"Why Technical Analysis is Nonsense"; Views?

Discussion in 'Technical Analysis' started by Trend Following, Jan 12, 2008.

  1. Trend Following

    Trend Following ET Sponsor

    I am curious to see the diversity of opinion about <a href="http://seekingalpha.com/article/59187-why-technical-analysis-is-nonsense">this post</a> from the "Prince of Wall Street".
     
  2. He's pretty much on spot but I disagree with him when he says traders are doing nothing more than throwing darts and getting lucky. Some people are better equipped to interpret the message of the market and profit from it. The best way to approach the market is this.....it's just data.
     
  3. Brandonf

    Brandonf ET Sponsor

    I think that the most important thing is to have something that gives you consistancy in your approach, be that T/A, F/A or a combo of the two. The market is also, in my opinion, much more random than most traders want to believe/hope it is. It is though also much less random than the academics would have you believe. So, most traders probably overtrade which causes a two fold problem- First the randomness I mentioned, and second of all trading is all about making good choices with imperfect info, most people cant even do that when they have perfect information. Again this is all just my own general observations from 10 years of trading and about 6 1/2 or 7 years of teaching.

    Brandon
     
  4. RL8093

    RL8093

    Sorry, but I never got past this quote:
    Simply put - the 'prince' is an idiot. There are many people who earn their living, year in & year out, by 'throwing darts'. At what point does this cease to be random?

    Although he's an idiot, the more people that follow 'experts' like him & Cramer, the more $$$ there is for the rest of us to harvest...

    Keep it coming...

    R
     
  5. Worthless article based on some summer intern's "experience." If fundamental analysis is so great, why do 80% of mutual funds fail to beat the S&P 500? Contrary to what this guy claims, a large percentage of hedge funds do high frequency trading, which by definition has to be non-fundamental in nature.
     
  6. Aside from some weird spelling errors ('high net work individuals'), what comes across is the author's extremely high opinion of himself. If he was moving in the circles he says he was moving in, what happened - what's he doing posting an anonymous blog trying to convince people that TA doesn't work? He refers to himself in the third person. That's a red flag right there.

    This subject has been beaten to death here. It seems to me that there are plenty of way to enter a market - TA is just one of them. If a trader can use TA in order to enter, it's still the post entry actions that make the difference between losing and winning. Anyone who says TA can't provide good entries is kidding themselves.

    I often think that those who run TA down are guys who don't have too much math.
     
  7. Not much to say, due to the fact, nothing has been said.

    1. Seeking Alpha is an erag who's writers appear mostly to be clueless and sporting agendas.

    2. Prince of Wall Street is going for the page views by knocking technical analysis and fanning the flames.

    3. Michael, I'm not sure where to start with you so I won't.

    At first glance this thread looks like a 50+ pager, enjoy the attention(-)the sales, that should = your net contribution to the world of financial speculation.
     
  8. Exactly right.

     
  9. I liked one aspect of the article because at least he's willing to admit or able to describe that TA isn't all about some indicator (e.g. cci, macd et cetera).

    Such is a common problem among most TA bashers in that they exclude TA involving just chart reading (no indicators) and that gets into the art versus science debate.

    However, the following is arguable because he's making a blanket statement that's not true for many TA traders...

    Technical traders believe it is best to concentrate on what, and not pay attention to why. This is in direct contrast to most fundamental traders (i.e. most successful hedge fund managers and institutional money managers of other stripes) who are concerned with why the price is what it is. For technical traders the why portion of the equation is too broad and many times the fundamental reasons given are seem suspect.

    Some of the best TA traders I know that have been profitable for many many years...

    The why is absolutely critical in reference to futures.

    Yet, I have met a few profitable TA traders that could care less about the why.

    However, I think he's lost in the following statement...

    Technical analysis is an art, and not a science, and The Prince believes in science.

    It shouldn't matter what TA is...art, science, majic or whatever.

    Traders that are able to profit from it consistently from year to year could care less about what someone calls it.

    Further, as long as there's one trader out there that can show he/she is profitable via using TA (there are many) regardless if you label it art or science...

    It cannot be said it doesn't work nor can it be said its useless or nonsense.

    Summary - It's much easier to walk up to a trader that's not profitable while using TA and say it doesn't work.

    However, walking up to a trader that's profitable while using TA will leave any TA basher very frustrated and confused especially if the profitable trader doesn't care if you call it art, science, majic, voodoo or suki mama. :cool:

    Think about it carefully.

    There are many aspects of art (sculpting, painting, photography et cetera) that requires a lot of science or technical application.

    Thus, don't lose yourself into the debate about if its art or science.

    Instead, concentrate on one thing...

    Do you have the ability to profit from it???

    Mark
     

  10. interesting POV. actually its the direct opposite, and im confused with your statement.

    TA is not quantifiable, nor math based. it is subjective art form that allows for numerous interpretations of data---where as quantatative methods are math based providing for one result.

    here's an article explaining these ideas in more detail:

    http://www.dailyspeculations.com/wordpress/?p=2158


    yes, some prelimary work has been done to quantify TA--- dr. Lo and david aronson come to mind--however the results are far from being conclusive.

    its tough to test things that can't be defined.


    surf
     
    #10     Jan 12, 2008