After using this trading simulator I'm convinced technical analysis simply doesn't work

I haven't played it yet, I will give it a go.

Quick thoughts, if it scores your forecasting ability based on chart/pattern interpretation plus you throw in time expectation, then I expect result to be below 50% probability.

But what about money management? It's not being offered as part of the test.

But let's look at it from another angle. If best money managers 'get by' being right on around 50% to maximum 60% of their portfolio picks (average) using highly sophisticated systems and strategies, then what do you expect from common systems based on a plain old chart?

So what is the secret? Technical analysis or not, on average it's extremely hard to be right more than 50% of the time.

So maybe people's expectations are set too high?

Most folks want to be right all the time, it's a basic instinct. To achieve this level of consistency in a highly competitive environment is impossible for the vast majority. Some can, vast majority can't and won't. There are edges, but finding one may take you years and years. I certainly haven't found one, yet.

Bottom line - TA works only with correct application of money management, without it it falls on it's ass, just like any other methodology, be it fundamental based decision making or coin tossing.

Learn to be in charge of your risk and payout expecting low probability. Be ready for the worst, then you'll survive this game.
 
I've applied a stripped version of my methodology yet sticking to money management goals.

performance.png
 
nxt7 said:
http://chartgame.com/

(Edit: The game in the link above loads up historical data of real stocks. You trade at a particular snapshot in time of the stock's performance.)

I don't mean to cause any offence to those who frequently use it here, but things I've learnt after having a play with this for several hours:

- Short/long term crossovers don't work unless you just use it to buy/hold for the long run. Even then, plenty of whiplashes undo your gains....
- Support/Resistance works sometimes but not most of the time..
- Chart patterns rarely work...
- MACD, RSI and ADX just gives too many false signals...
- Buy/hold wins everytime if you're "lucky" to hang on to a good stock....

Mind you this is just a simulator. If it were actual trading I would have probably lost my account several times over + broker fees.

Whether its years of experience staring at charts and eventually "seeing the light" or just being lucky every time, it leads me to wonder how some people find success using TA at all....

Now I still want to believe TA works and that its probably me not using it properly. But after this, kind of wondering what strategies there are left that give one the "edge" after months/years of experience...
More...
Good ;
because it takes all kinds to make a market. NOT a prediction; wisdom is profitable to direct.
 
nxt7 said:
http://chartgame.com/

(Edit: The game in the link above loads up historical data of real stocks. You trade at a particular snapshot in time of the stock's performance.)

I don't mean to cause any offence to those who frequently use it here, but things I've learnt after having a play with this for several hours:

- Short/long term crossovers don't work unless you just use it to buy/hold for the long run. Even then, plenty of whiplashes undo your gains....
- Support/Resistance works sometimes but not most of the time..
- Chart patterns rarely work...
- MACD, RSI and ADX just gives too many false signals...
- Buy/hold wins everytime if you're "lucky" to hang on to a good stock....

Mind you this is just a simulator. If it were actual trading I would have probably lost my account several times over + broker fees.

Whether its years of experience staring at charts and eventually "seeing the light" or just being lucky every time, it leads me to wonder how some people find success using TA at all....

Now I still want to believe TA works and that its probably me not using it properly. But after this, kind of wondering what strategies there are left that give one the "edge" after months/years of experience...
More...
Technical analysis was originally intended for Daily, Weekly, and Monthly charts. During the 1970s, this is how a lot of the great commodity traders got filthy rich. I doubt Japanese rice farmers were "day trading" so knowing this why would anyone burn money trading 5 minute charts?
 
nxt7 said:
http://chartgame.com/

(Edit: The game in the link above loads up historical data of real stocks. You trade at a particular snapshot in time of the stock's performance.)

I don't mean to cause any offence to those who frequently use it here, but things I've learnt after having a play with this for several hours:

- Short/long term crossovers don't work unless you just use it to buy/hold for the long run. Even then, plenty of whiplashes undo your gains....
- Support/Resistance works sometimes but not most of the time..
- Chart patterns rarely work...
- MACD, RSI and ADX just gives too many false signals...
- Buy/hold wins everytime if you're "lucky" to hang on to a good stock....

