Hypothesis: Technical Analysis only works in the immediate short-term

bashatrader said:
The old TA is out for good, failed and done.
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Sorry, but I gotta tell ya that it was still alive and kickin' as of last Friday. Just look at the attached chart.Your newfangled machine learning stuff may be fine for what you do, but ol' school TA is as good as ever! 'New' may be good in some respects, but you can't roast a turkey in a microwave!

And that article you mentioned was posted in a thread on ET a while ago. And it is fairly obvious that the guy who wrote it doesn't know his ass from a hole in the ground on the subject of old school TA.
 

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Please do not use the terms "predictive" and "certainty" when discussing trading and technical analysis. Unless you are engaged in an illegal activity, we are dealing with probabilities.
 
bone said:
Please do not use the terms "predictive" and "certainty" when discussing trading and technical analysis. Unless you are engaged in an illegal activity, we are dealing with probabilities.
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Bone, I'm still interested in what you have to say regarding long-term TA. You were the most confident that it is superior out of everyone, so why do you think so? Thanks.

EDIT: Or is it because of the automated trade entries you mentioned earlier?
 
For us, and for our trading system, longer timeframe modeling has consistently shown well above 50% W/L probabilities for clients the past several years.
 
Investor said:
Bone, I'm still interested in what you have to say regarding long-term TA. You were the most confident that it is superior out of everyone, so why do you think so? Thanks.

EDIT: Or is it because of the automated trade entries you mentioned earlier?
More...

Take a 50 Day Moving Average on the S&Ps and only BUY with a CLOSE ABOVE the 50 Day MA. EXIT WITH CLOSE<50 DAY MA. This is LONG ONLY. Don't get SHORT. Compare this to a 50 Period Moving Average Intraday on anytime frame. It is easier to be a winner on a longer time frame. I agree with that 100%. Money can be made intraday but damn it is getting harder and harder. Remember anytime you backtest intraday and use a Market Order you are losing a Tick. If it is wider than a tick then you lose even more. Crossing the Bid/Ask spread really ADDS UP BIG TIME over time! The edge on longer term time frames is that you are also trading less. I am still an intraday guy but I see the appeal and edge to longer term trading.
 
To just say "markets are fractal" is too simplistic. Everything is not equal across time frames. Longer Time Frames=Greater Volatility. You can't treat everything as a ratio, you can't just say "well this scales down to smaller time frames". You could say that a "head and shoulders" TA pattern has the same probabilities on an Hourly or a Daily time frame. The problem with that way of thinking is that it ignores the underlying structure of volatility and time.

Understand the Epps Effect and the Signature Plot in terms of data for volatility and correlation and how it breaks at really small time frames. Just because a candle pattern looks the same on a daily chart or a one-minute chart does not mean that the underlying structural forces of volatility are normally distributed within that candle.
 
Here's my two cents. The shorter the time frame that you like to play, the smaller the fraction of the overall volume of trades you're seeing. If you look at a 15 minute interval, it may look like a bold rally, but it could be a "dead cat bounce" from a longer time period that will be snuffed out by traders who wish they had sold earlier and are happy to cut their loss.

I'm saying here that the longer time period you look at, the more of the market sentiment you're seeing. During the '80's and '90's, a short time frame of a Microsoft chart would look like a sell, but we all know the overall sentiment was bullish.

All that being said, you can make money in either time frame, but your holding time should match up with the time intervals you're looking at. If you're looking at daily charts, maybe you don't want to hold for more than a few days. So if you're looking at 10 minute charts, perhaps you shouldn't hold for more than 30 minutes. Otherwise, you're running afoul of the larger market sentiment.

SM
 
That I can go with but one thing to add - the pros are the most active on the last hour of the day, the closing price is everything in classic TA because this involve the positions being held overnight - whereas a lot of the intra-day action are small fish day trading, arbitrage, and HFT gaming by spiking price to pick off clustered orders. HFTs know all the indicators and patterns and are experts at creating false signals to pick off these clustered orders. TA can still work intra-day to some degree provided the TA user is savvy enough to recognize the games and knows how to use them to their advantage.
 
We make technical analysis work, consistently, and over a protracted period of time. Having said that, T/A is definitely NOT used in a vacuum. We have trade entry rules and other trade entry confirming protocols that are used in conjunction with our custom indicator package.
 
You
learner2007 said:
Sorry, but I gotta tell ya that it was still alive and kickin' as of last Friday. Just look at the attached chart.Your newfangled machine learning stuff may be fine for what you do, but ol' school TA is as good as ever! 'New' may be good in some respects, but you can't roast a turkey in a microwave!

And that article you mentioned was posted in a thread on ET a while ago. And it is fairly obvious that the guy who wrote it doesn't know his ass from a hole in the ground on the subject of old school TA.
More...

You will lose all your money and still cry loud TA. Typical of losers because that is the only thing you know and you do not know it well either.

This is how it is done nowadays:

numer.ai
 
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