Why does technical analysis work

Discussion in 'Technical Analysis' started by Demarco8, Sep 8, 2006.

  1. Demarco8


    Technical analysis means looking at markets a different way. It requires a different kind of thinking. And the establishment is always reluctant to accept another way of thinking. After all, another way of thinking could be risky, it could require more study, worst of all -- it could mean your job.

    One problem with technical analysis is that it's not automatic. You need experience, you need imagination, you need an inquisitive and searching mind. You also have to realize that technical analysis isn't the royal road to riches in the markets. Well, nothing is. Everything in the investment business requires thinking, trial-and-error, and a realization that no matter how smart you think you are -- you can always, at any time, be dead wrong.
  2. Mark, are you doing drugs or something?
  3. Demarco8


    Just decided to write a few posts. Anyways I am a fib trader. Always important to watch how price reacts to major support and resistance.
  4. The secret as stated in a book or someplace:

    "Technical analysis works because many people use it, and successful traders are able to predict how other people will react on the different technical analysis indicators and signals."

    1. It is not true that many people use it (meaning TA).

    2. Prediction is not usually part of technical analysis. TA is an alternative to prediction. This point is probably very debatable but the TA leading indicators I prefer preclude the need for anything else and that would include prediction.

    3. Not many people use leading TA indicators of price. Price usually leads what people use as TA indicators. The example starts with TA but leaves it at the tarting gate and then goes to some other line of quasi reasoning. seems like TA is not being used to make the trades in the example.

    The secret is not a very good secret or, maybe it is wrong.

    Transactions in the markets may or may not be done by people. They may be done by people using computers who take information from computers or even let the computers do the traes according to stuff in the computer. Programmed trading.

    Both your posts quoting some guy seem to be kinda corny.
  5. Technical analysis allows you to become a one eyed among the blind.
  6. I'll take whatever he has.

  7. The facts are TA does not work. Yes, it seems to work at times, but this is very deceiving. TA works until it doesn't, if that makes better sense.

    TA is non quantifiable, the patterns are not definable in a scientific manner, and there is no evidence ( other than anecdotal) that it works.

    TA is the opiate of the trading masses, it's an easy fix--just follow price mantra leads most to an early financial death or disallusion.

    this is from an ex TA practioner.


  8. FutTrd


    you are right if computer system is something too simple and not researched enough with just a few variables, that system will bomb out.

    The reason my system is ok is because its tested on data from 1980 to 2005, so it works.

    There are so many ways, markets are more efficient every day, BUT there are still many ways to do it.

    For example I met a guy who makes killing on Penny stock (how crazy is that)
  9. People resort to "TA" when they have no better alternative. It's not so much a question of whether it's right or wrong, but just making do with what you have. Perhaps it's because so many retail traders have nothing actual to rely on, that alot of TA gets manufactured and "sold" to them.

    Even those who trade primarily on price alone, they "make do" with what they have and necessarily discard the rest, as they have no access to the same informational sources (I don't mean "inside" info here) the big players have -- price dissemination being the only real "level" playing field for the individual. It might be the "right" way for that particular individual to trade, but it doesn't mean those who you are trying to profit off of remain such market "purists".

    Those with the right kinds of information at hand trade as close to the impetus behind market movement as possible -- I seriously doubt they would need to resort to guessing whether price will stop at .618 or .382, RSI is below 20 or above 80 -- and so on and so forth.
  10. achilles28


    You guys don't believe in the concept of support and resistance? Trendlines and channels?

    Im not talking indicators or oscillators. JUst the simple stuff.
    #10     Sep 8, 2006