41–50 of 52 posts
Technical analysis is the homeopathy of finance.
Can you provide any useful information other than a cool sound bite? Is there a better way to analyze equities? There is a lot of computer trading. Must be some analysis happening. I'm sure a lot of us here would like to be pointed in the right direction.
I've read too many books and articles, and heard too many anecdotes that make some technical indicator sound fantastic. But until you backtest it (and then forward test it) against a large amount of data, and make sure you're not curve-fitting, I don't think you can have much confidence in it actually working in the real world in the long run (though you may get lucky and have it work for a brief period of time).
For backtesting, the best tool I've found is AmiBroker[2]. It's orders of magnitude faster than any other backtesting tool that I've found, and lets me backtest mountains of data against any indicator I can dream up within seconds or minutes, and then go on to the next one. It's pretty awesome (though kind of quirky in that its programming language is array-based). Anyway, highly recommended.
Earlier quoted context omitted.
They are self fulfilling to an extent - because all the TA day traders are using the same signals
If that is the case, it would create a market inefficiency which some other market participant could come along and exploit (anticipate the TAs moves and act preemptively). Your statement is basically saying there is no one out there smart enough to do this.
Momentum is a well established empirical regularity in stock prices. Knowing this, you trade with the momentum at then trade against it later. This does not help momentum go away.
Earlier quoted context omitted.
Just because I said that technical analysis is bullshit does not mean that I think EMT holds. I can also say that using the times bulls shit in Colorado to predict stock prices is bullshit. That once again does not mean that I think EMT holds. It just means that the technique I called out has no predictive value.
The claim "technical analysis doesn't work" is the weak form EMH. So yes, you are being inconsistent, unless I've mistakenly interpreted "technical analysis is bullshit" as "technical analysis doesn't work". Is it your belief that technical analysis does work, but is still bullshit?
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> You can take the opinion of someone that has walked the walk, or not. In opinions we trust? What kind of a trader are you? > I have been a trader for 15 years, I have seen "go all in on a bunch of calls" absolutely working and I have seen it failing. That sentence is basically void of content. > I have given you a specific example where TA does work, so it can't all be bullshit right? No. You could give me an examp…
Are you being deliberately obtuse? The example I gave is a logical one, which just happens to also work on occasion in the real world. It does not rely on what sort of trader I am, it is a thought scenario, which can and does work in the real world. Logically, if a large number of people are using a specific TA signal to make trades, their trades will move the market to a degree. Then if one knows what that signal is…
How often do these occasions arise? If I used this technique every day, would I last a week before going broke? Give us some indication that this is more valuable than flipping a coin.
Earlier quoted context omitted.
Can you provide any useful information other than a cool sound bite? Is there a better way to analyze equities? There is a lot of computer trading. Must be some analysis happening. I'm sure a lot of us here would like to be pointed in the right direction.
They are better analyzed against each other. A starting point is modern portfolio theory.
Backtesting[1] is really critical when deciding on whether to use a given technical indicator. I've read too many books and articles, and heard too many anecdotes that make some technical indicator sound fantastic. But until you backtest it (and then forward test it) against a large amount of data, and make sure you're not curve-fitting, I don't think you can have much confidence in it actually working in the real wo…
Backtesting[1] is really critical when deciding on whether to use a given technical indicator. I've read too many books and articles, and heard too many anecdotes that make some technical indicator sound fantastic. But until you backtest it (and then forward test it) against a large amount of data, and make sure you're not curve-fitting, I don't think you can have much confidence in it actually working in the real wo…
Alternatively, you can save your money and use one of the myriad of backtesting tools built into existing trading platforms using a demo account.
Funny, I read this is as a free and complete guide to the effects of confirmation bias. A free and complete guide to bullshit is just bullshit. Technical analysis is a farce.
Earlier quoted context omitted.
They are self fulfilling to an extent - because all the TA day traders are using the same signals
If that is the case, it would create a market inefficiency which some other market participant could come along and exploit (anticipate the TAs moves and act preemptively). Your statement is basically saying there is no one out there smart enough to do this.
But my point is that technical ANALYSIS is the utilization of TOOLS. People apply tools in different ways. Especially with fibonacci, there is certainly not one way to trade using fibonacci retracements, extensions, time, harmonics, etc.. I know traders who use it completely differently than I do. What matters is how it's applied to a chart and how trading decisions are made based on how the trader interprets what they're seeing.
It sounds like you guys are describing things like MA crosses to be useless. How they're normally applied by new traders is "the red crossed the green, so I sold", then they get mad when they lose money on the trade (and blame technical analysis). Yet, a moving average is a tool which can be tweaked in numerous ways - how you tweak/apply/interpret/trade using that tool is an entirely other question. Nobody in the right mind should be trading using only one tool, or by applying an "out of the box" charting tool then just blindly making decisions based on that.
Liken this to a software context: "Sensitive data can get stolen, so software is BAD". Yet, it's really just how it's written, up/downsides that are inherent of the language it's written in, but mainly HOW it was designed and how businesses utilized or tweaked it. You can't generalize the entire software industry because of security holes.
If you reduce technical analysis to generic "super awesome signal, works every time!" marketing ploys, you'll miss one of the best edges you could possibly have in trading/investing.
Note: This disagreement is a perfect example of why volume exists on each side of the market.