Best Thread Technical analysis... a load of ********

[Rhody Trader]

They are one and the same.

When you boil it all down, you are quite right, of course. I totally agree with your premise. Perception of the future influences the future.

It might be harder for folks to visualize in terms of many businesses, but take the example of a bank. If the perception that a bank is in trouble spreads then the rush to pull money out of it will certainly put it in to difficulty. You may say that we can't have the same kind of bank runs as in the past - the types that utterly destroyed banks and cost depositors their money - but that doesn't mean the bank wouldn't struggle to recover for the action.

 

[Rhody Trader]

'Withdrawn from the markets'? If you paid £640 for each of the 1000 shares you bought on Monday and then decided it was a bad move and sold them for £610 yesterday, you haven't withdrawn £30K from the market. You've lost it. The person who shorted 1000 ICI on Monday at £640 and covered yesterday at £610 has your money. It hasn't been lost. It hasn't been withdrawn. It has transferred ownership. Bailing out (withdrawing) means selling a long position or covering a short. Someone loses. Someone wins. Money doesn't disappear.

You assume here that on the other side of every trade is a short. That's fine for the futures, forex, and options markets, but is not true of the stock market. It's not zero-sum like the others because you're transfering ownership, not agreements.

 

[Rhody Trader]

Not true for every trade in forex either (corporates with cross - border business activities just one example of the way that not all trades have a 'speculator' on both sides (assuming that's the distinction we're trying to make here).

Quite right. For business transactions like that where possession of the currency is actually being taken it's just an exchange of assets.

 

[Zenda]

I use RSI, Stochastics, Moving Averages, MACD and Fibonacci Retracements. Someone I know who has worked in investment banking and heads up a team of traders said that all these methods and the shapes were "a load of ********"; that the real price is the current price; that up and down movement is completely random.

Any thoughts? It seems to work for me, which has made me confused a bit.

Well most work for me to! (except the Fibonacci rubbish). But the indicators can only guide you to a decision - I also agree that the markets are totally random - now if they were not then.............

 

[dbphoenix]

imho that sort of thing leaves the random walk hypothesis in absolute tatters. Personally I think that people who believe the markets are random are either i) talking about really longer term timeframes (in which case they may have something - I'm not sure) or ii) Talking their book a bit (as if they're not random they'll actually have to go out and learn something other than charting in order to be able to trade).

I absolutely disagree that in short term timeframes (the ones most retail traders are using for sure) the markets are random. But it is of course only my view.

GJ

Discussions of this type are characterized by a lack of consensus over terms. Thus they never resolve anything. I also disagree that the markets are random in the short term. But then I don't think they are random in any timeframe. However, if I'm defining "random" differently from someone else, the first task is to clarify the terms. The following may help:

Randomness is an objective property. Nevertheless, what appears random to one observer may not appear random to another observer. Consider two observers of a sequence of bits, only one of whom has the cryptographic key needed to turn the sequence of bits into a readable message. The message is not random, but is for one of the observers unpredictable. One of the intriguing aspects of random processes is that it is hard to know whether the process is truly random. The observer can always suspect that there is some "key" that unlocks the message. This is one of the foundations of superstition and is also what is a driving motive, curiosity, for discovery in science and mathematics.

Under the cosmological hypothesis of determinism there is no randomness in the universe, only unpredictability.

Some mathematically defined sequences exhibit some of the same characteristics as random sequences, but because they are generated by a describable mechanism they are called pseudorandom.

Chaotic systems are unpredictable in practice due to their extreme dependence on initial conditions. Whether or not they are unpredictable in terms of computability theory is a subject of current research. At least in some disciplines of computability theory the notion of randomness turns out to be identified with computational unpredictability.

Randomness of a phenomenon is not itself 'random'. It can often be precisely characterized, usually in terms of probability or expected value. For instance quantum mechanics allows a very precise calculation of the half-lives of atoms even though the process of atomic decay is a random one. More simply, though we cannot predict the outcome of a single toss of a fair coin, we can characterize its general behavior by saying that if a large number of tosses are made, roughly half of them will show up "Heads". Ohm's law and the kinetic theory of gases are precise characterizations of macroscopic phenomena which are random on the microscopic level.

