DISCOVERS TECHNICAL INDICATORS

Once the discretionary trader discovers technical indicators, he or sheincorporates some rudimentary ones into trading, usually as additionaljustification for making the trade. “Not only did Ralph (my broker) tell me to buyGizmo Corp. but Gizmo has great relative strength. Gizmo’s moving averages arebullish, and the Stochastics are oversold and giving a buy signal as well.”These newfound technical indicators give the discretionary trader a new lease ontrading. Now our trader has a whole new world in front of him—the world oftechnical trading. For a while, this newfound world combines with intuition andthe discretionary trader views himself as a strategy trader. He says, “I trade astrategy using moving averages and Stochastics with a dash of daily news and tipsfrom my broker. I am now a real objective strategy trader.” While the trader mayview himself as a strategy trader, this could not be farther from the truth. Thediscretionary trader’s style is still undisciplined, based on newly educated guesses,and he is probably still losing money.For a moment, these technical tools were thought to be the answer, and whilethey add a little more rationale to his trades, the losses continue to pile up.Despite his continuing angst, our discretionary trader is now on the way tobecoming a technical trader.