I am convinced that there is no such thing as a "holy grail" for the market, but there are certainly some very profitable ways to exploit statistically highly recurrent price patterns (rather than TA rules). If you'd ask me who of the 'known' traders is the closest to the way I trade, I would say it's Dan Zanger. Because he uses only chart patterns, price and volume. No TA, no other form of snakeoil. Because non-TA trading means non-lag trading, I consider this quantitatively far superior to using indicators, which is something I used to do for a long time. Ever since I was 'forced' not to use any 'spaghetti' on my charts for a few days, I threw TA away completely, and never used it again. I now sincerely frown upon TA altogether, since I am pretty convinced it's all snakeoil. Reasons? Well, there are several: - TA is generally lagging, so signals come too late. TA people basically rehearse, while pro's anticipate price action. - TA is based on past behaviour, and the past has nothing to do with the future - TA is generally calculated singularly from price or volume. But volume can at times almost completely negate price, and vice versa. There is yet no good TA to do do a proper mechanical calculation of the P/V relationship. Therefore TA, generally solely calculated from price, is at least heavily misleading at times. - TA inclines to give the observer a directional bias, and nothing is worse in trading than having a bias - TA 'bolognaise' obstructs the clear reading of charts, and particularly chart patterns. - Price levels, S&R's, basic trend rules (higher lows, lower highs etc) are more important than TA. Why not focus your attention on them instead? - "Locals", pit traders, don't use TA, they just use chart patterns and volume. Most people who started in the pit never changed this, even after they went screen-based. There are sure many more reasons, but it seems there are a lot of people who still believe in TA. For me, the jump away from TA has made me significantly more profitable, and I wonder how others think about this. If the whole thing ends up in a blood bath of TA-users VS non-TA users - Fine. Anything is good. Scientist.
TA is fun and appealing to those with artistic / visual leanings---- however it is EXTREMELY misleading when used as a hard rule based system. charts are deceptive when viewed in the traditional manner. best , surf
Great thread. I think that this will spur some great discussion. However, I will be out of pocket most of the day so I'll make my position known right now. Regardless of whether or not you use TA or some unconventional use of TA or not it does not matter as long as you are profitable. Anyway, I think that TA & price charts are one in the same. Price Charts: use past price patterns to predict future price movement. The basis of this theory is that past price patterns repeat themselves. TA: uses mathmatical formulations to compute past price movement to predict future price levels. ALL THE SAME THING!
Hi Scientist, I think the problem may be or may arise is that some traders associate the term technical analysis (TA) with indicators while others don't. For example...there are some traders that consider themselves pure TA's and they don't use indicators...just price action only. Therefore...I prefer the terms or phrase of Price Action Only Trading in comparison to Indicator Trading. Thus, the term TA trading seems a little generalized in my opinion. With that said...I have met one trader in my life that didn't use indicators, that didn't use TA (had no charting software) and only traded via price quotes in his broker's execution platform (I believe he uses X-Trader or something like that)... He's been doing this for about 7 months after dumping all TA and Indicators (no more charts)... still doing no better than he was when he used realtime charts (TA). I guess what I'm saying is...the definition between Technical Analysis and Indicators may not be well-defined and may be confusing for many. Simply...what would you call a trader...based on your definition...that's using no indicators (MACD, RSI et cetera)... just realtime price charts? Last of all, its funny sometimes to see traders entering the same type of position at about the same time (maybe seconds apart)... results in a profit... one trader via indicators, another via TA, another via price action only, another via something that sounds like voodoo... why care if your trade methodology is better or more effecient than another when the results may be the same??? Note: I see the above almost every trading day from a group of different type of traders. One day one will outperform the others...another day a different type of trader will outperform the others. My point is this...no matter what type of trader someone uses to define themselves...there will always be a majority of them that fails and a minority of them that succeed... many roads to profits. Good luck with the thread...should be interesting for awhile before all the usual personal attacks begin. NihabaAshi
Scientist, What the hell are you talking about? Are "Technical Indicators" and "techincal Analist" the same thing to you? Maybe you made a typo or something? I know your post don't make any sense to me, ..any body else? sulong
Hi sulong, Thanks for your feedback! Thanks also to marketsurfer, NihabaAshi and all the others... Yes, I mean technical indicators, as based on mathematical formulas computing past price action. It is interesting to see the stressing of a difference between TA and TA indicators. Can we call them TI's? So can we assume that almost anything that isn't fundamental or quantitative analysis, is technical analysis, even if based solely on naked charts? Well, I've certainly learnt something here. So the question is rather : Mathematical TA Indicators vs Pure Price & Volume - Which is better? Scientist.
That's a good question. Here is my method: 1.) I use a Momentum Oscillator 2.) I use a MACD 3.) I use RSI 4.) I use a Stochastic Oscillator 5.) I use a 200 bar EMA 6.) I use a 40 Bar EMA 7.) I use a 10 Bar EMA * I use Monthly, Weekly, Daily, 60min, 5min, 1min Candlestick Price Charts. * I use End-of-day Pivot Points. * I use my discretionary experience which can not be qualified nor quantified. Its just my experience as a professional full time trader. These are my tools. However, PRICE IS KING. :eek:
Scientist, I believe that TA can be defined by 2 approaches. 1. Pure Price & Volume 2. Pattern reconignition (spelling?) Indicators are just that, indicators. Which means they can not stand by them selves, They need to have 1 or 2 to go with them. 1 or 2 can stand by themselves. sulong
Hmm... That's interesting. How about both? I personally use both 1. and 2. But I don't use indicators. I wonder if 1. actually works well without at least some of 2... Admitted, I can scalp solely from an execution platform if I need to, but the issue to this is that this limits you to ultra-short-term trading only. If you want to rely on tape and depth only that is... Personally, I prefer to use charts with my platform, since there's so much information, particularly about the stages of trend and prior S&R's, all compressed in an easily visually comprehensible form. That's why I use charts. Not for any TI whatsoever. Also, I absolutely believe in the validity of various chart patterns, particularly congestion patterns, such as various triangles, boxes, pennants. They work all the time. There is a saying that goes "Show me a good indicator, and I'll show you a pattern that works better." I certainly believe in that. There are a variety of patterns, and some of them are extremely powerful. I also am, similarly to NihabaAshi, a great fan of candlestick charts and various candlestick patterns, which occur on any timeframe. Candlesticks, again, can be quite powerful. At the end of the day, you need to just hand-backtest it to be sure for yourself what the probabilities of various patterns are. There's no way you can really objectively tell solely based on past memories. You need some sort of database to verify it. Doint hand-backtests and entering parameters into Excel works well for me. Thanks for your feedback, sulong! Scientist.