Technical analysis :useless junk science

Discussion in 'Technical Analysis' started by oilfxpro, Sep 1, 2012.

  1. Most professors who teach in business schools feel that most technical analysis rules are historic , and are aids for gamblers.Gamblers need a reason to bet , and technical anylysis gives gamblers the reason.

    A recent study by finance professors at Massey University in New Zealand examined more than 5,000 technical trading rules to see if they added value. The authors found "no evidence that the profits to the technical trading rules we consider are greater than those that might be expected due to random data variation."

    http://www.cbsnews.com/8301-505123_162-37840656/is-technical-analysis-a-waste-of-time/?tag=mwuser

    Most of you will give opinions of why t/a works , you can not provide any evidence or studies because technical anylysis can not be tested , it does not always work , all context can not be applied in testing , emotional trading failures due to t/a failure can't be tested , stress and it's negative influences of t/a can't be back tested.WTF. F O S .

    Give me 50 opinion posts without evidence ,and start up 10 other threads positive about t/a , that t/a works.

    95 % losers in trading probably use t/a to place bets.

    http://www.elitetrader.com/vb/showthread.php?s=&threadid=236978
     
    SupermanTrades likes this.
  2. jcl

    jcl

    Of course TA can be tested - when you trade an algorithm that makes steady profit, it obviously works. Such algorithms have been posted here several times, and anyone can verify that they work.

    Your "finance professors" apparently just proved that their 5000 rules do not work. What has this do do with science? Anyone can easily produce 10,000 TA rules that won't work either.
     
  3. It's not because it doesn't work. It's because you don't know what your doing. Books, and websites do not give you a cookie-cutter edge and actually can set you back simply due to how open-ended this study is. I spent 6 years wasting my time trying to make things work until someone on here put me on the correct path. Took another 2 years after that to finally get rid of the bad habits and another 1 year after that to get to profitability. Spending 10 hours+ a day scanning over charts and putting pieces together. After that you need to learn to execute which is another HUGE bump in the road. So it's certainly not easy and that's why 95% fail. The majority that succeed have had something handed to them.

    I will say that i'm not in the market all the time like others. There are guys on here that can trade circles around me. I can only pick off a small percent of the overall movement of the market. But that's enough for me.

    Moreover, anyone on here can use TA to determine an excellent trade. The trick is self control. Don't trade unless you're sure of what you're doing. Wait until you get a screamer. Otherwise stay the heck out and find something else to do.
     
  4. jcl

    jcl

    That's only partially true. For rational TA methods - I don't mean esoteric stuff like Elliott waves, Fibonacci etc. - you can normally tell why they work. But you don't know why they work with certain parameter sets and not with others. Due to the complexity of the markets, there is no such thing as TA theory. TA is mostly empirical.

    However bad habits, self control, and the other problems you mentioned are easily solved when you don't trade yourself, but leave that to your computer.
     
  5. Why hasn't anyone produced a software with algorithms ? your statement is incorrect , and you lack the knowledge about software and algos.

    The professors probably took an independent view , and proved that 10,000 t/a rules worked and 10,000 did not work., so there was no benefit.

    There are plenty of software sellers on this site , why don't they just license it out on commission basis with guaranteed profits?The softwares don't work consistently.
     
  6. Exactly! After 9 fuckin years , it's certainly not easy and that's why 95% fail.

    There is no edge or benefit ,if somebody does not hand you something , so by your own admission t/a has no edge.
     
  7. ssrrkk

    ssrrkk

    I've tested plenty of signals that only work when you neglect commission and slippage. Even MACD or simple MA cross-overs work over a long period of time with some drawdowns of course, only if you neglect commission and slippage. The intriguing thing is that pretty much all simple methods cannot overcome the costs. Perhaps that is not a coincidence.

     
  8. Why should lagging data and information produce future profits and provide an edge?
     
  9. ssrrkk

    ssrrkk

    Surprising but it does. I have hundreds of such test results. Also MACD is widely published. Also take a look at the world championship automated trading competitions. Most of the "successful" winning algorithms are based on cross-overs. Overcoming the costs is the name of the game.
     
  10. jcl

    jcl

    I can not confirm this experience, and there is also no logical reason for it. Commission and slippage alone have no impact on the profitability of an algorithm. They have only relevance in combination with the timeframe.

    When you trade on minutes timeframes, then of course your algorithm must be very profitable for overcoming the trading costs, because the price movements are small. When you however trade the same algo on hour or day time frames, trading costs are negligible compared to the typical price movement range.

    I can also not confirm that simple MA or MACD crossovers are a consistently profitable algorithm. That has been also proved wrong by several studies.
     
    #10     Sep 1, 2012