Is TA less profitable now?

[traderfut2000]

Completely agree with you...
It was much easier to use TA a few years before since few people were using it. Today, the market is just more competitive but one has to know it and work in that direction.

Quote from mattjclark:

Last night I did some simulated trading using data from 1978, and I tell you, I couldn't lose. My success rate was 82%. Like shooting fish in a barrel.

So what does that tell us?

I think is says that trading has evolved due to the greater number of traders and the greater complexity of the trading tools at our disposal. In a nutshell you just have to work harder than you did in 1978, but you have a lot more tools to work with.

Has anyone else tried this?

 

[capitalMan]

Most TA doesn't work

elliot wave,gann, patterns, oscillators..

none of it survive under backtesting

(assuming it could objectively backtested)


the only TA that has any validity is trend-following..

ma and breakouts..

if anyone bother to read the paper b4 they comment on it,

the authors think TA( defined as trend-following)

works and still works but that volatility has decreased casuing

TA trading to be less profitable..

Without volatility...no strategy can make money..

you guys don't have to feel hostile just because they

are "academics " and "don't trade"...

 

[vladiator]

Quote from vegasoul:

Most TA doesn't work

elliot wave,gann, patterns, oscillators..

none of it survive under backtesting

(assuming it could objectively backtested)


the only TA that has any validity is trend-following..

ma and breakouts..

if anyone bother to read the paper b4 they comment on it,

the authors think TA( defined as trend-following)

works and still works but that volatility has decreased casuing

TA trading to be less profitable..

Without volatility...no strategy can make money..

you guys don't have to feel hostile just because they

are "academics " and "don't trade"...

Thanks vegasoul. For some reason many ET members almost pride themselves in despising academia, without realizing how much good stuff is being done there (I guess they just don't understand most of it and how it can be used to make $$$). Out of all the academics in finance, there are some who are in asset pricing and who do examine things that can potentially lead to trading profits. Believe it or not, many of them wouldn't trade even if they found smth but would rather publish it and a boost to their reputation. I've met a share of those. Besides, as they, mostly correctly, argue, the money will come back to them one way or the other - e.g. after publishing some good work in asset pricing, it's not rare that someone is contacted by a major institution to do work for them for a substatial remuneration.
Some just like the life style of academia and aren't after the money and the pressure of working for it through trading etc.
IOW, don't judge guys.
Vegasoul, why do you say the only TA that works is trendfollowing? Contrarian strategies works just as well if not better. A bit more risk usually, but much greater returns as well.
Good weekend, everyone.

 

[mattjclark]

I suppose that many academics have been testing TA verses the bull market for the last 20 years. I can easily see how someone that hasn't done a considerable amount of homework would have difficulty beating the results of general market during that period using TA.

The last time we had a market like this, virtually no one had a computer with which to study the market and make instantaneous decisions. Today just about everyone has a spreadsheet or database which are very viable tools for intense analysis.

Being that we're probably in for a sideways to down market for the next 10 years or more, It will be interesting to see if TA will start to dominate the conventional wisdom of trading. I would suspect it will and as such many TA systems that work fine now will become poor performers due the enhanced attention on TA.

10 years from now, we'll probably have to have some fairly elaborate systems to continue making a good living in this business (not that I make a living at it).

Thoughts?

 

[vladiator]

Quote from mattjclark:

I suppose that many academics have been testing TA verses the bull market for the last 20 years. I can easily see how someone that hasn't done a considerable amount of homework would have difficulty beating the results of general market during that period using TA.

No, you don't seem to give them enough credit . They have tested it over many many more years than that and over various time windows, yearly, montly, weakly, daily, intraday. the results aren't a function of the bull market.
The research is truely voluminous in this area. It may not have TA in the title or abstract, but if you know what to look for, you'll find lots of really good papers that are very interesting and useful for traders. Some theoretical, most empirical, some both.

Quote from mattjclark:
Being that we're probably in for a sideways to down market for the next 10 years or more, It will be interesting to see if TA will start to dominate the conventional wisdom of trading. I would suspect it will and as such many TA systems that work fine now will become poor performers due the enhanced attention on TA.
/B]

I don't think it will be the "dominant wisdom" of trading. As you correctly indicate, the advances in technology force the inefficiencies we are after to be much smaller, as the large ones are quickly arbed away. This makes the markets more efficient and the TA less profitable.

Quote from mattjclark:
10 years from now, we'll probably have to have some fairly elaborate systems to continue making a good living in this business (not that I make a living at it).
Thoughts? [/B]

That I absolutely agree with. And it only strengthens the argument that the market will be more efficient and TA less dominant, if it ever was
I'd agrue that pretty soon even the miniscule inefficiencies will be quickly and automatically found by programs at large institutions and a lot of nonprofessional traders who didn't amass enough wealth by then might have to "real" jobs

 

[LongShot]

vlad, you are an amusing 25 yr old knowitall. thanks for the laughs

 

[Free Thinker]

"That I absolutely agree with. And it only strengthens the argument that the market will be more efficient and TA less dominant, if it ever was
I'd agrue that pretty soon even the miniscule inefficiencies will be quickly and automatically found by programs at large institutions and a lot of nonprofessional traders who didn't amass enough wealth by then might have to "real" jobs "

don't agree at all.the market is driven by the emotions of the people involved. they haven't yet nor will they ever create a program that can account for the emotions of millions of people at the same time.the emotions of fear and greed cant be predicted or changed. something unexpected always happens to spook the market. that can be your opportunity.

 

[mattjclark]

Quote from vladiator:





I don't think it will be the "dominant wisdom" of trading. As you correctly indicate, the advances in technology force the inefficiencies we are after to be much smaller, as the large ones are quickly arbed away. This makes the markets more efficient and the TA less profitable.

Good Points.

I don't doubt what you are saying, but its hard for me to imagine what an extremely efficient market (if there is such a thing) is like.

I suppose it would be something like Lumber contracts that have unbelievable moves followed by three weeks of dead calm.

If what you're speaking of does come to pass the only money to be made will probably be from other traders.

 

[vladiator]

Quote from LongShot:

vlad, you are an amusing 25 yr old knowitall. thanks for the laughs

Laughter is good for health. So I'm happy you had a few laughs
But I don't see anything amusing or funny in what I said. If you step back 20 years or so, you'd find some opportunities that are very easy to exploit with even basic TA. Those who were the pioneers became quite rich. Look at the situation now. You won't find opportunities that are as blatant. And it's somewhat presumptuous to think that small TA dabblers will have an advantage over large institutions in exploring whatever is left. They have (and will continue to do so to an even greater extent) advantages in terms of technology, information, expertise and, quite frankly, in most cases brain power.
I'm not saying that some individual trader won't be able to trade successfully. What I am saying is that it will be much harder to compete with the pros.
PS I read a post by someone the other day here on ET about the traders in France and how they lost jobs b/c things became electronic/automatic.

 

[vladiator]

Quote from mattjclark:





Good Points.

I don't doubt what you are saying, but its hard for me to imagine what an extremely efficient market (if there is such a thing) is like.

US treasuries. Try to compete with the big boys in that market

If what you're speaking of does come to pass the only money to be made will probably be from other traders.

Most likely. Although even that will probably end up captured by some automatic trading program...