Wall Street = Casino. Minus Sum Game.

[Xeno]

It's a pity that just because many new traders lose with TA that people who use pure TA properly aren't afforded the same respect that people using FA properly are.

If this wasn't such a religious debate, we'd probably care less about where to draw the line too. If news announcements are FA, including the timing of them, then consider a 1 min cable strategy, fully automated, pure TA, that has a rule to stay out of the market a few mins either side of 9.30, 10, 12, 13.30. Let's say the rule only exists because backtesting showed that volatility was too high at those times. Pure TA....

 

[Mr. Charts]

Somebody posted up here recently that in the short terms it is a voting machine but in the long term it is a weighing machine. I thought this was a very succinct way of describing markets and their behaviour.

That quote was from a great fundamental analyst called Benjamin Graham many years ago. Warren Buffett's investment approach was and still is based on Ben Graham's.
Richard

 

[Prawnsandwich]

In his first posting to this thread, he was talking about "The Financial Industry", and gave examples, e.g. IPOs, then Mutual Funds, and then went on to talk about brokers, training courses, etc. I assumed his argument was the gamut of trading that tends to get talked about on T2W, a lot of which has little directly to do with stocks.

The thread may have started out with the above, but nearly all of the posts apart from the above refer to stocks, which you have chosen to ignore in your response.

The main point of the discussion I have been involved in is response to DTs assertion that "pure" TA does not work without "discretion" or "FA" input.... and in looking to define what he means by these two terms...lets not change to subject of the discussion.

Some examples :

Post 23
"A company coming to the end of it's lock-up period is part of fundamental analysis but has nothing to do with price-earnings, price-book, debt to equity etc. It is simply a moment in the life-cycle of the company where things change."

As far as 'everything else' is concerned we have
- market participant information
- scheduled announcement information
- insider activity information
- news
- company financial information
- company life-cycle information
- product release/approval/patent expiration
- industry information
- economic information (employment, inflation, interest rates, inventories, retail sales etc)
- index re-balancing"

Post 171 :
"TA purists say that everything is built into price.
They will then say that of course you stand aside during earnings & economic announcements.
But apart from that - everthing is built into price.

So - even though technicians will admit that non-technical information is needed in the case of earnings/announcements, they refuse to believe that other non-technical information could be as much or even more useful."

Post 148 :
"Mr Charts - You don't know the whole picture. How do you think he's got the right stocks on his screens at the right moment ? "

When a stock is first put on the market, there's a 4 month quiet period and a 6 month lock-up period during which insiders can't sell the shares they gave themselves. So - 4 months where they can't pump the price up followed by 2 months where they can at which time they can start to offload their holdings. For this scenario, you don't have to know everything about the company. Like a game of poker, the players may tip their hands as to what they are going to do. "

Post 141:
"Imagine you could put youself in the shoes of the people making decisions in a company & understand how their own self interests would sway things."

Post 121 :
"Right GladiatorX - did you keep an eye on XLNX & KMP yesterday as I said ?

Do you see how the earnings went the opposite way to the markets expectation ? I'm not talking about the earnings vs expected earnings but earnings vs price move prior to the earnings."

Post 125:
Do you think that a collar around stocks you don't hold would be a good strategy too or are you mostly doing that for 'insurance' purposes ?then went on to talk about brokers, training courses, etc. I assumed his argument was the gamut of trading that tends to get talked about on T2W, a lot of which has little directly to do with stocks.

 

[Mr. Charts]

Since you mention a comment of DT's about me, I thought an illustration might help illuminate.
Unfortunately I was away helping someone with the live market in the very early part of the afternoon so I wasn't trading for myself but spotted a story PRE-MARKET about BKS which added it to the watch list for the day.
There was no prior TA sign whatsoever of the move that happened once the market opened, which proves DT's point that TA alone is not the whole picture. And DT is correct !
TA however enabled people to spot a possible move BEFORE it happened and many profited as a consequence of trading the TA of the move itself. As I said, I wasn't trading then but hey, there will be other opportunities tomorrow
One picture worth a thousand words sometimes.
Richard

 

[Prawnsandwich]

The whole point of this thread is that there is an entire industry out there 'teaching' you how to trade/encouraging you to trade too much. The industry consists ALMOST entirely of people that can't trade. It's an industry designed to suck money out of investors/traders.

I dont disagree with you on the above. This is commonly accepted.

