My approach is via technical analysis (TA). If you don't know what TA is, think of me of someone who assess my trend direction from a chart of proce vs. time.
There are many approach in technical analysis, some uses pattern recognition, some uses Elliot Wave analysis, Fibonacci numbers, indicators, intermarket analysis, industry-sector analysis, and many more I can't list right now. But after getting some intro and to a certain extent extensive research into some of the areas mentioned, I have found cycle analysis to be the one that can give me the map of the market.
What do I mean by the map of the market? A global map for example will show you the absolute position of all countries in the world. A map of the market will then give you where you are in the market itself. It can perhaps tell you that you are in a beginning of a bear market and you may not want to hold a buy position during this period. With this map you are no longer lost! A lot of other system will help to shine the light on where you are right now, but sometimes it doesn't help if you don't know where you are in relative to other position. Your incomplete map may say that you are safe right now, but what you don't know can hurt you as danger may be lurking just around the corner. Risk management is essential, but at the end of the day, traders usually want peace of mind, whether they admit it or not.
Ok, what about cycle analysis? I like the description of cycle analysis from this website. The book which got me started in cycle analysis is Profit Magic of Stock Transaction Timing by J.M. Hurst
But who is J.M. Hurst? Known by many contemporary market gurus as the father of cyclical analysis, some believe that his discovery is worthy of a Nobel prize. I was at awe when I read the book mentioned as all the pieces of technical analysis start to come together in a comprehensible picture. What was not comprehensible to me when I first read his book was how to exactly recreate his channel and envelope analysis. After tolling around for a few months, I was finally able to figure out what the missing link was. From that point onwards, I didn't look back and made significant improvement in my trading performance and also peace of mind.
As time goes on, insyallah, I will further improve the market map and provide more guidelines on how to use it. All the best in your trading. |
