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# Why does technical analysis work

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

1. ### 4re

I was putting the commission guys in the Bentley and Rolls. Maybe I got it backwards, sorry...

#31     Sep 9, 2006
2. ### ceniman

Because with mathematics (i.e. Technical Analysis) we can explain the past pricing action on a chart perfectly with various indicators. Just like mathematics can describe the universe.

With mathematics we should be able to increase our chances to predict the immediate pricing action to some degree and get into the market at a "low risk entry" in order to protect our capital sooner.

#32     Sep 9, 2006
3. ### ProfLogic

Be careful . . . The foundation of TA is not math and even more so the consistency of price movement can not be read using math in a timely useful manner. Math is a tiny tiny part of modern TA.

#33     Sep 9, 2006
4. ### 4re

Totally agree, using chartpatterns and S/R uses very little math. I do understand what is being said here though. I am thinking that the writer was talking about pivots and fibs and other math based indicators.

Hopefully the math part should be counting profits.

#34     Sep 9, 2006
5. ### ceniman

Are you implying that Technical Analysis does not involve numbers? Using numbers implies using mathematics.

Even displaying a historical chart involves technical analysis. The initial decision you make when displaying a chart is what type of chart to put up. The chart itself is a form of indicator and is constructed with mathematics.

People look at it and decide to buy low and sell high, or buy high and sell higher, etc.

#35     Sep 9, 2006
6. ### ProfLogic

I think what 4re and I are saying is that Math shouldn't be of Primary importance. We understand that the chart is constructed using math but the focus isn't on the Math its price. People have a tendency to get hung up on the process and shouldn't. They need to focus on the tradable aspect of the result . . . price. What does price do that gives me, the trader, an edge over the rest of the individuals trading in this environment on a consistent. Math is definitely involved but not a decision point.

A house is constructed with nails but the focus for the house isn't the nails.

I hope you understand what I'm trying to say. Sometimes I'm not as clear as I think I could be. Distracted watching football.

#36     Sep 9, 2006
7. ### 4re

No I am not implying that as all trading involves numbers. I am implying that some T/A methods involve mathmatical formulas to figure I.E. Fib ratios and pivots. Any trading is going to have some form af addition and subtraction at the least.

#37     Sep 9, 2006
8. ### marketsurfer

Please define your terms, professor. what is "modern TA" and who,pray tell, are its practioners?

the first place i would suggest looking for your terms is the Market Technicians Association--- the arbiter of the TA world. unfortunately, your creative language is not used there.

regards,

surf

<i> "swan diving off the tonques of crippled giants. international business machine, to the last of academe'---okam's razor makes this cutting clean--shaven like a banker, lilac-vegetal"</i>

#38     Sep 9, 2006
9. ### marketsurfer

exactly.

however, i don't believe many on wall street actually use TA for anything more than basic analysis and/or a marketing tool for the public. one of the big houses recently fired their entire TA staff--which was part of the marketing department by the way.

TA is pretty useless when you can see order flow and have informational advantage.

Regards,

surf

<i> "swan diving off the tonques of crippled giants. international business machine, to the last of academe'---okam's razor makes this cutting clean--shaven like a banker, lilac-vegetal"</i>

#39     Sep 9, 2006
10. ### ProfLogic

Go back and reread your previous statement regarding the ever changing TA environment about 1000 times and maybe you will figure it out before you turn 80.

#40     Sep 9, 2006
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