Technical analysis can't be it

[Knugs]

Hello T2W,

I'm a 21 year old medical student and because I have summer holidays(3months) I wanted to devote a little more time to trading and the surrounding topics. I don't think I will be trading soon as I think I'm far too inexperienced and stupid to do it and it would rather result to gambling than trading anyway. That would result in failure eventually. I used to be a blackjack freak but not a gambler or addict. Everything i was doing was relying on probability and card counting to minimise house advantage. I emotionally detached from wins and loses and decisions were purely based on rationality and probability. I have made some good money with it but I knew that one day house would win, so I stopped before it would happen. I believe trading is similar to blackjack. Its a game of interpreting probability and events. Anyway, I have read a few articles and stickies and I wanted to pick on two points people have made clear.

1) succesful trading is NOT based on luck
2) succesful trading is NOT based on opinions.

These two points make perfectly sense to me. However, I have made some conclusions:
If luck is not part of succesful trading then succesful trading must purely be SKILL and KNOWLEDGE based. Especially when opinions do not matter in trading. Skills and knowledge can be learned by anyone but good resources are rather difficult to find. Similiar to blackjack, you learn card counting and with experience your skill becomes better. However, you google card counting techniques and in about 5 minutes you know how to do it. Trading is completely opposite and informstion harder to find. Anyway, Banks teach this to graduates and they become professionals. They will always have the superior knowledge and software than we have. They have crazy algorithms and better technical analysis. So, how is it possible for our technical analysis to give us the better edge? IMO, a computer can all do that what we try to do without emotions and opinions. It's like we try to compete with a calculator. Sure, 20 years ago would have been different but Now?

I'm just confused about how technical analysis without human opinion and luck can result to succesful trading alone.

 

[Shakone]

Nice post.

There are few absolutes, so things like "succesful trading is NOT based on opinions" depend on what you mean by opinions, and "succesful trading is NOT based on luck" depends on what you mean by based on. It's probably not worth getting bogged down in this sort of thing.

You do not need to beat every other trader in the world to succeed. There are always new traders with no experience coming to the markets to try their hand, or people trading not for profit but because they need to. There are even experienced ones who go on making the same mistakes, and there are successful ones who you can jump on the back of. So you don't need the "better edge" than all the other traders, you just need AN edge.

Some people will tell you that if there was such a thing as an edge, that algos would quickly wipe it out. Some people will tell you TA doesn't work, that it's not rigorous, that so and so tested this or that and found it was useless, that we can't compete with the banks and so on. What do all of these have in common?

If from your question you are thinking this is probably not worth it and you should avoid trading because it doesn't make sense or because of what other people say, then avoid trading. Best decision for you. If you've tested lots of ideas and found none of them works, again avoid trading. Will save you plenty of money and time.

If you actually want to find out for yourself, then the hard work begins, but you need to throw these ideas in the bin about what works, doesn't work, what can be done and can't and whether you can compete with the banks.

Lastly I would say that trading is creative and dynamic. It is not like making a straightforward calculation, and it is ... still ... based on various human emotions.

 

[wino59]

Hello T2W,

1) succesful trading is NOT based on luck
2) succesful trading is NOT based on opinions.

No but Luck helps, when you are in a trade and forgot to check when the news breaks, and end up 20 to 30 ticks up, because you forgot to look...that is what I call luck, and it happens, and also adds to the bottom line at the end of the year. It can also go the other way....but luck pays a roll in trading... same thing when I guys wants to go long, but hits the sell button, only to end up with a nice winner instead of what would have been a loser.

It is all just part of the game!

 

[Trader333]

In my view an important lesson for anyone wishing to engage in trading is that it is not possible for the retail trader to compete against the institutional professionals using the same approach that they do so don't even begin to try. There are ways that retail traders can do very well and that would not be of any interest to institutional professionals but they are not the same approach and in many ways are mutually incompatible.

This is a key reason why anyone who claims they can teach you to trade because they used to trade for an institutional trading firm is talking nonsense in my view.

 

[be-positive]

In my view an important lesson for anyone wishing to engage in trading is that it is not possible for the retail trader to compete against the institutional professionals using the same approach that they do so don't even begin to try. There are ways that retail traders can do very well and that would not be of any interest to institutional professionals but they are not the same approach and in many ways are mutually incompatible.

