Enough already! It's not random

Quote from science_trader:

... the problem with your approach is that it's not practically usable.

One example. Today is up. Then, from your study you would say that tomorrow would tend to be up too, but actually not, because your study says that there is a bias that may last more than just 2 days. I don't know if you follow me on that one.

Conditional probabilities are far more efficient and practical to work with. Then you know your odds (based on the past of course) of seeing precise events, not only saying that "as a whole" the market satisfies a statistical test or not.
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I've done the overall daily return distribution analysis that you first suggested and here are the results:

1,256 positive deviations from the median daily return
1,256 negative deviations from the median daily return
1 zero deviation (ignored)
1,348 runs

The runs-test analysis yields a z-score of 3.632.

So the chance of getting 1,348 runs in a random sequence of 1,256 positive deviations and 1,256 negative deviations is one out of 7,112.

The daily returns of the S&P 500 from 2 Jan 1998 to 31 Dec 2007 are not remotely iid (independent and identically distributed).
 
Quote from SuperCruz:

Why is there so much opposition against Technical Analysis? Is it not a science?
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Not basically. TA is far more art than science, and too much of it is at best a valiant failure. Many beginning traders have been burned by touted TA methods that are too weak, and in some cases downright fraudulent, to produce a profitable edge. So some become adamantly anti-TA in all its forms, whether they've tried all of those forms or not. Some become strongly polemic about which types of TA they approve and which types they disapprove. It's almost like arguing about politics in this forum sometimes.
After all, such popular theories like the DOW (Day of Week), Candle Sticks, Elliott wave theory, Trend line, Relative Strength Index (RSI) , Stochastic etc. are all associated with Technical Analysis.

Is it so, because it is a science just like many do not like maths, but yet it is important. :)
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There may be some anti-math bias with some but there are other people who are strong in math who still don't trust TA. It takes more than math to find a new and useful indicator, it takes creativity ... or luck.

The real problem, which not everybody sees as a problem, is that any TA that actually works well is likely to be kept secret by the discoverer(s), because they have no incentive to share such knowledge with the general public. As a result, most TA researchers are working solo, hoping to gather bits and pieces from various sources to combine into a TA strategy that works.
 
Quote from kut2k2:

The real problem, which not everybody sees as a problem, is that any TA that actually works well is likely to be kept secret by the discoverer(s), because they have no incentive to share such knowledge with the general public. As a result, most TA researchers are working solo, hoping to gather bits and pieces from various sources to combine into a TA strategy that works.
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True.In the professional world of trading markets, institutions and all other types of big player keep their formulae and methodologies as secretive as possible. It has been and will always be like that.And no offence intended but by contrast ET is just a cowboy outpost where the age of the automobile has not arrived yet.
 
Quote from kut2k2:

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The real problem, which not everybody sees as a problem, is that any TA that actually works well is likely to be kept secret by the discoverer(s), because they have no incentive to share such knowledge with the general public. As a result, most TA researchers are working solo, hoping to gather bits and pieces from various sources to combine into a TA strategy that works.
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Thank you, kut2k2 for your explanations. :) However, does that mean that the truth and success of TA shall not be known? I have my doubts, as so many traders have shared their successful trading experiences, so why not the same in TA?
 
Quote from TraderSystem:

Thank you, kut2k2 for your explanations. :) However, does that mean that the truth and success of TA shall not be known? I have my doubts, as so many traders have shared their successful trading experiences, so why not the same in TA?
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kut2k2, thanks for the reply, a good one. :)

TraderSystem, I echo the same feelings. :) However, I would like to add, that experiences whether good or bad, successful or failure, have helped others learn from them.
 
Kut2k2,
You are correct in that there is a man behind the curtain like in the Wizard of Oz. He sets the range and then lets the money chasers lose to take out stops and have the munchkins (most traders) drive the market in the desired direction just to take their money when they think their doing well.
It is fun and sad at the same time to watch them manipulate indicators
and then take out stops.
My trading has improved greatly with this cynical view.
92 percenter
 
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