Is TA less profitable now?

[mattjclark]

Quote from vladiator:



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

Damn,

I guess I'm going to have to start learning how to program a Neural Network. I knew it was going to come to this sooner or later.

 

[Free Thinker]

"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. "

by pros do you mean the hundreds of funds with unlimited expertise that are down double digits for the 3rd year in a row?

 

[mattjclark]

I think he means banks like Citibank that was near bankruptcy until it bet the whole wad on TA.

 

[capitalMan]

Quote from vladiator:



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.

I think that TA is dispised amongst academics because most of it is not objective and there is simply no logic behind it..
(e.g. why should the market go up in 5 waves?)

you are right...

Trend following works and contrarian strategies are opposites sides of a coin and they both works
because they both try to capture a underlying nature of the market ... price overreacts(or underreact) then corrects itself (which is what volatility is all about..)..trend following captures the overreaction.
contrarian stragies tries to profit when price corrects itself..

but IMHO contrarian tools that REALLY work doesn't belong in the TA realm it's more related to fundatmentals (finding value ) or quantitative( market inefficiencies) ...

finding trends is relatively easy and can be done by the average trader like you and me...

 

[Corso482]

2 things:

When people speak of TA beating FA, what do they really mean? Do they mean in terms of raw return? Then I would agree, it the last bullmarket FA would certainly dominate. But what about in terms of risk adjusted return? Those who use FA usually use no defense, which means they could theoretically lose BIG, e.g. the last year or two.

And that brings me to my second point, that TA is useless without applying money management to it. I think most traders would agree that MM is very important. Most would also agree that TA is no magic pill, but hopefully it will give some edge. But again, a small edge is usually useless without money management to control losses and create a positive expectancy.

That's the problem with these studies. They don't take into account money management and they don't account for risk when analyzing those who use FA.

 

[vladiator]

Quote from vhehn:
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. [/B]

I didn't say the emotions and their effects won't be there. Of course they will. BUT, the opportunities they result in will most likely be quickly taken advantage of by automatic trading routines. While the emotions are hard to predict, their effects are often easy to spot. In many cases that is done automatically even now and I would bet this will be much more prevelant in the future.

 

[vladiator]

Quote from Corso482:



That's the problem with these studies. They don't take into account money management and they don't account for risk when analyzing those who use FA.

They do.

 

[vladiator]

Quote from mattjclark:






Damn,

I guess I'm going to have to start learning how to program a Neural Network. I knew it was going to come to this sooner or later.

Might as well start just about now . I hope it's not late yet. I saw a firm in Atlanta that has done it and is doing VERY well.

 

[vladiator]

Quote from vegasoul:




I think that TA is dispised amongst academics because most of it is not objective and there is simply no logic behind it..

Most maybe. But to me it's the TA that does have logic and that is objective that is most valuable. That's the only kind of TA I ever use. I do look at other popular things at times just to see what the herd is seeing so I can know what they are likely to do.

but IMHO contrarian tools that REALLY work doesn't belong in the TA realm it's more related to fundatmentals (finding value ) or quantitative( market inefficiencies) ...

You might be right. I am 99.99% contrarian and what I do is a mixture of some TA and some FA. I think I'm somewhere on the boundary between the two where it's really murky as to what it's called .

 

[dottom]

Some academics have a great gasp of statistical testing of various trading strategies, including using much more advanced time series analysis techniques, but their use and understand of TA is dismal. You'll see them doing sophisticated non-linear time series analysis but using simple SMA's as one of the inputs. Of course, many traders understand TA well but have no idea how to build or validate the positive expectancy of a trading method without taking many discretionary short cuts that often leads to losses. e.g. traders who do only empirical testing using one week's worth of data and jumping in with both feet.