Prove to me that Technical Analysis Works.

[taowave]

Exactly where you went,which in my humble opinion is more a discretionary art form than anything else.Or a curve fitted optimisation

Im not saying you aren't a great discretionary trader able to enter trades and rarely get stopped out,but that would make you a unicorn.Unicorns can take somewhat imprudent size,mere mortals should not...

IMHO,a systematic approach with proper money management is the most important piece to the puzzle. That affords you multiple chances to be right,which is the next best thing to having great entries and rarely getting stopped

Good entries have a big impact on the expectancy. And that is the key to prudent risk management. And I found out that good entries have a very big impact on (lowering) risk, and lowering drawdowns. Which leaves room for bigger leverage.
They also enable you to use smaller stops. Add compounding and you will see the difference in returns even with your eyes closed.

So the logical, but not realistic, solution is:

Try to pick all the bottoms for each long and all tops for each short entry, which is impossible, and you would have almost no losing trades, or at least small losses.
So the logical, realistic aim is to get as close as possible to these optimal entry points.


Where do you think I am going?

 

[wrbtrader]

...That said, I agree that most TA is garbage. Lines are crude and are better at attempting to explain the past than predict the future...

Considering the Op (thread starter) specifically identified "lines" (e.g. VWAP or moving averages to explain the entirety of a company) and wants someone using "lines" to prove that they work in explaining a particular company...

• His words...not mine.

I suspect the OP was using "lines" for a different purpose to determine which companies to "invest" and probably made an investment to only see traders and investors dumping a stock that fell below some "line" he believed didn't merit as important instead of evaluating the company through the eyes of fundamentals.

Thus, the TA traders ruined his investment in what he considered to be a strong company or he doesn't like traders speculating in stocks.

• Everybody else then jumps into the conversation talking about something else involving TA that has absolutely nothing to do with what the thread starter was talking about.

With that said, I think this thread will reach +50 pages with very few of the pages associated with "lines" (e.g. VWAP or moving averages) in Technical Analysis being used to explain the health of a company that relates to what the thread starter was talking about.

wrbtrader

 

[virtusa]

Exactly where you went,which in my humble opinion is more a discretionary art form than anything else.Or a curve fitted optimisation

You clearly have no clue what I speak about. I trade based on a dynamical mathematical model with almost no discretionary influence. The model tells me what to do. The model is also not curved fitted as the calculations are never adapted or optimized and the parameters are exactly the same as they were 10 years ago. A self adapting module is build in to catch the maximum out of each wave.

• I can take bigger size with exactly the same risk just by managing to get better entries.
  
• Better entries means that the stops can be placed much closer. So decreasing the risk/loss per trade.
• The decrease in risk can be used to raise the leverage till the level where the risk is equal again to the original risk with the original (worse) entries.
  
• Better entries also means a higher percentage of winning trades.

So in expectancy:

• % winning trades goes up
• average profit per trades goes up
• % losing trades goes down
• average loss per trade goes down

All this improves the expectancy a lot. And the risk stays the same.

 

[Aisone]

Considering the Op (thread starter) specifically identified "lines" (e.g. VWAP or moving averages to explain the entirety of a company) and wants someone using "lines" to prove that they work in explaining a particular company...

• His words...not mine.

I suspect the OP was using "lines" for a different purpose to determine which companies to "invest" and probably made an investment to only see traders and investors dumping a stock that fell below some "line" he believed didn't merit as important instead of evaluating the company through the eyes of fundamentals.

Thus, the TA traders ruined his investment in what he considered to be a strong company or he doesn't like traders speculating in stocks.

• Everybody else then jumps into the conversation talking about something else involving TA that has absolutely nothing to do with what the thread starter was talking about.

With that said, I think this thread will reach +50 pages with very few of the pages associated with "lines" (e.g. VWAP or moving averages) in Technical Analysis being used to explain the health of a company that relates to what the thread starter was talking about.

wrbtrader

Like I tell my wife all the time, 'you can't expect me to listen to EVERYTHING you have to say!'

 

[tomkat22]

If it is that easy, you must be very rich too.
In real life there are people who become billionaires in no time while others need many years or even a full lifetime. Using your logic all these billionaires are losers except the one who did it in no time.

You are posting on ET already 12 years. You past the 100mm mark too? Paper trading does not count.

I was using Kullamagi as an example to give hope to new traders,dont give up,it can be done. Granted he's an extreme example. And I wouldn't call 11 years "no time", he paid his dues.Blew up 3 accounts before he finally got it right. Myself I only been trading 4/5 years cumulatively,only mildly profitable. How long you been trading? Profitable? You talk like you've made the stock market your bitch.

 

[sidbunch]

long here on ES? - 5 min inverted head and shoulders pattern?

update

 

[Illini Trader]

Like I tell my wife all the time, 'you can't expect me to listen to EVERYTHING you have to say!'

Yes you do and you even have to pretend to be interested. Much better that way.

 

[HolyGrailSeeker]

Are you sure nobody ever gotten rich of TA?

 

[sidbunch]

update
View attachment 285807

stopped out here for -6

 

[Illini Trader]

You made good entry and bad exit you made smaller profit.
You make bad entry and good exit you incur smaller loss .
So is smaller profit better than smaller loss ?
If you can calculate you will get the conclusion that entry is more important than exit.

I have been thinking about the posts in this thread and I am starting to agree with you. When I think about one of my most common mistakes and that is chasing a move. This makes for a bad entry and since I know I stepped into no-man's land I am looking for a quick profit. When I don't get it I hang on because I just KNOW the trend will resume. Very bad risk/reward trading based on a bad entry.

They way I would like to trade is to have the discipline to wait for the trending move to revert and bounce off the mean into the direction of the trend. That entry provides me with a lower risk and knowledge of what it takes to prove the trade wrong. Likewise in a sideways market, the beginning of a bounce off the support or resistance also provides a lower risk entry and again I know what it will take to prove the trade wrong.

A wise trader once said that in good trades you are right, right away. A well placed entry increases the probability that you may be right, right away. And if not, your risk is smaller and exit point is known.

Exit is still important of course because the cash register does not ring until the trade is a round trip.

So, I now agree that the most important part of the trade is the selection of the entry point and I would suggest that the 2nd most important part of the trade is to avoid position bias. It is tough not to become a cheerleader for your position.