Posted by: joetradingplace | March 21, 2014

Fundamentals V Technicals

Two questions from followers…thought its best to answer them here so that other followers wouldn’t ask the same questions

1. Keith asked “Do you use any fundamentals in your trading or you only trade technicals/PA”

I don’t use any fundamentals, because I believe that all the news is included in the price. Big traders who move the markets always have big research departments that provide estimates before the fundamental news, so most of these traders would have placed themselves in the market. Price usually continues in the prevailing direction prior to the news, price might spike in the opposite direction due to short term traders or unexpected news, but it usually continues in the direction of the prevailing trend. Traders can have different opinions on fundamentals, because everyone have their own interpretation of good or bad news. I believe its far much easier to look at the movement of price, momentum, and the structure of the market to find patterns that lead to high probability outcomes than trying to read a Fed statement and make a trading decision from that.  Recognizing these patterns and their positive expectancy allows traders to enter the market  and exit later at a better price for a profit.

 

2. You said that you buy dips in an uptrend and sell rallies in a downtrend….how do you know that a dip is not a reversal?

I don’t know that a dip will be  a pull back or a complete reversal, but what i know is that if i trade in the direction of the prevailing trend, the odds are in my favor…i might have a few losses, but if i catch the big trend it will easily cover for all the small losses.

 

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