TA debunked?

This is a discussion on TA debunked? within the Technical Analysis forums, part of the Methods category; Originally Posted by bbmac I you accept the premis that TA is not predictive your statement is one of what ...

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Old Jul 20, 2012, 12:59am   #16
 
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Re: TA debunked?

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Originally Posted by bbmac View Post
I you accept the premis that TA is not predictive your statement is one of what the greater probability is, not a prediction, - there is a difference, nuanced as it may be to some (I don't mean you.)

G/L
Yes. It's a matter of what you consider predict to mean. And I think i've debated on this with you before, as you have a very different definition of predict, which is not a wrong definition, it's yours, but not mine. I don't think it's nuanced, as that would imply there is some sort of subtle distinction between a correct interpretation and an incorrect one, when there isn't. Except for you.

Perhaps my view on this is because I think EVERYTHING is a case of probabilities. Nothing is certain. I've looked for things that are certain, but there really aren't any. Even things with probability 1 aren't certain.

And yet another problem with this debate is that if I say TA is any analysis carried out upon price, and price history, there will always be someone who comes along and says, no, TA is indicators and stochastics. Which it is to them. These debates never get anywhere. But the key issue to trading is, can you conclude from past price data, a point of entry and method to trade after point of entry that gives you a probabilistic edge, at least for a time. And the answer is yes. And there's no amount of papers attempting to prove that price is a random walk, never predictable, a martingale, a black Scholes SDE, a Brownian motion, an efficient market or any other concept that is going to make me change my mind from what I know from experience to be true.
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Old Jul 20, 2012, 1:06am   #17
 
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Re: TA debunked?

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Originally Posted by Atilla View Post
Assume there is no TA, no charts, how does one determine;

1. which direction to enter a trade
2. where is the exit point
3. where is the stop

Say yesterday's closing price was £100
Well you could look at the time and sale + order book only and trade from that without a chart if you wanted to. Some people would lead you to believe that this is superior to trading off a chart with/without volume studies. The reality of course is nothing is superior everything is what it is and you use it accordingly to trade your edge.

Some tape readers will even poo poo historical patterns on charts then proceed to identify price patterns that have occurred in the past on the tape. A bias or something more sinister..............
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Old Jul 20, 2012, 1:21am   #18
 
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Re: TA debunked?

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Originally Posted by Shakone View Post
Even things with probability 1 aren't certain.
now you got me. are you including the probability of the laws of probability breaking down.

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Originally Posted by Shakone View Post
These debates never get anywhere.
very true, everyone leaves with the same opinion as they started with. some people do seem to get shouty though when anything other than their strategy could possibly work ever. lol. Then some people have a HSA and try and push their points, all very predictable.

Quote:
Originally Posted by Shakone View Post
But the key issue to trading is, can you conclude from past price data, a point of entry and method to trade after point of entry that gives you a probabilistic edge, at least for a time. And the answer is yes. And there's no amount of papers attempting to prove that price is a random walk, never predictable, a martingale, a black Scholes SDE, a Brownian motion, an efficient market or any other concept that is going to make me change my mind from what I know from experience to be true.
+1 100% spot on. markets are not random imo. The majority of trades are still made/controlled by humans, hence the market is much more neuro-behavioral than we think and not random.

Consider the following:

1. Anchoring . This is the tendency for traders and investors to base perception on the most readily available information.

2. Recency Bias. This is the tendency for traders and investors to place more importance on events that have happened recently.

The above 2 human traits can be traded.
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Old Jul 20, 2012, 7:10am   #19
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I don't know what you all fussing about. T! Ts and @ss works for me every time
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Old Jul 20, 2012, 6:06pm   #20
 
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Re: TA debunked?

It's pretty simple to understand what is wrong with textbook technical analysis.

First, two important elementary school concepts:

Cause & Effect
Action & Reaction

No-one needs to look those up, right? Still - people will study price action (AKA Effect AKA Reaction) for years looking for the answers.

TA is the science of looking at effect hoping to find cause.

This is not to say market activity cannot tip your hand to what caused a move.

This is not to say the only effects are fundamental and are outside of what can be seen on a chart. Markets get out of balance for instance.

You just wont find cause in most TA textbooks. It has to be said that forums are improving nowadays, everyone tried pin bars already and are becoming more savvy.

Perhaps there is hope yet.
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Old Jul 20, 2012, 7:30pm   #21
 
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Re: TA debunked?

If I had to describe my trading style - I would call it purely text book TA.

Without the charts, support and resistance lines I'd have great difficulty assessing entry and exit points.

Picture paints a 1000 words. It really does. Nuff said.
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Old Jul 20, 2012, 7:47pm   #22
 
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Re: TA debunked?

Quote:
Originally Posted by DionysusToast View Post
It's pretty simple to understand what is wrong with textbook technical analysis.

First, two important elementary school concepts:

Cause & Effect
Action & Reaction

No-one needs to look those up, right? Still - people will study price action (AKA Effect AKA Reaction) for years looking for the answers.

TA is the science of looking at effect hoping to find cause.

This is not to say market activity cannot tip your hand to what caused a move.

This is not to say the only effects are fundamental and are outside of what can be seen on a chart. Markets get out of balance for instance.

You just wont find cause in most TA textbooks. It has to be said that forums are improving nowadays, everyone tried pin bars already and are becoming more savvy.

Perhaps there is hope yet.

Since you mention cause and effect, it might be of interest to read

Cause and Effect (and) Levels and Rates

He's a little bit eccentric but I think he has a valid point here.
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Old Jul 20, 2012, 7:48pm   #23
 
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Re: TA debunked?

