Is Technical Analysis a joke??

J

Jdesey

I am starting to finally believe that TA ain't all it's touted to be. I get solid Sup/Res numbers from some great Tech Analysis experts, this is only on the indexes as I trade QQQ and SPY,,, snd then we just slice right thru those levels. I think all the patterns of handles, flags, hanging man, cups, hammers , etc... is crap.

What all of it misses is how exactly price moves. Price moves by investor activity. there are only 4 moves, Buy / Sell / Hold / stay out (or I guess moves if we consider shorts).
So, to me predicting the future based on chart patterns of the past is like predicting the next spin of the roulette wheel based on the last X number of spins. Which does not work.

I am starting to fully believe in doing the opposite of investor sentiment. I watch the Put/call ratio, AAII survey, etc... just do the opposite.

thoughts? comments?
 
Jdesey said:
I am starting to finally believe that TA ain't all it's touted to be. I get solid Sup/Res numbers from some great Tech Analysis experts, this is only on the indexes as I trade QQQ and SPY,,, snd then we just slice right thru those levels. I think all the patterns of handles, flags, hanging man, cups, hammers , etc... is crap.
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Jdesey,

If you do not like all the support and resistances and patterns and other TA stuff you mentioned, why not just remove them from your chart and Only focus on price movement.

Noone ever said you need all those lines and patterns on the chart to make trading decisions.
 
Jdesey said:
I am starting to finally believe that TA ain't all it's touted to be. I get solid Sup/Res numbers from some great Tech Analysis experts, this is only on the indexes as I trade QQQ and SPY,,, snd then we just slice right thru those levels. I think all the patterns of handles, flags, hanging man, cups, hammers , etc... is crap.

What all of it misses is how exactly price moves. Price moves by investor activity. there are only 4 moves, Buy / Sell / Hold / stay out (or I guess moves if we consider shorts).
So, to me predicting the future based on chart patterns of the past is like predicting the next spin of the roulette wheel based on the last X number of spins. Which does not work.

I am starting to fully believe in doing the opposite of investor sentiment. I watch the Put/call ratio, AAII survey, etc... just do the opposite.

thoughts? comments?
More...

Most people using TA do not know what it is nor do they use it properly...that's the joke.

For example, many will use TA without backtesting it and then simulate trading it in whatever trading plan they've designed. They then get frustrated with their real money trading results of an unproven trade method (they forgot to backtest and simulate trade it before real money).

With that said, if you're confident that Put/Call Ratio, AAII survey is the way to go...

Do just that and don't be concern about others using TA the wrong way.

wrbtrader
 
wrbtrader said:
Most people using TA do not know what it is nor do they use it properly...that's the joke.

For example, many will use TA without backtesting it and then simulate trading it in whatever trading plan they've designed. They then get frustrated with their real money trading results of an unproven trade method (they forgot to backtest and simulate trade it before real money).

With that said, if you're confident that Put/Call Ratio, AAII survey is the way to go...

Do just that and don't be concern about others using TA the wrong way.

wrbtrader
More...
I agree,,, I guess it is just a very old habit that I use TA,,, but now really second guessing it.
I think there as alot to be said for investor behavior, the herd mentality, FOMO, etc... as a driver of price. This is precisely how a price can move, or an entire index, and we are surprised as it has no basis in solid analysis, Technical or Fundemental.
 
Everything works until it doesn't.

Luckily s/r aren't sacred otherwise we would be in a range all the time.

Trend lines and s/r are bound to be broken at some point. At what point is for one to figure out, s/r or trend lines on their own aren't the best tools, but they can definitely help pointing out places of interest.

For example in ES: if we are reaching a resistance level but we have seen nothing but higher lows, higher highs, VIX creeping down all day and NYSE up/down volume at high of day you have to be stupid to short that level.

TA can work but isn't very strong on its own.
 
wrbtrader said:
For example, many will use TA without backtesting it and then simulate trading it in whatever trading plan they've designed. They then get frustrated with their real money trading results of an unproven trade method (they forgot to backtest and simulate trade it before real money).
More...

wrbtrader,

And that is the root cause to many traders problem. I am testament to that.
 
TA is very profitable, but you have to sell / teach it to others and take there money, doesn't actually work.

Momentum is the only thing that works, look for strength and direction and learn how to enter it with a min downside and hopefully far larger upside.

Didn't work today, very little momentum NQ and YM wise :(
 
It is not. It was created by people with well-developed numeracy for their time. Some of the creators were from highly quantitative fields such as electrical engineering (look up Frequency Analysis). Most are based on simple, abstract versions of now commonly known statistical concepts. It was a different world.

It's not the rigorous calculation that brings you to a decision but the correct interpretation which we know statisticians have enough debates about.

Someday our kids will look at quant finance models as voodoo. But, don't over do it. It is just one (small) part of the picture.
 
Jdesey said:
I am starting to finally believe that TA ain't all it's touted to be. I get solid Sup/Res numbers from some great Tech Analysis experts, this is only on the indexes as I trade QQQ and SPY,,, snd then we just slice right thru those levels.
More...

Guess they're not experts, then.
 
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