Mind you this is just a simulator. If it were actual trading I would have probably lost my account several times over + broker fees.

Whether its years of experience staring at charts and eventually "seeing the light" or just being lucky every time, it leads me to wonder how some people find success using TA at all....

Now I still want to believe TA works and that its probably me not using it properly. But after this, kind of wondering what strategies there are left that give one the "edge" after months/years of experience...
More...
I've made billions playing chart game using the only pattern I believe happens. The buy and hold was -99% by the time I was done. My thoughts are there is one main pattern and then overextension. aside from trading on the daily/weekly, in day trading there are very simple strategies that I believe can be profitable, without indicators. A simple trend line across the top and buying a breakout works. A lot of stocks cant be traded, you have to know your place in the market. Day traders usually make money off of other day traders(big gainers) because highly institutionally owned stocks are much more difficult to trade.
 
nxt7 said:
...I've learnt not to look for 100% accuracy with indicators based on advice here. But whatever backtesting I do, the sample size is far too small to be any reliable. Like sure, I may get a 70% accuracy sometimes, but doesn't seem all that reliable if the sample size is only 0.9%...

FYI, though I may be skeptical I still haven't completely discounted TA's usefulness.
More...

What about 40%? Trend followers usually have win rates below 50% yet they can make very good returns.

TA usually falls into two camps. You can be mechanical and "buy whenever X < 20" or you can use your intuition/discretion. Particularly chart patterns are very dependent on your intuition.

Your intuition is not designed for trading, so it will take your brain probably years of practice reading charts to become reliable. A simulator is a great way to build that practice using accelerated time or outside of work hours. It is not a great way to "prove" TA works as someone new to the markets. In the long run, I think discretionary TA makes the most and most consistent money for a retail trader, but you have to pay your dues. There is no substitute for screen time.

If you want to prove mechanical TA works, pick up WealthLab, AMIBroker or MetaTrader4 (for F/X). Code up a description of your rules and it can test it against years of data and 1000s of trades. This should convince you of the following:

1) Win rate % has little to do with profitability
2) It takes many trades to show an edge
3) Even a winning setup can have a losing *year*
4) TA has an edge, even mechanically, albeit not as big as you might've wanted

If you want to learn more about discretionary trading, I recommend these books.. but I am systematic so you may get more recs elsewhere.

Encylcopedia of Chart Patterns (Bulkowski)
The Daily Trading Coach (Steenbarger)
The Disciplined Trader (Douglas)

If you want to lean more systematic, I recommend these books to start:

Trend Following (Covel)
High Probability ETF Trading (Connors)
Trade Like a Hedge Fund (Altucher)
Unholy Grails (Radge)
 
Every strategy works some of the time, so does flipping a coin. To get ahead, requires time of watching these markets as how they react and follow, or not follow through important economic data.
We have never been in negative interest rates, so how does back testing reveal itself?
I thought you folks were more mature than baby pips...apparently not.
 
Unequivocaltim said:
how they react and follow
More...

That's all I said, you may consider Nasdaq as a baby index and that it has no weight, perhaps it doesn't, but confluence does matter. When SPX and INDU have gone through their previous support levels Nasdaq hasn't reached it yet, so I guess my take on things as they stand is let's see how Nasdaq reacts to previous support tag. If there is rejection then why not sell it? Because you are cautious how big guns may be positioned against you? I know for a fact that there are plenty of big players that seek out opportunities when potential reward exponentially outweighs risk, that's what this is all about IMO & so I was told by my previous conversations with folks who used to be floor traders prior to technological processes started to take over - always look for those moments when the risk is much less than what the potential reward is. That's the core foundation of most businesses that sell tangible or even intangibles to aim to pay as little as possible so that you make a killing when you let go of the bag :)
 
You must log in or register to reply here.
Back
Top