Bitcoin Forum

What is the standard method for reading charts and predicting market movements based on them?

What does this community use?

Before the great bubble of '11, it was all log charts and straight lines.  Now it's non-log and triangles.

lol!

yup drawing lines on a chart always make me trade with more confidence ;)

Typically, you'd use log charts for longer term time frames (particularly when it involves exponential moves) and linear charts for the shorter term.

Technical analysis is a very finessed artform. Personally, I think its limited value derives mostly from understanding how high-volume algos and plunge protection teams paint the charts. It's possible to glean some insight into where certain boundaries are, but one must always think outside the box. For example, why use a 200 dma when a 88 dma might be more helpful? Seems strange, but why is the 88 dma more helpful? Connect it to fundamental analysis and then you might make some money. TA informs fundamental analysis, but I would never rely on TA exclusively. In fact, I think it is very overrated. Rarely is it anything more than amateurish backwards-looking pretty pictures that sell subscriptions.

In terms of bitcoin, I don't have any opinion yet.

I suggest learning Japanese candlesticks and another method of your choosing. Don't learn just one.

Crystal balls and related methods.

This is the best method:
http://en.wikipedia.org/wiki/Haruspex
 :o

i call it learning how to think like a criminal.  it is important and i mix 30% fundamentals in with 70% technicals.


to each his own but i've proven it to myself that it is indeed possible to pick major corners using TA.  its much harder to call the short term twists and turns.  but it is an artform that requires alot of work and precision.  cycle theory is dependent on alot of statistical work and historical analysis.  it can be painstaking but its worth it.


i am in the process of determining average cycle lengths for Bitcoin and i've come to some very interesting conclusions.

I have no doubt that TA can be helpful for picking major moves.

And you're right about it being dependent upon statistical and historical analysis!  :)

Although I find most TA experts to be charlatans, I'll be first to admit I've studied a great deal of TA from Kondratiev to Dow Theory to Martin Armstrong. I don't agree with it all, but I can see the value if done right. Just last month I used an Ichimoku cloud to help me advise one of my clients. But as you know, it's an artform, not a science.

I use the sense of selling pressure \ buying pressure. In conjunction with technical analysis and the "herd instinct" of players.

I'd be remiss not to mention the importance of market psychology and contrarian investing. See where the herd is going. Is it worth following them and riding the bubble, or is better to invest against their over-weighted positions?

yes, this is called "intuition".

Only if you don't know what you're doing.

A great deal of such information in quantifiable. Not all of it, but enough. Visit the Wilmott forum to get an idea of how this is done. It's not easy, but a decent quant can produce high alpha low beta returns based on contrarian indicators.

I'm surprised at your response, because technical analysis can include such aspects as contrarian investing and market psychology.

Based on experience, one can trade exclusively using TA. I ignore completely any news since many years, and the more I focus on TA, the better my trading got.

Interesting. I've only met a few 100% pure TA traders, but all of them were successful. The ones that were not successful (>99%) were actually the ones who followed the news and other garbage financial headlines and claimed "90% TA" or something like that.

This is spot on. Whenever I start using even only 1% of fundamentals, I get into the danger zone. This is why I have only charts on my screen, without even having a chance to read or hear the news when I am making any trading decisions.

I think the news was wr0te after the TA  was done .  It was planed.  Already known.  Think , The Euro Zone was meant to crash now and was known well since its beginning.  A B C.  done.  Now it recovers or fails.

What do you think.

I think it's clear to anyone with eyes to see that financial news (Bloomberg, CNBC, etc) is never ahead of the story and exists to pump and dump and to persuade people regardless of what's in their best interest. As to your specific point, yeah, such things do happen as planned, and probably often. It's hard to prove but easy to see.

Some people use R, which doesn't seem to be related.

I highly recommend Evidence-Based Technical Analysis: Applying the Scientific Method and Statistical Inference to Trading Signals (http://www.amazon.com/Evidence-Based-Technical-Analysis-Scientific-Statistical/dp/0470008741).

The problem most CMT's have in my experience is that they don't do rigorous statistical analysis of their methodology.

Is chart reading much different between forex and individual stocks? I ask as I'm keen on learning programmatic chart trading however from what I've read on various forums, a lot differs between forex and individual stock.

What does bitcoin follow more closely?

It's important to understand that in retail Forex (and Zhoutong-style trading) there is no market. You are playing not against other people and institutions but against a market simulator casino machine.

In contrast, it is widely believed that at MtGox we have a real market and not mere simulator.

So you should differentiate between retail Forex, real interbank foreign exchange, and stocks (which I hope are usually real markets and not simulations).

As for programmatic reading I suggest you to seek for research papers in quantitative finance about price modeling and don't bother learning the usual black magic fortune telling (Elliott waves etc) taught at retail Forex shops.

Here is a basic course: http://www.algorithm.cs.sunysb.edu/computationalfinance/

The course mentions Elliot waves as "The popular (but mystical) Elliot Wave Theory" - see the detailed overview of common spiritual practices in http://www.algorithm.cs.sunysb.edu/computationalfinance/pdf/lecture20.pdf there.

Note however that you cannot avoid the black magic in trading. It is just that learning from scientific sources lets you be focused on evidence and not on "trader's intuition" in evaluating quality of your black magic trading algorithm.