Wall Street = Casino. Minus Sum Game.

[DionysusToast]

Yeah I'm a bit surpised as well.....when its fairly obvious that TA works, and works very well....when used in a effective method.

By TA I mean anything from candlesticks, MAs, chart patterns, trends, indicators , price action etc

Problem with fundamental analysis is that the market prices in a lot of known and projected fundamental information, as there are always insiders and entities who have access to information ahead of the masses....very difficult for small / retail investor to compete with big / insider money

TA is suppposed to pick up this inside information acting in the market via chart patterns , trends etc...

"it's fairly obvious that TA works". For sure. It sells books, it generates broker commissions. It keeps Daryll Guppy on CNBC.

If TA works where are all the people proving that with prediction on this thread ? From what I can see, the only person who's put up a prediction here was me based on a holistic view.

As for 'the problems with fundamental analysis' - the issue here is that you somehow need to pigeonhole types of information about an instrument and then only use a certain type of information based on your style.

Imagine there was no TA/FA divide, imagine there was just information you could assimilate and use to make a judgement. 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. Sounds tough, right ? Sounds like we'd make bad calls, right ? Much better to spend years trying to figure out which combination of oscillators, lookback periods to use in order to eek the cents out.

TA in the abscence of discretion has NEVER been proven. It just gives you a fixed set of rules to hold onto to avoid thinking too much. That's OK & you will be succesful with that ONLY if you end up adding discretion/FA to your system.

 

[DionysusToast]

You're wrong. In the example you give above both traders are TAKING liquidity from the market, whereas in fact in each and every trade there is one party taking liquidity and one party providing liquidity. So yes indeed it is negative sum between two traders both taking liquidity, but that just isn't how the market works!

Actually my point is that there is a 3rd party making a spread and/or commission that makes it an instant negative sum but this is on a micro scale. This will cause the winner to make less than the loser.

On a macro scale. All the money the financial services industry earns & pays out to it's staff ( as opposed to the shareholders) makes it a guaranteed negative sum game for all the poor sods putting $$$ in and expecting a return.

 

[zupcon]

If TA works where are all the people proving that with prediction on this thread ?

TA is NOT predictive, its not supposed to be predictive, nobody with the slightest amount of credability ever claimed TA was predictive. The only people who believe TA is predictive are the retards who waste ther time on trading forums !

TA does not need to be predictive in order to profit from its use.

I've asked this question 1000 times before to people who whitter on about predictive TA, WHERE exacly did you read that TA was predictive, what exactly is the source of this ridiculous urban myth ? Is there anyone who can answer that ?

 

[Prawnsandwich]

"it's fairly obvious that TA works". For sure. It sells books, it generates broker commissions. It keeps Daryll Guppy on CNBC.

If TA works where are all the people proving that with prediction on this thread ? From what I can see, the only person who's put up a prediction here was me based on a holistic view.

As for 'the problems with fundamental analysis' - the issue here is that you somehow need to pigeonhole types of information about an instrument and then only use a certain type of information based on your style.

Imagine there was no TA/FA divide, imagine there was just information you could assimilate and use to make a judgement. 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. Sounds tough, right ? Sounds like we'd make bad calls, right ? Much better to spend years trying to figure out which combination of oscillators, lookback periods to use in order to eek the cents out.

TA in the abscence of discretion has NEVER been proven. It just gives you a fixed set of rules to hold onto to avoid thinking too much. That's OK & you will be succesful with that ONLY if you end up adding discretion/FA to your system.

Ah jaysus your missing the point here...

You dont have to look very far for examples of very effective TA.....this site - Trader Dante, Claudia, Mr Charts and others I'm sure...very simple but effective methods...so to say that TA without discretion / FA has never been proven is a nonsense ..of course there is often an element of discretion within a method, but this discretion is based on the chart / TA / method, and does not take into account FA....

Oh yeah not to forget my own personal experience....so is that proof enough for you ?

How can you put yourself in the shoes of people making decisions in a company when you might have no clue about how that company operates or the industry etc...do you have to become an expert to fully understand the sector / company / industry ? as I said previously if you try this approach you are competing with entities that have direct access to directors, have massive budgets to employ R & D teams, get news ahead of official release etc....

Lets just say that you do manage to put yourself in the shoes of the directors spend time and resources researching the company only to find that the overall market tanks taking your company with it ? Or that the market has already priced into the share price future expectations ? What about prices that drop even after good earnings have been published?

Its a waste of time in my opinion. You could just look at the chart and see that the price is going up.

TA is not just about oscillators.....any basic book on TA will be clear that you do not use one oscilator or indicator alone to enter a position or use for the basis for a method - they're only a tool...to be used in conjunction with other tools ...indeed many TA methods do not use oscillators or indicators..

