Technical analysis: self-correcting vs. self-fulfilling?

Hello everybody,

I'd like to ask if anyone could explain me what exactly the "self-correcting" nature of technical analysis means? I read about it in John J. Murphy's book "Technical Analysis of Financial Markets", but still don't get it... The self-fulfilling prophecy debate is clear, but the thing why the denomination "self-correcting" is more valid for technical analysis than self-fulfilling, is not easy to understand to me... If you would be so kind and explain it to me via an example, I'd really appreciate it.

Thank you in advance!

Steven

 

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Steve
Having studied/invested /traded for decades;
dont have a clue, what that means-but Proverbs & Jack Schwager's 3 Top Trader books are much more helpful that that concept, whatever it is is???????????????????????????????????????

 

John Murphy cannot trade his way out of a paper bag.

 

proverbs in the bible?

 

He's saying in "theory" that traders using charts (anyone using a chart is using technical analysis) to make trade decisions and did such all together at the same time will distort the markets.

After such, if they got smarter as a group within a distorted market, they would stop using charts for trade decisions or change trade strategies in an effort to beat the crowd.

Thus, self-fulfilling would eventually become self-correcting (in theory) after all traders or the majority of traders had the same trade decision about the same time.

I don't think his theory can occur because the markets are far too complicated with many not using charts for trade decisions while many are using charts for trade decisions let alone making the same trade decision. However, if all the big boys (those that can put millions of dollars into a particular price direction) were to act together in one particular market...

Yeah it's possible in theory regardless if they use charts or not.

Mark

 

Everything works until it doesn't.

for real.. don't get caught up in the philosophical bullshit.

 

You are caught up in some esoteric interpretation of a very complicated reality, which I am not sure it has any explanation at all. Frankly speaking, such interpretations are like trying to explain what a hypersphere looks like by looking at a projection of a slice of it on a 2-dimensional plane. The markets are trading and trading is the markets.