Technical Limits – A Fundamental Challenge

There’s a pile of traders out there that feel “the fundamentals” are a complete waste of time. Following the charts day by day, minute to minute, hour by hour, “riding the waves” and trading the technicals – ¬†with little or no regard for any such thing as a “fundamental”.

This works great of course…….until it doesn’t.

A “technical limit” provides a “fundamental challenge” in that eventually ( as markets will always push further in either direction than the average trader can bear) “all technicals” will be broken/shattered ¬†creating further “fuel for the fire” in an industry “built” on the sale of technical analysis, and the promise of eternal wealth – while the fundamentals continue to lurk in the under current.

Can you consider making a living trading with “no concern” for the fundamentals, trading only the technicals?

I’ts my belief, that the answer to this question is no.

Eventually…..”all technicals” will be broken as the simple mechanics of the system “require” this to be the case.

Markets tell you to buy the RSI at level “x” and sell MACD at “y” as it “commands” – all-knowing the indicators / levels are meant to be breached, pushing “past” any extreme, essentially “snatching your dreams” with little concern for “anything you’ve learned” about technical analysis, time and time again as the fundamentals continue to hide in the shadows.

Do not leave your indicators set at the “pre defined” levels suggested to you in your trading platform! They are designed to be broken!

Learn to “compliment” your short-term trading with a “sprinkling” of the fundamentals as you really can’t survive without both.

Do I like coming home to “yet another day” of a counter trend rally? Absolutely not.

Am I at all worried about it?

What do you think?

Back in the game……nothing has changed.

19 Responses

  1. Franky February 11, 2014 / 8:13 am

    Well…still holding on…
    Is it Yellen or good support at 80.50 pushing USD up last half an hour?

    • Pot Stock Watch February 11, 2014 / 8:23 am

      Perfect combo of both but sure……

      USD shaking the tree as usual but looking good this morning.

  2. JSkogs February 11, 2014 / 9:04 am

    Ya I’m recently positioned lightly lond usd and long yen. Kong how was the trip?!

  3. timfrec February 11, 2014 / 9:29 am

    but after years of try .. i still can not define ‘what is trader fundamental’ ? some said trader economics. wow my head spin … hard. is there ‘solution’

  4. Leonardo February 11, 2014 / 10:48 am

    Fundamentals matter, and how! That said, it is the flip side to the coin with technical analysis. And just like technical analysis below the 1hr timeframe is noise, a lot of so called fundamental data is also noise. It’s when the correct fundamentals are combined to the respective timeframe that odds turn in one’s favour

    • Pot Stock Watch February 11, 2014 / 11:05 am

      Fantastic Leonardo – you’ve got to get this stuff tied down / put in context / aligned with your own personal trading / time frame.

      When “stars align” and the tech / fundies are “both” lined up – Boom!

      These are generally the trades I look to make.

      Well done.

  5. Q February 11, 2014 / 2:38 pm

    Fundamentals are based on data/news that can’t always be trusted and technicals don’t always behave in the way you’d like or expect. My head hurts.

  6. Peter February 12, 2014 / 12:55 am

    Are you assuming technical trading is short-term only?

    • Pot Stock Watch February 12, 2014 / 6:34 am

      Hey Peter.

      I look at a few technical factors on longer term charts as well sure but……by the time you are trading weeklies, don’t you think it’s more a case of fundamentals affecting price, and those “fundamental factors” being “reflected” via candles etc?

      I guess what I’m getting at is….short term traders often caught “looking for answers” in time frames where only technical factors come into play…and no “real reason” for larger movement in price can really be found.

      • Leonardo February 12, 2014 / 8:20 am

        Your second paragraph is probably one of the most insightful comment I’ve ever read with regards to trading.

        • Pot Stock Watch February 12, 2014 / 9:35 am

          Thanks Leonardo. I really appreciate that.

          Aside from being “born a sceptic” – I’ve been thru every indicator known to man, only to have come full circle and look to develop my own.

          RSI is always useful/handy – but I look for even “greater extremes” in it than the industry standard.

          We have to appreciate that the “retail forex industry” is esentially designed to liquidate your account so choosing levels and setting stops as per your “broker recommendation” is really just playing right into it.

          We can do better than that!

  7. Peter February 12, 2014 / 12:53 pm

    Thanks Kong.

    Yes – eventually. I am reminded that stock markets turn (6months?) before fundamentals come out, as people “anticipate” – so for ~6 months, fundamentals and price action don’t match. Then we had gold last year, or rather, from Oct 2012 onwards. FED merrily printing (bond buying, weakening USD), but gold kept going down – price action not matching fundamentals. But in the end – can’t argue with the market – and the market is price action. Now, whether those prices move because of: fundamentals, or because people take profits, or people start anticipating…. I don’t know – so I just look at prices. All I am saying is: it’s not as simple as “just looking at fundamentals” and away you go.

    • Pot Stock Watch February 12, 2014 / 1:07 pm

      It’s the combo of both exactly.

      Keep in mind as well – the fundamentals you’ve outlined are “somewhat static” assuming / suggesting typical moves in gold, bonds and the dollar.

      Fundamentals are “dynamic” and shift / evolve over time.

      With such Central Bank involvement in markets these days …..”these ain’t yer grandma’s fundamentals either!”

      Gotta stay sharp on all levels…tech and fundies combined.

  8. pstormark February 13, 2014 / 3:16 pm

    I trade technically only. It’s a lot of ways to trade technically, and my approach is to look for prices to go to the extremes before starting to reverse. This is simple human psychology, and it will always be, but it’s not fundamental trading as you see it. I can’t see any reason for this strategy to not work in fifty years, as traders are humans who are driven by greed and fear. They will always push prices too far because of greed and when it starts to reverse, fear will show and the fall in price will escalate until it hits a mean average.

    • Pot Stock Watch February 13, 2014 / 3:42 pm

      As long as you’ve found something that works for you – thats really all that counts.

      There are a “million and one ways” to view and trade markets – containing both the technicals and the fundamentals.

      I’ve never met a full time forex / professional forex trader / making a living trading who “didn’t” know something of the underlying fundamentals – if only for interests sake.

      But then again…………I’ve never met another person trading forex for a living period so…

      Go man go.

      • pstormark February 15, 2014 / 7:10 am

        You have never met a person trading forex for a living? Do you trade for a living yourself? Everyone with an edge can trade for a living if they are disciplined and patient, because of compound growth. Too bad there are few who doesn’t have those two traits.

        • Pot Stock Watch February 15, 2014 / 8:11 am

          Of course I trade for a living.

          And no – to date I have yet to meet another full time forex trader. Lot’s of websites posting charts and trade information, lots of guys in suits, lots “forex systems for sale” but to date not a single full time trader, living directly from profits generated via forex – no.

          Have you?

          Maybe I need to get out a little more.

          • pstormark February 15, 2014 / 8:14 am

            I have learned from a guy who trades for a living. But to this date I can’t say I have ever met any person interested in trading even. There are many people believing they know alot about currencies though, but they don’t earn money on it. It’s just talk.

          • Pot Stock Watch February 15, 2014 / 8:17 am

            Exactly the reason I started the blog.

            People get a chance to read / watch / question (maybe even learn I don’t know) from an actual person “actually trading”, as opposed to wading thru the piles of garbage on the Internet.

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