Quote:
Originally Posted by DionysusToast View Post
It's pretty simple to understand what is wrong with textbook technical analysis.

First, two important elementary school concepts:

Cause & Effect
Action & Reaction

No-one needs to look those up, right? Still - people will study price action (AKA Effect AKA Reaction) for years looking for the answers.

TA is the science of looking at effect hoping to find cause.

This is not to say market activity cannot tip your hand to what caused a move.

This is not to say the only effects are fundamental and are outside of what can be seen on a chart. Markets get out of balance for instance.

You just wont find cause in most TA textbooks. It has to be said that forums are improving nowadays, everyone tried pin bars already and are becoming more savvy.

Perhaps there is hope yet.
Absolute to5h with hidden agenda as per normal.
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Old Jul 20, 2012, 9:58pm   #24
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Re: TA debunked?

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Originally Posted by Atilla View Post
Assume there is no TA, no charts, how does one determine;

1. which direction to enter a trade
2. where is the exit point
3. where is the stop

Say yesterday's closing price was £100
So we have no way of looking at previous data on charts.

If you were able to get a feel for the speed of the momentum maybe you could say to yourself , if the next 5 mins the price goes to the next level I put in 10 % of my capital.

I would assume then you would have a gut feel for how quick the price could move next and if it started to go against you with speed you'd auto get out. If however speed of the trades went in your direction, maybe you could say after a gain of 15% I''ll take some profit ,let the trade playout for a few more minutes. If price returned to your origial entry , auto get out. You'd have to have mental stops based on what you were willing to lose and mental limits on what you expected to gain from each trade.

Though for me , a chart and maybe (but not necessarily) a couple of handy indicators is better than trying to remember historical prices and also quicker than drawing it on graph paper.
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Old Jul 21, 2012, 12:19am   #25
 
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Re: TA debunked?

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Originally Posted by ChocolateDigestive View Post
Absolute to5h with hidden agenda as per normal.
Which, as usual, you are unable to break down point by point.

This is a discussion forum and not a playground CD.

It is very simple. We can discuss, disagree, debate points that others make and have a healthy discussion. Or we can do what you do.

Why you resort to such tactics is beyond me. You seem to have your nose permanently out of joint.
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Old Jul 21, 2012, 12:45am   #26
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Re: TA debunked?

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Originally Posted by the hare View Post
Can someone please tell me where everyone gets this ridiculous idea that TA is predictive ? Is it written in a book somewhere ?, is there a website where this nonsense is being promoted ?

Where did this ridiculous urban myth start, and why does an alleged trading forum allow it to continue ?

I could point you to thousands of books, articles, and websites where there is clear and definite proof provided that TA is non predictive. There's a mountain of evidence to support that view.

Despite all of the evidence to the contrary, trading forums are filled with people discussing the predictive capabilities of TA. What is it about forums that lead to such irrational behavior ?

when we talk about TA, it doesn't just mean using indicators etc. Once we open the chart and read off the prices, without plugging in indicators, it is also considered TA! And we should get the term "prediction" right. A prediction is just a prediction. The only outcome is just whether its accurate, or not. That's all. Whether we consider TA predictive or not, it depends. If we can understand and use our tools properly, we can "predict" the next move and act accordingly. That "predictive" property of TA derives from our minds!

Take another example, no indicators, no nothing. Only price chart (candles, bars etc). Even reading off the current price is "predicting" isn't it.? If you interpret a bunch of rising candles around a support as being bullish, then you are "predicting" the next one to be rising as well. Past price data is also "predictive" , why not? You read off support and resistance levels in the past as well , isn't it so? And then you "predict" that price is coming back to test those areas. Who says TA is not "predictive" ? The term "self fullfiling prophecy" comes to mind
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Old Jul 21, 2012, 1:37am   #27
 
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Re: TA debunked?

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Originally Posted by the hare View Post
Can someone please tell me where everyone gets this ridiculous idea that TA is predictive ? Is it written in a book somewhere ?
Yes unfortunately, many of them.
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Old Jul 21, 2012, 4:54am   #28
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Re: TA debunked?

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Yes unfortunately, many of them.
many things, ideas in trading are subjective. Only Mr Market is right.
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Old Jul 21, 2012, 7:13am   #29
 
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Re: TA debunked?

I think trading is mostly subjective and I think a lot of textbook TA promises an objective method of analysis.

Admittedly, it's been a number of years since I read a TA book. Mind you - I've just read Markets In Profile by James Dalton and I thought it was fantastic.

I think the biggest failing in all the most popular TA books - Alexander Elder and the like - is that they talk as if the charts are the market. They discuss indicators/candlesticks etc as if they are the market and as if understanding them is what makes you a good trader. It is as if you can learn the indicators and patterns and not really have any clue other than that in order to make money.

I think you can only make money from charts if you understand the market they represent. That gives you the context within which you can read something into the activity you see on the chart.

If you take concepts like "oversold" on an indicator - it's complete tosh. Oversold conditions do occur, they are fairly easy to spot, not so easy to trade though as you need large spheres. They have little relationship to the "oversold" in those 40 year old techniques you read in traditional TA journals though.
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Old Jul 21, 2012, 7:38am   #30
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Re: TA debunked?

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Originally Posted by DionysusToast View Post
Yes unfortunately, many of them.
There is no way that a market can be predictive. Chart patterrns do reoccur, giving the trader an impression that they are predictive but it is my experience that they are only so in hindsight and what did happen should have been predicted-

I have ceased to be surprised by what happens. I do what I think is a probability and believe that the longer one is in a trade, the more likely it is to go wrong, in the end.
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