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In today’s episode, you’ll understand what are the 5 things I avoid in technical analysis and why.
So listen to it right now…
Resources
The NO BS Guide to Forex Indicators
The Ascending Triangle Trading Strategy Guide
Transcript
Hey, hey, what’s up my friend?
In today’s episode, I want to share with you 5 things I avoid in technical analysis. And just because I avoid it, doesn’t mean it’s wrong or can’t be used. But it’s just not meant for me.
1. I avoid Elliott Wave
I get a lot of comments and questions from traders asking me to do a sharing on Elliott Wave. And the reason why I get so many comments and feedbacks about it is because it’s darn confusing.
I find it’s way too subjective and way too confusing for me. You have the five waves, and within each wave, you have A, B, C, D, E. And if the waves do something that’s not up to expectations, you have to adjust your levels, the numbering, the lines whatsoever.
And it’s just way too complex for me, so I avoid Elliott Wave. Not that it’s not a good tool, I know there are traders who find success with it. But it’s just not for me because I like to keep my trading simple and Elliott Wave to me is not simple, so I avoid it.
2. I avoid scalping
I also avoid scalping not because scalping is wrong, I know of traders who are successfully scalping the markets. But I know what I want from trading.
When I get involved in trading, I know I want to treat this as a business. I want trading to provide for me and not the other way around where I have to serve trading as though it’s my master.
Trading to me is a business where I put in money into the business, and I want the money to make me even more money. I don’t want to be a slave to the business. I don’t want you to spend 12 hours in front of the monitor because that’s what scalping is all about.
You’ll spend hours watching the markets, scalping the markets, and it’s just not meant for me. It’s not my goal, and not why I got involved with trading in the first place.
That’s why I avoid scalping.
3. I avoid meaningless patterns
There are some patterns in the market, with some weird animal names, where the price goes up, comes down, goes up, comes down, and it’s a sign for me to buy. But why should I be buying just because there’s this particular pattern in the market?
The human mind is pretty amazing. You can find patterns in randomness out there. And if I don’t have a logic as to why I should be buying based on a certain pattern, I wouldn’t do it.
Because I wouldn’t even be convinced of the pattern. How do I know it works, without a sound logic behind it?
However, that’s not to say that all patterns are useless because there are certain patterns that I like to trade. For example, the ascending triangle pattern.
When you see an ascending triangle pattern, you see a series of higher lows into resistance. This tells you that the buyers that are willing to buy at higher prices, even up to resistance.
This is kind of like pressure building up, and if it breaks out of resistance, there’s a good chance the price could follow through higher.
For patterns like the ascending triangle, I do trade it because I understand the logic behind why it should work. But for patterns which don’t have any sound logic, I avoid it as well.
4. I avoid indicators that I don’t understand
If you go down to any trading platform, they have their built-in indicators and it’s overwhelming. I’m looking at Trading View right now, and you have stuff like the Fisher Transform (I swear that’s an indicator I’m seeing now). What’s a Fisher Transform?
Then I see something like the Elder’s Force Index. Is that like Star Wars? The force is with you?
Then you have stuff like the Know Sure Thing indicator. What’s a Know Sure Thing? There’s nothing sure in the markets and yet this indicator is called the Know Sure Thing.
Again, nothing against these indicators, but I clearly don’t understand what’s that all about. I don’t understand the math behind it. I don’t understand what it’s meant to do, and I avoid it because I don’t know anything about it.
If you don’t understand something in trading, you don’t know the underlying logic, how the math comes about, then avoid it at all costs.
Because it’s like going on a date, but you have no idea who that person is. If I don’t know who you are and if you’re male or female, I don’t know your agenda, there’s no way I’m going to hang out with you. And it’s the same for trading.
If you have no idea what the indicator does, why do you wanna have it on your charts?
5. I avoid specific trading systems
This is something that I look forward to in my younger days. I was always looking for the latest trading system, the latest strategies. But these days I avoid it because I know that any sound trading strategy or system has to be backed biologic.
It must have a proven concept behind it. So instead of, looking out for specific trading systems, I always ask myself, what’s the underlying concept behind it? What is the logic behind it? So I don’t look for systems anymore.
I look at concepts and logic, then from there, I build my own trading system. So whenever you know, someone comes up with a trading system that I’ve never seen before, I can’t comment anything about it because I don’t even know what’s the logical concept behind it.
I’ve got to brainstorm and think about it before I can come up with anything meaningful. So that’s why I avoid specific trading systems altogether. I rather look for the concept, the principles behind it.
So these are the 5 things I avoid in technical analysis. As I’ve mentioned, it’s just me and the way I look at the markets. I wouldn’t say it’s the only way to trade the markets.
That’s it, I hope you got some value out of it and I’ll talk to you soon.