Do large banks and institutions use TA to profit?

[wrbtrader]

Progression to me equates to establishing better odds, weapon of choice is irrelevant. I think my opinion is quite straightforward - a pro trader should be able to derive profit trading a chart.

Now that's clear...a pro trader "should be" but the reality is that someone that already is successful professional trader via a particular trading style (e.g. algorithms, fundamentals, statistical analysis, spreads, bid/ask screens or whatever) is not going to switch to chart analysis when their firm has not trained them to do such nor approved such. For example, someone hired as a quant and to design algorithms isn't going to be caught at his/her desk doing chart analysis because they'll obviously be at risk of losing their job.

Simply, to a professional trader that you believe "should be" will not be allowed unless of course he/she quits her job and become a private trader or finds a new job and then takes a new position that involves chart analysis (not reality).

The above is the reason why I asked in a prior reply if you're talking about retail traders or professional traders because you're "should be" comment is not applicable to professional traders because they are hired to do a particular job and if they decide to do something else...they get fired or maybe reprimanded with a warning to do what they were hired to do.

In contrast, its common to hear about a retail trader switching trading styles, switching trading models, switching trading instruments without needing anyone's permission unlike a professional trader. That's more of a reality. For example, we have many journals or threads were someone says they were profitable with fundamental analysis or profitable with bid/ask screens or profitable at whatever and are now asking for advice because they're switching to chart analysis. I usually respond "don't switch"...keep doing what works for you because the goal is to be profitable and you already found a way to be such.

 

[endicottsteel]

That's fact. It's just a game where the primary objective is to win more than lose, if a trader can't achieve that by using a chart (with or without indicators) then he won't have the intelligence to achieve profitability using more sophisticated methods.

You are talking 5hit mate. Poor logic here.

 

[lucysparabola]

"Maybe you can Jake, maybe you can't- that's what makes a market."

 

[Sig]

That's fact. It's just a game where the primary objective is to win more than lose, if a trader can't achieve that by using a chart (with or without indicators) then he won't have the intelligence to achieve profitability using more sophisticated methods.

I know a whole bunch of quants who are among the smartest people in the world, as well as the most profitable traders, who not only don't trade with charts but who would laugh you out of the room for even advocating it. I'm not opening the argument that you deserve to be laughed out of the room for being a chartist, but to claim that if you can't trade a chart you don't have the intelligence to be a profitable trader is absurd.

 

[m1nt]

I know a whole bunch of quants who are among the smartest people in the world, as well as the most profitable traders, who not only don't trade with charts but who would laugh you out of the room for even advocating it. I'm not opening the argument that you deserve to be laughed out of the room for being a chartist, but to claim that if you can't trade a chart you don't have the intelligence to be a profitable trader is absurd.

Are these quants short term frontrunners or do they hold positions for an hour or more? It would seem that even chartists would agree that charts don't matter if the average holding time is seconds or less.

 

[I Know You]

to claim that if you can't trade a chart you don't have the intelligence to be a profitable trader is absurd.

What's absurd? That a chess player can't figure out how to play draughts?

 

[tt.texantrader]

What is trading all about? It's about establishing risk vs reward and establishing probability, based on those you establish what you will risk per trade. That's it. Pro traders can do probability and risk calculations, retail traders fail at those, hence the failing statistic.

For what its worth, I do agree with you even though you seem to have some passionate opposition here. Trading is all about balancing risk vs. reward. If you fail at this, it doesn't matter how well you read a chart or how comfortable you are with looking at spreadsheets full of data, you will fail regardless. Once you master the ability to think in terms of probabilities and not be affected by any one outcome, in essence, once you master to be a trader, it simply won't matter what you use. When you look at charts, or simply spreadsheets of data, its all the exact same thing, the same data, just displayed differently.

I also like your race car analogy because although there is a huge difference between an F1 Indy car and a go-cart, the same variables of speed, acceleration, turning, stopping power, etc., apply. When you understand these forces and how to use them, its all very much interchangeable.

 

[tt.texantrader]

I know a whole bunch of quants who are among the smartest people in the world, as well as the most profitable traders, who not only don't trade with charts but who would laugh you out of the room for even advocating it.

What is being argued here is not that a quant is using a chart, but that if he is a profitable quant, he couldn't also look at a chart and make a series of trades that turn out to be profitable. He might not have enough information from looking at a chart, he might need the raw data to calculate probabilities and such, but whatever his method of trading is in the quant world, surely this same method could be crudely applied to chart trading since charts are after all just data displayed graphically.

