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Wall Street LOVES charts because charting encourage rapid trading

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bearspread   Saturday, 08/12/17 01:10:24 PM
Re: bar1080 post# 124962
Post # of 130168 
Wall Street LOVES charts because charting encourage rapid trading

Not exactly. Also charts mean different things to different segments of the market.

Rapid trading in today's market equals some Hedgies plugged into one of the HFT computers. I trade mostly oil stocks, and surprise if the WTI price moves, the stocks move. It can do so with great volatility. A HFT computer plugged into various oil stocks, does not have or attaches very little heuristic weight to the traditional technicals, be it stochastics, rsi or other. Why should it trade based on math derived when the market telephoned in orders, and volume was far lower? When instant access to an important macro like WTI price was only accessible on the trading floor before the Internet. It's a different market than decades ago, when the math behind the technicals were defined. What was once based on human herd behavior is now based on computers.

As a retail investor/trader I typically pull up the 3 month chart, and ask where was the last recent support, and resistance point. Is the stock channeling? Is it hitting a new high, or going back to a recent low? What is the news about the associated sector macros? The chart just gives me a visual representation of where a stock has been, and where it is going- while plugging in fundamentals, and macros. It's always amusing when someone posts a chart claiming it's breaking out, and draws a couple bollinger like straight lines as proof. Use a different time frame, and one can make a chart say just the opposite. Actually I prefer Constellation Charting. When I see the Mad Goat chasing Pisces pattern, that's a very strong signal. LOL

A Tute or FM probably is taking a similar approach, trying to time an entry or exit. With the idea of staying for awhile. They aren't going to be paying much attention to technical indicators. The difference between a FM, and retail is they have more money, and the money is not their own. Which leads to...

Quote:
Buffett's average holding period is several years.



His specific recommendation is don't get into a stock, unless you are prepared to hold it 9 yrs. Buffett can afford to do such a thing. Can we? He can afford to invest in a stock, and see it go 25-50% down, and then recover 6 yrs from now. Buffett isn't going to worry about ending up in a soup line along the way. What would you do if your latest stock started to crash big? Mangling your account(s) in the process? Would you feel pressure? Ya bet! Besides investing someone else's money for them, Buffett has yet another advantage. If I buy a few K shares in a stock, it's faint background noise in the market. If Buffett buys, other lazy FMs will follow, and up goes the price of the stock.

A retail investor, or one who places their faith in a FM isn't going to win big following Buffett's advise of hold for yrs. Note also if the market did a major 2008 like crash next week, Buffett wouldn't care. He has $100B on the sidelines waiting for such events. Us retail investors do not. Same planet different worlds.

Quote:
Charts are especially popular in the realm of scam stocks because they ignore fundamentals ...



There's one other factor. Unlike the real market where retail is just background noise, in a Microcrap scam a pump gang of half a dozen can create volume out of the blue in some 000n scam. They also can perform creative painting of the tape to make those magic chart technicals look better. It's probably this sense of power, that the little guy can influence a Microcrap PPS which helps suck in the dreamers.


The Jewel of the Mind is Colored with the Hue of what it Imagines
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