Active TA for Prop Traders

In Markets, Technicals by Guy Bower

This site covers a lot of theory. Generally speaking when we add new course material, we don’t want 100 or more new pages. The idea should be to get the point across then move on.

A million and one books have been written on technical analysis. A lot of them go down a complicated path with convoluted formulas and concepts in an effort to tell you they can predict tomorrow’s high or next month’s low.

For the most part, it’s garbage. It’s either designed to sell a book or subscription access to secret indicators or simple there to fluff up some old trader’s ego.

For active trading, we don’t even need to consider most of these. Anything that measures a trend such as a moving average, is really just focused on the past. Perhaps that past will repeat, perhaps not. Who cares?

What we care about here, as active day traders, is what the market might react to next. That might mean what it can do in the next hour, 5 minutes, 1 minute or just the next few seconds.

Think about what was just mentioned: “what the market might react to”. That has nothing to do with predicting the future. It’s more about read the market and estimating what other traders might be doing.

If you play poker, I bet you think it’s useful to know what others are about to do. We cannot do that with trading. At best it’s an estimate, and we can use charts to make that estimate.

So TA here is not about predicting the future. It’s about what others might be about to do and with that, you place orders accordingly.

How Do I Know?

My main training in TA came from several years as an analyst at Thomson Financial, now called Thomson Reuters. My job there was to write about bills and bond markets, mostly Aussie, Gilts, BTPs JGBs and US Treasuries.

In the room, there were several others doing similar stuff. There were two FX technical analysts. There was a STIR analyst. There were a couple of fundamental guys and a couple of political commentators. I liked my specific job because I got to use a Reuters, a Bloomberg, TradeStation and CompuTrac TAG (extinct now).

On a daily basis, I was to write between 20 and 34 reports on these markets from the points of view of technical analysis. It was a great please to learn because I was forced to know many different types of analysis and be able to write something about it very quickly.

About this Course

For technical analysis, I like the basics. The basics work. That old principle of KISS (Keep it Simple Stupid) applies to technical analysis as much as anything else.

So here we are going to look at charts, chart patterns and levels. It will give you a starting point for analysing the market.

That’s it. There are no Autoregressive Integrated Moving Averages here. That stuff is hard enough to type let alone use.

Why so simple? All want to see from our charts is what others might be looking at. That’s it. If you want to go ahead and research your own ideas for an indicator, pattern or set up, please do.  Far be it for us to discourage your research ideas.

For our style of active trading however, we don’t need to touch the complex. Read a chart, find a level, know what to do around it. That’s it.