Kiwi, To determine a probable price movement one has to use rigorous statistical tests, staring at the charts and indicators is not the edge, and will not give a trader a positive expectancy. I am working in FX & commodities risk management of the SP500 company, and because the slightest edge in FX or commodities markets will give the company millions of dollars in extra profits, we have tested all the technical indicators and found all of them useless. We have a great computing power, funds for research, as well as virtually unlimited man hours. We do occasionally find statistically significant patterns in FX and commodities markets, but one has to use multivariate statistics to find them. Would you care to comment on your credentials? It seems that one who is calling people "stupid" must have something to show for himself? ThetaSpec
Theta, Please do expand on what you are saying if you can. What type of statistics are you using? Brabed
Still, seems ridiculous to call someone stupid who by no means challenged or offended anyone, regardless of experience. Gotta love these forums. As long as you're content with listening to people drone on about MA's and MACD everything's cool. But the second someone has a novel idea that might actually be interesting, all hell breaks loose.
Whomever "We" is, they need to be fired, because with great computer power, funds for research, and unlimited hours spent, you high credential market wizards shouldn't have a problem. It took me a total of almost 3 years to find an edge, and then maybe 1 or 2 to find a few more to become consistently profitable. Its pure technical, cant be seen with the naked eye, purely mechanical, and guess what, I do make my decisions by staring at a few screens. Your statements are very closed minded and to say that it cant be done is very unintelligent. I mean if you are correct, you would have had to interview every profitable trader in the world to make sure he isn't using technical analysis (i.e. indicators, etc). wouldn't you? And since there are numerous article, numerous professional traders admitting using technical indicators, some using them alone, you are proven wrong by that alone. Im not going to debate this. Simply by your statements stating that its a fact and not in your opinion, you lose all credibility. You want some, start posting on the p&l threads. No time to do so? No problem, thanks for the comments, bye. Do I have any credibility, no, although I can prove everything above. Ok, im done. - secXces
Brabed, There are multiple levels of statistical complexity one can use. We always start with something simple, such as linear regression, to see if we can get a slope that is statistically different from zero. We run tens of those a day, to test simple hypotheses, and as you can imagine, the majority of them fail. By using simple regressions, one can answer questions such as are currencies and commodities mean reverting? when dollar strengthens what happens to Mexican Peso etc.? If you see anything significant, you can start building on your findings by carefully adding independent variables to build multiple regression models (multiple independent variables, one dependent). The next level of complexity is to start using multivariate statistics, where we try to build models with multiple independent as well as dependent variables (for example how is the move in Gold up, copper up, Oil up, SP500 down impacts Mexican peso, Argentinean peso, and Brazilian real today? how about tomorrow? how about a month from now?). Let me give you an example how such analysis can add value. There was a period in the last quarter of 2006, when Mexican peso strengthened significantly. The move by itself was not a big deal, peso is very volatile and is correlated with dollar, S&P500, and sometimes oil, but what was suspicions, that the correlations with other currencies, SP500 and other variables did not support the move. Something was definitely out of touch -- either the models did not work, or we had a great opportunity. We started calling our counterparties (banks), asking around what was the deal with the peso. The majority gave us the usual explanation -- oil is up, Calderone is doing well, Mexican economy is strong ... pretty much they were going through the list of the good news on their Bloomberg screens and coming up with explanations on the fly. One bank, however, offered something unusual -- a huge M&A deal just went through, and someone bought billions of pesos. How did they know? Well, they probably made the market on the deal, and because now they were willing to talk about it, the buying was over. We sold pesos, bought dollars, and made a bundle for the company. ThetaSpec
I am new to this board, and I am very surprised how aggressive and defensive people get. It does not make much sense. I always thought that the way to progress in any endeavor, including trading, is to constantly get challenged. When I come up with a new trading idea, I send it to my colleagues, and I specifically ask to "kill" it, to poke as many holes as they can. The criticism sometimes does kill the idea, sometimes we find flaws that we need to fix. By the reaction I get, I almost feel that I have offended someone's religious beliefs, by critiquing technical analysis. ThetSpec
secXces, Thank you for your reply. I guess I missed something in my research of technical indicators over the years. I will definetly try harder to learn and understand this field in the future, and hopefully will be able to to find an edge in technical analysis. Best regards, ThetaSpec
I didnt say I condoned it. Its just a fact. You can claim to be a good trader, you can attack others, say anything you want without have to back up anything, physically or otherwise. I would like to see Baron split this forum into two levels. One level anyone could post to and the other where you have people who have given some sort of proof of their true identity. Sort of like an airplane. You have your coach section and your first class section. It would be great to have discussions with people who cant hide behind anyonymity.
I know I was taken aback w/ your original post saying TA was useless (or something to that effect). You very much come across as one of many college professors who have proven that the markets are a random walk - over & over. Yet, in the real world there are literally millions of P/L's from people that somehow manage to produce a profit within this 'random' realm. To me, this amazing divergence alone refutes the 'proofs' of the random walk. If your company has that much at risk (or to gain), it may want to consider hiring a trader w/ a proven track record (if it can find one who wants to join the corporate world). As for the personality of ET, I am also fairly new here (but not to trading), and have noticed the value of a thick skin