The Hidden Secret of Technical Analysis

[spencereng]

The larger trend always wins, so use short term time frames to trade in the direction of the larger trend. If the 60 min chart is bullish don't short the 5 min chart.



[gengarjetty]

lots of traders criticize indicators (and correctly so, apart from the moving averages and RSI, I don't find these oscillators or macd good) and prefer price action.. what exactly IS price action, I mean, what methods would you categorize under price action? Thanks.

[YourTradingCoach]

@gengarjetty

Good question. I'll expand on this in an upcoming newsletter article, due to limited space here, but essentially there are two main branches of price action analysis. (a) the pattern based approach (triangles, head and shoulders etc) and (b) analysis of strength and weakness within price movement (Wyckoff, Volume Spread Analysis, YTC Price Action Analysis). I'm very much in the second category. In either case though, the most critical element is CONTEXT.

[gengarjetty]

@YourTradingCoach : oh I see, thanks a lot for your answer! will definitely check out your newsletter.

[NaledgeDIESEL]

@gengarjetty Technical indicators such as slow stochastics or RSI, can help you determine whether a stock has reached technical overbought/oversold levels...Candlestick charting can help judge the sentiment of the price action; a candlestick pattern like the "dark cloud cover" is a good bearish reversal pattern to take a short opportunity. Bearish price action for example would be decreasing volume during a rally, stochastics rolling over, reversal patterns after a recent rally..etc

[gengarjetty]

@NaledgeDIESEL

so basically what your saying is that the oscillator just tells you when to look out for the reversal signal, but isn't an actual reversal signal , unlike the price action, or even the MA crossover.

[NaledgeDIESEL]

@gengarjetty when the stochastics reach the overbought range this could potentially mean that the bulls are running out of momentum. Then you will be looking for a bearish reversal pattern from your candlestick analysis followed by further selling pressure(confirmation of the trend). This could be a great opportunity to take a short position for a potential pullback down to oversold levels..buyback to cover short on bullish reversal pattern, stochastic cross, breaks resistance, etc.

[gengarjetty]

@NaledgeDIESEL

Understood, but what about the longer term trend, I mean, who really looks for a bullish reversal pattern when the longer term trend is bearish? medium term oversold levels are better in longer term bull markets , and vice versa, right?and can we look for bearish chart patterns within longer term ranges? ie, on the weekly chart theres a range, but there's a breakout pattern in the dailies, we could go for it, right?

[NaledgeDIESEL]

@gengarjetty all time frames link together, meaning that yes if you have a bullish signal on a short term chart but a bearish signal on the long term you can still pull the trigger on your short term bull reversal; but keep in mind that the long term trend is still bearish. This type of trading requires a closer eye on your trades, but short term swings within the longer term trend be it bullish or bearish can provide hefty profits during a time of correction or consolidation...

[YourTradingCoach]

@haybusaz, Decreasing momentum indicates reducing net bullish or bearish pressure. So in an uptrend for example, it would indicate either a reduced urgency from the bulls, and/or an increase from the bears. What that means for future price action depends on the context - where is it happening within the higher timeframe structure.

[wisnuwd]

thx for your video

[questkiddy1]

@ luv bug head and shoulders is a reversal not a continuation pattern... trading coach is trading momentum which is macd and stochastics and volume inconsideration of direction of trading that day

[TheJohnVandivier]

Thanks for the video! I would appreciate a read or critique of my April 8th blog entry which is a basic intro to forex, securities, and other investments.

[maheshyashada]

Nice video!

[luvbug50514]

Head and shoulders is usually a continuation pattern by the way which means you will be selling the bottom of a trading range most the time so be careful with them.

[YourTradingCoach]

@luvbug50514

Hi luvbug50514,

Thanks for your comment, but you must have misunderstood the video. I don't trade H&S patterns at all. They were given as an example of the overly simplistic way that most traders approach TA. That's not how I trade at all. Apologies if this was confusing. My TA is more pure price action based, analysing individual bars within the context of previous price action, to identify shifts in supply/demand and identify future bias.

Cheers,

Lance

YourTradingCoach

[freeSCALPINGindicato]

nice one, thanks

[AsianTeas]

Yeah I agree with the comment about volume. As I watched this video I couldn't help but think come on..... mention volume. Analyzing price movements without looking at the volume is a ticket for disaster in my opinion. A stock moving on 500k versus that same stock moving on 4m is not the same, even if the price movement is identical.

I love your videos and I appreciate the time and effort you put into them. Your series on candlestick patterns were great.

[YourTradingCoach]

@AsianTeas

Hi AsianTeas,

Thanks for your great feedback. Yeah... anything which is not a derivative of price can add value, so I encourage people to make use of volume and market internals, when available for their chosen markets.

Thanks again for your comments,

All the best with your trading,

Lance.

[ghahandi]

Lance, You mentioned Dow theory briefly (very briefly. How about volume? Volume tells a tale, doesn't it? All indicators aside. Dow spoke of the 200 day ma in at least two out of three major indices to establish a bull or bear market. (Naz,SP500,DJIA these days)

[YourTradingCoach]

@ghahandi

Hi ghahandi,

Yes... volume can be used quite effectively alongside price, as it's not a derivative of price, but actually does provide new information. It doesn't play much of a part in my trading, as I come from a forex world which did not provide reliable volume data, so I've learnt to read market sentiment without it. If interested in volume, I recommend reading up on Volume Spread Analysis. 200MA plays no part in my trading. Thanks for your comments. Happy trading,

Lance.