 

[barjon]

...............On a macro scale. All the money the financial services industry earns & pays out to it's staff ( as opposed to the shareholders) makes it a guaranteed negative sum game for all the poor sods putting $$$ in and expecting a return...............

dt

Yes, but don't forget all the new money coming into the market which, while it lasts, pays for the industry cream AND a positive return for the poor sods already in. It's a bit like a giant Ponzi scheme and only breaks down when the fat lady sings. If you believe she'll never appear on the stage - and the opera's lasted over 200 years so far - then keep buying a ticket.

good trading

jon

 

[GladiatorX]

The problem with this arguement is that peoples definitions of technical analysis are all different.

For example; when someone talks to me about technical analysis - I think about charts/Price/Volume and using them to understand the context of the current market ... For example - I check a chart; i see that
1. Price has been ranging recently and spiking
2. We've gapped up on low volume

So TA is more about looking at Price/Volume and looking at the market context ...
Then you can use the current context to make decisions on the best way to play it, if at all.

Others will see it as more mechanical; technical analysis meaning
- Flag = Buy here, Stop loss here.
- Inside bar breakout = Buy on B/O, stop below.

Without taking in the current situation into account.

Others i would imagine would think of indicators
- Using stochastics to enter
- Making decisions of indicators
- Systems based on indicators
- Mechanical indicator setups.

Looking at price, level 2 information & volume can be used to understand the current context/situation of the market.... We are ranging; What reasons might give weighting a directional move outside ? Does this move outside the range have a particular good reason or can i fade ?
And then allow you to make an educated decision on whether trend following or reversion to the mean strategies should be executed.

Also, you can view volatility, to determine exits that don't get hit through normal market volatility cycles.

.....

In that sense; i think looking at charts/volume and the various details there are too look at (Yesterdays high/low etc) can be very usual information to all traders.

However; in regards to trying to take all the situational, contextual based information out of the market, i cannot see why any one would limit themeselves to that amount of information.

Using Technical analysis in the sense of looking for situtional setups, contextual analysis to assess good entries and in determing potential order flow/momentum based on various information such as time - i see as very valuable from experience.

Whatever you do; the time-frame you trade you want to have a contextual assessment, as well as looking at the information that is important to the supply/demand of that market.

For example; pivots in the E-mini S&P 500 are important - FACT - volume is significantly higher on the touch of a pivot, order flow numbers much bigger...
Therefore, for a day-trader and scalper; such information is worth looking at and keeping in mind in a contextual analysis of the market...

x

Dionysus - You say your totally against TA - Yet in your example about earnings; an important part was that price had been falling before earnings ... That to me, is technical analysis - Using price to understand context.

Your viewing price information, and using it to make decisions = TA

You've even stated you use stochastics, a 200 SMA & candlestick patterns.

So i'm just wondering whether i've misunderstood your view point.

 

[Prawnsandwich]

TA is charts, support / resistance , moving averges, candelsticks, indicators, price action etc ..

http://www.investopedia.com/terms/t/technicalanalysis.asp

FA is company valuation, company finances, Price earnings ratios, sector evaluation, etc ...

http://www.investopedia.com/terms/f/fundamentalanalysis.asp

 

[DionysusToast]

Ah jaysus your missing the point here...

You dont have to look very far for examples of very effective TA.....this site - Trader Dante, Claudia, Mr Charts and others I'm sure...very simple but effective methods...so to say that TA without discretion / FA has never been proven is a nonsense ..of course there is often an element of discretion within a method, but this discretion is based on the chart / TA / method, and does not take into account FA....

Oh yeah not to forget my own personal experience....so is that proof enough for you ?

Dante - has already admitted that his methods do not work on all markets. Doesn't this qualify as using discretion ?

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 ? You think he has all of them up ? What about the other parts that he uses, tells you about on the thread but doesn't harp on about because he doesn't want to come across as a salesman ?

Do you think as well that Mr Charts will be in a day trade during an FOMC announcement ? Isn't this a fundamental.

Again and again, fundamentals will trip you up if you only focus on technicals.

How can you put yourself in the shoes of people making decisions in a company when you might have no clue about how that company operates or the industry etc...do you have to become an expert to fully understand the sector / company / industry ? as I said previously if you try this approach you are competing with entities that have direct access to directors, have massive budgets to employ R & D teams, get news ahead of official release etc....

You have some misconceptions about fundamentals. What you have done is limit yourself to technicals and convinced yourself that to expand this, you would have to learn everthing. Let's say you have a nice pullback in the stock - good time to go long, but the company is about to go bankrupt. It would not take a genius to find this, it'd take about 1 minute.

