If you want to fail as a trader, study TA

[jon1971]

Based on all the conversations, study and everything else trading related that I have had involvement with, I am now at the point where, as I understand more, I seem to know less and at this rate I will soon understand everything about nothing.


Paul

Yeah, that's a real paradox and indeed TA is a paradox.

It really does work and I'm passionate about TA, it makes you the casino. But (and here's the rub) it does not work on an individual trade by trade basis.

Take roulette (and believe me when I say, I know a great deal about roulette and roulette systems, learned in sweat). On a European table, the zero slot is the casinos edge, it represents just a 2.7% house edge, but that 2.7% ensures profitability. The casino has no expectation on a single spin of the wheel, but over a hundred or a thousand spins the casino knows that the table will be profitable. Because of the 2.7% probabilistic edge. I can't off hand think of a better analogy.

TA is exactly the same, by giving you a probabilistic edge it ensures your profitability over a series of trades, BUT NOT ON ANY INDIVIDUAL TRADE. This is where risk management and trade execution come in, because at the end of the day, these are the only areas that you have control over.

Your particular area of TA methodology, be it divergence, patterns, elliott, whatever, are really incidental, so long as it provides your probabilistic edge, that's all that matters.

Trading is about making "EDGE"-ucated guesses.

 

[dealer911]

Based on all the conversations, study and everything else trading related that I have had involvement with, I am now at the point where, as I understand more, I seem to know less and at this rate I will soon understand everything about nothing.


Paul

Hold strong convictions lightly! - thinking you know nothing can be a big help - thinking you know it all will lead you to ruin

 

[DionysusToast]

Yeah, that's a real paradox and indeed TA is a paradox.

It really does work and I'm passionate about TA, it makes you the casino. But (and here's the rub) it does not work on an individual trade by trade basis.

Take roulette (and believe me when I say, I know a great deal about roulette and roulette systems, learned in sweat). On a European table, the zero slot is the casinos edge, it represents just a 2.7% house edge, but that 2.7% ensures profitability. The casino has no expectation on a single spin of the wheel, but over a hundred or a thousand spins the casino knows that the table will be profitable. Because of the 2.7% probabilistic edge. I can't off hand think of a better analogy.

TA is exactly the same, by giving you a probabilistic edge it ensures your profitability over a series of trades, BUT NOT ON ANY INDIVIDUAL TRADE. This is where risk management and trade execution come in, because at the end of the day, these are the only areas that you have control over.

Your particular area of TA methodology, be it divergence, patterns, elliott, whatever, are really incidental, so long as it provides your probabilistic edge, that's all that matters.

Trading is about making "EDGE"-ucated guesses.

There is no evidence that TA does what you suggest. You are suggesting that ALL TA methods - divergence, patterns, elliot waves etc provide a statistical edge. This is total nonsense.

Take Elliot Waves - has anyone ever proven there is any edge and that they provide anything other than randomness ? Of course not.

What is clear Jon, is that you are not yet trading. To say that ALL TA methods offer a statistical edge suggests you have done much theory but very little practise.

Of course - some TA methods may give you an edge (although I do not belive this) - but there is much nonsense out there and none more that "all TA methods offer an edge".

Much of TA is hogwash and would be better replaced with a dartboard.

 

[dealer911]

There is no evidence that TA does what you suggest. You are suggesting that ALL TA methods - divergence, patterns, elliot waves etc provide a statistical edge. This is total nonsense.

Take Elliot Waves - has anyone ever proven there is any edge and that they provide anything other than randomness ? Of course not.

What is clear Jon, is that you are not yet trading. To say that ALL TA methods offer a statistical edge suggests you have done much theory but very little practise.

Of course - some TA methods may give you an edge (although I do not belive this) - but there is much nonsense out there and none more that "all TA methods offer an edge".

Much of TA is hogwash and would be better replaced with a dartboard.

I think there have been lots of studies done - T.A can be useful to use as a rear view mirror but it has little predictive power - exponential M.A were shown to be the most effective but that is still a lagging indicator!

