TA does/doesn't work thread with a difference.

[Pazienza]

This quote from TD is very much worth paying attention to:

I think there are many people that don't want to believe in TA (substitute thing of choice) because they can't understand why they can't make it work for themselves. I think all these academics seem to spot a classic head and shoulders chart formation, short the neckline break, do their a*se and then spout off about how TA doesn't work. Just like the people that used to tell me in MMT that they were taking every 5m pin they saw in the FTSE and then complaining that pin bars don't work.

NOTHING "works". If you are looking for something that works you are long way away from success.

I am very close to going full time, and what I use I suppose most people would call PA (I don't think it is, but people like to stick labels on things).

Bear that in mind, as I say again: NOTHING "works".

 

[JRP2891]

I think you miss the point

All TA does is to represent repeating patterns of market behaviour...there are patterns in life, nature, science and mathematics and it is beyond dispute that many repeat. Patterns composed of tech analysis merely represent these repeating patterns of market behaviour- on a chart. These patterns give us an edge that is all....but it is an edge because these market behaviour patterns repeat (as represented by the TA pattern.)

I certainly have never argued that TA is gospel, but it is beyond dispute that used correctly these patterns repeat...

Of course not all patterns that repeat play out and this is part of any trading edge. Ie when a pattern develops ...we pays our money (the risk) to see whether it will play out for a gain,..to this extent there will be plenty of times that 'TA doesn't work' but the patterns that don't produce a gain are just statistical occurences in an overall sample of a tech trading edge.

I do buy into the idea that TA may be self fulfilling even if there is little empirical evidence to support that. For eg I wonder how many people buy or sell a pinbar when they see one etc...

It's not a question of TA does or does not work, it is merely a tool from which we can derive a trading edge. Some Trading edge's will 'work,' - some will not, over time.

Agreed.

The question whether TA works and asking for examples of where it doesn't work is flawed in conception.

 

[brettus]

Look at GBPUSD over the last 2 weeks. 1.6030-35 has been a great level and price has bounced off it 4 times with a quick retracement. Has this worked because of TA or because everyone knows that 1.6035 is a good level when this level is a good daily ATR distance away from the high that day. The answer is you might not know 1.6030-35 is a level before looking at the chart. The guys buying at 1.6030-35 might not have been looking at a chart, but if you looked at the chart to get the level, you are using TA.

With TA, you can see every level where large orders were left on. Most of these guys with the large orders might just remember the levels, but if you can see these levels from a chart, you are just making it easier to remember.

 

[scose-no-doubt]

Agreed.

The question whether TA works and asking for examples of where it doesn't work is flawed in conception.

Why? Nothing "works" 100% of the time. The idea of the thread was to discuss why any TA trades posted didn't work.

Less pedantry if you would, good sir.

 

[Pazienza]

Why? Nothing "works" 100% of the time. The idea of the thread was to discuss why any TA trades posted didn't work.

Less pedantry if you would, good sir.

Ah! That's different to some extent.

I think there's two points to make, and the first and most important is this. Essentially, a given set up doesn't work because nothing works. Price can do anything at any time, and you should not be surprised at the outcome, whatever it is. What we are attempting to do is to be profitable overall, and your entry set up is just a small part of this.

Second, and leading on from the first, nothing can accurately predict. However, certain things can help to increase the likelihood over time. Most failures are due to people placing undue weight on something that doesn't merit it.

So don't be surprised if you take a random hammer (or whatever) and it fails. Wait for a stronger story to be built up, whatever that might entail. You are probably familiar with most of the things that add up to a more convincing story.

One final thing, and that is trade management. One person's failure might be another's break even or success, depending upon their management.

It is very difficult to do what you are asking. I don't see many of my set ups that fail, because I don't view them as set ups in the first place. Certainly not calmly looking over a chart - where I do it is in the heat of the moment, ie when emotion takes over (greed, in this case).

It might be better if you pick a method, find a set up that you think someone using it would have taken that failed, and ask for opinions on the set up.

Otherwise, I can show you umpteen crap PA set ups that failed, and the reason in most cases will be "This is a crap set up".

 

[Pazienza]

Scose, genuinely very few of my good set ups fail. Why am I not already a billionaire? Because I refuse to wait for good ones only, and sometimes take bad ones.

Bad set ups fail because a set up is not predictive, and further because they're generally bad.

If you're playing any old breakout, or a bounce off support, or any of the indicator based things (which I know nothing about) why expect it to work?

 

[bbmac]

Assuming that a 'set-up' is technically sound (ie comprised of sound and accepted technical analysis logic) then when it fails, it fails because;

a. On this occassion the market did not agree with the indication of future price movement (that the set-up has historically achieved) that the set-up developing suggested.

-or-

b. The set-up has stopped working.

Other than the set-up being flawed in it's conception, there are no other reasons.

G/L

 

[brettus]

Scose, genuinely very few of my good set ups fail. Why am I not already a billionaire? Because I refuse to wait for good ones only, and sometimes take bad ones.

Bad set ups fail because a set up is not predictive, and further because they're generally bad.

If you're playing any old breakout, or a bounce off support, or any of the indicator based things (which I know nothing about) why expect it to work?

