The AlphaMind Podcast - Adam Sorab: Technical Analysis - Far More Than Merely a Tool For Analysing Market Price Action.

In this latest episode of the AlphaMind podcast, we talk with Adam Sorab about how Technical Analysis can provide an entire framework for your trading, helping improve timing of discretionary actions, forming the core underpinnings of systematic or quant-based approaches, enhancing your fundamental trading views, and can be a vital part of your risk management approach. 

Adam has a long history in the financial markets industry and is one of the most informed and interesting people you will come across in the trading and investment world. 

Adam has held trading, investing and analysts’ roles at some of the world’s leading investment banks, asset management firms, and global hedge funds. Today Adam is a Partner at Aptior Capital, a distressed debt hedge fund based in the UK. Prior to that, and for over a decade, he was head of technical research and product specialist sales at the hedge fund giant CQS where he produced technical analysis-based investment research and strategy for their traders and portfolio managers. 

Prior to that he held various roles, including his early years’ experience as an FX trader at the Swiss Investment Bank Credit Suisse, and head of Absolute Return strategies at Deutsche Bank Asset Management. 

Adam holds a honours degree in Economics from the London School of Economics and has also been heavily involved with our sponsorship partner the Society of Technical Analysts, the STA, where he was formerly chairman and remains a member of their ‘Investment committee’. Adam was also president of the International Federation of Technical Analysts (IFTA), the global body which the STA is itself a constituent member of. 

Adam brings a wealth of experience and insight that we are delighted and honoured to be able to share with our podcast audience, and which we are certain you will find informative, insightful and may challenge some of your long-held perspective and beliefs. 

You can find out more about the Society of Technical Analysts (The STA) and how you can become a member on their webpage: https://technicalanalysts.com

You can follow the STA on Twitter here

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Episode Links: 

🎧 Podcast: https://link.chtbl.com/Sorab
📺 YouTube: https://youtu.be/LUJnXjJYTHE

 
The AlphaMind Podcast
The AlphaMind podcast is co-hosted by Steven Goldstein and Mark Randall, market veterans with over seven decades between them in the financial markets. To find out more visit the AlphaMind podcast website.

The AlphaMind Podcast is produced in partnership with 'The Society of Technical Analysts'.

Followers of the AlphaMind Podcast can gain an exclusive GBP 100 (or local currency equivalent) on the full cost of the Society of Technical Analysts world beating Home Study Course and Home Study Course and Diploma programme. Go to this link to find out more.

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AlphaMind Podcast Episode 52: Beyond Technical Analysis with Robin Bieber

 

Robin Bieber has been working in the Oil markets for the past 40 years. He has been a trader, broker and analysts, and is now considered one of the leading technical analysts in the trading industry. 

There are few better qualified people who possess the depth of knowledge and insight about how to use and apply Technical Analysis than Robin. Robin joined the markets in 1982 after nine years in the British Army. Robin first worked at E.D. and F. Mann followed by spells at Tiger Petroleum, and Amerex Petroleum, before Robin founded Bieber Oil Ltd, which was acquired by PVM in 1993. He now runs Rb Oil Ltd, a consultancy company

In this fascinating discussion Robin and hosts Mark and Steven move quickly move beyond the usual talk about Technical Analysis to discuss how best to use and apply analysis in a way which brings real value to a trader’s approach and practice.  

We think you will get a lot out of this chat between Steven, Mark and our outstanding guest Robin.

You can find out more about Robin and his work at https://www.rboil.co.uk/

Podcast Episode Links:
🎧Main Link
🎧‬iTunes
🎧‬Spotify

The AlphaMind Podcast

The AlphaMind podcast is co-hosted by Steven Goldstein and Mark Randall, market veterans with over seven decades between them in the financial markets. The podcast delves into the lives and stories of extraordinary guests whose experiences provide a fresh and powerful lens through which to understand the mental, emotional, psychological and behavioural challenges people face when encountering risk and uncertainty in financial markets. To find out more visit the AlphaMind podcast website. The AlphaMind Podcast is produced in partnership with 'The Society of Technical Analysts'.

