Thursday, 2 December 2010

Trading Price

When I first started trading, I was lucky enough to find the book by Edwards and Magee .There is a new edition which I haven't seen here. This is how I started in technical analysis. Later on, as I became more successful (it was really easy in those days), I hired a "chartist" who had big pieces of graph paper which he updated every day on the stocks I was interested in. That gave me the confidence in technical analysis.

In 1979/1980 I started using computers to draw charts- initially gold and then lots of other futures markets. That's where I found indicators, mainly the stochastic, which was developed by George Lane- a member of a group of technical analysts that I belonged to.

In talking to newer traders, one of the things that I notice is that as soon as they discover indicators they fall into the trap of trading the indicators rather than the price.

It's the price we trade, and we should use the indicators to make the unclear, clearer. The indicator should confirm what you are seeing in price. Failure to focus on the top part of the chart is a road to failure in discretionary trading.

Between Mr Trichet and the other news, we got a great 6E trade today. Watching price kept me in the trade. I did scale out at the first red candle. Price just kept making higher Highs and higher Lows.


  1. EL, how is the skiing coming along over there?

    As miserable as Scotland's skiing can be sometimes, this last week has brought -10C and an accumulated 3ft. of fresh and light.

    Love your blog, thanks and please keep it going.

  2. Whats the criterion for switching the range value?

  3. Hi,Tom,
    Edwards and Magee's newest Technical Analysis of Stock Trends 9th edition is Here:
    It is really a classical book that includes many long lasting observations. Sadly, when I first read it, I could not deeply understand or even ignored those observations and think it is too simple.:)
    Good luck.

  4. Hi EL,

    Are the blue dots an ATR trailing stop? I know we shouldn't focus too much on indicators, but I use the ATR trailer to stay in trades as long as possible. Do you?


  5. Marshall, ski lifts are only open on the week-ends nearby and I'm in London this week-end so I'll have to wait a couple of days.
    Anon 19:42, I rarely change range values unless I want to change speed or clarity or I do a FloBot test that catches a change in market fingerprint before I do.
    Anon 22:27, Yes ATR. I don't use it in discretionary trading but am watching it as part of the FloBot development where I do use it. Computers are dumb and need numbers.
    Jack, I can't imagine what cam be improved 9 times in a great book like that. My original had a hard cover with, I think, greem and black paper cover over it. Don't remember which edition it was. A must book.