With that in mind - why would I pay attention to anything on Investopedia which is a part of that industry ? Do we think it's run by people who trade succesfully every day ?

The link to Investopedia was for a simple definition only. I also provided a link to Stockcharts.com, with a similar definition. The definition was provided due to various posters having different ideas on what FA meant. I'm sure you would get a similar definition from various other sources. I also considered the provision of a definition salient because my argument was that TA did not require the input of FA to be effective.

Also - if only technicals are needed - why are people so keen to tell me I can't be using Fundamentals (i.e. non technical data) properly because it doesn't fit some internet definition ? It's all outside of technicals and therefore it's all useless in the eyes of someone taking a dogmatic technical approach. Still - is it that if I don't follow one religion, I need to follow the other ?

If anyone was being dogmatic it was yourself - the whole basis of the discussion was that TA could not be effective without FA , despite the evidence which you refused to take on board. Never once did I say that everything outside of TA was useless, and I dont think any other poster here said that, so I'm not sure where you got that one from.

The definition of FA I provided was not just "some internet definition" but actually was what FA actually is. If you take account of earnings / news etc, my point was that this was something that a TA trader would do anyway, and should be part of any TA method. So, to say that TA does not work without taking account of news / earnings does not mean that TA does not work without FA.

Also, it would not be true to say that TA does not work without taking account of news / earnings / event. Look at Claudias thread as an example, for a very successful approach.

How would we consider the weather as a piece of tradeable information ? Again, I'd say it's fundamentals but again doesn't fit that Investopedia approach (not that I read it).

It's pure dogmatism. It's bordering on religion.

It was actually yourself who was insisting that TA did'nt work without FA, which I would suggest is dogmatic. This is the whole point of the argument.


{QUOTE] Can't I be a Muslim & a Christian ? You know - eat a bacon sandwich on Christmas morning but still have 4 wives ?

Seems I'm also being accused of using Witchcraft too ![/QUOTE]

You can be what ever you want to be, and eat as much bacon as you like, but the difficulty I have is your refusal to accept others approachs to the markets....on the one hand you insist despite the evidence that TA is not effective without FA, but then when you are taken up on this and what FA actually means you complain of a witchhunt ....

 

[Prawnsandwich]

Chosen more or less at random from another thread:

http://www.trade2win.com/boards/forex-discussion/85722-cable-2010-a-18.html#post1039960

Point is, if you are looking at more than just the technicals, and have one eye on the calendar, you know that something is going to happen. You may not know for certain which way it is going to go, but you can have a bias based on wider knowledge..

Of course you need to keep an eye on the calender....no one disagrees on this.

As for "avoiding the news...", well there are data releases almost every day, or events of note. I don't think you can avoid the news, except perhaps by avoiding trading altogether.

Well, not really....in the case of stocks earnings come out 4 times a year...other company events occasionally...you can avoid earnings, other scheduled events, and FOMC announcements rather easily ...of course you can never completely avoid all news / upgrades / downgrades whatever your approach...although daytrading does reduce this risk...

 

[Prawnsandwich]

Indeed - it's really one and the same issue.

No - completely different issues. Refer to above posts.

I think it's probably easier for someone totally new to learn something like this than to go through all that TA crap..

Looking for an easy option? Dogmatic ?

 

[Prawnsandwich]

Since you mention a comment of DT's about me, I thought an illustration might help illuminate.
Unfortunately I was away helping someone with the live market in the very early part of the afternoon so I wasn't trading for myself but spotted a story PRE-MARKET about BKS which added it to the watch list for the day.
There was no prior TA sign whatsoever of the move that happened once the market opened, which proves DT's point that TA alone is not the whole picture. And DT is correct !
TA however enabled people to spot a possible move BEFORE it happened and many profited as a consequence of trading the TA of the move itself. As I said, I wasn't trading then but hey, there will be other opportunities tomorrow
One picture worth a thousand words sometimes.
Richard

Not sure I understand - you say that there was no prior TA sign whatsoever of the move, but then go on to say that TA enabled people to spot a possible move BEFORE it happened ?

Surely watching out for news stories such as this, keeping an eye on the premarket gainers or opening gap ups / large gainers with reference to the opening charts would be a standard part of a TA trader / day traders method ? You would not need to study or understand any aspect of the Fundamentals of the company to do this. You could just look at premarket volume, gainers, opening gainers etc.