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This programme has been delivered over the past 10 years to people at many of the world’s leading trading and investment firms.

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The AlphaMind project is a collaboration between AlphaRCubed Ltd and the Mark Randall Consultancy. Its aim is to explore, understand, educate and inform about the key factors which lead to successful trading and investment performance at the human level.

We work with many businesses in the Trading and Investment Industry to help them and their people improve their 'Risk Capability'. Our clients are some of the leaders in the trading world, including names such as Bank of America, Cargill, HSBC, RBS, Balyasny Asset Management amongst many others. If you would be interested to know more about us and how we could help your business. Please email steven.goldstein@alpharcubed.com. 

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Fascinating Interview with Alan Collins of 3cAnalysis : One of the World's Leading Technical Analysts.

Alan Collins of 3cAnalysis is one of the world's leading exponents of Technical Analysis, his firm's daily, weekly and monthly forecasts of FX, Fixed Income, and Equity Indices grace the trading floors at many of the world's leading Hedge Funds and Investment Banks. Following the high level of interest and excellent response to the recent interview with Brady Dahl author of 'Momo Traders: Tips, Tricks, & Strategies from Ten Top Traders', we now have the pleasure to publish an interview with Alan Collins.

Background

3cAnalysis was started by ex-traders Alan Collins and Steve Lucas. As traders who themselves used technical analysis, they often found that much of the technical analysis research they received could have been presented in a way more in-tune with the behaviour, thinking and actions of traders. This stirred them to start producing their own high quality research presented in a way which they felt was more conducive to how traders use and interact with analysis. Their unique approach, with special attention to the needs of the end-user, has enabled them to build up a strong client base among many of the world's leading wholesale and institutional players.

The Interview:

SG: Alan can you tell us what lies of the root of your approach to Technical Analysis?

AC: Well Steve, the underlying methodology that we apply at 3cAnalysis is trend identification and then following that trend – constantly re-analyzing whether the trend is solid or threatened by price action. As you know there are trends that can be found within almost any time frame and so, for example, our daily technical analysis is built upon the foundations of hourly and 2 hourly charts.

SG: There are countless TA services out there, what do you feel it is about your service which so attracts it to high end clients?

AC: There are 3 main reasons why we have a broad base of Institutional clients. Firstly its consistency- we supply 14 definitive FX calls per day, 4 Fixed Income and 6 Equity Indices and never fail to deliver before the market open. Secondly our forecasts are monitored throughout the day and live updates made on profit targets and risk levels as price action develops to maximise profitability. And thirdly it’s because all our analysis is written by ex-traders who understand the practical dynamics of the market rather than merely the technical theory.

SG: How did you first get into Technical Analysis?

AC: I first came into the markets with Barclays back in the early 80’s as a trainee spot dealer. I was surrounded by some excellent traders who dealt using a combination of market flow and a ‘feel’ for price action and its consequences. Responsible for minor currencies that had limited flow and an inability to develop that same ‘feel’ I had to look elsewhere for a rationale behind my positioning. I stumbled upon an article about moving averages and so, given the lack of desk computers at the time, set about drawing moving averages on graph paper - plotting USDESP (USD v Spanish Peseta) and USDSCH (USD v Austrian Schilling) etc. (everything quoted was USD based back then) and looking for crossovers to identify trends I was able to create a role. 

SG: I understand that your approach is perhaps more subjective than many of your competitors, do you think that has helped in securing such a wide following?

AC: I think our clients respect that the analysis that goes on behind our simple and graphic presentation of our calls is based on more than just technical analysis theory. Currency pairs, different asset classes and individual indices almost have personalities. Personalities that change over time and in different situations and it’s important to understand how they’re acting in the moment. So, our approach to being a value adding tool is a very pragmatic one and one that morphs as circumstances demand.

SG: Some of the traders I coach are huge fans of Technical Analysis, whilst others are more cynical. How do you respond to those who dismiss it as a valid tool for trading?

