John Murphy should be no stranger to anyone in financial services and trading. He is a technical analyst of commodity futures in the United States, and has published many monographs mainly on technical analysis, among which the book “Technical Analysis of Futures Market” is regarded as the “Bible” of technical analysis. I read this book twice ten years ago, and when I read it again recently, I feel more intimate and experience more profoundly, and the mysteries that have been in my heart for a long time have also become clear.
In the book “Technical Analysis of Futures Market”, John Murphy believes that “technical analysis is obviously empirical and has a strong subjective color, so it is actually an art”. In this regard, I deeply sympathize. In more than ten years of trading practice, I found that although technical analysis can be quantified, intuitive, and easy to grasp, it does not have strict scientific characteristics, nor does it have strict logical laws. Many technical tools are not saws that can saw through wood with enough strength and time, nor are they always a common heat source that can turn ice into water. It always requires investors to realize their own tricks at a certain time. These tricks cannot be copied and are more of an artistic quality.
All works of art can only be observed, studied, appreciated, and imitated by people. If they are copied, they become handicrafts instead of works of art. If you hear “Erquan Yingyue”, you can feel what it is like weeping like complaining, complaining in crying, crying in complaining, but you can only listen quietly and savor it slowly, and you must not copy it. Copying doesn’t make sense either. When it comes to peacock dance, you will think of Yang Liping. Others can dance peacock dance, but it can only be learned and imitated, and it will not have the artistic value of Yang Liping’s peacock dance. Technical analysis is like this. It looks like a set of techniques, but it contains elements of art. It is a combination of technology and art and cannot be simply copied.
John Murphy also said: “In the forecasting stage of the market, technical analysis or basic analysis can be used, but when it comes to choosing a specific time to enter and exit the market, you can only rely on technical analysis.” In stock trading, I have made profits quickly after entering the market, and then the market changed. I foolishly watched a profit order turn into a loss order. I never knew when to close the position. In fact, this is the result of not making good use of technology.
Just like a surgeon performing an operation on a patient, before the operation, he will definitely do a comprehensive physical examination for the patient, carefully prepare the operation plan, and sometimes invite experts for consultation. This preparation process is very similar to basic analysis stage. In the final operation, when and where to cut must be very accurate. If there is a slight difference, it may be a thousand miles away. The final surgical operation is like opening and closing positions in trading. You must choose the most favorable time to enter and exit the market with the support of technology, otherwise you will not get good results even if you make a reasonable analysis.
A set of technologies cannot conquer the world. In the book “Technical Analysis of Futures Market”, John Murphy quoted a very simple example to illustrate technical problems. He said: “You can only learn to swim in the water.” This is indeed the case, no one can learn swimming skills without going into the water. In trading, if you want to master trading techniques, you must enter the market and use real money to feel the storms of the market. Water quality is a summary of experience, not science. If you want to learn how to swim, you must go to the water and practice more. He also said: “No matter how good the water quality is, people will choke on water.” Therefore, we must be prepared to choke on water. While learning how to swim, we must also master how to deal with choking water. Before you go into the water, you need to know what to do if you choke on the water. Just like every transaction we make, we must know what to do when there is an adverse situation before entering the market.
There are many technical tools. As for whether you use the top and bottom of the head and shoulders shape, or use the moving average, or use the method of combining volume and price to trade, it depends on your own perception. It is usable, and it can be successful if it is used well. In short, there are tens of thousands of roads, and safety is the first. You don’t need to make money first, and you have hope if you survive. Therefore, John Murphy also said: “In the long run, a conservative trading style is the most desirable.”
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