Hehe I always liked the word "anticipate", however there seems to be a variety of definitions there. Perhaps "expect" is better. The more important bit is to have a couple of senarios and use TA to monitor which one is playng out. For example we might anticipate/expect/assume support to be just that (we get this from TA) we then monitor whether it actually is or not (using TA in the form of price action for example). We are the 'now' at this point. If it breaks we can anticipate/expect/assume that it will become resistance and the whole cycle begins again. It is surprising (to me) that some have a forcast mentality. For me that can be detrimental to my trading. Cheers, Nick.
thanks for all the cogent replies. no can argue that TA can't be used as an art form open to interpretation by the practioner. does this give one a quantifiable advantage, or is it merely illusional as Gallacher in "winner take all" sets forth? i have never seen any evidence that TA--meaning patterns,price and volume can be used to skew the odds in one's favor prior to entry. if one has access to this data, other than the often misinterpreted work of dr. lo, i would like to see it. thanks surf
interesting,nick. i have always thought that TA is attractive to "right brain, non mathematically oriented" traders since it is visual and graphic. where as "left brain" traders are much more suspicious of the non quantifiable pretty lines and formations. surf
*Sigh* You always seem to be just on the outskirts of comprehension. By definition, if you are not using fundamental analysis to arrive at your trading decisions, then you are engaging in one form or another of technical analysis. "Technical" refers to technique rather than economic rationale. Using statistics of PRICE, no matter how "scientific," is technical analysis. Some forms of TA are more efficacious than others. Within the rigorous statistical subset, some forms of analysis are better than others. The user must know what he is looking for, and then proceed properly. Much of the task is properly identifying the problem and then choosing the right tools to address it. However, it is not just the tools that matter, but the people who use them, regardless of the occupation in question. For all your wind about statistics and the scientific method, I would bet money that you have never read a statistics text from cover to cover. (And I'm very risk averse!) I would also be willing to bet that, left to your own devices, you would lose money using rigorous statistical methods in your trading for the simple reason that you do not understand how to use or interpret them. A little bet of knowledge... And as for your earlier reference to religion, it is you who seems to have found a new one. The world is suddenly black and white to you. Here's a suggestion. Read Pabst's post earlier in this thread, and try a thimbleful of humility. And let me ask you again, because you did not answer the first time: Are you reinterpreting your own past? http://www.elitetrader.com/vb/showthread.php?s=&postid=1194545#post1194545
It seems like TA was fine when prices were plotted in pencil and on graph paper at day's end from closing quotes in the news paper's financial section and clearly the markets are a physical (<B>E = MC^2</B>) system and may be modeled accordingly. The equation in the era of computers and the Internet seems to be; 'market data + magic dust = profit'. Me, I'm still looking for the data! :eek:
I don't think that the study of human behavior can be characterized as a physical science. It is better described as a "social science" along with all the vagaries that accompany it. There is far greater uncertainty in the social sciences than there is in the physical sciences.
Good point on the human mind and markets being driven by emotion, but the markets 'are' a physical entity. I think most subscribe them to Chaos theory and the difficulty of accurate prediction that's similar in nature to predicting the weather or the actual path of a hurricane. Not that those can't be done, but there are innumerable variables and bias effecting relationships that presently, repeatability and highly accurate predictions are unattainable.
I'll try to expand on that definition, as it relates in my environment. Technical Analysis is the analysis of current & past price and volume of an instrument or instruments and how it specifically oscillates within given and exact chart increments. I only use one indicator and that indicator is not to trade from but to verify and confirm what price/volume is showing me within that specific chart increment. I utilize volume bar charts as well to eliminate the variable element created by minute or tick charts. Nice post.
It will not be possible for you to get involved in reasoning nor generating statistical evidence of anything but Blowfish did give you all you need to start in one small place to learn, adroitly, how to deal with one precise and important consideration that OCCURS SEVERAL TIMES EVERY DAY. For others who may be anticipating either, some open minded learning or even writing an article on very successful people. (LOL), you can, daily, check out the TA relationship of P and V when support and resistance are being expanded. Just imagine your data set after a few days, weeks and months as you find that, with statisitcal significance, there IS a strong relationship that happens frequently every day regarding why there is and isn't range expansion according to the P V relationship. Strangely enough, presicely the same relationship is statistically (and significantly) demonstraded for all forms of pennant formations. After these five have been completed, the statisitically significant, P, V sequence for channel operations can be proven. The first order of business is the assure that the right brained observations are verified for the left brain by examining how the volatility expansion of a trending channel occurs. It is easily observed as blowfish states and even more easily it is verified with strong statisitical significance. For the relationship of the dominant and non dominant traverses in trending channels the same significance (strong) can be obtained using P and V. All seven of these statistically significant TA elements can be proved on any fractal you chose and every fractal that is commonly used by successful traders. Then you can check out the difference between successful traders and failures by examining who uses what TA to make money. Cashmoney is approaching the lizard syndrome in his deepening rate of failure. It is not either right or left brain as wrongly supposed by surfer ( will be author of articles o successful traders (he is trying to find a successful trader ,LOL; can't do it autobiographically)) Cash is SOL because he set himself up for repeated failure over and over. Look at the melage of "indicators" he uses. TA is ALL about using market variables, scientifically, in their proper mathematical relationships. Take a clue from Eckhardt on how to assess and measure the variables of the markets. He chose a stupid shortcut after he gleaned how to use maths