That's sorta true, but even if you trade good ones. You won't go all in. It's hard to become a billionaire from trading. The market will only give you so much. If you want to be a billionaire you need to trade stocks. That's just my opinion. I think i have the same problem though. It's just patience and i lack some of it.

 

[Pazienza]

That's sorta true, but even if you trade good ones. You won't go all in. It's hard to become a billionaire from trading. The market will only give you so much. If you want to be a billionaire you need to trade stocks. That's just my opinion. I think i have the same problem though. It's just patience and i lack some of it.

Sorry, billionaire was just lazy shorthand for very rich. But you pulled out the main point which is that my approach is built mainly on patience.

 

[brettus]

Sorry, billionaire was just lazy shorthand for very rich. But you pulled out the main point which is that my approach is built mainly on patience.

I can't wait till the market buys me one of these.

http://www.sunseeker.com/showboat.php?bid=23

 

[kimo'sabby]

TA provides no edge. What it does provide is a reason to enter the market, so does coin tossing. Any edge has to be derived from the actual market itself...what constitutes a market?

Buyers, sellers, a price, contracts traded, orders comming through. This creates price action.

TA is illusional boardering on delusional.

 

[brettus]

TA provides no edge. What it does provide is a reason to enter the market, so does coin tossing. Any edge has to be derived from the actual market itself...what constitutes a market?

Buyers, sellers, a price, contracts traded, orders comming through. This creates price action.

TA is illusional boardering on delusional.

TA gonna buy me a boat.

 

[TheBramble]

TA provides no edge. What it does provide is a reason to enter the market, so does coin tossing. Any edge has to be derived from the actual market itself...what constitutes a market?

Buyers, sellers, a price, contracts traded, orders comming through. This creates price action.

TA is illusional boardering on delusional.

My rep for this post simply said that I liked this post a lot.

(Well, it also said something else too, but that was just me being paranoid).

This really does say an awful lot in a very few words.

Quite the reverse to my normal mode. LOL.

 

[Pazienza]

TA provides no edge. What it does provide is a reason to enter the market, so does coin tossing. Any edge has to be derived from the actual market itself...what constitutes a market?

Buyers, sellers, a price, contracts traded, orders comming through. This creates price action.

TA is illusional boardering on delusional.

Good post, excellent question. Everyone thinking of buying a system or paying 3 grand for a seminar should stop and ask themselves that question.

 

[Pazienza]

I can't wait till the market buys me one of these.

http://www.sunseeker.com/showboat.php?bid=23

That's exactly right. Decide what you want, and the time frame in which you want it. Then force the market to give it to you.

That's the way that all successful traders do it.

 

[temporarilylight]

My rep for this post simply said that I liked this post a lot.

(Well, it also said something else too, but that was just me being paranoid).

This really does say an awful lot in a very few words.

Quite the reverse to my normal mode. LOL.

So you use fundamentals to trade, Brambles?
I always thought you were a technical/TA trader for some reason..?....
cheers

 

[TheBramble]

that's exactly right. Decide what you want, and the time frame in which you want it. Then force the market to give it to you.

That's the way that all successful traders do it.

lol

 

[TheBramble]

So you use fundamentals to trade, Brambles?
I always thought you were a technical/TA trader for some reason..?....
cheers

No. TA.

 

[Devilicus]

TA provides no edge. What it does provide is a reason to enter the market, so does coin tossing. Any edge has to be derived from the actual market itself...what constitutes a market?

Buyers, sellers, a price, contracts traded, orders comming through. This creates price action.

TA is illusional boardering on delusional.

But 'price action' IS TA, no?

 

[TheBramble]

So you use fundamentals to trade, Brambles?
I always thought you were a technical/TA trader for some reason..?....
cheers

Deserves a fuller response than I initially gave it.

You could trade a system that said: When the price is moving down, go short. Until it isn’t going down any more. When the price is going up, go Long. Until it isn’t going up any more.

That would be technical analysis.

We tend to weave in a bit more than that, all of which is useful one way or another I’m sure, but it’s all based on price and time (and volume where available).

For entries and exits, we generally look for confirmation and something a bit more specific than “when price is moving…” and “until it isn’t..”. Some bods take their need for confirmation, comfort and specificity to extremes. That’s up to them.

But basically, we all need something to push us over the edge into taking that trade. And then, when in it, for getting us out.

I liked the phrase “provide a reason to enter the market”. There has to be one. Even for traders that don’t use TA. Or coins. Or FA. For most (on this site I’m guessing anyway) TA performs that function.

I also like the phrase “illusional boardering on delusional”(sic). It is. It all is. Capturing helpless ticks and imprisoning them in H1 timeframes is about as arbitrary as it gets. It doesn’t ‘mean’ anything. It’s just an abstraction, a convenience. "I’ll trade the 5 min today as I want some action. Tomorrow I’m playing golf so I’ll switch the Hourly”. (I don’t do either of these but by way of example). We encapsulate the market action in abstract packets of time and assign meaning to them. Where did it start that period of time and end? How high and low did it go in that period of time? When in reality, it’s all just a constant stream of ticks. It doesn’t get more illusional or delusional than that.

The key is price action and what you do with it. Everything else is an abstraction, a derivative of that price action. Useful in many cases, but none the less, an abstraction.