AC:You’re right that some traders are cynical about it but I’ll be willing to bet that most of them will still have screens that show charts because even the most skeptical will realise that some levels can be self-fulfilling if enough people know of them. However the key to all trading is to benefit from market movements that are driven by people’s perception of value. In other words, market sentiment. Sometimes that can be felt but overall the best way to identify market perception is to view what the market is actually doing, rather than what economic theory says it should be doing- where it is buying, where it hesitates, what price it closes etc. – and the most graphic way to recognize that is via charts.

SG: Do you have any favourite set-ups which you'd be happy to share with readers.

I’d be delighted to share 3 of my favourites.

1. I’ve never lost sight of my first technical analysis love and that is moving averages. Currently I use a 13 day exponential average as a consistent indicator of short term trend.
2. Another great indicator of trend and, importantly, strength of trend is a Keltner channel and so no chart is complete without one although I do tweak the default settings to recognize the importance of Fibonacci numbers.
3. I use intraday RSI, Momentum and Stochastics readings but unusually apply moving averages to those readings as well as the spot price. It has interesting results. 

SG: I have seen lots of people do 'bad' technical analysis. How long do you think it takes to become proficient in TA.

AC: One of the downsides to the brilliant software that has developed over the years is that anyone who’s read a technical analysis book or taken an online course feels that they have qualified as a technician. Of course that’s not the case and while Michael Gladwin’s 10,000 hours may be a little extreme I do think it takes years applying the principles of technical analysis in a practical manner to declare yourself ‘qualified’.

SG: And what advice would you have to counter bad TA?

AC: How to counter bad TA is a difficult question. I think the first thing would be to avoid analysts who lack experience and that those with experience cover a number of disciplines across our industry to ensure that the analysis is ‘real’ world and therefore of use. Secondly I would advise reading all analysis with a wary eye, constantly questioning its basis and appraising its usefulness. Quality will shine through.

SG: Indeed becoming good takes time, becoming a expert even more so. Do you believe Technical Analysis to be an art or a science?

AC: The important thing to remember is that the markets are not static. Times and the ‘personalities’ of instruments change and so technical analysis cannot ever be a science. It’s an art and one that has to be constantly maintained to keep up excellence.

SG: The previous point about continually 'questioning your own analysis' strikes a chord with me. I know from my own time as a trader, both in my trading activities and my own technical analysis that I often got into trouble when I did not question my own analysis. It was a very behavioural thing, in effect I was trying to prove my premise. This got me into trouble too many times to recall. What advice, if any, would you recommend to traders and analysts to counter this behaviour?

AC: As you’ll be aware from your experiences in the past and in your current role as a coach, the market is made up of many different personality types and the ability to constantly question yourself is a trait of some of those types who often achieve success on a continual basis. For those for who it doesn’t come naturally to, I think it’s important to understand the benefits that will come from such reflection. Practice is the obvious answer but also looking for outside help and mentoring to adopt such a habit. 

SG: I guess one of the benefits of working in a team with other technical analysts, must the ability to have people who can question your work, and help develop more robust product and service?

AC: Certainly communication with other team members ensures that the style we present of our analysis and our methods of publication is kept consistent and remains focused on the core values that we believe will lead our analysis to benefit our clients.

SG: Do you feel being part of a team helps offer other advantages which analysis on your own doesn't offer.

AC: To be honest, preparing our work is done alone and without discussion. Where that shows a benefit is that is members of the team come to the same conclusions on US$, Sterling and such like then it reinforces our convictions. Divergence in opinions will lead to explanations to clients that extra caution is needed. That benefit can also be seen when correlation between interest rate futures and stock indices is arrived at by independent analysts.

SG: I recall in my early days as trader utilizing technical analysis, that I sometimes over-egged the pudding, trying to find certainty where no certainty can exist. Do you, or did you ever find yourself caught in that mindset?

AC: Yes without a doubt that does happen, although I think, after so many years, I managed to get the incidence quite low. I think that we all take pride in our work, no matter what environment we’re in, and when it comes to making calls, like a traders positions, a certain amount of ego is invested. That’s where discipline comes into things and a belief in the technical indicators that I’ve built up over the years into a analytical methodology.

SG: What advice would you offer to anyone caught up in that sort of behaviour?

