When 1+1= Any number you like.
I waited a while before doing this type of weekly lesson for this might ruin some of the basic knowledge na tinuro sa inyo about trading. Most of you learned about the indicators as lines or curves sa graph. I have been trading for over a decade. I did not learn indicators the way you did. I learned moving averages by adding yung closing prices and divide it sa number of days. I learned rsi not as a line na nagffluctuate or oscillate from zero to 100. I learned it by solving using its formula. Same with Bollinger and the rest of the indicators. You can tweak an indicator properly if you understand the principle and the math behind it.
Look at the pictures below. The first pic is support and resistance plotted by different traders. Subjective ang pagplot ng support and resistance so iba ibang traders iba iba din ang result. Next one is Fibonacci retracement levels. Iba ibang traders, iba iba din ang pagplot. Last one is darvas box.
What does this tell you? It tells you na its very hard for these ideas to be a self-fulfilling prophecy. Trading is a game of probabilities. The more people use an indicator, the more na ngkakatotoo. If you think 4 pesos is a price kung saan mgbobounce ang price, you will start buying shares at 4 pesos. If 1000 or more traders see what you see, they too will buy at 4 pesos. Kung marami buyers sa 4 pesos di na baba pa dun ang price. Magbobounce satock 4 pesos ang price. Naging self-fulfilling prophecy ngayon ang thinking niyo ng bounce sa 4 pesos.
When you are new sa trading, you will be introduced sa idea na buy at support and sell at resistance. Maiintroduce ka din sa idea na support becomes new resistance if broken as well as resistance becomes new support when broken.
You will also learn na support and resistance are not levels but are zones or areas. I’m here to tell you today that those are not true. They may appear to be true at times. Same din sa broken clock na tumatama twice per day.
Support/resistance lines, fibo ret and darvas are areas sa chart that don’t adjust as the price moves. They are fixed areas. They appear to be true when price respects them and false when price moves above/under them.
Look at the last picture. Six traders plot alma. I used alma for example but it can be any moving average. Six traders plot alma and all of them get the same line. However you look at it it will always be the same.
Some of you will reject this lesson. I’m okay with that but to those who look at things with an open mind you can study the picture. You can even try plotting it sa chart and ask a stranger to plot as well and see if this lesson holds weight.
Learn from this. Backtest it.
More weekly lessons to come.
