Try chapter 3 of Niederhoffer's 'Practical Speculation'.
Nearly all TA can be proven worthless by rigorous data-mining.
Nearly all TA can be proven worthless by rigorous data-mining.
Book on Percentages & Probabilities of TA Setups
- Thread starter DisciplinedHedg
- Start date
By definition, anything can be disproven OR proven with data-mining?
So what does that prove?!?
Please feel free to rebuff Niederhoffer's arguments against TA , AFTER you've read them.
I guess that money in my account from trading off of TA is just a figment of my imagination then.....
Rearden,
What do you use to make your trade decisions?
Mechanical, discretionary, price action only, indicators, economics...what?
I've been around for over +14 years as a trader and a lot longer than that via being associated with family and friends that are successful retail traders or ex-floor traders.
Technical analysis works.
Note: I haven't tested nor traded EVERY single chart pattern.
However...I will say this...I've read dozens of reports, articles or stories by traders and non-traders that test a specific chart pattern or numerous chart patterns and come to the conclusion...
that chart patterns are not profitable over the tested period.
Such raises an interesting question that many that do these tests...
fail to raise.
What is it that allows successful traders that do use technical analysis over many years...
to succeed in an area where a computer that crunches numbers is unable to duplicate the results of patterns used by successful traders?
Is it possible...that many of these tests were done by someone applying a specific trade methodology while testing the chart pattern...
in which the trade methodology (how to trade...how to test the pattern) is what failed and not the chart pattern?
Is it common sense that a computer cannot measure?
Does common sense falls within the category of a discretionary trader?
Therefore...I've come to the conclusion...
indicators and chart patterns don't make profits.
It's the trader that is the deciding factor while using those indicators and chart patterns (trading tools).
Someone once said...technical analysis is like a hammer to the skill carpenter or a scalpel to a skill surgeon.
Remove the skill surgeon and carpenter and input someone that doesn't know how to correctly use these tools...
you got failure.
Thus...it's unimaginable that every successful trader I know online or in person that uses TA successfully...
are all liars.
Geeeshh...if this was true...
this would be better than the Single Bullet Theory concerning JFK assination.
http://mcadams.posc.mu.edu/sbt.htm
Maybe that's the flaw with data mining.
Statisticians are fond of pointing out that if you torture the data long enough, it will confess to anything.
Just some thoughts for those that enjoy contemplating about stuff like this.
NihabaAshi
NihabaAshi,
I think what your talking about is what Traderkay( I think it was traderkay) refered to as SOMP( seat of my pants) indicator. This indicator can only be derived by trading the pattern many, many times over and over and throwing out a good prtion of the patterns. Similar to Gary B. Smith of Real Money...he looks at his scans every night and throws out some for various reasons that he can quantify only having traded these patterns many times..its not perfect, but its how I think many make $$ trading patterns.
I think what your talking about is what Traderkay( I think it was traderkay) refered to as SOMP( seat of my pants) indicator. This indicator can only be derived by trading the pattern many, many times over and over and throwing out a good prtion of the patterns. Similar to Gary B. Smith of Real Money...he looks at his scans every night and throws out some for various reasons that he can quantify only having traded these patterns many times..its not perfect, but its how I think many make $$ trading patterns.
Shaq48,
Thanks for the reminder on one of my favorite indicators.
Just in case somebody doesn't know what the SOMP Indicator is...click the below link:
http://www.elitetrader.com/vb/searc...d=151506&sortby=lastpost&sortorder=descending
NihabaAshi
By that flawed logic you could say that some devoutly religious individuals are happy & wealthy, therefore religion is the proven key to happiness/wealth.
Good post NA, I think that's a workable theory.
As for my own trading, I use short-term relative strength/ momentum/ pattern recognition/ fundamentals/ gut feel.
Never touching the regression lines/parabolic stops/ boilinger bands/oscillators/ point-and-figure/ fibonacci/ super-doji -backflip stuff.