Prove to me that Technical Analysis Works.

Discussion in 'Technical Analysis' started by TazTheLaz, May 28, 2022.

  1. TazTheLaz


    I refuse to believe that a line on a chart can explain the entirety of a company. It defies rationality and logic. Not to mention that NOBODY notable has gotten super rich off of TA. On the other hand, fundamentals have made several people rich (Warren Buffett, Charles Munger, Bill Ackman, Carl Icahn, etc.).

    Please explain to me, with logic, how TA is supposed to work.

    I don't care if it's the VWAP or a moving average, just explain to me how a line on a chart will predict anything beyond a vague guess.
  2. smallfil


    There is a whole lot of information on technical analysis out there. If you do not believe it and do not use it, good luck with that. I only use stockcharts to trade and would be a big idiot if I traded on news, guts or plain stupid say so of other clueless traders. Ask other ET trolls for advice. Again, good luck with that. Fundamentals can be faked. I have an accounting degree by the way. Bernie Madoff had bogus statements of his clients manufactured in his office. He did not even trade stock. Remember the accounting scandals around 2000 or thereabouts? Big accounting firms got fined big for certifying financial statements of companies they did not audit. How reliable are those figures? If you got 100 years, go follow Warren Buffet. Few people can do what he did nowadays and I would not even go thru the various reasons. Huge waste of time.
  3. TazTheLaz


    This is clearly a cope. 99% of financial statements are not fake, so we can dismiss this claim.

    Mohnish Pabrai? Peter Lynch? Joel Greenblatt? All are good examples of modern day investors with equal/better performance than Buffett.
    mason macgregorson likes this.
  4. fan27


    Do you believe in the concept of trend?
  5. TazTheLaz


    Past performance cannot predict future results
    the dude likes this.
  6. Nobert


    Essentially, a company is just a group of people.

    If you trust a single individual to delegate, to do well - in the future, thus, you could trust the whole company as well, to do well, based on their perfomance in the past.
    Last edited: May 28, 2022
  7. TazTheLaz


    Sounds a lot more logical/rational than trusting a line on a chart.
    Nobert likes this.
  8. smallfil


    Ignorance is what lines the pockets of big boys (banks, brokers, hedge funds, mutual funds). Do you think they care that there are legions of retail traders with their heads filled with useless fluff that does not work in the stockmarket? But, if you have figured it out, you would not be asking would you?
  9. Information on a chart that’s useful is:
    - price volatility
    - trend (past performance can be indicative of future performance a la momentum anomaly)
    - trading volumes (price and volume tends to be cointegrated)
    - option positioning (implied vol, OI, volumes at strike)
    - 14 day rsi is a proxy for short term reversal (known anomaly)

    So “technicals” can be useful though are largely abrogated by more advanced quantitative analysis (kalman filtering, cointegration analysis, cross correlations, etc.).

    In the 1980s-early 00s, computing power wasn’t as powerful on-demand, which meant using things like moving averages to approximate momentum was an acceptable solution. Today not so much, and there is a lot of garbage out there mainly due to most retail traders not understanding the nature of prices (non stationary geometric random walk) and people looking for simple solutions (that aren’t rigorously tested).
    Last edited: May 28, 2022
    #10     May 28, 2022