 

[DionysusToast]

Since you mention a comment of DT's about me, I thought an illustration might help illuminate.
Unfortunately I was away helping someone with the live market in the very early part of the afternoon so I wasn't trading for myself but spotted a story PRE-MARKET about BKS which added it to the watch list for the day.
There was no prior TA sign whatsoever of the move that happened once the market opened, which proves DT's point that TA alone is not the whole picture. And DT is correct !
TA however enabled people to spot a possible move BEFORE it happened and many profited as a consequence of trading the TA of the move itself. As I said, I wasn't trading then but hey, there will be other opportunities tomorrow
One picture worth a thousand words sometimes.
Richard

And a lovely runner it was too.

Sadly, I got there late but still managed to get 40c out of it.

 

[DionysusToast]

then consider a 1 min cable strategy, fully automated, pure TA, that has a rule to stay out of the market a few mins either side of 9.30, 10, 12, 13.30. Let's say the rule only exists because backtesting showed that volatility was too high at those times. Pure TA....

These systems only exist in someone's imagination.

 

[DionysusToast]

Not sure I understand - you say that there was no prior TA sign whatsoever of the move, but then go on to say that TA enabled people to spot a possible move BEFORE it happened ?

In this case, the driver was there, that got you LOOKING at the stock. Order flow told you when the move starter and when it was coming to an end way before it appeared on the chart.

Surely watching out for news stories such as this, keeping an eye on the premarket gainers or opening gap ups / large gainers with reference to the opening charts would be a standard part of a TA trader / day traders method ? You would not need to study or understand any aspect of the Fundamentals of the company to do this. You could just look at premarket volume, gainers, opening gainers etc.

I would agree that this does give you potential movers for day trades.

On top of this, some understanding of the market is required. For instance, the role of the market maker/specialst and how he makes money, when he loses money and how and WHERE he may attempt to recoup those losses is important. This in my opinion is not TA. It is knowing your market.

I would also say that day trading has more to do with order flow and could be considered more technical - but it is NOT about trading chart setups.

TA generates book revenues, training revenues, web site hits, broker fees and unprofitable traders.

In fact, it stands to chance that even within this thread - most all of the defenders of 'it's all in the charts' are also not making money from it.

The concept of confluence is an amusing one. The more indicators saying the same thing, the more likely the move, right ? Well - considering that all of the indicators are based on the same set of data, surely them all indicating the same thing is to be expected. This doesn't make a prediction based on them any more likely to be correct.

 

[zupcon]

These systems only exist in someone's imagination.

I assure you, these systems exist, I take absolutely no account of fundemental analysis, news releases, and I use zero discretion. I probably take more trades in a day than most traders using FA take in a year. My results are statistically significant, I doubt many traders trading based on FA can say the same.

 

[DionysusToast]

Not sure I understand - you say that there was no prior TA sign whatsoever of the move, but then go on to say that TA enabled people to spot a possible move BEFORE it happened ?

A TA purist would not have been looking at the rumour that Barnes & Noble were going to have their app on the new Apple Tablet.

This thread is in danger of turning into Panto.

So what is it that TA is supposed to tell us ? Is it Supply and Demand scenario ? If so, why is it that TA does not distinguish between markets with finite supply and those with infinite supply ? Stocks have a finite float whereas futures do not. This has an impact on how the price moves. How is it that TA provides a global framework considering such different supply scenarios ?

Is TA telling us about market psychology ? If you look at 2003, you can see a lot of market swings in the build up and after the inception of the Iraqi war. If TA is meant to reflect market psychology. It would make sense that the specific psychology in play at that time would be irrelevant to todays markets. The patterns and support/resistance zones made in that period would effectively be meaningless. How many TA people that backtest take this into account ? What about other, similar periods where some crisis was driving the markets.

TA purists may be using discretion about the current geopolitical/news situation to make decisions but how many look at past data in context ? How can it be necessary to use todays news but not necessary to use the news on the past charts you were looking at

Finally - what on earth is the explanation to esoteric stuff like Fibonacci ? Numbers that occur in nature ?

I would venture that if most home traders traded off moon cycles, then you'd see thousands of ebooks, courses and instructors teaching the merits of astrology for trading.

 

[Mr. Charts]

Originally Posted by Prawnsandwich
"Not sure I understand - you say that there was no prior TA sign whatsoever of the move, but then go on to say that TA enabled people to spot a possible move BEFORE it happened ?" says prawnsandwich

"A TA purist would not have been looking at the rumour that Barnes & Noble were going to have their app on the new Apple Tablet." says DT

DT is correct.

