Specific Formation definitions?!?

Discussion in 'Technical Analysis' started by cyborgSHK, Nov 17, 2006.

  1. So I'm trying to develop a business plan for technical trading, and in order to do so, I want to forward test how certain technical patterns hold up (and possibly back test eventually if I ever learn how to do that effectively)

    But, my main point that I am trying to at here is this: in order to really test, say, a double top's effectiveness, you have to have a specific definition of what a double top *is*. I know the classic definition, of course, but I'm really hung up on the part where most people say "the two tops are *about* the same price".

    Does anyone use any specific numbers, and if so, how did you determine those? I'm personally trading US Treasuries, Eurex Bunds, Stoxx and Dax using 60 min charts. Any info on those specific markets is great, but any info on any maket is good too, so I can pick some brains about methodology.

    The other thing I'm having trouble is with Trend Lines. The classic technical idea is "the more times it's tested, the better," but I don't have a definition of "test."

    Thanks in advance for any insights.

    CyborgSHK
     
  2. marketsurfer

    marketsurfer Sponsor

    specific,testable definitions do not exist, hence the non-quantifiable nature of TA. Most of TA's practioners treat it as an art form,not a science thus the nebulous nature of the discipline.

    Dr. Andrew Lo of MIT did some preliminary work in this regard. Here is something to get you started:

    http://web.mit.edu/alo/www/Papers/techanal.html

    regards,

    surfer
     
  3. Mo06

    Mo06

    "Does anyone use any specific numbers, and if so, how did you determine those? I'm personally trading US Treasuries, Eurex Bunds, Stoxx and Dax using 60 min charts. Any info on those specific markets is great, but any info on any maket is good too, so I can pick some brains about methodology."

    You are trying to quantify the unquantifiable.


    By that I mean, pattern recognition is not an exact science, probably not a science at all.

    Mo
     
  4. ]
    Bulkowskis book has a lot of statisitics on patterns. It was put together on info gathered during the last bull market so it might be applicable now.

    http://www.elitetrader.com/bo/index.cfm?action=view&B_ID=16&CatID=3