to do analysis, however. He only used one variable over time. Doing maths and analysis is off the table for surfer and for cash. One has a closed mind (left and right sides it looks like) and cash is becoming a lizard where his mind is now "fleeing" the markets to protect him and assure his survival as an animal with instincts. If Eckhardt had followed his admonitions mathematically and had not dropped all market variables, he would have aced every opportunity the market offers for proving in stuff with statistical significance. See how surfer's right brain dominates his thinking (he sees patterns and their geometry, but he is incapable of using the Eckhardt admonitions for left brained analysis). Geometry is not the left brain subject. The subject is the maths relationships of the variables with respect to time and the interrelationships. NONOnsense and hypo blow it too with their respective maths bents of pascal/ fermat and applied maths, respectively. They are driven by using maths in THEIR way instead of an analytical way THAT IS DICTATED BY THE MARKETS as Eckhadt surmised and did use only with price alone (because, as he said that is what traders do (oh 90% of traders fail by the way)). Lets get this down by the numbers. I chatted with Todd on the phone after his NYC trip to work with some of our PhD's for a week. It takes 1 day to clean the slates; one day to learn that a wash trade puts you on the right side of the market and two days of experiencing multiple H-L results as a verification of the above seven items. You make money with P using P and the relationships of P, V and t. After that you can throw in the other leading stuff of other RELATED commodities. To run tests of statisitcal significance to prove relationships under any varying conditions and specific significant money making opportunities, you have to do it correctly. Eckhardt may not have as much experience as I do but he did spent a lot of time repeating what he believes. He concluded correctly that a "right" of the market is either there or not there. This is his monkey gibberish as is said by dummies in ET. What is a "right"? It is an element that is constructive for making money. It is something to be regarded and understood because it is true in market operations. Mathematically speaking, the way people handle things that are there or not there is by a specific algebra invented in the 1820's in England. George did it. This kind of stuff with regard to answers comes down as marks (single vertical strokes) on a ledger of two columns. You can keep ledgers on narrow slips of paper I use 4 equal pieces derived from and 8 1/2 by 11 piece of paper. Think of the floor and something simpler than the cards used there. People do this stuff in reality. I found that Eckhardt could have improved his conclusion a little since time is involved. I do his "rights" as vectors simply because of the power of magnitude and direction over just a scalor of magnitude. It also takes a reference to create a vector. the sufficient condition for this is, majically, two bars. This can't be done by surfer, by cash, by NONO, or by hypo because they make the choice to not do it or probably not even think along these lines. What if you log with strokes the "rights" of vectors with regard to "what you See". You could even start, here is the punch line, with all the possible combinations of the P and V over t (the source of two bars with its passing). By doing this you start with what women used to call "the equal rights ammendment" to eckhardt's approach. That is how Eckhardt started as he went from school to school in the those midwestern communities. Give all the vector combinations an equal shot at the opportunity to get your undivided attention. This is TA as it is done to obtain TA by working with reality. You are examining the market, its potential and what the market is TELLING YOU about how it works. I am writing ( meaning my dragon 9.0 and an olympus digital recorder) about 1400 of these squibs on how the market works as it is viewed (monitored) to let people know how to squeeze ticks out of every market condition. (mind building) What a person does, is spend about 50 years getting it down by making stokes on sheets of paper and then taking the statisitically significant results and using them in sport memory to trade without even using the left or right brain. These two parts are used after hours to get your sports memory in gear. I probably should show blowfish's example of testing support for you step by step. I should go as far as setting up the sheets and how to annotate them for a few weeks to be able to code up the software for automating it to use it to front run those quant post doctoral guys. This may give some of you the reasons why the people I mentioned find intraday trading at multiple H-L levels to be "UNBELIEBABLE" As it is said: "they just haven't done the work" and they are using the worong tools and parts of their minds. It is never going to happen for any of these people. The reasons are: that they made the wrong choices and that now their minds are built improperly and that past building is not reversable. Minds that get built wrong last a life time. It is very difficult to build around the crap in a person's mind. You can see how it is processed by these mistaken people. They are processing my words as monkey gibberish. I am processing their commentary as a display of what comes out of minds that are, irreversably, in a state that makes making the kind of money I make as "unbelievable". Check it out Take a chart and a crayon. Draw crude crayola lines on the chart from move to move of price. Take a string and use it to add the crayola line segments. Make another string that goes from top to bottom of the range. Cut the string you first made into segments that are equal to the range segment string. Do you have three segments or more? Glue the strings on a sheet of paper and have a second grader take it to show and tell. Ask the child what the other kids said in class. Frame the strings and the show and tell comments. It is not "unbelievable" to people whose brains are not fried. It can become believable by putting the work into getting how the market works undertood if it is not too late in the mental growth of the mind.
I am not familiar with chaos theory, therefore, I cannot comment one way or the other about it. I am out of my depth on the subject. (Are you listening, marketsurfer?) However, I think that describing the markets as a physical entity in the context of trading them using principles of physical science may be a bit misguided. Market prices, which in the final analysis is what we are all concerned about, are just manifestations of collective human behavior. Human behavior is not readily explained by the physical sciences as I vaguely understand them. As I noted, I am not familiar at all with chaos theory. However, as I understand it, the "if-then" relationships in the markets are a lot more tenuous than the "if-then" relationships in, say, physics. Beyond that confined observation, I do not consider myself qualified to comment.