Lets just say that you do manage to put yourself in the shoes of the directors spend time and resources researching the company only to find that the overall market tanks taking your company with it ? Or that the market has already priced into the share price future expectations ? What about prices that drop even after good earnings have been published?

The market can tank at any time. I didn't see any TA guys predicting the drop last week.

Its a waste of time in my opinion. You could just look at the chart and see that the price is going up.

TA is not just about oscillators.....any basic book on TA will be clear that you do not use one oscilator or indicator alone to enter a position or use for the basis for a method - they're only a tool...to be used in conjunction with other tools ...indeed many TA methods do not use oscillators or indicators..

Like I said. You are limiting yourself to a subset of information which by it's very nature is limited to a very small number of parameters. Real life is not like that.

There is simply no reason to distinguish between TA & FA. All you have is information about the past. Using that information about the past, you can make judgements about the future. With fundamentals though - there is also information about the future. 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.

Like I say - if you only use technicals, a lot of your trades WILL go bad because of fundamentals. If you don't look back on your losing trades, you wont see it. If you do look back on your losing trades, you will stay out of the market at key times.

Go for a pure TA approach if you like. I just like to use information without worrying which 'camp' it falls into.

 

[DionysusToast]

TA is charts, support / resistance , moving averges, candelsticks, indicators, price action etc ..

http://www.investopedia.com/terms/t/technicalanalysis.asp

FA is company valuation, company finances, Price earnings ratios, sector evaluation, etc ...

http://www.investopedia.com/terms/f/fundamentalanalysis.asp

And that, my friend is all Wall St wants you to know about.

All of the good stuff falls outside of both of those definitions.

I include fundamental analysis as ANYTHING that isn't related to analysis of price, volume & time.

That includes stuff like Mutual Fund Managers trying to defend their end of year bonuses. Where is that on investopedia ?

 

[DionysusToast]

Dionysus - You say your totally against TA - Yet in your example about earnings; an important part was that price had been falling before earnings ... That to me, is technical analysis - Using price to understand context.
.

I am not against TA. I am against using just TA on it's own. I am against using it the way 'the industry' wants you to use it - to make more trades.

Even for day trading, I need to figure out WHAT to look at and TA generally doesn't give me that.

I find it hard to believe that any profitable trader uses only TA. In fact, discretion will come into play unless you are some kind of savant.

 

[DionysusToast]

TA is NOT predictive, its not supposed to be predictive, nobody with the slightest amount of credability ever claimed TA was predictive. The only people who believe TA is predictive are the retards who waste ther time on trading forums !

TA does not need to be predictive in order to profit from its use.

I've asked this question 1000 times before to people who whitter on about predictive TA, WHERE exacly did you read that TA was predictive, what exactly is the source of this ridiculous urban myth ? Is there anyone who can answer that ?

Well - there's plenty of books at your local book store that claim TA provides you an 'edge', that certain technical set ups make a move in a certain direction probable.

If something is more probable based on past information, then it has a predictive quality.

 

[zupcon]

Well - there's plenty of books at your local book store that claim TA provides you an 'edge', that certain technical set ups make a move in a certain direction probable.

Technical Analysis does provide an edge. Statistical analysis of my trading results proves this to be the case. The validity of TA is simply not in doubt.

I personally havn't seen any reasonable discusion of Technical Analysis in a book, or on a public forum (and I'm quite widely read). This would certainly account for why the majority fail using a fundementally flawed TA approach. You would expect no less

 

[oildaytrader]

Well - there's plenty of books at your local book store that claim TA provides you an 'edge', that certain technical set ups make a move in a certain direction probable.

If something is more probable based on past information, then it has a predictive quality.

Is this 50% probable , or more than 50% or less than 50%?

 

[zupcon]

Is this 50% probable , or more than 50% or less than 50%?

The probability of the set up is a completely irrelevant question and you know it !

 

[dimsdaletraders]

The market can tank at any time. I didn't see any TA guys predicting the drop last week.

In that case, can I jump in here just to point you to the "swinging the FTSE 2010" thread, where you'll see exactly that from Max, using Elliot Wave TA?

I should add I'm not saying anyone here is wrong, or right, about TA/FA/discretion etc.

Just giving an example of a "TA guy" that seems to have predicted the moves to a nicety.

regards
Tess

 

[Splitlink]

Well - there's plenty of books at your local book store that claim TA provides you an 'edge', that certain technical set ups make a move in a certain direction probable.

If something is more probable based on past information, then it has a predictive quality.

Most of the time TA gives a signal to keep going in the direction of the main trend. Trends change with difficulty...so they say. However, there is a saying that a price can turn on a dime. Who is right?

