I'll bet its statistically based and not reliant on looking at charts to make trading decisions. surf By the way, the guy who got me into trading back in the late 1980's used astrology-- he called the 1987 crash to the day and made over a million $ starting with 10k-- this does not mean astro works.
What difference does it make? Stats build charts, whether you look at the charts or not is irrelevant if you are using the data to make trading decisions.
I can't believe someone actually believes this---- I nominate this post to be the single most naive and ill informed post of the week---
Here is an article from CBS money back in 2009 laying out about an academic paper laying out a strong case against TA: By LARRY SWEDROE / MONEYWATCH/ October 26, 2009, 7:00 AM Is Technical Analysis a Waste of Time? 1 Comment / Shares/1 Tweets/Stumble/EmailMore + There are some investors who believe they can profit by finding patterns in historical stock prices or trading volume. These investors are attempting to profit from technical analysis. Kevin Grogan, my colleague at Buckingham Asset Management, reviewed some evidence on these strategies and found that these investors could probably find a more productive use for their time. A recent study by finance professors at Massey University in New Zealand examined more than 5,000 technical trading rules to see if they added value. The authors found "no evidence that the profits to the technical trading rules we consider are greater than those that might be expected due to random data variation." The major contributions of this paper are: The paper looks at more than 5,000 trading rules in 49 developed and emerging markets. Most other studies look at far fewer trading strategies and markets. The paper uses statistical methods to adjust for data snooping bias. The paper looks at both developed and emerging markets to determine whether technical trading rules add more value in less developed (or efficient) markets. The authors found that technical analysis may work better in emerging markets than developed markets, but it was "not a strong result." The paper's findings certainly don't cast technical analysis in a great light, especially when you also consider the findings from some other significant studies on technical analysis: The study "Market Efficiency and the Returns to Technical Analysis" found that profits from technical trading rules don't exceed reasonable estimates of transaction costs in the U.S. market. The study "A Note on the Weak Form Efficiency of Capital Markets" applied technical trading rules to the U.K. market. They found the rules profitable, but again, the profits weren't large enough to overcome transaction costs. These studies show that looking for patterns and studying historical stock price charts is simply a waste of time. Your time would be much better spent on other endeavors. © 2009 CBS Interactive Inc.. All Rights Reserved
As far as I remember, they didn't test '5000 trading rules' but instead a few very basic trading systems (like moving average crossovers) with dozens or hundreds of parameter sets for each system. The 5000 number is simply the number of all the variations tested. However, IMHO their conclusion is true: There is no edge in well known, basic and unoriginal 'technical trading systems'... Hardly news. ;-)
They are making up the 5000 rules? I haven't seen the paper but i dont think it could have been published with that kind of error. surf
+1 They can't test what they don't know. And what they don't know is where the TA that works resides. Seriously, surf, how many times do you have to be told this?
You got a lot of "crickets" to this post because everyone (but you) seems to understand that charts are just visual representations of data.
It's no error. It just the way of naming things in these academic papers. Each system and parameter set = different (set of) rules. I have seen many papers in which the authors applied the same kind of logic.