My only edge is technical analysis

[Frederick Foresight]

It obviously can’t be price action alone.

Are you sure? At its most elemental level, isn't trading about trying to catch a wave ideally somewhere near its beginning? Does a surfer need to understand physics, or can he also just learn by trial and error what to look for and what to avoid, until he eventually gets better at it or gives up?

 

[Frederick Foresight]

So you’re saying that your interpretation of a chart is unique and distinct from everyone else’s? E.g. I see price falling and you interpret it as rising ..?

I think you're being somewhat dismissive. Consider economists. They all have access to the same information, but some are better at using it than others in arriving at their conclusions. Similarly, traders who form trade ideas on the basis of fundamental information largely have the same information at their disposal as other traders, excluding inside/prior knowledge. Yet some are better traders than others using that very same information. Now we can debate whether this is an edge, or simply a difference in ability.

 

[PPC]

Am I in trouble?
What other edges should I look for

Psychological edge is far more important than technical analysis (TA).

Metaphorically speaking, TA edge is like having a rally car, and psychological edge is like knowing how to drive the rally car during racing.

A very good rally driver with a slower rally car will outperform a bad driver with a faster rally car.

Same thing with trading, a trader with very solid psychology and risk management who makes very few psychological and execution errors will over the long run outperform the weaker traders regardless of how good their TA edge is.

 

[longandshort]

That's not quite was I was saying (maybe re-read my prior post). In simplicity, my point was that given the same information and resources in any area of life, there are some who will outperform.

I hear what you’re saying and agree with you. My point of contention is in that a manual review of time series data is inferior to a quantitative analysis of it. If your trading process is to look at a chart and then make a trading decision, you do not have an analytical edge over your competitors (phds conducting serious analysis on time-series across multiple dimensions). You in fact may be completely unaware of your competition, which is a very dangerous and unsuccessful way to trade.

To clarify: I’m not saying that looking at chart can’t be helpful. I’m saying it’s not a source of edge. Pick any “old school” trader here who has been reading charts for 10 years+. I guarantee that they will not have an analytical edge over a quant with the same years of experience. In fact the difference between the two will be quite substantial.

 

[longandshort]

I think you're being somewhat dismissive. Consider economists. They all have access to the same information, but some are better at using it than others in arriving at their conclusions. Similarly, traders who form trade ideas on the basis of fundamental information largely have the same information at their disposal as other traders, excluding inside/prior knowledge. Yet some are better traders than others using that very same information. Now we can debate whether this is an edge, or simply a difference in ability.

I understand your point, see my response to LF.
At the end of the day there are three sources of edge:
- informational edges (you have info the market doesn’t)
- analytical (you analyze the same data better)
- behavioral (you have better process controls)

The data (in this case a price chart), is information. Everyone can pull up a chart, so it’s not an informational edge.

Your analysis of the data is different yes but no one is explaining how other than by saying “it is different because it has been done for a longer period of time”. This is an argument from authority, but it’s not true. If you have no edge in analysis then it doesn’t matter how long you’ve been at it. Al Brooks has been doing his sort of analysis for a very long time and is still quite poor.

The economist example is great because economists conduct a significant amount of quantitative analysis of data, and so the older they are, typically the more insights they’ve generated through their analysis which gives them an edge.

Guess what — that’s exactly what people do with stock price timeseries data too. They conduct quantitative analysis to generate insights at a level impossible through manual review. The brain was not made to conduct statistical analysis on the fly, and we suffer from many types of logical fallacies (anchoring, sunk cost, etc.). So a manual chart trader has a distinct disadvantage — subpar analysis and subpar behavioral / process issues.

 

[hilmy83]

I understand your point, see my response to LF.
At the end of the day there are three sources of edge:
- informational edges (you have info the market doesn’t)
- analytical (you analyze the same data better)
- behavioral (you have better process controls)

The data (in this case a price chart), is information. Everyone can pull up a chart, so it’s not an informational edge.

Your analysis of the data is different yes but no one is explaining how other than by saying “it is different because it has been done for a longer period of time”. This is an argument from authority, but it’s not true. If you have no edge in analysis then it doesn’t matter how long you’ve been at it. Al Brooks has been doing his sort of analysis for a very long time and is still quite poor.

The economist example is great because economists conduct a significant amount of quantitative analysis of data, and so the older they are, typically the more insights they’ve generated through their analysis which gives them an edge.

Guess what — that’s exactly what people do with timeseries data too. They conduct quantitative analysis to generate insights at a level impossible through manual review. The brain was not made to conduct statistical analysis on the fly, and we suffer from many types of logical fallacies (anchoring, sunk cost, etc.). So a manual chart trader has a distinct disadvantage — subpar analysis and subpar behavioral / process issues.

Do you think if a day trader has one or more of the sources of edges you stated above, it's possible to net a profit every day?

 

[longandshort]

Do you think if a day trader has one or more of the sources of edges you stated above, it's possible to net a profit every day?

Yes. Though I probably wouldn’t call them a “day trader”; in the pro world you call people by their strategy generally unless they’re HFT.

 

[Frederick Foresight]

I understand your point, see my response to LF.
At the end of the day there are three sources of edge:
- informational edges (you have info the market doesn’t)
- analytical (you analyze the same data better)
- behavioral (you have better process controls)

The data (in this case a price chart), is information. Everyone can pull up a chart, so it’s not an informational edge.

Your analysis of the data is different yes but no one is explaining how other than by saying “it is different because it has been done for a longer period of time”. This is an argument from authority, but it’s not true. If you have no edge in analysis then it doesn’t matter how long you’ve been at it. Al Brooks has been doing his sort of analysis for a very long time and is still quite poor.

The economist example is great because economists conduct a significant amount of quantitative analysis of data, and so the older they are, typically the more insights they’ve generated through their analysis which gives them an edge.

Guess what — that’s exactly what people do with stock price timeseries data too. They conduct quantitative analysis to generate insights at a level impossible through manual review. The brain was not made to conduct statistical analysis on the fly, and we suffer from many types of logical fallacies (anchoring, sunk cost, etc.). So a manual chart trader has a distinct disadvantage — subpar analysis and subpar behavioral / process issues.

Good post. But you can always find someone who will tell you you can’t succeed because of the odds.

 

[longandshort]

Good post. But you can always find someone who will tell you you can’t succeed because of the odds.

Yes but don’t conflate luck with skill. A broken clock is right twice a day, that doesn’t mean it reliably tells you the correct time.

 

[themickey]

My wife trades predominantly gold stocks using old school methods, classic TA, MA's, RSI, and throws in lots of fundamentals but not sophisticated FA.
She spends all her life on the internet, constantly plugged in - while she's cooking, doing housework, in bed, asleep, frequently while eating dinner.... non stop internet.
She's Asian but her edge appears to be her memory, she has an incredible memory.
She operates no algos but does listen to me time to time as I write and operate them.
Does she make money trading? A shit load!

See, it takes all sorts.