This is a key reason why anyone who claims they can teach you to trade because they used to trade for an institutional trading firm is talking nonsense in my view.

ok Arnie spill the beans and start a new thread

 

[new_trader]

In my view an important lesson for anyone wishing to engage in trading is that it is not possible for the retail trader to compete against the institutional professionals using the same approach that they do so don't even begin to try. There are ways that retail traders can do very well and that would not be of any interest to institutional professionals but they are not the same approach and in many ways are mutually incompatible.

This is a key reason why anyone who claims they can teach you to trade because they used to trade for an institutional trading firm is talking nonsense in my view.

Che?

 

[Hakuna Matata]

An interesting post which raises some interesting questions.

Hello T2W,

... I believe trading is similar to blackjack. Its a game of interpreting probability and events.

Blackjack is a very simple game where you attempt to calculate the numerator against a known denominaotor and act accordingly. When speculating, you are using an estimated numerator against an unknown denominator.

Prices are bound by 0 and infinity. It doesn't matter how "overbought" your analysis tells you it is, someone can always step in and buy the **** out of it. You're trading blackjack with an unlimited number of decks.

Anyway, I have read a few articles and stickies and I wanted to pick on two points people have made clear.

1) succesful trading is NOT based on luck
2) succesful trading is NOT based on opinions.

1) It doesn't matter how good a trader you are, luck counts.
2) Speculating is entirely based on opinions.

... Anyway, Banks teach this to graduates and they become professionals.

a) Not really true
b) Not really relevant.

It's not helpful to think about what "bank traders" do. Completely different game.

 

[Hakuna Matata]

FWIW, when I first started to tape read, I tried keeping a running tally of certain events (not the delta, but plays in the book) - in essence, I tried to "card count" the tape.

Didn't work.

 

[cablemonster]

It's not helpful to think about what "bank traders" do. Completely different game.

yes because they often have flow information. If you know a big order is going to go through in Tapis crude you can 'front run' it by taking a position in a spread. Your transaction costs are negligible so the odds are loaded in your favour init.

 

[The Leopard]

It's not helpful to think about what "bank traders" do. Completely different game.

Absolutely.

 

[Knugs]

I will try to respond to everyone.

@shakone,
Thanky you for answering! Opinions can be evidence or non-evidence based and take a factor of emotions and feelings in. Therefore they can be irrational which isnt good in trading. A conclusion/intepretation of an analysis and tests is similar to an opinion but carries weight behind it. This is why I was saying "succesful trading is not opinion based" but you are right, there is no point getting boged down on this. One thing for sure, if anyone lets their opinion control their trading behaviour it will lead to failure.

At the moment, trading doesnt make sense to me because I dont grasp the concepts and factors influencing it. Actually, I believe there are too many factors taking place which we are not able to comprehend at a time. This is why some analysis will work at a specific time and wont work in another scenario. You know that a lot of strategies work for a bit and then dont because the market changes. The problem is that no one is/was able to construct a strategy which maximises the probability of foreseeing the market by taking most factors in. There are obvious factors such as technical analysis, crisis, public emotions, reactions to this and that, weather, whatever influences DEMAND. This is why technical analysis alone cannot lead to succesful trading but it probably forms a big part of it.

I agree with all your points and it has def. helped me understand trading more. I wont give up because its more complicated than blackjack, hell no, this makes trading even more interesting to me.

@wino59
trading is luck based but succesful trading is not luck based. See the difference is in succesful. I agree with you that luck will help but since its a factor we are not able to influence and since it can go the other way we shouldnt be relying on it.
When you miss the news or mis-click the buttons then you violated your own trading strategy. You will have entered the gambling world and would rely on chances alone. :clover: OK, even if the mistake leads to bigger %increase in your capital, there is something wrong with the strategy itself which would eventually repeat again. So yes, luck is important anywhere in all aspects of life but when we talk about succesfull trading then we need to forget about it.

@hakuna matata
You can be succesful by Speculating alone?

Why is it not true and why is it not relevant. Why is it a completely different game. Try to answer with facts and explanations rather than your opinion please

 

[SlowlyButSurely]

1) succesful trading is NOT based on luck
2) succesful trading is NOT based on opinions.

I would disagree with both of these statements.

In Reminiscences of a Stock Operator Livermore refers to himself as a speculator throughout most of it until he starts to manipulate the stock and then becomes an operator. In my view speculation involves the opinion of an individual and what he/she interprets from the markets. It involves personal input and some form of guessing as nothing in the markets is for certain.