AC: I think to find a belief in what you’re doing and that, despite the ups and downs, strict appliance of your methodology, tempered with market knowledge will lead to consistency. Of course, here again, like traders, some will benefit from outside help to rationalize their thought processes. Lose the ego is another way of putting it. The worst piece of advice I ever received as a trader was ‘these are not door numbers you’re dealing in!’. It’s actually better for a dispassionate analysis of the market to treat prices as no more important than door numbers.

SG: Most traders and most analysts have a favourite product or currency pair. Is this the case for you? And why would these be your favourites? For full disclosure, mine were the Bund Future, and Spot Aussie. On the other hand I loathed Cable (GBP v USD) and the Loonie (USD v CAD).

AC: Strangely, I have an affection for the Bund. I came to Fixed Income analysis late – most of my career is FX based – but the definitive HLOC is wonderful for pure technical analysis, the market can trend strongly and I have developed a ‘feel’ for when the technicals are likely to be BS. Cable though I enjoy but oddly I find EURGBP much tougher.

SG: How ironic, whilst I hated Cable I got on really well with EURGBP. - Following on from that. Every trader and every analyst has a favourite trade or call, which usually they can dine out on for quite a few years. Do you have any that you could share, and what was the set-ups behind these?

AC: My current favourite is the USDTRY which was a longer dated call for our Trend Table and a long call was initiated on a move above the 21 week moving average, closing basis, in July 2014 (3cAnalysis 23rd June update on this can be seen below). Confirmation and increased conviction was provided 6 weeks later when prices moved to, then through, the upper band of a positively trend Keltner channel.-That trend then rose steadily through to a peak in September this year with gains, at the extreme, of 94 big figures (44%). Importantly profit taking setbacks throughout that rise were restricted by Marabuzo lines, notably in Feb, Mar, June, July and August. Only when the latest, created at the end of August, at 2.9650 was breached did the positive trend come under threat. (Price action since has yet to confirm a complete change at the time of writing). 

SG: I notice that you talk about trends, momentum, sentiment, moving averages etc. Does this suggest that you are not a big fan of patterns or formations?

AC: That’s totally true. I, like most technicians currently, will always use Candlestick charts and these are extremely useful. But its really important not to view them as stand alone signals. They have to be viewed in the context of the trend, their relationship to moving averages and relative to what indicators like RSI and momentum are saying.

SG: Are there any patterns or formations which you particularly like or are wary of?

AC: Firstly I am a firm disbeliever in Elliot waves. In my view it is weak analysis, too often subject to hindsight adjustments and was only ever intended by its architect as applicable to Stock markets – which is where it should be solely used in my opinion.

SG: Interesting. I know a great many people who passionately believe in Elliot Wave as a tool to predict the market. For my own part, I agree, I found it better for understanding whats happened in the past rather than as a reliable tool for making probability based risk assessments. When I did dabble in the past with it. I found its rigidity to restrictive and often ended up trying to find narratives to support its conclusions. This in itself led me dangerously into 'confirmation bias'. How do you feel about patterns produced by standard western technical analysis?

AC: I’m also wary of triangles, wedges etc. as I find they always look good in retrospect but rarely contribute to accurate forecasts, especially on a short term basis. There are other analysts who would, though, strongly disagree and will pepper their charts with such formations.

SG: Well I guess that is where we diverge, I was a big fan of these, though context was vital for me. Context included trend, my interpretation of how the market was set-up (how short or long it may be), market fundamentals, event risk, risk-reward, and my own intuitive senses.

AC: We also like to bring our fuller wider understanding of market drivers into play. Pure technical analysis states that one is supposed to exclude these aspects, but practical reality is of course very different, you cannot do t/a in a vacuum.

SG: A good example of this was the situation earlier this year when the FX markets were rocked by the Swiss-Franc Peg being removed, and the resultant unprecedented price action. How did that affect your calls and analysis in the immediate aftermath?

AC: Of course it made a huge difference and it would be foolish to pretend otherwise. Technical analysis is the reading of market sentiment and for that reading to be accurate the data has to be pure and true, the markets deep and an equal number of potential buyers and sellers. When a Central Bank manipulates the market in such a fashion, all normal technical indicators have to be placed on hold. Of course when you’re watching a 13 day moving average, intervention is soon filtered through, momentum based on 21 week readings is obviously going to take longer. But playing in the background for weeks afterward was the concern that the SNB could step in again in another way.

