Trading the T-line Trading the T-line - cut to the chase ... Stephen Bigalow https://elitetrader.com/et/threads/...t-right-here-baby.335635/page-15#post-5162295
Here is what it means to me. I use charts as a visually pleasing way to see what has happened in the past. ( Add in past performance disclaimer) I look for patterns that have repeated enough time for me to be fairly confident that they have a high probability of repeating again. (No guarantee that they will repeat only that they have done so many times in the past) I make my trades based on those patterns. I expect a number of them to fail. I also expect to make more money on the ones that succeed than I will lose on the ones that fail. When I say charts have no predictive power I mean that I can't tell you with any reliability what the next bar on a chart will look like. What I can tell you is how I will react. Trading after all is being able to react to what the market gives you.
Well since price is highly correlated to profit and loss, I'm not entirely convinced by those who minimize the importance of price.
Yep, anyone can set up a spreadsheet. That does not prove anything at all. Again, TA sometimes works, most of the times it does not, else everyone on Wallstreet would be using it. They don't.
I don't think anyone minimizes the value of prices, but to start with past prices have very little predictive power of future prices in isolation. There is a reason professionals look at the market holistically because the past prices of an asset itself only impact its future price by a margin. But one step further down into the basement is to pretend that some chart formations have predictive power. They don't, that myth has been debunked by every professional trader and yet the lazy retail crowd is hooked to charts as if there is no tomorrow. That only allows for one conclusion, professionals know things a retailer does not. And retailers don't have access to an infrastructure that allows for cross asset correlation analyses and the like. That does in no way mean that if a retailer sticks to the only data that are at his disposal that profits are guaranteed. The high loss ratio among retail traders is a testimony to that fact.
well, let me briefly sum up my previous trading endeavors: i started my journey somewhere around 2013. i don't remember the reason anymore, i think i wanted to have the freedom to trade whereever i wanted, whenever i wanted, and have a good life. so what does a guy do, if he wants to learn something, a new skill or acquire new knowledge? he searches the web. that is what i did. so what does one guy find when he searches the web for trading education? fundamental or technical analysis. well, fundamental analysis is kind of lagging, right? i mean, when the NFP figure is out, it is too late to trade on that. most of the time, it is. unless the consensus forecast is 200k and then the actual number is 500k. that will create some moves in the marketplace, but those events are rare. professionals try to forecast fundamentals and make trading decisions based on that. they listen to every word Powell says, they track inflation numbers, housing prices and many different things and then predict the next rate hike and position themselves accordingly. when the figure is out, all bets are already made. obviously, for the retail guy, fundamental analysis is too much work. well, no problem, do the educators say, right? there is another way to make money, it is called Technical Analysis. because price ultimately is the result of human interaction, it will produce reoccuring patterns. if you don't believe me, look at those 1000000 stock charts. do you see the head and shoulders, flags, pennants, double/tripple bottoms ... "wow thats crazy, patterns all over the place. lets make some decent money." now, good news for you. because you have some mathematical talent/background why don't you check the indicators? check out the MACD/RSI divergence indicator, to check if this indicator supports the next trend leg up or down. to sum up: that is how i came across the TA stuff. that is why i have those books and courses, i have lots of them. i didn't know better back then. i didn't know the stuff i should have known. but thats the case always, right? that is why it is called experience. i really spent too much time, backtesting and real trading the ideas, blown up a few accounts, mixed results overall. sometime, i started to look at TA from a critical point of view. it was not to discredit that approach. i started to dig deeper down. i analyzed how exchanges worked, how the futures markets worked, i analyzed the course creators, their approaches etc. i searched the web for academic research regarding TA. all in all, thats what i found, just to sum up the key points: 1. research on TA produced mixed results. the majority of papers didn't show any value of TA. the papers, in which TA produces good results, should be viewed critically. academics work with assumptions, you don't see the impact of real-time trade execution or slippage, which will affect your results negatively. there was a documentary about Jim Simons, that he and his teams found a good trading system, which produced really good results in backtesting, but was not profitable in real trading, because of bad execution. they got to fix it ultimately, but the point is, bad execution can destroy a profitable strategy. 2. assuming TA works with decent money/risk management, which means you actively make trading decisions based on new price/chart information, is it possible to outperform buy and hold startegies of S&P ETF? if so, is it really worth it spending so much time looking for a new edge? will your edge evaporate over time? i assume everybody knows John Bollinger, who created the Bollinger Bands. his mini hedge fund outperformed the S&P just by couple of percentage over the last 10 years, or so. and i can tell you, that he doesn't trade only based on TA. if you want you can contact him, you can subsribe to his letters: https://www.bollingerbands.com/ 3. i hope, everybody knows how much a course costs. i think, if somebody has the insolence to ask for that amounts of money, he should at least show his track record. how many trading course sellers show real trades? i know only one guy, who is that much transparent: https://www.nobsdaytrading.com/ this guy shows in every course 2 weeks of life trading with real money. this guy deserves the money he is asking for. the others all don't!!!! saying TA works on historical charts is cheap talk, show me the real trades on the hard right edge! like i said in my earlier post: the retard Peter L Brandt (market wizard) deletes the trades that didn't workout, and draws new patterns ...... 4. everybody should know the market he trades. in a risk off environment gold price will rise, it does not matter if the price creates a certain pattern or if the indicators show divergence. predicting where the S&P 500 will go in 5 minutes means, that you predict what the underlying 500 stocks will do as a whole in 5 minutes. do you really think that a certain pattern will help you to predict what 500 stocks will do and what kind of impact it will have on the S&P 500? do you really think that when the arabs cut oil production that the previous resistance level will hold the oil price from rising? did you know that the majority of futures trading is dominated by algorithms? https://www.cftc.gov/sites/default/...lysis/documents/file/oce_automatedtrading.pdf i could write a book about that stuff.
Well, when you became an engineer, I assume you didn't Google your way to become one, nor did you expect to become one by buying random courses or books. Well, several of the traders in Schwager's latest book called themselves fundamental trades and trading generally is 'too much 'work. That's the thing. Seems like you really fell for it, didn't you? Hook, line and sinker? Most of the educational industry is generally snake oil, IMO. Sure. One thing should be noted, though. These academic papers aren't really testing any sophisticated type of TA. One of the papers I linked to wasn't doing much other than testing a MA strategy. In others words - really superficial stuff. So, personally, I wouldn't make any conclusions on such papers. Completely agree. I don't see why an educator like for example Al Brooks won't disclose his trading records. I think we all know the answer to that. However, when all is said and done nobody forced you to buy these books or courses. Nobody forced you to fund an account and blow it. Ultimately, you need to take full responsibility for your actions. You won't get anywhere playing the blame game. This goes for everything in life. Trade something else than S&P 500 if this bothers you, then. But sure. There definitely are patterns that repeat themselves in the S&P 500. It's far from a random walk. Yes. Which is why markets generally are technical.
And who exactly are those professionals? Link, please? I'm generally not interested in the research of others as I rely on my own research and custom developed tools (among which I have a statistical model not based on charts) to help my trading. It's all TA, of course.