 

[jon1971]

There is no evidence that TA does what you suggest. You are suggesting that ALL TA methods - divergence, patterns, elliot waves etc provide a statistical edge. This is total nonsense.

Take Elliot Waves - has anyone ever proven there is any edge and that they provide anything other than randomness ? Of course not.

What is clear Jon, is that you are not yet trading. To say that ALL TA methods offer a statistical edge suggests you have done much theory but very little practise.

Of course - some TA methods may give you an edge (although I do not belive this) - but there is much nonsense out there and none more that "all TA methods offer an edge".

Much of TA is hogwash and would be better replaced with a dartboard.

OK, I think we're making some headway here, so we can agree that certain TA methods work, and some don't, or some work some of the time at least, or maybe nothing really works on it's own, but does when used in conjunction with other methods.

Also, I didn't say, "ALL TA methods provide a statistical edge" what I actually said was, "so long as it provides YOUR probabilistic edge" and there is a distinct difference. What I meant was, so long as it works for you. Look TA works, and the reason it works (not on individual trades, but probabilistically over a series) is that the market has a memory, or rather market participants have a memory.

I can't really comment on other forms of TA, my own approach is trend following, I use a variation of TMAP, in conjunction with cycle and momentum oscillators, I also incorporate a small element of Elliott Wave, but only in the sense of understanding, if I'm early or late in the trend, and you wouldn't really recognise it as Elliott.

With regard to your statement about Elliott (has any one ever proven an edge?), well yeah frankly, am I not mistaken in thinking that a certain Mr Tudor-Jones (currently worth in the region of $6 billion US, that's with a B) was primarily an Elliott analyst?

Admittedly, I've been trading less than two years and so would still consider myself a novice, but we're not discussing my career to date, Moreover I don't for one second think that I know everything or even much, but I do understand the need to view trading in terms of probabilities and not certainties. Which, quite frankly is what screws up 90% of traders from a psychological perspective.

 

[DionysusToast]

90% of traders do NOT screw up from a psychological perspective Jon - this is just more BS you get from trading websites/books/mentors.

People fail because they don't know how to trade. They don't know how to trade because of the amount of misinformation out there.

As you say, you are new to the game, yet you are repeating unproven crap on the internet as if it is fact. Initially you stated that all TA gives a statistical edge. When confronted with the fact that this is nonsense you change your tune. How are you helping the community at large by repeating such things ?

There are so many mantras about trading that are accepted and regurgitated by people who are still trying to find their way that they themselves prevent anyone else from finding their way. This is the dilemman in learning to trade. The people that are looking read a few books and are suddenly self-professed interweb experts.

It is easy enough to see through this after wading through the mire of crapola and looking back and seeing it for what it was but for newbies, it just bogs them down, loses them money and enriches those that know better.

It is indeed, a sad situation.

As for anyone who has $6 Billion telling people how he made it - well Jon - let's just say you'd have to be a bit naive to not realise that 99.999% of that $6 billion was made using the things he ISN'T telling you. The reasons for that will become clear to you over time.

 

[wackypete2]

As for anyone who has $6 Billion telling people how he made it - well Jon - let's just say you'd have to be a bit naive to not realise that 99.999% of that $6 billion was made using the things he ISN'T telling you. The reasons for that will become clear to you over time.

I have a slightly different view on that. If he's telling you how he made it he hopes you will follow his "methods". Of course he will then be happy to take the other side of your trades...THATS how he made $6 billion.

Peter

 

[temporarilylight]

DT, would you consider Mr.Charts to use TA out of interest?
cheers

 

[jon1971]

90% of traders do NOT screw up from a psychological perspective Jon - this is just more BS you get from trading websites/books/mentors.

People fail because they don't know how to trade. They don't know how to trade because of the amount of misinformation out there.

As you say, you are new to the game, yet you are repeating unproven crap on the internet as if it is fact. Initially you stated that all TA gives a statistical edge. When confronted with the fact that this is nonsense you change your tune. How are you helping the community at large by repeating such things ?

There are so many mantras about trading that are accepted and regurgitated by people who are still trying to find their way that they themselves prevent anyone else from finding their way. This is the dilemman in learning to trade. The people that are looking read a few books and are suddenly self-professed interweb experts.

