The near term risk for the Dow is on the downside, says Adam Hewison of INO.com. In this free video, he describes the recent bounce as a classic Fibonacci retracement, where markets typically retrace 50-62% of their recent losses, before retesting new lows.Regular readers know that traditionally, I have not been a big believer in heavy forms of technical analysis. However about a year ago, I adopted a simple entry and exit system based on basic technical cues after reading Winner Take All, by William Gallacher (which I'd highly recommend, by the way).
And I have to admit, I'm very grateful I did, because otherwise I would have been completely wiped out in the commodity crash that has taken place this year.
What is your experience with technical analysis? Do you view it as a critical component of your trading? I'd love to hear your thoughts in the comment section below.
2 comments:
i did get wiped out of the commodity crash, $3k in the corn and wheat bull decapitation.
Part of the losses can blame to tech analysis, or my over estimation of it, since i had a buyer attitude in every grain trade i did (about 14), I was betting on mini reversals which ended in what we all have seen.
Top speculators don't put much attention to technicals since most of them have not way o proving statistic significance; Some say that the only one with a true statistical edge is the head and shoulders. Trade Station has a very nice tool that identifies this pattern, some time this life will study it.
I do think technicals are good for understanding the market behavior, but not for getting an true edge for speculating.
Yeah I got head faked on most of the false rallies that have happened since March also.
In Winner Take All, he makes the case that you should be long in a bull environment and short in a bear environment, to help frame how you use the technicals. I agree, but, it didn't work out well for us during this entire correction.
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