Monday, August 27, 2007

Technical Analysis

I've had a few requests to do a post on how I use TA. Here goes. First off let me say to a great extent I look for TA that will confirm the COT position. So yes I have a bias. Don't we all? Mostly I'm looking for reversals that signify that the selling or buying has dried up. I have a strong preference for the 2b reversal. I also look for the 4 day rule and 4 day corollary after long intermediate moves. Mostly I'm looking for levels of supply and demand. I will use indicators such as RSI, MACD and Stochastics as a secondary indicator if they confirm the COT position but definitely not as a reason to trade against the big boys. I almost never pay any attention to patterns personally such as head and shoulders or bear flags (whatever the hell that is). I particularly like the point and figure charts because they take out everything but the price action and levels of support and resistance are pretty obvious. I try to keep it as simple as possible and not overthink my trades. If the COT is long I look at the indicators to confirm that position. If it's short I look for indicators that would suggest that the market is or has turned down. Pretty basic stuff really.