TA debunked

Quote from deaddog:

TA, like Fundamental analysis and money management, is a tool that traders use.

It’s like saying a hammer or a screwdriver doesn’t work.

It’s how we utilize the tools at our disposal that makes us proficient. Don’t discard a useful tool just because you don’t understand how to use it.
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It's like a hammer or screwdriver in a world where there are no nails or screws.

Sure, it's a tool. But it's not doing anyone any good.

I've never seen someone claim otherwise who will call trades ahead of time rather than posting pretty charts after the fact.

I have seen plenty of people claim TA works for them and post charts, but they are either overly-complicated charts with simple/joking explanations (eg. "if you can't see what's going on here then you shouldn't be trading," which conveys no useful information), or they are posted after the fact and they ignore questions where following their own system rules would've produced losing trades ("gurus" are notorious for this).

If someone claims TA works, the onus of proof is on that person to prove that TA works.
 
For those of us who use TA profitably, we could care less if you believe it works or not. Obviously, the standard TA does not work, but the TA I use has a proven scientific statistical edge. Just like betting when you have 2 aces in poker has a higher probability of winning the hand than any other random hand. Will it win every time. No, of course not, but just because having 2 aces does not mean a 100% victory, I rather wager against you when I have those cards.
 
Quote from oraclewizard77:

For those of us who use TA profitably, we could care less if you believe it works or not.
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Agreed.

If you sit in your office all day and trade based on TA and make money, that's awesome. And you probably don't care if anyone believes you. I have no problem with that.

My point is that anyone who makes a claim, the onus of proof is on them to prove their claim. Especially in an industry like trading.

Obviously, the standard TA does not work,
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Agreed.

but the TA I use has a proven scientific statistical edge. Just like betting when you have 2 aces in poker has a higher probability of winning the hand than any other random hand. Will it win every time. No, of course not, but just because having 2 aces does not mean a 100% victory, I rather wager against you when I have those cards.
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I never said a TA system has to have a 100% win rate.

I expect a "guru" (including TA gurus) to:

1) acknowledge all losing trades from their system (most cannot even get past this first step and will ban you from their chatroom or whatever if you mention this)

2) be overall profitable. Not every trade or every week, but ideally every month, especially if you're a day trader. Special exceptions can be made if trades are held longer than a month since you might be in drawdown in an open trade at the end of a given month.

3) not talk like a fortune cookie. Clear and precise answers should be given to all questions. Not double speak, not vague nonsense, not "do what price tells you to do" or "if you can't tell what is going on on this chart you have no business trading," and certainly not any nonsense like "I don't need a weatherman to tell me if it's going to be raining 5 minutes from now." This is the absolute #1 giveaway of a scam artist yet so many people don't see it because they want to believe.

I believe the public needs "snakeoil salesman awareness" training or something. You even see that nonsense on this forum pretty regularly. Someone posts complex charts with simple joking comments on them, talks about how much money they make, how trading is so easy, either ignores direct questions or replies to direct questions with a misdirection (because answering the direct question would reveal that they have no idea what they are talking about and the gig would be up), replies to questions from noobs with vague ambiguity and a joke, tries to sell them shit via PM, etc.

What's fun is that someone wouldn't even have to give away their system. They could just post calls in real time, without revealing their system (like "buy ES @ price", "sell ES @ price", etc.) and prove that they are profitable. That would provide evidence of being profitable without someone having to a) reveal their system or b) take the time to explain it (assuming the system is complicated).

Most importantly, it would provide hope for all the struggling newbies out there that it is possible to trade successfully.

If you have a profitable TA system that's cool. Your name doesn't seem to be one of the people who are constantly peddling their shit and spamming the forums with garbage designed to get PMs from noobs :D
 
Quote from 1a2b3cppp:

Link to "TA that works"?
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Would you ask Coke for a link to their formula?

Have you ever read academic papers "proving" TA can't work? They test the most naive forms of TA possible, so they can state that they tested dozens of "rules" and none of them worked.

Besides, would you consider an algorithm to be TA? I think on some level, they are equivalent and we see algorithms at work in the markets every day and the developers of those algorithms don't divulge their inner workings any more than anyone who had a working form of other types of technical analysis would. Would you expect Goldman Sachs or RenTech to give you a link to their algorithm code?
 
http://www.marketwatch.com/story/si...ving-average-2012-06-12?link=MW_story_popular

Let's look to a link of simple TA working for hundreds of years until everyone finally realizes it works, and it stops working. A 200 day average is one of the most simple TA strategies in the world for long term swing trades. Over time it has been proven to out perform buy and hold. That was until too many people found out about it, and it stopped working.

