by 'model' you're talking about system? Like trendline breaks etc?
Does Technical Trading Really Work?
- Thread starter Lloyd W. Coutee
- Start date
Usually when someone uses the words "system" or "model"...they're talking about something that has been programmed, coded or automated. They are traders that approach their TA or trading in a scientific manner...not discretionary trading.
The traders using program, codes or automation is what the TA naysayers are debating about. Ironically, most of the TA debates have been between discretionary traders and the naysayers that do not believe TA can be proven scientifically to work. Simply, its these systematic traders that most of the naysayers do not get into debates with.
Seriously, take a look at any of the threads down in the sections below...
Automated Trading @ http://www.elitetrader.com/et/index.php?forums/automated-trading.48/
Programming @ http://www.elitetrader.com/et/index.php?forums/programming.65/
Strategy (System) Design @ http://www.elitetrader.com/et/index.php?forums/strategy-system-design.34/
There's rarely debates in the above threads about scientific application in trading, in PA and in TA. All the above threads are located in one section called Technically Speaking. This is something to think about seriously, the naysayers of TA keep throwing that "scientific" debate around but they do not actually do such in those threads. In contrast, they prefer to debate with "discretionary traders" that are not using automation or system codes. Saying its ironic is an understatement.
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A thorough study of price action concepts will lead a dedicated student to the discovery of algo exploitation. I learned about price action concepts from Brooks, a video I saw by austinp, and, later, Volman.
I've never seen a book or video or someone on a trading forum discuss the tactics I developed from these concepts.
I won't be writing that book, selling my trading plan, or opening that trading room.
One thing the guru-bashers have right: The authors, bloggers, trading room operators are not giving away precise details; they're sharing general concepts that can lead to success.
There are many reasons for that and anyone who's put their "10,000 hours" in understands those reasons.
HFT is not harming small day traders; the "retail" traders one reads about that HFT is harming are the mutual fund/401K managers. They have to place a lot of money into the market regularly and HFTs take advantage of this.
Small retail day traders using 1-min and 5-min charts to exploit small (and sometimes significant) price swings are usually destroyed by trading with no plan/rules, or their inability to follow their own rules.
If I know from thorough statistical analyses that price retraces to a particular level before resuming its travel in the direction of an initial signal and place my order at that level immediately upon recognition of the signal and I have a stop loss and profit target in place upon fill, HFTs have no impact on me.
On the other hand if I have no plan and I chase price, HFT will destroy me; if I have a plan and I hesitate to place my order immediately upon signal, I may miss getting filled on a percentage of trades, thereby diluting my edge; if I hesitate and chase an entry after price resumes its move, I now have a skewed risk/reward ratio, thereby diluting my edge; and if I do everything correctly on entry, but move my stop (farther during adverse moves or closer during favorable moves), I again skew my risk/reward ratio, thereby diluting my edge.
A diluted edge often becomes no edge at all, and lack of an edge is what destroys traders.
Many of us make a living trading technically so for us it works.
A model is a date and time where price and various components or rudiments interact in a way which enables understanding why price is moving the way it is. The model enables illustrating how the bars and the components must interact and how that interaction differs from other dates and times. This enables determining what aspects of price and which components are important.
Then strict specifications can be written and those specs enable writing a system, strategy or trading plan. Without a specific date and time which precisely models behavior which should be understandable as a viable logically based reason 'why' the model captures the behavior and thus predicts the next move then all the effort to make TA work or write a trading plan isn't much better than guessing.
Impressive. Hopefully i'll get there one day. Will be in my 6th year as a full time trader soon!
The reason the naysayers focus on TA is because so much it is discretionary aka subjective and thus not scientifically analyzable or programmable. And the part of TA that can be objectified (primarily the technical indicators) is mostly garbage and thus easily subjected to ridicule. You've noticed these naysayers don't dare go after QA the way they've gone after TA, even though a lot of QA is GIGO as well. But the QA math scares them shitless, whereas TA math almost never gets beyond the level of high-school algebra.
TA by definition excludes all nonobjective analysis. Many who try to use TA are unable to remain objective but TA is inherently objective. It can't by it's nature be anything but objective.