TA v FA Discussion

[FTSE Beater]

Hi all

Wayno has just posted this on the Basics of Trading thread, but I think it warrants further discussion
(Hope you don't mind Wayno, but I believe you make a valid point )

FTSE I don't doubt that TA works for you, and for an awful lot of the guys on here, and I'm only raising the following point as a matter of intellectual debate- not out of obnoxiousness ( I have no personal trust nor faith in TA) In the above 6 months Dixon's chart- posted yesterday afternoon. Did you, go long at the 120 level after seeing the gap appear? surely anyone other than a long term investor, who went long hoping for the gap to be filled, would have been wiped out by the fall to 80p? In the long term almost every trade will come right- it's just very few of us here run a trade for the long term.

There was another Phillip Cogan article in the FT yesterday- did you read it? But do you trade purely from charts? or do you combine TA with FA? or gut feeling?

Wayno

Hi Wayno

Your completely right. Going long at 120 after the gap would be a recipe for disaster. What stops you going long? Well no resistance has been broken and no support has been created, so there was no trade for me there.

If I was to trade it then I would have been waiting for it to close the gap on the upside, looking for a long at 127 in May. In this case I would have been wrong, but with a tight stop I would be happy to take a small loss on that

I'm purely a TA trader. I'm sorry I couldn't find the FT article. If you could find it at www.ft.com I would really applicate it


PS: I don't want this turn into a FA / TA slanging match. Both styles have their own merits

 

[oatman]

The FT article refers to a challenge to prove that TA works. Go to
http://www.burns-stat.com/
I haven't had time to look yet.

 

[Trader333]

I have just looked at this "Burns-Stat Test" and already I believe that the study is flawed. There is no opportunity to test intra-day TA skills or much longer term TA skills either.

In my view TA does not work much of the time and yet all arguments are focused on it working all the time or not. This will present a problem for those who trade just one market such as the Dow future, because you would need to develop skills to determine when TA is likley to work and when it wont.

I have learned that, on any given day, there will always be a number of stocks that are adhering to TA principles and this is why I now trade Nasdaq stocks only. There will usually be between 4 and 10 that can be found and traded using TA successfully.

All the other arguments about whether TA works or not never take the above situation into account. Because of this the whole basis for a study has the wrong parameters in which to draw any meaningful conclusions

So in my view TA works some of the time and does not work some of the time and the key is to know when it will and when it will not.


Paul

 

[oatman]

I had a brief look at a few of the charts. It seemed there were some nice trend lines, patterns etc. evolving, but you wouldn't enter a trade until you saw the next move start, which is what they want you to call

 

[ColinRiche]

I have learned that, on any given day, there will always be a number of stocks that are adhering to TA principles and this is why I now trade Nasdaq stocks only. There will usually be between 4 and 10 that can be found and traded using TA successfully.

Paul

Paul are you saying out of 100 Nasdaq stocks you only find 4-10 setups that are tradable in any given day ?

What do you use to scan for these stocks ?

 

[Trader333]

Colin,

There are hundreds of Nasdaq stocks and I dont just trade the ones that make up the Nasdaq100. I will send you a pm with a bit more detail.


Paul

 

[DaveJB]

Hmm,
just took a very brief look and it's rubbish I'd say unless I misunderstood (entirely possible). I looked at a few charts and said to myself 'I reckon this is going to go up, down' etc then the extension charts offer 4 'what happened next' charts - their definition of TA works/doesn't isn't mine - for me TA has worked if I can figure that the price is going to rise a useful amount before I get an exit signal on a stop, allowing me to make a profit. (Put simply, long case). For this study it means, apparently, being able to predict which set of zig zags actually occurred... now forecasting a future course that is 'generally up enough' to make a profit is succesful TA in my view, but this test seems to offer the chance that you can pick a good long, and you'll be 'wrong', and TA will be duff, if you pick 'A' when 'B' was the right answer...even though both A and B offer 'a muppet could make money' results - TA isn't about predicting every zig zag, and this bunch don't seem to know that - I suppose EPS provides an accurate forecast of intraday movements for the average stock, does it, or did I sleep thorugh that part of the lecture. Of course if FA doesn't allow every zig zag to be plotted, and TA doesn't, then the markets must be totally random then... damn it, I'd best donate a few quid somewhere - I'm not claiming to be making huge gains but then if this were random surely I'd be down significantly over the last few years..... hmmm, no, that doesn't seem to actually be the case, I seem to be managing to pick the odd decent share, is there somewhere I'm supposed to send this accidentally acquired money?
As usual a case of someone who doesn't seem to understand TA deciding they're qualified to judge it - I really must get myself onto the Nobel committee for Raffia Work or something....It's becoming ever more obvious these days that knowledge of the difference between ones posterior and that bendy bit in the middle of the arm is superfluous when making judegements. Thank goodness for experts, eh?
Dave

 

[FTSE Beater]

Hi Dave

Well said

 

[jimmyp993]

Dave,

I'm sure you know more about TA than I do. (EVERYONE knows more about TA....etc).

Just to point out that the Burns Stat test does appear to give credit for ruling out 1, 2, or 3 of the possible future price moves.

On this basis, if you are sure that the price will go up (but the magic wand is at the cleaners, so you don't know the exact shape) then by ruling out the downward price movements you would be adding to the evidence that TA does work.

Perhaps if this was a general response, then they may conclude that TA gives directional indicators without being exact, which seems to be what most TA users would believe.

 

[neil]

Perhaps TA shows us where price has been and we hope it continues in its previous direction. If it doesn't then we exit or sit on the sidelines.

We may think TA exhibits certain set ups ( Consolidation, support and resistance, ) and we wait for the price to show its hand in the market.

These set ups quickly let us know if we are right or wrong after we enter the market at these points.

TA is not predictive.

Just my `umble opinion your worship.

 

[rossored]

I think you're spot on, Neil.

TA is all about probabilities : how likely is a particular move to continue based on pattern A or pattern B etc etc. No one pattern or technique performs 100% all of the time (prove me wrong someone, please!) , so how can TA be 100% reliable?

It may be likely to do what we "predict" ( ie guess at ), but of course it doesnt always work. TA simply gives you a bit of an edge. Sometimes that edge is sharp, and it cuts you. Other times, it works just fine. Just like everything else.

No-one ( I dont care who they are ) can read or predict the markets. They simply guess. Sometimes they are right, sometimes they are wrong. Generally, I've discovered, the "correct" calls get lauded about all over the place and a new following pops up, and the "incorrect" ones get brushed under the carpet and the predictor hopes they get forgotten about. Not naming names, of course


PS : Is FB going to start wearing a cape, and his underpants on the outside now that he is a "super moderator"?

 

[barjon]

Another 'umble opinion.

Supply and demand moves the market. FA tells you what SHOULD
be in demand (and vice versa) but TA tells you what IS in demand
(and vice versa).

Agree that TA is not predictive but it does give you clues as to
how the supply and demand balance is likely move and/or when
it is likely to change.

good trading

jon

 

[Car Key Boi]

a stock rally is no different to a pyramid scam

winners=Tards who are first in, first out

loozers=Tards who are last in, last out

FA Tards are always the first in, whereas TA Tards lag behind

End Of Discussion

- Car Key Boi :8