I would tend to argue that a trader who trades by way of charts would be lost in the quant world and find it difficult to perhaps trade profitable if forced to only use data and not charts, but the quant should not be lost by looking at a chart. He could, if needed, simply jot down some prices and times on paper that a derived from a chart and do what he needs to do with this. If he needs fine data, he could simply pull up a shorter time frame chart. It might be uncomfortable for him to work this way, but he shouldn't be lost, and he certainly shouldn't be unable to put on at least a few trades.

So ask your quant trader friends who are smart not if they prefer charts, since this is what you seem to say they would laugh at, but if they could manage to put on some trader given what they know if forced to only look at charts and come up with some trades.

The basis of what @I Know You is saying is that profitability comes from a disciplined approach to order execution. No matter how you display the data and what your trading plan calls for, this game is all about execution. If you have the experience of knowing what to do when in a winning trade, or a losing trade, and the ability to put on trade after trade regardless of the previous trade, this is how the money is made long term.

 

[I Know You]

Here is a classic for you, true story. I knew two very smart guys, mathematicians, both chess players. Went into capital management trading mostly stocks, at one time had one of the largest silver funds in Russia. Researched technical analysis based trading and decided to go with fundamental research. After 3 years the firm changed course and went into property/land/banking, as the trading activities did not generate sufficient enough return, barely breakeven. Around 12 months after their silver fund was closed silver took off. Same happened to some of the stocks that were in their portfolio. Research was solid, timing was poor. These two guys are now multimillionaires, not through their trading, but investment/banking activities. If you ask them whether trading makes money their response would be - no. It doesn't work, fundamental or technical or whatever else. The reason it doesn't work is because it didn't work for them. If only they were to involve a technical analyst, perhaps their end result would have been different.

 

[wrbtrader]

...So ask your quant trader friends who are smart not if they prefer charts, since this is what you seem to say they would laugh at, but if they could manage to put on some trader given what they know if forced to only look at charts and come up with some trades.

The basis of what @I Know You is saying is that profitability comes from a disciplined approach to order execution. No matter how you display the data and what your trading plan calls for, this game is all about execution. If you have the experience of knowing what to do when in a winning trade, or a losing trade, and the ability to put on trade after trade regardless of the previous trade, this is how the money is made long term.

As stated before, the reality is that a profitable quant trader is not going to abandon his/her job responsibility at a financial institution to do chart analysis. Can (the should be statement by I Know You) that profitable quant trader be profitable via chart analysis if the firm changes its business model or the quant trader quits to become a private trader...I don't know.

I do know that a profitable quant traders will try to duplicate the access to those other resources if they quit to become a private quant trader instead of using chart analysis or any other trading tool all by itself. Simply, they already know what works and will most likely try to duplicate such if they go private.

In contrast, if the quant trader was not profitable at a firm and then quits for whatever reasons...I would think they would be a little more open minded to chart analysis but they'll most likely first trying to succeed as a quant on their own prior to exploring other trading tools such as chart analysis.

Thus, if you're a profitable quant at an financial institution...you'll keep doing what your doing. In contrast, if you're not profitable quant or the firm has major changes in its business model...I'm sure a quant trader will take a look at other jobs within the firm (possibly technical analysis if the firm already has traders as such) but reality is that the quant trader will just quit and send out the resume to other firms for a quant position.

I do know a few profitable retail traders (chartists) that have now become algorithm retail traders because they want to adapt to the growing involvement of algorithm trading in the markets. They've always been the systematic types in their chart analysis. In comparison, I don't know any algorithm retail traders that were discretionary traders in their chart analysis. Therefore, I believe systematic chartist are more discipline in their analysis than discretionary chartist but oddly the stats still show that regardless to being systematic or discretionary...

Most retail traders lose regardless if we use charts or not. In comparison, professional traders at a financial institution have a higher success rate even if they don't have a technical analysis department. I Know You implies that you'll be a better trader if you use technical analysis via his true story example. That's arguable but there was once research done on over 4000 hedge funds and those that used technical analysis slightly outperformed those that did not use technical analysis. The outperformance was only a few percentage points but in the arena of hedge funds...a few percentage points is huge.

I'm not sure if that research covered just one year or many years but it is something worth thinking about.