Prove to me that Technical Analysis Works.

[Ivano]

I'm not sure about the 20-day breakout in modern bull markets. You'd need to quantify the rules (bull market = SPX > 200 day MA? or above its price level 12 months ago?) and specify the entry and exit signals. A lot of strategies seem profitable and no-brainer until you do the work of testing them. Most end up being quite disappointing. I've noticed people will revive Turtle after something like 2008, the COVID crash or the first few months of this year. Yes, it works pretty well with high volatility and big moves in stocks, oil, gold, etc. However, there are also plenty of "head fakes" where markets appear to be crashing or starting big rallies that fizzle. You'll have to trade during those or find a good filter...and things like ADX don't really work--they just tell you what happened in the past.

True, `SPX` over `200 MA` may or not define a bull market( depending of course if one is fan of Tudor Jones ) but is not per se an environment where 20 day `BO` works always because there are periods of choppy oscillations really long above `200MA`, i have to correct myself, is really when there is euphoria, and everybody can agree and decide which parameter using to determine this, because there are a plethora of ways to go, to understand if is *that* period can last a year or a 2 weeks short lived rally that ALWAYS come in a year, that everybody loves.

Back testing is overrated for technical analysis imo, and not because of fitting curves or delisted/not delisted stocks, but because as our troll/OP suggested the past does not predict the future, and is left to our intelligence and research on how to be smart on this point. We do not need to be outsmarted by pool of geniuses employed by a market maker or investment bank, fund, I want to play in their direction, and usually is not a day trade game. My first tought is: when the market goes crazy up or whipsaws down who and why is taking the other direction, who is exploiting miss volatility. How and when to backtest is left to my intelligence and my python skills

In 2020 even if one had planted a plant on ashes would have grown to the sky. ADX? Indeed is a super lagging indicator to me, but is the context where is used that matters I guess. I am not a trader for a living, I am newbe, and can identify quite a few psychological mistakes I did this year, so do not care anymore about bull traps, head fakes, (possible) manipulations, because I do not want to overtrade, I want to learn from my mistakes..because I am mostly a technical trader. Few of use would dare to disagree maybe that losses can come after a streak of confident hits, this happens when one does not have a solid method to `entry` and jump on every train. So I stick with my custom setup and wait for the market. Market will come and is better not gaining money that losing in an unfavorable adverse mediocre trade. I will take my endorphins from running and coding not by trading. As a consequence entry point and exit you mention make an huge difference, and so every aspect can help my daily mantra: how to increase my possibilities to increase my profitability?

 

[TimtheEnchanter]

I refuse to believe that a line on a chart can explain the entirety of a company. It defies rationality and logic. Not to mention that NOBODY notable has gotten super rich off of TA. On the other hand, fundamentals have made several people rich (Warren Buffett, Charles Munger, Bill Ackman, Carl Icahn, etc.).

Please explain to me, with logic, how TA is supposed to work.

I don't care if it's the VWAP or a moving average, just explain to me how a line on a chart will predict anything beyond a vague guess.

Price action charting (using only a few indicators) has made a lot of people a lot of money. Among other quant stuff what do you think algo's use? tea leaves?
For your information I use some fundamental information as I do not touch cash losing companies (I do not day trade). BTW. Bringing up Buffett is just silly in this context...
The fact that the markets have gone up in the last 90+ years with minor bear markets is technical analysis.

 

[vincentnyc]

Will Rogers said;

"Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it.

If it don't go up, don't buy it". I added; "If it goes down get rid of it".

I swing trade individual stocks.

I don't look at fundamentals or care what the company does.

I scan for stocks making new highs.

I prefer stocks that are breaking out of a consolidation.

I use money management (Usually risk less than 1% of capital)

I use risk management. (Tight stops)

I make money year over year and have managed to sit out the big drops in 2008 and 2020.

If that's TA it works for me.

this is basically my mentor swing trading strategy.

 

[Ivano]

Tell that to the experts in this thread that say : "Indicators are not TA, they are ´price analysis´" "TA is market analysis". I don't care at all in case you wanted to school me.

Dear fellow trader/investor I see you gotta a lot of likes and also you reply in the automated trading forum, so you suggest montecarlo simulation that is based on statistics.

I am not an expert but would we have some common ground saying that there are a lot of documented traders that do money year after year with technical analysis whatever they define as such? Is not maybe this is a proof?

One could say no these people use secretly fundamental/quantitative analysis and then declare that are TA experts, but then we could say the same for Mr.Buffet that declare is FA and do not use TA

 

[virtusa]

I read what I see. I don't see smallfilmind and a few others. Life is sooo much better that way.

I blocked smallfil longtime ago too. What a relief!

 

[Illini Trader]

If you want proof that TA works all you have to do is read through volpri's journal. He analyzes his trades and shows exactly how he trades. He made one response on this thread but is too modest to promote himself. He is a day trade scalper and does it brilliantly.

 

[vincentnyc]

I blocked smallfil longtime ago too. What a relief!

i blocked that fool too!

 

[MKTrader]

Back testing is overrated...

I am newbe, and can identify quite a few psychological mistakes I did this year

No offense, but these two excerpts from your long comment will suffice. If you believe there's a strong edge in TA, prove it by real-time trading calls. But to even find a possible edge, you'll have to backtest. I'm assuming you (or someone) did that for your "custom edge." If not, you might as well go to the casino.

You can wax eloquently (or not so eloquently) all you want about why TA "works" but the proof is in the pudding. Where are the real-time, market-beating results of someone using retail-level TA? This doesn't include Jim Simons types, who use much more sophisticated strategies and rely on speed/HFT the rest of us can't access.

 

[MKTrader]

If you want proof that TA works all you have to do is read through volpri's journal. He analyzes his trades and shows exactly how he trades. He made one response on this thread but is too modest to promote himself. He is a day trade scalper and does it brilliantly.

And we can be 100% positive that he's as profitable and brilliant as you say because......?

Don't tell me to look through some 764 page journal. We simply need sanitized account statements or 3rd party audited performance for a significantly long period. With all the claims of super successful anon traders on here, I've yet to see something like that. The most I've seen are single trade screenshots from Desterio (or Destitute or something) that could've easily been photoshopped. Or maybe he didn't show the 5 losing trades he gets along with each winning trade.

 

[MKTrader]

View attachment 285757
Price action charting (using only a few indicators) has made a lot of people a lot of money. Among other quant stuff what do you think algo's use? tea leaves?
For your information I use some fundamental information as I do not touch cash losing companies (I do not day trade). BTW. Bringing up Buffett is just silly in this context...
The fact that the markets have gone up in the last 90+ years with minor bear markets is technical analysis.

Not so sure about that chart. It says "there will always be a new high in a few years" and includes the 1929 crash where it took 25+ years to make a new all-time-high. Let's hope we don't go the Japan route, where the Nikkei still hasn't topped the peak it reached at the end of 1989.
Nikkei 225 Index - 67 Year Historical Chart | MacroTrends