My point is that 90% of people fail not because they are stupid but because they learn something inheritently flawed. And if you go to any bookstore you see that 99% of trading books are on technical analysis. That's my take.
I subscribed for a free trial at street.com for th Chartman's daily picks using TA. I went through the archives of his picks and compared to results: in my opinion, his predictions were wrong most of the time, and in the rare occasions they were right, the stock didn't move up much. Look at Google for example. On Friday, it dipped below the 50 day MA and the 10 day MA dipped below the 50 day MA and almost below 20 day MA. And the indicators (RSI and ADX) signalled it would go lower too. Today it is up over 3 points.
TA is stupid because it does not work for majority of people who use it. And because majority of traders use TA it explains why 90% of traders fail.
gkishot My point is 90% of people fail not because they are stupid but because they learn something inheritently flawed. And if you go to any bookstore you see that 99% of trading books are on technical analysis. That's my take. Agree 100% And this is so easy.... For example: Not one book writer...cd..tape..seminar..software.. seller or reseller can offer to show you proof in the form of common monthly statements either by themselves or their buyers of their services...not one... In other words...any individual selling their worthless stuff at the International Traders Expo etc..... ............................................ You are 100% correct....
The argument that TA = 90% traders fail might be a fallacy of correlation. I'd bet that most fail because they have no system, they trade during choppy times rather than when a trend is established, they have mad money management, they overtrade because they get bored, they stay too long on losers, they play every hand rather than folding on the bad hands, etc.
Hey, TA? Suppose it exists, it being the rational method that enables users to profit in the market, it's simply that 90% of those trying are perfectly incompetent in applying it. The same situation holds for a lot of disciplines, mathematics, music, you name it.
Here's an example of why TA can describe what has happened but can't predict anything. Suppose you are in a big trading range. TA can tell you either to play the bounce off the range extremes or trade the break out. But which one? TA will tell you stuff like 'Wait for the price to break out of the range by so much then trade the breakout." Well if I had a nickel for every breakout that got reversed (and sometimes the market would actually breakout after the breakout reversal, screwing eveyone over in the process)... If TA really was like nuclear physics (something that is hard to understand, but ultimately works by regular laws) then we'd all quit our jobs and have little computers earning money by trading. I've seen articles in Real Money in which the writer complained that black boxes were fading all the classic TA signals. Well he's just realizing now what always was the case. When you play poker with Phil Ivey, why expect him to always follow the percentages and what the book says? Every time the market follows a range, any potential breakout gets violated. When the market finally breaks out, the range gets violated. TA simultaneously explains either of the two possibilities and predicts both outcomes. A theory that covers everything, is a theory of nothing. You can't use it to make decisions.
And in fact, Katz and McCormick found thru extensive testing that, with very few exceptions, TA and standard "systems" doesn't work in and of itself. I believe they did see some positive results on some markets using genetic algorithms and a simple MACD system, but it's been a while since I read it. http://finmath.com/KatzMcCormickETS.html
My take is that 99% of the books on Technical Analysis are flawed but that does not mean that ALL Technical Analysis is flawed. If you look at the books that are out there it is all a rehash and spin of old information. There is absolutely nothing new in it. Traders are too lazy to look for something new they would rather take the easy way out and leach old information, lose money and then whine about it saying none of it works. How much personal research have YOU done in the last 5 years into absolutely new theories of price action?
nononsense hit the nail on the head without realizing it. They TRY Technical Analysis and their result is failure. You can't try TA you must perfect it then use it and 90% of the traders out there don't know how to do that. Thanks for the trigger nononsense!