TA becomes self defeating??

marketsurfer · Jan 26, 2003

Quote from Tycoon:

To verify my claim, we can use a thought experiment in which everyone is using TA. In that case, surfer's example would not work at all.

According to surfer: "a large trend following hedge fund is watching the resistance line at 8777 on the djia. price breaks the line by the funds parameters..." But how does price break through resistance if everyone is waiting for the breakout? Surely, there must be some non-TA traders to push it through that level. And that flies in the face of the assertion that as more people use TA, it works better.

Also, if surfer really holds the view that "there are no false breakouts", why must he qualify his statement with "it depends on your time frame"?. You can't say, dogmatically, that there are no false breakouts, and then say it "depends" on something, because the latter statement suggests that false breakouts sometimes exist. And they do. A breakout may appear valid to a tape reader, but it can simultaneously be false to a swing trader using the daily chart.

To wit, if a double bottom has an implied technical target 10 points above the pivot, but price only goes up 50 cents before collapsing, that qualifies as a false breakout in my book. It's always possible to argue otherwise depending on one's definition of a "false breakout", but that misses the key point of this discussion: sometimes TA doesn't work as intended, and we're trying to determine why that's the case.

what you are missing, tycoon, is that everyone is not interpreting TA the same way. hence, TA traders could have pushed the market above the hedge fund's buy line.

best,

surfer

wally_ · Jan 26, 2003

and so it's good to diversify among systems or setups.

Is it yet another thread to prove that there is something wrong with a purely probablistic game without saying the dirty word 'probability'? Once you realize that the game is probabilistic in nature, you should not expect to win it all the time. So what's the point, where is any statistics to show that TA works now worse than in the past?

Stop-losses are still as valid as ever, at least to me.

MondoTrader · Jan 27, 2003

If you focus all your attention on TA or fundamental analysis, or any trade entry system, in the long run you will be dissapointed. Trade selection is only 1/3rd of the picture, the other parts are position sizing and trade exit, which are both just as important as trade entry.

Fluidity · Jan 27, 2003

Quote from dbphoenix:

More than that, if they don't coincide with price S/R, they likely won't hold. i.e., they'll be irrelevant.

--Db

So, essentialy you are saying that fib retracement/extension levels in and of themselves are irrelevant???

dbphoenix · Jan 27, 2003

Quote from Fluidity:

So, essentialy you are saying that fib retracement/extension levels in and of themselves are irrelevant???

Pretty much.

Let the flamefest begin . . .

--Db

GreenDog · Jan 27, 2003

"purely probablistic game"

The "make up your own words" thread is on another forum I think.

This discussion is on technicalistic analysistation.
Take a hike, Wally.

Let the flaming continue

Fluidity · Jan 27, 2003

Quote from dbphoenix:

Pretty much.

Let the flamefest begin . . .

--Db

Perhaps they are only irrelevant/meaningless to you because of the angle in which you view them?

Perhaps if you were to see them as more of a 'map' vs. a predictive tool -- then you may find more use in them?

Perhaps not, just some food for thought...

BTW; Wasn't trying to suck you into a 'flamefest' -- was just curious to see where your 'at'...

dbphoenix · Jan 27, 2003

Quote from Fluidity:

perhaps they are only irrelevant/meaningless to you because of the angle in which you view them?

Perhaps if you were to see them as more of a 'map' vs. a predictive tool -- then you may find more use in them?

Perhaps not, just some food for thought...

BTW; Wasn't trying to suck you into a 'flamefest' -- was just curious to see where your 'at'...

If by "map" you're referring to Magee's map, I'd rather focus on the territory - price and volume - than rely on the sort of maps drawn by indicators, at least until somebody can show statistical significance to Fibonacci levels that are independent of previous price support and resistance.

And I know you weren't trying to draw me into a flamefest. Your posts so far have been pretty adult

. But Fib is a hot issue amongst indicator people. Saying they (Fib levels) are irrelevant is like telling somebody his children are ugly.

--Db

Fluidity · Jan 27, 2003

Quote from dbphoenix:

If by "map" you're referring to Magee's map, I'd rather focus on the territory - price and volume - than rely on the sort of maps drawn by indicators, at least until somebody can show statistical significance to Fibonacci levels that are independent of previous price support and resistance.

And I know you weren't trying to draw me into a flamefest. Your posts so far have been pretty adult . But Fib is a hot issue amongst indicator people. Saying they (Fib levels) are irrelevant is like telling somebody his children are ugly.

--Db

Actually by 'map' I wasn't referring to Magee -- been years since I have read that book...

I like the way you use the term 'territory'

I too focus on price and volume as my only 'indictor', but draw 'maps' using S/R, Fib Levels, MA's, Balance Points, etc to get a feel for the 'terrain' I am working with...

"Can TA become self defeating??" -----> Most definitely if one forgets that the 'map is NOT the territory'!

murray t turtle · Jan 27, 2003

Quote from jlcarey1:

My trading experience, albeit limited, clearly indicates that the use of TA becomes self defeating. I have read the forums for a while now and it has come to my attention that TA, although useful, becomes self defeating because many traders misuse them. For example, some traders use several TA's on top of each other and it backfires on them because they sort of cancel each other out. In addition, a trader will tend to focus on the TA too much and therefore lose sight of the larger picture for the day.

What are your thoughts?

IMHO, the rule is: Keep It Simple Stupid

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No, but you might be on the alert for some needed adjustments; like substituting a 21 for a 20 period Moving average [& discretion.]

Noticed Price Headly requires a two day close above 20 day MA. Fortunately many institutions dont even look at the above info ..