% of winning trading using TA

Discussion in 'Technical Analysis' started by Bluegar3, Jan 6, 2007.

  1. I've been reading a ton about TA, especially from the web site stockcharts.com. I have yet to do some paper trading using TA, but from what I have read, using TA seems to be able to predict where the prices are going some what decently.

    But... as I have been reading the forums there are many people who say that TA is a scam, a complete waste of time. It just doesn't predict where prices are going accurately enough. So I ask, what is the % of winning trading that one who uses TA has? I read the book, "The encyclopedia of chart patterns" in that book the author states some very good numbers in favor of TA being able to predict
  2. Hey thanks, I just read several of the reviews on the book and it sure seems that people say this is the book that puts all the TA stuff out there to the test to determine what's BS and what's for real.

  3. In this thought-provoking work, David Aronson tests more than 6,400 technical analysis rules and finds that none of them offer statistically significant returns when applied to trading the S&P 500. This result, presented at the end of his work, is not disappointing to dedicated students of technical analysis who draw from the book not a new trading technique but instead take away a new, and more effective, approach to system development and trading. Those seeking the single best indicator or day trading pattern will be disappointed after reading Evidence-Based Technical Analysis, just as they will be disappointed in their trading until they advance beyond seeking the Holy Grail of Trading.

    This is a quote from the review. So now I almost ? all the work I've been putting into learning this. 6400 indicators and all are not statistically significant...

  4. anytime. I have over 100 books on TA alone, and this one is by far the best I have read.


  5. 100%
  6. The book is interesting but - as a means of addressing the question of whether you can use price analysis of the market to trade - it is essentially more reductionist crap.

    Surfer has hyped it (and other books he should be ashamed of) before. See this thread for Surfer's hype and a discussion of what its missing: http://www.elitetrader.com/vb/showthread.php?s=&threadid=79465

    Remember that Surfer is a former ta believer who couldn't make it work for himself, a former trader, and now a book person. He specialises in trying to make himself feel good about this by attacking narrowly defined versions of analysis and trend following. A little frustrating as it misleads those with little experience but highly amusing most of the time if you know enough about his history to recognize what he's doing. :D

    If you define TA as the use of historical price and volume to provide trading opportunities (set-ups) then you will (hopefully) perceive the testing of single patterns to be interesting but that's all. Aronson fails to test anything that isn't easy to test and thus misses the bits of TA that successful non-FA traders use.

    If you define TA as using context and patterns to give an entry, stop, target and management strategy you may be able to achieve win rates of 70% to 80% with win/loss ratios of 1:1 to 5:1 depending on your goals and patience. You can probably do that with price alone but in some tradables volume will allow you to improve your odds.

    Or you might fail. Its up to you. :)
  7. Right combination of TAs can yield ~65% correct trading algorithm. Use different combinations to capture trending, side way trading market conditions, etc.
  8. While you're asking whether or not TA which worked for others in the past will work for you in the future, you might want to also ask yourself why anything "statistically signifcant" (or insignificant for that matter) in the markets will necessarily continue in the future as well.

    In other words, you're just begging the same question all over again.
  9. ddunbar

    ddunbar Guest

    All science starts with observation. There's no magic to TA. The trick is making the proper correlations. Not much different than FA.

    No matter what, TA or FA, one is simply observing human reaction to price and information.
    #10     Jan 6, 2007