Wednesday, March 21, 2007

Ditching Two Methods

Like in school when we were made to study various subjects which probably would have no bearings in our lives.
I was from the Science Stream and now, all the Physics, Biology, Chemistry are poured down the drain.
Instead of pursuing a science driven career, I went ahead with Accounting.

In the course of my journey in Trading, as I've mentioned previously in My Journey of Learning, I have learned various methods - Candlestick, Indicators, Patterns and Elliott Wave.
Today, I am resolve to ditch two methods:

1. Patterns
I have deep affinity for this method. This patterns was one of my favorite.
It basically revolves around a breakout system with a target price.
It may also suggest additional top up entries

However, the drawbacks are as follows:
1) if you have to cringe you eyes to see the pattern, its not there.
2) If you are the only one to see the pattern, its going to fail.
3) If you are the last one to see the pattern, its going to fail.
4) Price pattern is a self fulfilling prophecy. You need a lot of other trader think alike to make it work.
5) Different trader may act differently to make the price pattern fail.
6) Price pattern will not give you an "edge" because it is observable by anyone.

What it means by "self-fulfilling prophecy" is that the more people use this method, the more this method will work. And if no one uses this method, it will fail.
One of the famous quote which was used and reused, basically overused, is Mao Zedong's "It doesn't matter whether a cat is black or white, so long as it catches mice."

For me to advance another level in TA, I must disagree.
I must not leave my fate to mere chance.
Hence, I must use only the right way. And sad but I must, ditch this method.

2. Elliott Wave

I am also ditching this method.
Some of you who knows me, probably know I am a defender of Elliott Wave Theory. My method of usage is slightly different. However, while this method does work, there are many areas of subjectivity.

Also, the major problem I have with this method is myself.
I find myself too prone to predicting the market and trying to time the market even though, I keep stressing that one must not do so.

This is a trading sin which I am guilty of and of which everyone should be aware and avoid.

So what does it mean?
Well, it basically means, I am consolidating my methods.
Henceforth, I shall rely mainly on candlestick - which shows the price movement; and indicators - which assist me to decipher the price volume movement.

I am getting closer to nature, I think.

Will I be handicapped if I ditch this two methods?
Let's see - a pattern is based on breakouts.
Breakouts are based on trendlines.
Pattern targets - well, I ll missed them, but I ll substitute with Resistance Concept.

Elliott Wave, Well, I ll miss this tool too, frankly speaking.
But wave identification is also based on breakouts.
Breakouts of which is based on trendline & resistance.
Targets? I ll substitute with the same - Resistance Concept.

However, every now and then, I may decide to publish some of the abandoned methods just for educational and entertainment purposes. You may get some ideas from the two methods mentioned above and used it on your own trading strategies/style.


Ben Gan said...

To achieve the impossible, you must attempt the ridiculous.

Anonymous said...

sad to see that you're ditching EWT. i'm a firm believer of EWT, if you can combo with some other TA, it is the "secret to the universe" as Mr RN Elliott wrote in his book RN Elliott Master Works.

then again we all choose our destiny and the world is full of choices...just follow your heart.

Trader Max said...

Its a painful decision.
Hopefully I made the right one.

Safree said...

I understand the Elliott Wave Theory but do not use it.

Unknown said...

An olive leave to Maxforce on account of the bigger issue of creating a "Malaysian Malaysia" and the concept of equality and fairness.
"Mayban's discriminative policy"

Dear Max,

I have posted a message on Mayban's discriminative policy and was looking forward to you posting it in this blog.

I have posted a similar message in Ben Gan's blog and was also hoping that he would retain it.

Please read my message which I have just posted in Beng Gan's blog and for convenience I will post it again below:---

"Hi Ben,

The very least you should not do is to delete my posting on Mayban's discriminative policy. Think of the future of this country and your children and grandchildren.It is something very very little to ask from any patriotic Malaysian.

As for Max,you must remember that although you claim not to be taking side, you have in all honesty did side with maxforce.

I will take your advice and forgive Maxforce if my requests for you and Maxforce to highlight Mayban's discriminative policy in this and Maxgorce's blog are acceded.

You and Maxforce will have my fullest respect thereafter and I will apologise for all I ever said against Maxforce and you. But I got to vehemently deny having used multiples names.

Hopefully we all come out from all these to become a better Malaysian.

Please accept my olive leave!"

Unknown said...

Hi Max,

Thank you for being so gracious.

I think all bloggers who are patriotic Malaysian should highlight the discrminative policy of Mayban (and AmBank).

Maybe all right thinking Malaysian should be asked to seriously consider whether they want to continue banking with such a Bank.
Should we not make out voices heard loud and clear. Should we not seriously consider withdrawing all our monies from Mayban (and AmBank), cut their credit cards into two and returned to them, turn down all their offer of banking facilities and switch our banking facilities to banks which do not practise discriminative policies? Should we not deliver this strong message to Mayban (and AmBank) in such a loud voice to be heard also by others who are practising or intend to practise discriminative policies - so they will stop such disgusting policies?

Think about it and let all of us who belong to the group of right thinking Malaysian highlight and create an action group to fight discriminative policies being practice by any parties.

Consider pls!!!!!

Trader Max said...


You do realise that while your intentions on Maybank etc may be good, it is totally out of topic?
I did provided a link to Toebear's blog - and readers would be able to read the whole post there.
I think its quite sufficient already.

Do refrain from posting out of topic sentiments in the future. If you like, you could create your own blog to post topics of your liking.

Thank you.