how do you make sense of seasonal market trends?

[longandshort]

I barely knew what a stock was 5 years ago. I've got 1 year of regular daytrading. But even aside from me there are plenty of people who trade based solely on TA. On top of that, what do you think the Quants that write the algos base their signals on? Seasonal trends and fundamentals? Whereas fundamentals are most certainly used, such as the economic calendar days, support/ resistance are a regular signal among others.

There are plenty of poor/unsuccessful traders who trade based solely on TA, and lots of youtubers who make money teaching those poor souls TA lol.

Most quant strategies are some form of stats arb, momentum, or market making. Sure, some use moving averages (smart ones use kalman filtering) -- but that quant dev is not analyzing a chart pattern, he/she is studying a vast set of data, and the "TA" component is an add on based upon what works for their analysis.

That is not the same as some dude trying to time ES intraday with a mouse click lol.

 

[deaddog]

Right...in this case, studying chart patterns has an extremely low accretive effect to pnl. So telling someone to "study the chart" is like telling someone who wants to play basketball to spend all of their training hours practicing hand writing, when they should be practicing shots, dribbling, and lay ups, etc. The real analytical toolkit of profitable traders is hypothesis testing with regressions, cointegration, and lots of reading.

Somehow I get the impression you haven't had much success reading charts. Is it because you were taught that TA didn't work or have you not put in the time to learn how it works?

I've done lots of reading but then I was studying how to read charts.

 

[Bugsy]

There are plenty of poor/unsuccessful traders who trade based solely on TA, and lots of youtubers who make money teaching those poor souls TA lol.

Most quant strategies are some form of stats arb, momentum, or market making. Sure, some use moving averages (smart ones use kalman filtering) -- but that quant dev is not analyzing a chart pattern, he/she is studying a vast set of data, and the "TA" component is an add on based upon what works for their analysis.

That is not the same as some dude trying to time ES intraday with a mouse click lol.

There are plenty of successful people who trade solely based on technical analysis as well. It goes both ways.

 

[longandshort]

Somehow I get the impression you haven't had much success reading charts. Is it because you were taught that TA didn't work or have you not put in the time to learn how it works?

I've done lots of reading but then I was studying how to read charts.

if you do some simple tests of TA rules, you'll find that the vast majority don't work. Among the ones that do, very few actually are accretive to PnL. Ultimately, what is more important than TA rules is being good at figuring out if a stock is going to go up or down through some time period.

The only thing that somewhat works is cross sectional ranking of time period returns on a 6/12month basis, and you can't do that on a chart.

 

[longandshort]

There are plenty of successful people who trade solely based on technical analysis as well. It goes both ways.

nope not really. maybe in the 1950s-80s before everyone and their mother could see real time moving averages lol (somewhat useful)...

The concept of price action trading is total shit. If I gave you a random stock and told you nothing about it, I guarantee your hit rate on subsequent direction would be at max 50/50. If we include transaction costs, it's down to 45/55 with negative skew and a losing bankroll (the more you trade, the more you lose).

Exogenous factors, such as macro, the industry you trade, or stocks you pick, have a much greater impact on your ex-post performance than you realize.

Anyway, not saying you should not look at the chart at all or that there cannot be some useful insights you can glean from them. However, you must first already have a view on the asset you're trading, and that requires a much deeper (and broader) analysis than a simple chart pattern.

 

[deaddog]

If I gave you a random stock and told you nothing about it, I guarantee your hit rate on subsequent direction would be at max 50/50. If we include transaction costs, it's down to 45/55 with negative skew and a losing bankroll (the more you trade, the more you lose).

Ah but if you throw in a little trade management. Cut losses and let winning trades run until they change trends you can make a pretty good return with 50/50.

I don't just pick random stocks. I prefer stocks making new highs, after being in a consolidation with the daily range and volume decreasing then breaking out with above average volume. Probabilities are high that I'll have a good risk/reward ratio.

 

[deaddog]

if you do some simple tests of TA rules, you'll find that the vast majority don't work.

There are rules? Trading is one of the few places where doing the same thing over and over and expecting different results actually makes sense.
My rules. Buy stocks that are going up. Don't hold losers in your portfolio. Don't hold stocks that are trending down.

How do I tell if they are going up? I look at a chart.
How do I tell if a stock is trending down? I look at a chart.

 

[longandshort]

Ah but if you throw in a little trade management. Cut losses and let winning trades run until they change trends you can make a pretty good return with 50/50.

I don't just pick random stocks. I prefer stocks making new highs, after being in a consolidation with the daily range and volume decreasing then breaking out with above average volume. Probabilities are high that I'll have a good risk/reward ratio.

I've explained this to you so many times now lol...if you were to actually follow your rules, then your performance would look very different! There is a subjective element in your security selection that you're not acknowledging, and it's that component that is more responsible for your returns than anything else you do lol.

 

[deaddog]

if you were to actually follow your rules, then your performance would look very different! There is a subjective element in your security selection that you're not acknowledging,

Any idea what that would be because I can't think of anything?

 

[longandshort]

Any idea what that would be because I can't think of anything?

what's your monthly turnover? how many positions do you hold? how many have you hold for more than 2 years?