Edges are the product of one's own interpretation of the Law of Probabilities. TA provides no edge, it only presents the positions of price closings, openings, highs and lows. The trader always interprets that information however he is inclined and we are all different.

That is why I believe that constant repetition of a proven pattern is what a trader must learn and, if he is right enough times out of ten, then he has an edge.

Without that, TA is as helpful as a candle in a gale.

 

[Prawnsandwich]

Dante - has already admitted that his methods do not work on all markets. Doesn't this qualify as using discretion ?

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 ? You think he has all of them up ? What about the other parts that he uses, tells you about on the thread but doesn't harp on about because he doesn't want to come across as a salesman ?

Do you think as well that Mr Charts will be in a day trade during an FOMC announcement ? Isn't this a fundamental.

Again and again, fundamentals will trip you up if you only focus on technicals.

Of course TA can involve discretion, I dont think there has been anyone arguing that discretion should not be used as part of a TA method. The level of discretion can vary from method to method, ranging from almost fully mechanical systems to ones with high levels of discretion. However, that discretion typically would not involve any aspect of FA.

Staying out of the market ahead of major news such as earnings or FOMC announcement is not trading using FA. Any decent TA trader knows to stay out of market ahead of such news. Even FA investors would often go to cash ahead of such news. This is not Fundaemntal Analysis - it is not gambling ahead of a major event of which you do not know the outcome. So there is no argument that if you are a TA trader you should stay out of market with pending news. It would also be common for FA investors to stay out of market ahead of such news.

You have some misconceptions about fundamentals. What you have done is limit yourself to technicals and convinced yourself that to expand this, you would have to learn everthing. Let's say you have a nice pullback in the stock - good time to go long, but the company is about to go bankrupt. It would not take a genius to find this, it'd take about 1 minute.

This is a ridiculous statment. If the company was about to go bankrupt, and you can find this out in one minute, do you not think that there may be a possibility that price might already be reflective of the impending banruptcy, ie tanking rather than pulling back nicely ?

I have absolutely no misconceptions about fundamentals - unlike you I have a clear understanding of what Fundamental Analysis is about.

The market can tank at any time. I didn't see any TA guys predicting the drop last week.

This guy did :

http://tradermike.net/

Like I said. You are limiting yourself to a subset of information which by it's very nature is limited to a very small number of parameters. Real life is not like that.

Oh gee, thanks for giving me some of your expert insights about real life....

There is simply no reason to distinguish between TA & FA.

Of course there is - they are two completely different approches to trading markets, with clearly generally accepted definitions.

All you have is information about the past. Using that information about the past, you can make judgements about the future. With fundamentals though - there is also information about the future. 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.

Like I say - if you only use technicals, a lot of your trades WILL go bad because of fundamentals. If you don't look back on your losing trades, you wont see it. If you do look back on your losing trades, you will stay out of the market at key times..

Again, you are confusing Fundamental Analysis with taking account of news.....one of the first things I do prior to taing a position is to check if there is any upcoming company events, news or earnings etc. I am not analysing the company from a fundamental viewpoint ie is the company good value, is there product good, what are current / projected market demand etc..etc. When I take the position I wont know much about the company, but I will know that there is no upcoming news or events.

Your your definition of FA switches one minute from putting yourself in the shoes of the directors to figure out what way the company is going to take to on the other hand saying that FA involves staying out of market ahead of news, two very different things.

The latter is not Fundamental Analysis and only confuses the issue. Likewise, saying that the only thing that makes TA work is discretion muddies the waters also, when discretion can be an intrinsic part of TA.

However, the main point of your arguments on this forum, which appear to be ever increasing in number, is that TA wont work without incorporating Fundamental Analysis is absolutely wrong, and your continued refusal to accept that there are many people making lost of money from TA trading is getting more and more irritating despite the evidence in front of you.....I would respectfully suggest that you undertake more research......

 

[zupcon]

Edges are the product of one's own interpretation of the Law of Probabilities. TA provides no edge, it only presents the positions of price closings, openings, highs and lows. The trader always interprets that information however he is inclined and we are all different.

You are completely wrong, and I could, if I wished, show solid evidence to prove that is the case.

Even the simplest of technical indicators can provide an edge, even used mechanically and without discretion. I can derive a tradable edge from practically ANY common indicator, or TA concept.

before anyone asks, no, I'm not sharing anything with anyone

 

[dimsdaletraders]

aaaawwwwwww, go on! *G*

 

[Trader333]

In that case, can I jump in here just to point you to the "swinging the FTSE 2010" thread, where you'll see exactly that from Max, using Elliot Wave TA?

Does this imply that Elliot Wave TA is capable of predicting that when a United States President makes a speech that the content of it then causes the markets to fall ?


Paul