As a trader and researcher, I think it’s important to do housekeeping every so often. I write up one of these “update where to now?” posts every now and then, and I’ve found them helpful for keeping everything in perspective. The main questions that should be asked are:
1. What do I know now that I didn’t know before?
2. What do I still want to know?
3. What do I think/know with some degree of certainty that works?
4. What do I think doesn’t work?
5. What do I think I still need to solve?
Most of these have 2 sides: Statistically founded and theory founded.
For example, I think now that some candle patterns can actually be quite useful. To recall a previous statistic, when an extreme is made, 3 particular patterns will appear at such an extreme 80%+ of the time. This is of course different from ‘when pattern x occurs, an extreme will follow’ but it is still beneficial to know. If pattern x has NOT occurred, the chances that the extreme has occurred are lower. At worst, you miss a winning trade. At best, you prevent yourself from taking a bad trade. Worth it.
(point 3) I think that wave patterns exist and are strong enough to produce a “fact” of the market that stands alone. Emphasis on the last 2 words. (statistically based)
(point 3) I think the idea of Transience bars can be expanded to view momentum, as well as potentially support and resistance areas. (theory based)
(point 5) I think Support and Resistance lines are still important, in the sense that they just make sense. How to quantify and trade from them is difficult.
It’s okay to think that something works, even if I have no (scientific) reason for doing so. What is important however, (and where most losing traders go wrong not doing) is to strive and create experiments to discover if such a premise is true or not. When I began my research, I thought that “waves work” because Relativity said so. I worked hundreds of hours to make that theory become a statistical reality. The above are simple and perhaps even vague questions. But when I think and answer them seriously, I often end up having conversations with myself that lead me to answer the real important question which is “What now?”
I think I will be laying off the statistics for the next couple weeks to do some New Years organizing. I plan to add another page to this site (similar to the Statistics tab) for my thoughts of how I view the market which were previously kept under the blog and journal categories but which I don’t think were well organized enough.