 

[Rhody Trader]

Discussions of this type are characterized by a lack of consensus over terms. Thus they never resolve anything. I also disagree that the markets are random in the short term. But then I don't think they are random in any timeframe...

I think most folks would tend to equate lack of predictiblity with randomness. They are, of course, not the same thing at all. A very easy example is weather forecasting. The weather geeks have a heck of a time getting the forecasts correct, but I don't think most folks would consider weather a random thing.

 

[TheBramble]

I don't think most folks would consider weather a random thing.

If temperature were the price, what would the volume be?

 

[Rhody Trader]

If temperature were the price, what would the volume be?

How about humidity?

Isn't the heat index a combination of the two?

 

[DDI]

Nice thread, although I admit i didnt read every post!

For me the rule is simple:

Any sort of analysis should work on the long term if, and only if, sound money management and strict discipline go with it.

I only use TA and find its ok. Yes I do go thru bad patches but if I am disciplined with the size of my trades, those bad patches eventually get more than compensated.

 

[TheBramble]

How about humidity?

Isn't the heat index a combination of the two?

I don't know. Wind, barometric pressure, sunshine hours, humidity may be a possible candidate as you suggest, previous day's high (and low), starting point of today...

Do temperature trends find support and resistance?

 

[TheBramble]

Any sort of analysis should work on the long term if, and only if, sound money management and strict discipline go with it.

Eh? Bet you I can come up with a sort of analysis that would defy the soundest money management and the strictest of disciplines.

They are both key, but largely unrelated to TA per se.

You could probably get away without using TA and using SMM and SD manage to make regular profits. But they in and of themselves will not make your TA work.

 

[fibonelli]

Here's a naked chart of the 30 min Bund. TA seems to be working pretty well!

 

[DDI]

Eh? Bet you I can come up with a sort of analysis that would defy the soundest money management and the strictest of disciplines.

They are both key, but largely unrelated to TA per se.

You could probably get away without using TA and using SMM and SD manage to make regular profits. But they in and of themselves will not make your TA work.

I apologize. I should not have used the word "any". Of course you backtest some strategies that become net losers for a given market.

Yep I am wrong I guess what I meant is that "my own technical strategies" work if I have SMM and SD!!

 

[shadowninja]

It's quite funny really. Plotted a trend line. One that a thousand traders around the world have probably plotted, too. As soon as it touched it, the market went in the other direction. Fan-self-fulfilling-prophecy-tastic.

 

[TheBramble]

Absolutely, but were you one of the few traders who drew that trendline that also studied the volume profile as the price approached that trendline? One of those that could with a high degree of probability detect that it was more likely going to rebound than push through?

That's the thing, they don't always rebound or even always breakthrough or ever always drift along the slope. If they didn't, they wouldn't.

It's assessing those other factors in the approach to the trendline (range, volume, close on range etc.) that make TA, TA.

 

[TheBramble]

out of interest tony what WAS the volume doing?

No idea GJ as I have no idea what instrument SN was talking about.

It was more of a general observation on the probability distribution of those traders simply drawing trendlines and expecting something (not sure what though) to happen around them and those using trendlines as a part of their price development assessment.

 

[shadowninja]

It was for EUR/USD. IG doesn't supply volume. But I am aware that it could break through. I was watching for that. In the end, the price just touched the line and fell back.

 

[TheBramble]

SN - good point made by GJ. Can you post the chart with trendline and volume so we can have a quick shuftie?

 

[TheBramble]

It was for EUR/USD. IG doesn't supply volume. But I am aware that it could break through. I was watching for that. In the end, the price just touched the line and fell back.

Ah, the volumeless world of FX.

Well, can you post the chart and trendline anyway. We could do a quick analysis anyway. I’ll pick up the longer timeframe chart for context.

 

[shadowninja]

Attached. Hopefully.