In this post I will examine the psychological aspects of trading. I’ll briefly illustrate—through my own experience—the essence of technical analysis and position analysis, explain how working people can easily determine the amount they can allocate to trading, and share my core practical principles for directional trading.
TECHNICAL ANALYSIS OR POSITIONING ANALYSIS?
My personal journey on analysis
This is a very old and unnecessary debate between the two camps about which approach is more valuable. I call it “unnecessary” because it doesn’t matter which one you use, as long as you understand the outputs.
In short: technical analysis “guesses” the important liquidity zones and probabilities based on historical data, while quantitatively monitoring positioning data, explaining the meaning behind levels and market environments, and thus gives us much greater confidence in determining probability distributions.
So, the micro-cycles are determined by the volatility market, within which technical analysis applies. The volatility market helps establish the probability distribution with a high conviction level, but which trades I close and which I size up is ultimately dictated by the realized chart patterns.
Fundamentals, by contrast, merely serve to supply a made-up narrative for the prevailing market dynamics. That’s why I never factor the fundamental itself purely into my calculations; instead, I focus on timing and ask myself, “What story are they trying to sell me?”…