SG: I notice you are not a huge user of volume as an indicator. I guess the problem for FX has always been its ‘over the counter’ nature, which restricts decent or real-time information on volume. Are there any occasions or products however where you do consider volume?

AC: Not for FX for the reason you mention. It does have a part to play in the Fixed Income markets and Equity indices. In both, but especially the latter, increased volume will increase the confidence that can be placed in the break of a Moving Average, a move to new highs or the formation of an important Candle pattern and vice versa of course.

SG: The FX trading business has faced many challenges in recent years, many of them well documented. One of the biggest consequences is I feel we have a far more level playing field, however at the same time there are periods of low liquidity and large multi standard-deviation moves. Have any of these affected how view the markets or present your findings.

AC: Certainly FX trading has altered in many ways over the years and will continue to change its nature. I don’t feel that these changes have had an impact on the actual technical tools that I use but what it has certainly altered is how we present our views and trade ideas to our clients. In the past trend were more entrenched and maintaining a positive or negative stance was easier, riding our dips and rallies, to maintain the overall view.-While that is still valid in the longer-term, the shorter term you analysis the more volatile price action currently is. To cope with this we have altered our style to a degree to ensure the maximum benefit for clients. So whereas 2 years ago we would be Bullish say in EURUSD from whatever the price was from 7am London time with a definitive set of targets and a risk level, we would now structure the forecast to be Bullish from the 7am price but also buying a Setback/Dip to another nominated but definitive price. This helps to allow for volatility within an overall short term trend.

SG: 3cAnalysis has gone from strength to strength in recent years, and is used by many top hedge fund and investment banks. Where next for you as a company?

AC: Well, our primary aim to ensure that our consistency continues and the level of service we provide our clients with remains excellent. Naturally we respond to client feedback and have changed the products we offer when appropriate: - We added Trend Table for a longer term view on an extra 13 currency pairs, 8 Equity products and 4 Commodities. 30 Year US Bond coverage has been added recently, following an earlier introduction of Gilts. And we now have a Commentary page where bigger picture technical analysis is provided, education pieces and guest articles by respected names from other, related, disciplines.We aim to continue such changes, are looking into beginning a Commodity product and also expanding our Technical Analysis training program.

SG: If you had any advice for traders who use ‘Technical analyses, other than to subscribe to your service, what that would be?

AC: Whether they subscribe to our service or not I think the input of outside independent research is vitally important. Such forecasts and ideas have no vested interest and can be excellent in complimenting / tempering existing views and will, in the right hands, add to profitability. When selecting such outside research it is vital to look for consistency, accuracy and market experience. A combination harder to find than you may think.

SG: Not everyone is a fan of technical analysis, whilst other people seem to be completely dismissive of it. What would you say to persuade those who don’t use or believe in Technical Analysis to consider it or to open their mind to it?

AC: I think many of the non-believers feel it is bland research offered by geeks with charts covered with lines and shapes with the ideas either buried within swathes of text or without any firm conclusions. Such ‘analysis’ is ripe and to really understand the benefits then it’s important to assess analysis that is, as I said above, Consistent, Accurate and provided by analysts that have a broader market experience than merely as analysts. In the final result charts definitely show what the market is doing rather than what many consider it should be doing. Reading that properly and then turning it into a probability of where the market is next heading is an art rather than a science. But even if you despair of finding a Leonard da Vinci who’ll help you make money, the levels that a pragmatic analyst can provide will place you ahead of the curve.

SG: Alan thank you for taking the time to let me interview and discuss your service. As a thank you I'd like to give you a chance to provide a call to action for any prospective clients interested in using your service. 

3cAnalysis currently only offer their excellent service to wholesale and institutional. If readers wish to know more about their service, they offer a free trial to potential new clients . Their website is www.3canalysis.com. 

