Trend, Overbought, Oversold, Noise and silly names for candlesticks … what????
Many traders love to throw around meaningless terms that they’ve picked up from useless forum threads / scammers / mega-bucks courses / etc. and think they’re clever; but are they really? I feel it’s time to get some things off my chest about how irritating the commonly used terms can be …
Let’s start with the word ‘trend’. It is extremely subjective – where one person sees the trend as being up (because they’re looking at, say, 100 bars), another might see it as being down (because they’re looking at 300 bars). Unless you’re going to be specific about the timeframe, the word ‘trend’ is meaningless, so don’t use it. As I type, the trend on Gold on the D1 timeframe, since 7th August 2020 is down (it’s actually in a corrective swing). The trend on Gold on the D1 timeframe since 15th August 2018 is very much up. The trend on Gold H1 since the start of 2021 is very much down. You get my point? You must give a reference timeframe when you use the word ‘trend’ or ‘trending’.
Overbought and oversold – I never ever use those terms. What do they really mean? Something has been bought or sold too much? Who is sufficiently qualified to define what is ‘too much’. Many will refer to (what I consider to be) completely useless indicators like RSI (which is just price in another form) for the definition; but how many times does price just continue rallying up in the ‘overbought’ zone. Sure, you might get a correction when wave 3 and 5 have reached their targets but it doesn’t mean price is overbought or oversold. Rather think about when a correction might be coming in a move that clearly has upside or downside momentum, then look to buy the dips/sell the rallies. Plain old common sense and reading of price action will give you a clue that a correction should come at some point. No doubt the OB OS RSI fans will have plenty of examples of where price corrected from the OB OS levels but then look at DOW D1 during Jan 2018 where price was supposedly overbought for the whole month and climbed about 2000 points – would you have stayed away from taking longs during that time???
Noise!!!! “The lower timeframes are just noise” Aaaargh!!!! That really annoys me. There is no such thing as noise when it comes to price action. The lowest timeframes give the best RR trading opportunities when trading the higher timeframes, so don’t ignore them because some so-called-guru says they’re just noise It’s offensive to price action and completely ignorant. The lower timeframes create the ‘butterfly effect’, so pay attention to them, regardless of the timeframe that you are trading.
While I’m having a rant, let’s talk about candlestick names that some well-known traders (at least they would have you believe they are traders) have made a lot of money writing books about and selling courses. There’s a module in my course about this and guess how many candlestick types I have: 3 ! You don’t need to remember obscure Japanese words and ridiculous names like ‘Pin Bar’ (named after a fictional wooden puppet) – just see what the price bar is telling you in relation to previous bars and key levels (ref the last blog post). Save yourself a lot of wasted effort and money in learning what you do not need to learn to trade.
That’s it – rant over. Feel free to rant back if you disagree 😊
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