I am here in my new workplace as our team is unleashing the final version of a time series analysis software for interest rate derivatives hedging and MBS arbitrage. But I want to relay what happened on Tuesday..... A particular incidence. I was trading the YM (secretly of course) last Tuesday and a coworker happens to come by and remarked offhandedly, "you know you cant win in the long run, all that technical analysis bullshitting." What struck me was not just his arrogance but also the blatant ignorance. He runs the equity trading portfolio where all day he just search for simplistic autocorrelation - a fancy work for trend and reversal ,i.e. another form of technical analysis! This is like saying that the fastball is horrible pitch and come out throwing the four-seamer. (P.S. Rich Harden is a stud, this year or next year ). When I approached him with this, he casually wave it off .... This incidence struck me with the fact that quants hide behind "quantitative analysis" or "time series analysis" so as to NOT be associated with technical analysis. TA the dirty faux pas word in this industry. <b>The irony of which is that pretty much ALL these Quant technique are just another form of technical analysis. Imagine the hypocrisy in the fact that Quant are very anti-Technical analysis.</b> I bring this up because of a peculiar circumstance regarding technical analysis. While "time series analysis" (TA close cousin) has some validity because its backed by <i> Theories</i>, Technical analysis is not! Why is that!!!???? I also bring this up to ask traders HOW and WHY do they know that their method works? You can backtest all you want and give me the Sharpe ratio.... but that's doesnt suffice. That might be a result of data mining. You can show me your Profit/Loss of a steady equity curve for ten year and I can counter with the word, CHANCE. What I am more interested in is the underlying ASSUMPTIONS or THEORIES. I ran into an issue of Northfield's article (Dan diBartolomeo) that alluded to the fact that technical analysis might work simply because of random walk trendiness. Here's a couple of articles that also mention this phenomen. A MUST READ. http://satyrican.tripod.com OR http://satyrican.tripod.com/Vol1No1.pdf ANd http://www.northinfo.com/papers/index.html ... (A bit more technical) Another popular assumption is that of psychological self-prophecy: http://www.sugaronline.com/editorials/editorials/FAQ/technical_analysis.pdf What's your take?