has to extract the requisite information of trend and levels from this set of signals
It is you who has to set up what is the ultimate signal that fires a trade
It is you who has to string together a variety of elements that will create an entry setup
Again it is you who has to manage the open trade wherein both stop setting and moving as well as planning the exit have to be designed and
executed.
In and through these two areas of analysis and application, it is you who has to deal with the surrounding noise, set
probabilities and manage external risks.
One may use a sharp knife to cut vegetables
But the real trick is to have a steady hand
It is the attribute of a knife to be sharp
But is your hand steady
That is the question you should be asking
You cannot buy the costliest knife and expect it to do the job by itself! If you do not spend the time to develop an understanding of the
background in which these technical signals operate, you will not be able to use them effectively.
Training to collect breadth of knowledge
Training to achieve depth is the real learning.
Constant bombardment of ever-changing news and events has made us all attention deficit in
Thus, we think seeking more of newer things is the way to go rather than seeking more of the thing we have learnt
Many times my advice to learners to read John Murphy or Martin Pring eponymous texts 10 times are greeted with laughter.
But I am dead
You learn more from re-reading of these two prized tomes than you would by reading 10 other authors, good as they may be
Trends are created and affected by macro events
Signals emerge from micro events, but they need to be strung together well in order to recognise the unfolding of the macro
Micro is what makes the macro tick! But attention deficit behaviour does not permit us to create the scenario of the unfolding macros and we
remain content to play out the micro, which keeps on changing from minute to minute.
Thus we remain caught in the smallness of things even
and minutes.
Approaching technical analysis this way will greatly increase the efficacy with which it is practised.