It is easy enough to see through this after wading through the mire of crapola and looking back and seeing it for what it was but for newbies, it just bogs them down, loses them money and enriches those that know better.

It is indeed, a sad situation.

As for anyone who has $6 Billion telling people how he made it - well Jon - let's just say you'd have to be a bit naive to not realise that 99.999% of that $6 billion was made using the things he ISN'T telling you. The reasons for that will become clear to you over time.

No they fail because they view the market from a dysfunctional perspective. And will you please STOP mis-representing what I said.

If you want to throw darts, fine be my guest, good luck to ya.

 

[DionysusToast]

DT, would you consider Mr.Charts to use TA out of interest?
cheers

Mr C does indeed use TA.

And knowledge of his specific market.
And who the players are.
And how they play the game.
And what fundamental events cause price moves.
And how to read buying/selling presssure.

Most of which is not covered in any book on Technical Analysis or what known in this thread as regular/traditional technical analysis - i.e. what the cannon fodder are fed.

What Mr C does will not work int he same way on index futures, or oil futures, neither should it.

On the other hand, most proponents of TA claim to have a universal approach that can be tagged onto any market, any timeframe and with the same rules (albeit reversed) for bullish and bearish markets.

 

[Mr. Charts]

Mr C does indeed use TA.

And knowledge of his specific market.
And who the players are.
And how they play the game.
And what fundamental events cause price moves.
And how to read buying/selling presssure.

Most of which is not covered in any book on Technical Analysis or what known in this thread as regular/traditional technical analysis - i.e. what the cannon fodder are fed.

What Mr C does will not work int he same way on index futures, or oil futures, neither should it.

On the other hand, most proponents of TA claim to have a universal approach that can be tagged onto any market, any timeframe and with the same rules (albeit reversed) for bullish and bearish markets.

"Most of which is not covered in any book on Technical Analysis or what known in this thread as regular/traditional technical analysis - i.e. what the cannon fodder are fed."

Precisely right, Toastie :clap::clap::clap:
Right tools, right KNOWLEDGE of what ACTUALLY works, right market, right time.
No one size fits all.
Although I occasionally use one particular approach on FX
Richard

 

[Traduk]

There is no evidence that TA does what you suggest. You are suggesting that ALL TA methods - divergence, patterns, elliot waves etc provide a statistical edge. This is total nonsense.

Take Elliot Waves - has anyone ever proven there is any edge and that they provide anything other than randomness ? Of course not.

What is clear Jon, is that you are not yet trading. To say that ALL TA methods offer a statistical edge suggests you have done much theory but very little practise.

Of course - some TA methods may give you an edge (although I do not belive this) - but there is much nonsense out there and none more that "all TA methods offer an edge".

Much of TA is hogwash and would be better replaced with a dartboard.

Firstly it needs to be stated that TA is based on mass psychology in action and unless a mass of trading is present on an instrument it is pointless using TA. Anybody who tries to apply TA to stocks that have less than a direct correlation with an index are going to be disappointed and quite rightly join the ranks of naysayers but using tools that are designed for other purposes is more of a problem with the user than the tools.

I have studied almost all types of TA and of the 20 or more different branches nobody has specified which are included in the not working category. Some branches work better than others but in the end they are visual aids that feed back instantaneously and update a couple of million times a day (per tick). If used with a thorough understanding of what you want to see and not by using default (author's) settings they can give a substantial edge.

I pay thousands p.a. for the best data and analytic s because it gives an edge with the use of hard earned knowledge and that edge has endured for a couple of decades. I do not own or trade stocks because IMO they are too random for my liking and do not conform to mass psychology. Also they require skills I have not learnt and IMO there is no correlation between stock punters and major market traders.

One of the tools I use is EWT and if its good enough for Paul Tudor Jones its good enough for me. BTW I proved with 100% certainty that EWT is present in mass markets but does not adhere rigidly to EWT rules. The fractal nature of markets from ticks upwards is what fools EW Theorists because of ambiguity in the counts. If ambiguity is removed with filtering, clarity follows.