[givemeusernameplz]

Since all indicators are different representations of price action, doesn't that mean that most anyone following a system is following price action (even if it's a slight abstraction of price action)

[YourTradingCoach]

Hi givemeusernameplz,

No, indicators are not price action, but instead are a derivative of price. Typically lagging (as a result of some sort of averaging function), trading off indicator based signals will simply increase the likelihood that you get into a move too late and get out too late.

Of course, if you're using them and they're working for you, keep it up - disregard everything I say. :-)

Happy trading,

Lance.

[orionmachine]

Excellent video Lance, I too am trying to help others see the truth about price action and stop relying on the indicators... You spotlighted some excellent situations for traders to think about, great job!

[YourTradingCoach]

Hey orionmachine,

Thanks for your great feedback. Much appreciated.

All the best with your trading,

Lance.

[hamodabadran]

thanks

[inflxshn]

I've been evaluating this aspect of the market for some time now; the context of the move. Problem is without any valid information there is little I can do other than speculate on the psychology. I don't have any friends in central banks. One point I do have problems with however is the idea of 'novice' traders.

[inflxshn]

I appreciate there are traders with less money, but since over 80 percent of the money moving the market is either institutional orders or commercial banks, there's hardly room for smaller money to make a difference. The 'novice' traders are usually smaller banks, hedge funds and large speculators. Retail traders should not be confused with 'novice.

[inflxshn]

Great video though, it helped clarify for me what I was missing and not understanding. Thanks, at least now I have areas to look at and find out more about. You heard of Tony Plummer's stuff?

[YourTradingCoach]

Hi inflxshn,

Thanks for your comments. 'Speculate on the psychology' is the key. Remember that whether trading against a retail trader or institutional traders, all the game really involves is being able to buy before others buy and sell before others sell. Identify areas which will invoke other traders fear or greed, and you've got yourself and edge.

(continued...)

[YourTradingCoach]

(... continued (I hate these small character reply boxes...:-) )

The term 'novice' in many of my videos may be confusing the issue - it relates to anyone who doesn't understand this game and is consistently buying late or selling late - this applies to some institutions (cause haven't they done well lately!!!) as well as individuals, regardless of size and analysis style (fundamental, statistical or technical).

Cheers,

Lance.

[jj3623211]

It is really resourceful and insightful, the best FREE training course I could find so far! Great thanks!!!

[YourTradingCoach]

Hi jj3623211,

Awesome. Thanks. Glad you enjoyed the video.

Happy trading,

Lance.

[affectedstudent]

Great explanation...tx

[PokerJokerFokNL]

YTC, very well explained. Had read some on price action, but never this clear. Thanks very much.

I'll give it some more study

[YourTradingCoach]

Hi PokerJoker,

Thanks for the feedback. I'm glad you got value out of the vid.

Happy trading,

Lance.

[PokerJokerFokNL]

Hey Lance. I've subscribed to yer siteletter and diggin into the articles, Once again, thanks.

Alex

[Frrobs]

Hi lance,

So, how do you use the momentum and the volatility?

I didn't look at these indicators before. Thanx for showing me.

cheers frrobs

[YourTradingCoach]

Hey frrobs,

Momentum and volatility aren't indicators. I'm looking at the nature of movement of the underlying price action. Watch for how it changes around areas of spt/res, for clues as to the most probable future action.

(Too much to show via one YouTube video)

Cheers,

Lance.

[Frrobs]

Hi Lance,

I'm very interested in this stuff. Do you have some sources (books/websites etc:) where I can get some more information about momentum and volatility regarding price action?

Thanx,

Frrobs

[YourTradingCoach]

Unfortunately there's not much out there. Toni Hansen has some good material on momentum - see my website resources page - Apart from that it really comes from experience. Just watch price - you can't buy experience through a book or course.

That being said, my main influences re price action - Mike Reed & Sam Seiden. Also read anything that talks about the nature of price movement as a function of changes in supply and demand.

Cheers,

Lance.

[Frrobs]

Thanx for your hints. Sam Seiden is my man. He has given me some important information.

Thanx again.

Frrobs

[spoonlines]

use the trendline.. :-)

[AM2M]

Tell your HONEY that I love you. Thank you for telling traders the unadulterated truth. Price action is price action, and it along with patience and some good trading rules are the keys to success in forex. I am a much better trader today, due to going completely bust listening to all of the noise out there and trying to learn everything about everything. I love your advice because it follows the KISS principle- keep it simple sexy. Happy trading. If only I'd found you a year's salary ago

[YourTradingCoach]

Cool. Thanks.

Better you found it now than in another years salary!! I'm glad you've discovered the secret of 'simplicity'.

Happy trading,

Lance

YourTradingCoach

[kinouye]

your the man..this is great stuff

[YourTradingCoach]

Cool. Glad you liked it,

Happy trading,

Lance

YourTradingCoach

[zeppi66]

Its interesting to find out how market psychology forms the price action. Looking forward to the follow ups.

Cheers Lance