The market is not random, but TA does not work

Discussion in 'Technical Analysis' started by shark, Aug 30, 2008.

  1. shark


    Hey. I have been deeply interested in technical analysis for a while, and have spent countless hours trying to find the right combination of indicators to predict the future. However, when you look at it from a legitimate economic standpoint, there is absolutely no reason for technical analysis to work.

    The market is absolutely not random, and it operates on a simple basis of cause and effect (e.g. Bad thing happens -> prices go down.) When you forget about all the indicators and just try to understand "why is it that the dow went down today?" you will start to see much more on a chart. I can not begin to comprehend how someone can expect to make a profit without taking into consideration economic and political fluctuations. To add to this point, it is largely impossible to trade solely on price and volume analysis. You will get blindsided too often by unexpected news reports and the like. The markets are not so complex that anyone will need more than two charts open. All technical analysis will ever do is re-illustrate the existing data. If, for example, I take a simple intraday candle chart and convert it to point-and-figure format, nothing changes. No amazing new views will be unlocked, because its the exact same thing. The market simply relies on speculators and investors reacting to the constant changes of the economy.

    This brings me to my next point. I have also been trying to figure out how to scalp, with little success. People say that scalping is worthwhile because you are less exposed to large economic movements. This is true. However, the orders coming in the market at such a micro scale can not be predicted. Even in a large downtrend, if you look at a one-minute or less chart, there will be multiple short up moves. I will state again that the market is absolutely not random, but it is almost random at such a short time scale.

    Many people, including myself, jump into day trading with hopes of easy profits working from home. it is almost like one of those "work from home" scams on late-night television. Yes, it is completely possible to become very rich trading from home. However, this requires the prospective trader to step away from the magical, colorful charts and look at the market like a seasoned economic professional.

    Thanks for your time.

  2. Plain and Simple... if you ever look at a CHART you are using technical analysis whether or not you want to call it that.

    support and resistance are real phenomena... it comes back to basic economic theory of supply and demand.. and a theory can't be disproven.
  3. First off, the opening sentence of your post says a whole lot of your inexperience and two, this post does an even better job showing us how green you are (a little over 1 month exp):

    No reason to make such definitive statements ( ie TA does not work) when you have next to no experience.

  4. shark


    A chart in my opinion is the simplest practical way to plot a market's movement, beyond the point of one's own memory. Support and resistance coincide with economic news, as what we are really trying to predict are the actions of other people. But my main point is that simplicity is key, and it is is best to avoid the obscure indicators that just make objective economic thought possible.
  5. shark


    You are correct, I am extremely inexperienced and probably among the youngest people on these boards. However, that is what we are trying to do, isn't it? (predict the future). We try to anticipate price movements to a reasonably accurate degree, and follow it there.
  6. More or less. We look for discernable patterns and situations and place trades and then manage them accordingly. TA is a lot more comprehensive than just obscure indicators, which is why I think you shouldn't make such definitive statements about TA, especially given your lack of experience.

  7. shark


    Ok. Perhaps TA might work if you can successfully gauge market and price conditions before a move. But wouldn't it seem impossible without taking news into account? You wouldn't know WHY a move is taking place, and just be in the dark.
  8. Of course there are certain news events that are on the calendar each day and, over time, you learn to know which ones are market moving and which ones aren't. The majority of price fluctuations that occur each day are not news driven. Just make sure you know when certain key numbers are being released (ie 8:30am, 10:00am, 2:15pm etc). Occasionally something unexpected will be released that will quickly move the markets and you cannot account for that. Just hope that, if you are in a trade, that it happens to move with the news :)

  9. shark


    lol just looking at how blank their site is tells me they have not had much luck. They could at least mention some kind of plan as to how they predict everything.
  10. You can't be making bold statements like that if you are inexperienced.

    Watch the markets every day for four years and if lucky you will begin to see patterns of price action repeat itself. Patterns that offer great rewards with adequate risk, patterns that do not always work.

    Over the course of time if you employ proper money management and discipline then you will join the circle of the chosen few.

    In the meantime, it will look like an impossible task.

    #10     Aug 30, 2008