In terms of edge it has been proven that many of the commonly used patterns are correct about 70% of the time, which IMO is not a bad edge. I have banker patterns that have a edge of around 90% which is nice when they appear. If an understanding of what psychology creates the patterns and what success or failure of the pattern means then appropriate action can be taken that profits from the pattern's success or failure.

People often state that TA lags therefore cannot have predictive capabilities because it cannot see into the future. The use of TA requires an understanding that market actions repeat over and over again albeit with variations on a theme and if identified those repeats can be exploited. Failure to accept that premise is the path towards random walk and if random walk was the answer my trading career would have ended a couple of decades ago.

 

[jon1971]

Oh sorry, I thought this might turn into an adult, objective discussion on the validity of technical analysis, I didn't realise it was just "battle of the egos."

(That comment is directed to DionysusToast).

 

[temporarilylight]

OK, Thanks DT.
Just wanted to clarify. Its sometimes a little confusing, because everyone seems to have a different definition of what TA is! There's always arguments on elitetrader as to whether 'price acion' is TA for example.
I've had some success daytrading for a few years now from just using 'TA'(although, not all 'classical TA'.) Howver, im certainly always open to alternatives, although if there is one, it is never really divuldged, for example, the numerous threads started by the_expert, lol.
I sometimes think that any alternatives are reserved for the 'big boys' working for huge investment banks who are able to access information and methods not available to us retail guys.

 

[N Rothschild]

And knowledge of his specific market.
And who the players are.
And how they play the game.
And what fundamental events cause price moves.
And how to read buying/selling presssure.

these points are far more important than any chart

 

[jon1971]

And knowledge of his specific market.
And who the players are.
And how they play the game.
And what fundamental events cause price moves.
And how to read buying/selling presssure.

these points are far more important than any chart

Ideal if you're in the pit and you can physically see who's moving price.

You could incorporate at least some of this into a technical approach (if that's your style), add an L2 screen and have Doomberg on in the back ground.

It is also possible to successfully operate a mechanical, passive, technical system, but to do so you need stringent pre-defined risk.

There are no right or wrong answers, everyone seems obsessed with finding the "holy grail." The "holy-grail" is realising that there is no "holy-grail" when you realise this you can operate efficiently, not trying to predict price action, but responding to your signals and executing orders with no internal conflict.

 

[N Rothschild]

get a squawk feed from the pit. i would say the holly grail is the realisation that TA isnt all that and indicators are a joke!

 

[rathcoole_exile]

It is also possible to successfully operate a mechanical, passive, technical system,

well, i did hear that Genics is into a bit of 'mechanical, passive' stuff, but that a bit off-topic isn't it ?

 

[DionysusToast]

Oh sorry, I thought this might turn into an adult, objective discussion on the validity of technical analysis, I didn't realise it was just "battle of the egos."

(That comment is directed to DionysusToast).

Many thanks.

I do not see it as a battle of ego's.

I just think people should not say things work when they don't use them. So - when I see a comment that "all TA provides a statistical edge", it is a red rag to a bull.

Newbies reading stuff like this stand to lose a lot of money putting their money where your mouth is.

Why don't we all just stick to what we use and that turns a profit ? I know we all want to contribute but repeating stuff we read in other media as if it's gospel just ends up giving us threads full of nonsense.

 

[jon1971]

Many thanks.

I do not see it as a battle of ego's.

I just think people should not say things work when they don't use them. So - when I see a comment that "all TA provides a statistical edge", it is a red rag to a bull.

Newbies reading stuff like this stand to lose a lot of money putting their money where your mouth is.

Why don't we all just stick to what we use and that turns a profit ? I know we all want to contribute but repeating stuff we read in other media as if it's gospel just ends up giving us threads full of nonsense.

Agreed, but I never said, "they all work." That's not what I intended it to mean, what I meant was, if it works for you and suits your style & personality. if you read my post in context that's what it says. You then became insistent that I had said something that I hadn't, which is why I got the hump.

Also, I'm not repeating stuff parrot fashion, I've put a great deal of thought & testing into these concepts.

Anyway, let's move on...