I received an email recently with a question regarding my opinion of indicators and chart patterns. I began to reply to the email and then stopped. I thought, if this reader has this question, perhaps others do as well. Given that many short term traders lose money and most long term investors never come close to achieving their long term financial goals, I felt it was my responsibility to give my honest opinion of conventional chart patterns and indicators from the world of technical analysis.
Let me first take you back to when I first learned how the trading markets worked and how money is really made and lost in the markets. In short, how to properly speculate in markets. Starting on the floor of the Chicago Mercantile Exchange (CME), I was responsible for facilitating institutional order flow. Each morning I would take buy and sell orders from banks, institutions, money managers, hedge funds, and some retail traders. I would have huge buy (demand) and sell (supply) orders in front of me all day. Each day, price would move from demand to supply and back again… Anyone who made money would be either buying where demand exceeded supply for a long position or selling short at price levels where supply exceeded demand. In other words, anyone I saw who made money trading and investing would be buying at wholesale prices and selling at retail prices, period.
Fast forward to today, nothing has changed, this is and will always be how you make money buying and selling anything. This picture of bank and institution… Continue Reading