Steven Goldstein is a leading Performance Coach working with Traders, Banks and Hedge funds at AlphaRCubed Ltd: To know more about Alpha R Cubed, visit their website www.alpharcubed.com or email Steven at steven.goldstein@alpharcubed.com. 

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Behavioural Finance Article for Society of Technical Analysis(STA) Magazine - April 2014

The following link is from an article I wrote for the Society of Technical Analysts Magazine. The aim of the article was to provide an introduction to the subject of Behavioral Finance. Behavioral Finance and Behavioral Economics looks at Human Behaviour as a key factor in the decisions people make in financial markets, and helps to explain why people do not act with rationality in economic and financial decision-making. I think the rise of Behavioural Finance and Economics is showing technical analysis in a new light, and that the price action patterns and behaviours which T/A tried to decipher in identifying value is becoming more accepted and mainstream. However, I do think it might take years if not decades for the academic community to start accepting the validity of T/A beyond a Pseudo-Science.


Any one interested in the article can find it at the following link: https://docs.google.com/file/d/0B5mDNVW4jFtkQjFQbVJrZFpOOWM/edit

AUDUSD – CORRECTION OR CONSOLIDATION?

As long-time readers know, I only occasionally comment on markets, with most of my other commentary saving itself more generally for aspects of trader performance, psychology and behaviour. One of my favourite markets to comment on (and trade) is AUDUSD fx. Maybe its because I have a good record on this in recent year, though whether that is skill or luck who knows?

My first attempt at calling the AUDUSD this year was Back in February. Whilst my call proved correct, my timing was a little premature. Nonetheless, I did qualify this in the title of the post ‘Is the AUDUSD in the early stages of turning?’ Approximately 2 months later it finally turned.

My next attempt was to call a bottom for the strong down-move from April through to late June. The post on the 25th June was titled ‘AUDUSD FX SPOT - Possible pause in the downside as market hits key Fibo levels.’. Whilst the call has proved prescient, the market did move slightly lower than I suggested it might, though in truth this was short-lived and quite marginal.

Over the 2 calls, I’d give myself a mark of around ‘8 out of 10’. – I did I’m glad to say have the trade on too, though I took my profit a little early, but still managed to catch a nice move.

Where to next then? My favoured call is that we are in the early stages of a correction, though this is not a high confidence call at this stage, and it is quite possible that the market is consolidating ahead of further decline. Looking at the attached 8 hour chart below, what appears to be a rounded basing pattern may have formed, though until it clears 9280 and then 9326 on decent volume and manages to hold those levels there is a risk of failure in the basing call. Looking at where the correction may move to if it does unfold. I’m guessing gains could move to around 9580 to 9600. This is where the 2012 low and the level where 38% correction of the drop from April occurs. A sustained move through 96.00 could possibly push higher closer to 98.00. – Personally I still remain bearish longer-term, hence any rally is most likely a contra-trend move, with the low to mid 80s still on the cards for later 2013 or 2014.

Looking at the risk reward on this trade, if it were to prove correct, then we could be looking at approximately 300-350 points on the upside (And possibly more), with risk below last week’s 9137 low, therefore approximately 110 points risk at this time. I like this risk/reward on this trade, though dip buyers would naturally improve their odds. Waiting for a confirmed break, would bring greater confidence to the trade, however it would have a far inferior risk/rewards odds in my mind.

Anyway, third time luck for this year, let’s see what the summer holds. (Or winter if you reading this south of the equator).

EURGBP chart - signs of a deeper correction.

Despite my focus on trader psychology, development and performance, I still like the odd dabble in the market. - I suppose once a trader always a trader. - One market which looks interesting to me right now is the EURGBP cross. - I have attached a chart below highlighting my view that we may be seeing a correction unfold. - Though not a lover of the 'Head & Shoulders' pattern (they so often disappoint), this is showing decent potential for a correction. Using the traditional measured target this could see a move to 0.8525 which is the 50% correction of the October - January decline, and around the base of the Sep - Dec range. Momentum is also quite supportive here, with clear 'bullish divergence' on the daily chart and shorter-term momentum studies favourable. Breaking over the most recent high (0.8377) and holding should strong favour a continuation of this correction.