Empire of Dunces

Neoreaction

Technical Trading

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I have been asked about the effectiveness of technical trading by some of my clients. Frankly, the entire subject has oftentimes a rather esoteric appearance. But in my personal experience, at least some of the aspects of technical trading work. Work well enough to give you an edge over those who do not use technical aspects in their trading. And remember, Casinos for example will only offer games where they have at least a 50% plus x chance of winning. That is why even the roulette wheel has the number zero. The one number that is neither red nor black. So even just placing your bet on a color will net you less than 50% odds. If you ever find a game that offers you a 51% chance of winning, play that game with all your money. Every last penny. And keep playing. If you play long enough, you will break the bank. In my philosophy, that is the extent of using technical aspects in trading. Because, in the end, every single technical trader out there could tell me that gold is massively overvalued right now, and I still would not sell. I might wait maybe, before I bought more. But I definitely would not sell a major position simply because the lines and graphs and numbers on a screen tell me that it will fall. I say this, even though I know that gold will fall. Quite possibly even very far. We can only hope. But as certain as the technical advice may be that it will fall, I am even more certain that it will rise even higher. And in the end, my investment decisions have to be based on factors out here in the real world. Supply and demand. Oversupply and scarcity. An oversupply of debt, and a scarcity of hard assets and common sense. We cannot bet on a date of when something will fall or rise. Only that it WILL fall or rise. Technical trading increases your odds of getting the date right. But in my experience, it does very little for you in trying to figure out, if something SHOULD rise or fall. It will give you a range in which a given price will probably move. But it will not be able to tell you, if it SHOULD break out of a trading range. We know for example that gold SHOULD move far higher based on the massive amounts of debt out there. But we don’t know when that will happen. Or how many corrections there will be in between. But that is something where technical trading will help.
Caveat – you will hear from many others that what I am saying is wrong. And, if they can prove me wrong, then I am happy to see it. Always happy to learn more. I am only giving you my honest opinion based on my personal experience. From what I have seen, the above statement best describes that experience.

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Written by gloege

May 17, 2010 at 22:19

Posted in Trading

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