the basic flaws in TA

darkhorse · Nov 20, 2005

Quote from marketsurfer:

let's see if this makes sense, just because TA can't be tested or proven in a scientific enviroment, DOES NOT mean that it can't be used at certain times, in a certain way, in certain markets for an edge.

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How in the heck is that a surprise?

There are purely technical traders with documented track records that beat the S&P over a 20 year plus time span. Jim Simons delivered a 33% return (after huge fees) from 1990 to 2004 with a methodology based on the observation that "Certain price patterns are nonrandom and will lead to a predictive effect."

This is like an aeronautics debate over whether or not bumblebees can fly.

(And I just demonstrated my own weakness once again.)

nononsense · Nov 20, 2005

Quote from nitro:

On this site, the same questions and same issues get raised once every two weeks. I am nearly certain someone sits there and posts the same question to keep people active on the site.

Look at this idiotic question on this thread:

http://www.elitetrader.com/vb/showthread.php?threadid=59170

How many times has this question been asked? And look at the answers, it is truly the blind leading the blind.

nitro
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nitro,

It's kind of like one of them Mandelbrot chaotic pictures, or perhaps not unlike a Tibetan mandela, maybe tantrum. These posters are those most useful guys that supply the liquidities fueling the profits of the few. The recent randomness thread is one of the better examples of this: very encouraging.

http://home3.inet.tele.dk/hitower/mandela.jpg
http://books.google.be/books?hl=en&...sec=0&lpg=PP1&sig=ohaGVjcbWSE9xJkXu5-jcNXQ8ws

cnms2 · Nov 20, 2005

Quote from darkhorse:
Might I suggest the value of ET is 95 / 5. That is to say, 95% of the value comes from 5% of the posts. (Those who post the good stuff also get personal value from the clarification of ideas and the mental stimulation of open exchange.)

With that said, the "other" 95% is necessary to sustain ET as a community. Similar to Ken Grant's observation that 90% of a good trader's profits will probably come from 10% of his trades -- but he still needs the breakevens to get the home runs.

The problem with many threads is simply muddled thinking. Because the cost of creating a new thread or a new post is essentially zero, people routinely offer up the first thing that pops into their heads without thinking it through. (Or they will post a question that has already been answered a thousand times.)

But why get upset about that? It's the nature of the beast -- mediocrity dominates by definition, so just appreciate the excellence and shrug off the slop. (As usual I learned this one the hard way. When an outrageous display of ignorance comes around, I still have to fight the urge to respond, and still occasionally give in.)

As for the basic flaws in TA, the thread might as well be discussing the basic flaws in capitalism. Criticisms will be too narrow because the topic is too broad. What you wind up with is a 'blind men and the elephant' exercise: one is describing the trunk, another the ear, another the foot and so on.
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Bingo!

uninvited_guest · Nov 20, 2005

Wow 16 pages and not one volunteer to prove TA works with a simple live trading journal. Can't you TA guys come up with something better than this live trading journal? My Options Play

Flipping coins will generate better results than what Multioption gets from his TA.

marketsurfer · Nov 20, 2005

Quote from darkhorse:

How in the heck is that a surprise?

There are purely technical traders with documented track records that beat the S&P over a 20 year plus time span. Jim Simons delivered a 33% return (after huge fees) from 1990 to 2004 with a methodology based on the observation that "Certain price patterns are nonrandom and will lead to a predictive effect."

This is like an aeronautics debate over whether or not bumblebees can fly.

(And I just demonstrated my own weakness once again.)
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purely an example of survivorship bias. one never hears from the legions of failed technical traders.

kiwi_trader · Nov 20, 2005

LOL Surfer, you really are incorrigible. Last I heard you were trading a form of technical analysis - what are you doing now?

Uninvited guest: if you keep behaving like a halfwit people will suspect that that's the best that you can give.

uninvited_guest · Nov 20, 2005

Quote from kiwi_trader:

Uninvited guest: if you keep behaving like a halfwit people will suspect that that's the best that you can give.
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Care to prove TA works with a live trading journal or a link to one? Hasn't been done in the 10 year history of the internet.

Very simple request.

sportmatt37 · Nov 20, 2005

Quote from uninvited_guest:

Wow 16 pages and not one volunteer to prove TA works with a simple live trading journal. Can't you TA guys come up with something better than this live trading journal? My Options Play

Flipping coins will generate better results than what Multioption gets from his TA.
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I would love to be able to trade options, but right now I don't really understand all the complexed option pricing theories. TA is the simpliest way for me to make money.

uninvited_guest · Nov 20, 2005

Quote from sportmatt37:

TA is the simpliest way for me to make money.
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Can you back up your claims with a live trading journal? If not why?

iceman1 · Nov 20, 2005

Quote from cnms2:

but nobody claims that TA works all the time. It works statistically as so many other fields of human activity: i.e. medicine and weather forecast, to name only two of them.

Also, as somebody mentioned on this thread, TA is a very wide field and with a very large number of followers. You can't dismiss them off hand.

I asked somebody else on this thread: what does it work for you? Why do you think that your approach is more sound than TA?
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good comments cnms2

does Ace/King or do Ks or Aces "always" win in a poker game? Does 9/4 or a pair of 8s etc. always lose? Does a left-handed relief pticher always get the left-handed batter out in the bottom of the ninth! And so on--

Well---- I guess betting those hands just-- doesn't "work" according to the poster starting this thead -- and according to "uninvited_guest"! Maybe Tore or Ozzie Guillen should disregard who the next batter is --- whenever they decide to make make a pitching change and just flip a coin-- since their strategy won't work --- all the time!

There- we solved the argument! Since TA patterns etc. don't "work" 100% of the time and/or the trader (i.e. poker player) reading the charts & patterns is not as always as competent as the next guy---- (or the left-handed reliever hangs a curve ball )

it must mean that TA --- doesn't work, too -since not all patterns will work as advertised etc.-- all the time OR the trader uses them incorectly in the improper conditions!

Ice

Duh...