I read news stories prior to market open and decide to put some of them on my watch list. That also consists of other stocks chosen for different reasons. I then watch and wait for one of the dozen set ups I use to occur and then read order flow and prints and buy/sell pressures on depth of market looking for an entry where the probability is high that the trade goes into immediate profit.
Even using simple TA there was money to be made on BKS. Doing what I do frequently puts me ahead of the game, a powerful edge.
It's a combination of the right tools at the right time in the right way. That, imho is the essence of what DT is saying (correct me if I'm wrong, DT ) and he is correct; not just in my opinion, but in my experience of trading for a living for the last ten years. That is not to denigrate what anyone else does (well, maybe I should make exceptions of fcta and everyonerich )
Richard

 

[DionysusToast]

That's right richard - you got my point.

I think that a mix is required. I would say that the succesful TA traders may be less pure TA than they think. They more than likely get to know the markets they trade.

Anyone trading corn contracts and seeing a hurricane hit the mid west will learn from the experience. Then your ear (pun intended) would be listening out for such things.

The use of news is a good example and if current news is being used, it opens a can of worms about past news too...

 

[Xeno]

These systems only exist in someone's imagination.

That's why I said 'consider'. The point made was not about whether or not that system exists and can make money, but about pure TA staying out of the market on fundamental data.

I'll let people draw their own conclusions. In one corner you have people who are clearly knowledgeable and skilled in what they do (I'm not claiming that's me, by the way - it's obvious who I mean), and who have told you what the truth is, and in the other corner you have the above.

Anyone who infers probable truth on an evidential basis will get the right message from this thread anyway.

 

[Xeno]

which proves DT's point that TA alone is not the whole picture.

Was anyone claiming that then?

 

[Mr. Charts]

What beats me is why anyone thinks one tool fits all.
Trading is a battlefield.
You require "situational awareness" in military jargon.
Why look at just one corner of the battlefield through just one set of sensors.
Doesn't make sense to me.

Time to prepare to make money - 15 minutes before US open.

And as for news.........New Home Sales at 1000 ET.......so is it wise to be long or short housing stocks AT THAT TIME, or is that just a gamble.
And as for news.........FOMC at 1915 ET..........so is it wise to be long or short anything AT THAT TIME, or is that just a gamble.
And as for news.........apparently AAPL is making an announcement..........so is it safe to be long or short AAPL, or is that just a gamble.
Richard

 

[temporarilylight]

Toast: Mr charts apparently uses charts for his 'setups'. That's TA.
Are you saying that you trade the news of stocks reading the orderflow of the time and sales/level 2 screen? That's also TA in most peoples books. If that's the case tho, whats the point in waiting for the news to come out? It can go down on good news and visa versa. It can start to go up on good news and tehn crash out of nowehere. You get teh same information/clues from using them tools in the evening when there might be no news as you do when you are watching it when news is announced.
cheers.

 

[DionysusToast]

Toast: Mr charts apparently uses charts for his 'setups'. That's TA.
Are you saying that you trade the news of stocks reading the orderflow of the time and sales/level 2 screen? That's also TA in most peoples books. If that's the case tho, whats the point in waiting for the news to come out? It can go down on good news and visa versa. It can start to go up on good news and tehn crash out of nowehere. You get teh same information/clues from using them tools in the evening when there might be no news as you do when you are watching it when news is announced.
cheers.

I do the same thing as Mr C - but I'm not as good as him. I would admit that it is mostly earnings/news/scanning/order flow. News and earnings make moves and as you rightly say, you might not know which way it will move but then you don't really care as you are reading the order flow, so it doesn't matter. Being there before the move as opposed to when a scanner finds it, does get you in earlier. That would be the advanatage of using that fundamental info. I can't see a reason not to use it, although there seems to be some argument that it's not technical enough.

I would agree that this type of trading involves TA, on the other hand, it is not fibbonacci, stochastics, macd, moving averages, RSI, ADX, trendlines, support and resistance, pin bars etc.

What I also do is longer term trading and that is usually the place where newbies are told that TA is the one size fits all solution. I see a lot of training material/books/teachers on how to swing trade with all the squiggles, yet I don't see people making money from them.

I guess if people fail to make money with TA, they should look at their psychology... There's another bunch of books/tutors/courses for that too ! Makes you wonder how anyone has money left to trade with.