the basic flaws in TA

version77 · Nov 22, 2005

Quote from kiwi_trader:

Yawn.
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Looks like univited_guest wants someone to teach him to trade with TA live so he can make some $$$...

kiwi_trader · Nov 22, 2005

Quote from version77:

Looks like univited_guest wants someone to teach him to trade with TA live so he can make some $$$...
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LMAO.

I have to say that I dont know whether "it" works or not. What I do does work but whose to say that its technical analysis. MS deliberately started this discussion with facetious arguments and in his typical old style didn't define the point being debated.

Seems to keep the thread going - especially good for those who aren't here to learn anything and have got bored with trying to reanswer the same beginners questions (can't anyone use a search function?)

Then of course we have an uninvited guest. Not sure guest is appropriate.

version77 · Nov 22, 2005

Quote from mogul:

you can probably figure out where the entries are (indicator based too gasp!)

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Shhh... Keep quiet... Remember, TA does not work!

So don't even try using 2 EMA's as... well I better shut up...

version77 · Nov 22, 2005

Quote from kiwi_trader:

Then of course we have an uninvited guest. Not sure guest is appropriate.
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Sure did pick out the right name for him/herself...

No, maybe univited_pest would of been better...

nononsense · Nov 22, 2005

Quote from uninvited_guest:

No need to post all that crap. Just some live trades will do.
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You must be in that rare 5% category.

Walther · Nov 22, 2005

Quote from marketsurfer:

1/newton's law can be applied to supply and demand? is that what you are saying?

2/mass is the same thing as price?? please elaborate a little on the correlation of newton's or any concept of material physics on price.

thanks !

surfer
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1/ Not at all. What I am saying is that laws of dynamics can be applied to TA. Fortunately there is not many people who understand how to properly apply those laws.
2/ As far as Field of physics is concerned it is. It does ot matter if graph shows object in motion , price in motion or emotion in motion. As long as it can be graphed,it can be analyzed by using dynamics.
And predicted or forecasted.

marketsurfer · Nov 22, 2005

Quote from darkhorse:

Great book. Why would I consider it junk science.

Survivorship bias is a real phenomenon. Mostly it applies to mutual fund managers who get lucky when their specific sector or asset class focus outperforms for a time. Also applies to style-specific hedge fund managers who see their particular niche get hot for a while.

Mutual funds in particular can get lucky for a period of months to years because certain sectors or investing styles can stay hot for months to years.

But survivorship bias does not apply to twenty year track records, which by definition encompass a wide variety of cycles and virtually all types of market conditions. Nor do I recall Taleb suggesting that it would.

In fact, a key point of Fooled By Randomness is that lucky fools get their comeuppance in the end. The odds of a long-only guy making great money for a few quarters, or for a number of years in a secular bull market, are decent. The odds of being lucky for two decades on the other hand, while playing both directions + paying commish and slip all the while, are essentially zero.

Given Taleb's extreme skepticism, it would seem longevity is about the only criteria he gives respect to. Trend followers have longevity in spades.

What do you think of Taleb, especially given what Taleb thinks of Niederhoffer?

Nevermind, don't answer that. Let me hide in peace.
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i enjoyed the book very much. he is a talented, brilliant mind. the reason i brought the book up, is due to your examples of succesful trend funds. on page 128, taleb talks about starting with 10, 000 fictional managers, (performing a negative expectation montecarlo simulation where the loser of each draw of a ball leave the game, there are more details---ou can read it yourself) making the managers incompetent, 198 of these managers rise to the top , less than 2%--- yet they have great track records. do you see where i am going with this?

by the way, taleb has much respect for niederhoffer. rumour has it, the perceived past rift has ended.

best,

surfer

marketsurfer · Nov 22, 2005

Quote from jamis359:

Here's rigorous academic proof that T/A works.

====
FOUNDATIONS OF TECHNICAL ANALYSIS: COMPUTATIONAL ALGORITHMS, STATISTICAL INFERENCE, AND EMPIRICAL IMPLEMENTATION

Journal of Finance 55(2000), 1705-1765.

Andrew W. Lo

---we find that over the 31-year sample period, several technical indicators do provide incremental information and may have some practical value.
====

Table VI of this study lists 10 common T/A patterns that were tested. In the Nasdaq, all 10 patterns yielded positive, non-random returns. The best patterns are the triangle top, triangle bottom and inverted head and shoulders.
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i am very familiar with dr. lo's work. he is the first person to attempt to truly quantify TA. Not only is dr. lo a respected academic, he runs a succesful fund.

best,

surfer

jem · Nov 22, 2005

I do not believe he is the first person.

My understanding is that the Federal Reserve put out a paper showing that t/a works in the currency markets.

Thunderdog · Nov 22, 2005

Quote from Walther:

1/ Not at all. What I am saying is that laws of dynamics can be applied to TA. Fortunately there is not many people who understand how to properly apply those laws.
2/ As far as Field of physics is concerned it is. It does ot matter if graph shows object in motion , price in motion or emotion in motion. As long as it can be graphed,it can be analyzed by using dynamics.
And predicted or forecasted.
More...

I think that it is a mistake to apply principles from the pure, physical sciences to the soft, social sciences (human behavior) and expect anywhere near the same level of certitude. If that could be done, then I suspect that far more scientists would have already become trading millionaires in their spare time.