There is also certainly an element of luck, you can be 1 tick away from getting closed out of a position that goes on to be a winner. Another day you might get stopped out. Your thinking was right but you just got lucky/unlucky. Then again you may see that as calculating the SL correctly but its hard to guess the value others put on products.

 

[Hakuna Matata]

I will try to respond to everyone.

@shakone,
Thanky you for answering! Opinions can be evidence or non-evidence based and take a factor of emotions and feelings in. Therefore they can be irrational which isnt good in trading. A conclusion/intepretation of an analysis and tests is similar to an opinion but carries weight behind it. This is why I was saying "succesful trading is not opinion based" but you are right, there is no point getting boged down on this. One thing for sure, if anyone lets their opinion control their trading behaviour it will lead to failure.

At the moment, trading doesnt make sense to me because I dont grasp the concepts and factors influencing it. Actually, I believe there are too many factors taking place which we are not able to comprehend at a time. This is why some analysis will work at a specific time and wont work in another scenario. You know that a lot of strategies work for a bit and then dont because the market changes. The problem is that no one is/was able to construct a strategy which maximises the probability of foreseeing the market by taking most factors in. There are obvious factors such as technical analysis, crisis, public emotions, reactions to this and that, weather, whatever influences DEMAND. This is why technical analysis alone cannot lead to succesful trading but it probably forms a big part of it.

I agree with all your points and it has def. helped me understand trading more. I wont give up because its more complicated than blackjack, hell no, this makes trading even more interesting to me.

@wino59
trading is luck based but succesful trading is not luck based. See the difference is in succesful. I agree with you that luck will help but since its a factor we are not able to influence and since it can go the other way we shouldnt be relying on it.
When you miss the news or mis-click the buttons then you violated your own trading strategy. You will have entered the gambling world and would rely on chances alone. :clover: OK, even if the mistake leads to bigger %increase in your capital, there is something wrong with the strategy itself which would eventually repeat again. So yes, luck is important anywhere in all aspects of life but when we talk about succesfull trading then we need to forget about it.

@hakuna matata
You can be succesful by Speculating alone?

Why is it not true and why is it not relevant. Why is it a completely different game. Try to answer with facts and explanations rather than your opinion please

Can you re-phrase your questions? I don't really know what your getting at...

 

[The Leopard]

It might help to begin with to explain what one means by 'technical anlysis'. It is a very lose term.

 

[Knugs]

Quote:
Originally Posted by Knugs View Post

... Anyway, Banks teach this to graduates and they become professionals.
a) Not really true
b) Not really relevant.

It's not helpful to think about what "bank traders" do. Completely different game.

this

 

[Hakuna Matata]

this

Most traders in banks are either executing customer orders or making markets. They're not sat at their desk punting money (prop trading) using technical analysis.

(Not withstanding that, prop desks were culled. Dunno if they're on the up, I thought they just spun out their prop desks into a fund and sent them all to HK or wherever.)

 

[The Leopard]

Most traders in banks are either executing customer orders or making markets. They're not sat at their desk punting money (prop trading) using technical analysis.

(Not withstanding that, prop desks were culled. Dunno if they're on the up, I thought they just spun out their prop desks into a fund and sent them all to HK or wherever.)

I was going to make this point. The training that a lot of bank traders get involves how to charge people for providing a service.

But put their wanger on the anvil when the hammers are flying about? Most of them wouldn't have a scooby, and why would they? Let some other chump slap the tiger in the face with his dangleberries, you sit on the right side of the safety glass and take a cut for letting the guy in the cage.

 

[forexjesus]

I agree with shakone. Trading from home is not luck over the long run. Your short commings will slowly start revealing themselves after the luck streak is over. Sometimes very quickly.

 

[The Leopard]

I mean, who needs it if you don't need it. Fine, from this end, what you finds, you keeps. But if you get it wrong - you'll be one hearing " ve cut off your chonson, Lebowski. Ja, and maybe we stomp on it and sqoosh it, Lebowski."

So why bother? Get paid every day, with no risk. It's a good system.

 

[Knugs]

I'm pretty sure a big part of investment baking is made of sales and trading and research departments. Traders are fed information from research analysts etc and get money from clients from the sales department. The trading makes the profit for the client and whatever is made more is kept by the bank.