THE LIMITATIONS OF DYNAMIC INDICATORS
Plus Got Trolled on Twitter
Just this shorty to address the limitation for what is known as the Larry Williams Sequential, Tom Demark Indicator, and Tone Vays Random Indicator inspired by the following tweet.
These are tools. That is all. Use a hammer wrong and you smash your finger. Use a hammer without a saw and you will never build a house.
Used alone dynamic indicators can get you in big trouble. Used with other things they can be very useful.
As Tone teaches you, it is a timing indicator, not a price indicator. This means it is a dynamic indicator not a static indicator. Unlike a bar chart with a high, low, close it is dynamic indicator providing a high and low against a back drop of preceding data of high, lows, and closes.
Further, the time frame is purely subjective. You choose whether it is 1 minute, 10 minutes, 30 minutes, 1 hour, 4 hour, 12 hour, daily, weekly, or monthly.
For this reason a 9 can turn into a 1 of the opposite color. A green 2 trading above a green 1 can suddenly turn to crap, providing a big red 1 with no signal at all after the fact.
It is better not to use such an indicator at all if you don’t know how to use it. It is one of the last things to look at in a trading decision, not one of the first things which I know for a fact is what Tone teaches because I have paid for and attended one of his classes.
I was taught the system years ago by Larry Williams and pretty well dropped it due to its short-comings. But I am convinced that any short comings was on my end, not recognizing its limitations.
I started using it again after attending Tone Vays class, but I traded bitcoin successfully for 5 straight years without it.
My father always believed in the Holy Grail. A mathematical system you can plug into the market and simply pick up the golden eggs from the goose.
I had an undying respect for my father, and he was certainly a smarter and wiser man than me. Highly successful in business, but a gawd awful trader. Addicted to the adrenaline, blindly following his system, with little or no sound risk management that he knew and practiced in business, mainly because his capital was limited. Everything that can be done wrong trading, he did. And that is probably the reason I am the trader I am today.
But it took me years to overcome the thinking ingrained in me. And it took an entire new life to replace this wrong thinking with right thinking. The system is to recognize there is no system. There are trading principles. These principles are the golden goose.
I can’t tell you how many times I have seen otherwise successful people who throw away hard earned savings. For some reason trading diminishes the capacity of otherwise sane and smart people. But this is what makes the market and this is why successful traders can be consistently successful. But it is hard, not easy. Appearances are deceptive.
I consider it a confirming indicator, not a leading indicator. It is one of the last things I look at, not the first.
I also want to address the unfounded criticism of my good friend Tyler Jenks. Apparently, he made the statement that Bitcoin has a 99.99% chance of breaking below $1,000 in one of his interviews. This statement is regrettable not because it is necessarily wrong, but because such statements are taken sometimes as gospel. I have learned never to make such forecasts and refuse to do so. Such forecasts are useless for trading purposes even if they pan out to be correct.
But in this case it was taken entirely out of context. Tyler has time and again warned against shorting Bitcoin even though he is convinced it will go below $1,000 before the bear market ends.
Apparently I am just now learning how crazy things can get on twitter.
Incredibly, this You Tuber takes a interview with done with Ivan on Tech and uses it for his own puffery. Here is the original interview.
First, Tyler is a traditional trader. He manages funds professionally. I trade for myself and advise my wife alone. I am more of a street fighter and gunslinger, as is my friend Tone Vays. We are simply of a different breed and culture from Tyler.
Until recently Tyler never even owned bitcoin! He traded it professionally in the only place he could professionally, on GBTC. He got in, it went up, he recognized the top, and got out and has been bearish ever since.
For a traditional money manager to make such a leap is amazing all by itself. For Tyler to be a part of the community of Bitcoin Standard Bearers is a benefit for all of us. Tyler is not an analyst to be ignored or dismissed.
Second, Tyler has done some amazing work with his Hyper-Wave and also with moving averages which he calls Consensio. His moving average work is far beyond anything I have ever seen. We are both schooled by the same mentors but he has taken this foundation far beyond anyone else.
Third, Tyler has I believe correctly recognized Bitcoin has the stand alone digital asset meeting the qualifications of what he terms Hyper-Wave. He has done this independently and apart from anyone else. Tone, Tyler, and I relate because we have all come the same conclusions following entirely different paths. It is our conclusions and not our methods that unite us.
Fourth, apart from what I consider an isolated and unfortunate misstatement Tyler’s analysis is right on. Bitcoin is a speculation . . . what I believe be a solid speculation. . . . so much so that I regard a portfolio without bitcoin a far greater risk than one with bitcoin.
Fifth, when Tyler wrote that bitcoin could go under $1,000 to over 10 million I understood exactly what he is talking about.
The Long And Winding Road To $10 Million Bitcoin
Written by Lucid Investment Strategies D. Tyler Jenks and Leah Wald
And that is the reason his analysis was explicitly mentioned in my last article. Tyler made what might be considered a ridiculous claim that Bitcoin can go under $1000 and then over 10 million. My point is no one knows and taking Tyler’s work as the worst case scenario . . . and he is alone in forecasting sub $1,000 Bitcoin . . . dollar cost averaging at current levels just makes good sense. The math is a potential 70% adversity versus a potential 3,333x gain.
Unlike those in The Crypto World, Bitcoin Standard Bearers have one thing in common. We emphasize risk rather than riches.
Further, while I am certain Tyler sincerely believes bitcoin will break $1,000 I also know for a fact that he has never shorted Bitcoin and in every setting I have heard him speak he warns against ever shorting Bitcoin. He could not be clearer on this point.
Further, Tyler is the first to admit his analysis can be wrong. Sometimes we tend to get caught up in our own analysis. His comment was isolated and quoted entirely out of context. I was led down a rabbit hole by a twitter follower. And this is why I primarily post on Medium.
Finally, my Medium followers may have missed this tweet. I remain bullish and that is what makes markets!
And this one:
I also added lightly to my long position.
Hope this helps.