So once you find a TA strategy that works for you, it may be fine to teach a few people, but after that you better shut the f up, or all your hard work and time spent looking for it will be be for naught.

By the time the so called academics test anything, I doubt Goldman is still using it to make money for themselves.

When one uses advanced TA, you need to work out what win % based on even risk vs reward a setup will produce. You then can also test out having a low win% but increasing reward, or having a high win% and increasing risk. Also, you may have more than one setup, and/or scale into or out of a trade.
 
Well said. The only thing I would add to this is that trading is more of an art than a science. Put two traders on the same chart and you'll get two different results.

Kudos for using statistical analysis. The market is really nothing more than data (largely random) so what better tool to analyze it than statistical methods. If you can learn how to analyze the market as a non-stationary or trend-stationary time series it will put well ahead of the curve as far as the competition is concerned.

Quote from Laissez Faire:

In my opinion, all analysis that uses price as the sole input is technical analysis.

I use a combination of technical analysis and statistical analysis both on a micro and macro level and it works for me.

I don`t know the academic studies of technical analysis in depth and exactly how they are conducted, but if they simply propose to buy or sell a breakout or a moving average crossover, I can tell them in advance that the result would be that technical analysis does not work. To me, it seems like the academics are the ones that are naive.

It is simply not that simple and more filters and knowledge would be needed in order to profitably trade a breakout strategy. Not all breakouts are equal and different markets behave differently. Some markets are more prone to breakout than others and quite often fading a breakout is the profitable trade. A simple filter that would increase profitability is to enter on the pullback to the area price broke away from provided that it now acts as support or resistance, i.e., let price tell you that the breakout was real.

Money management is obviously also crucial.

I do however agree with the article that it is madness to believe one can make money after a 30-day crash course in technical analysis. It takes a lot more than that. :)
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Quote from 1a2b3cppp:

It's like a hammer or screwdriver in a world where there are no nails or screws.

Sure, it's a tool. But it's not doing anyone any good.

I've never seen someone claim otherwise who will call trades ahead of time rather than posting pretty charts after the fact.

I have seen plenty of people claim TA works for them and post charts, but they are either overly-complicated charts with simple/joking explanations (eg. "if you can't see what's going on here then you shouldn't be trading," which conveys no useful information), or they are posted after the fact and they ignore questions where following their own system rules would've produced losing trades ("gurus" are notorious for this).

If someone claims TA works, the onus of proof is on that person to prove that TA works.
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Folks--for an example of how powerful price action using supply and demand is on a chart as your number one criteria-- look at AAPL today on a 5 minute chart. AAPL established a low of 568.81 today at the open... now go back in time to 6/14-- there you will find a strong level of demand where price reversed for a significant move up from 569.02... price had not revisited that level prior to this morning. So price briefly breaches that low this morning with a capitulation red extended range candle and significant pierce of lower BB and reverses for a $ 5.50+ move. Where does it stop? $ 574.49. Why does it stop there? Nothing to do with indicators. Look to the left from yesterday-- big capitulation move up with a large bb pierce to $ 574.60...then boom, price reverses for over a $ 2.00 move... goes back up but fails to make a higher high..continues to go lower from there. Fast forward to today-- the next candle after the pierce is a huge extended range candle to the downside...the initial move over the next 15 mins is $ 3.50 approx.
Now price eventually revisits the low of the day but stops $ .19 short at $ 569! Despite no bb pierce this time-- a valid long entry exists here. Why? Again because of demand on the chart and how price left that level. A $ 2.46 move back up. Now keep going to the right of the chart-- price revisits again... WITH A PIERCE! Why does price breach the low this time? RELATIVE WEAKNESS.... AAPL started to make lower highs while the market was making higher highs... PRICE DIVERGENCE. Multiple BB pierces occur at this point as it continues to go lower. There was no reason to go long here due to PRICE ACTION AND THE CHART INDICATING WHERE TRUE SUPPLY/DEMAND IS LOCATED. However-- when AAPL finally makes a new low of $ 567.33 it reverses...why? Look back to 6/14... THE LOW OF THE DAY WAS $ 567.26!! From there price reversed with 3 large candles back up to $ 572.25...all the way to the upper band with another bb pierce! Price then reverses again down to the $ 569.02 mentioned earlier.... because SUPPLY EXISTED OVERHEAD from earlier on 6/14.
 
Quote from riffrafffpatrol:

Folks--for an example of how powerful price action using supply and demand is on a chart as your number one criteria-- look at AAPL today on a 5 minute chart. AAPL established a low of 568.81 today at the open... now go back in time to 6/14-- there you will find a strong level of demand where price reversed for a significant move up from 569.02... price had not revisited that level prior to this morning. So price briefly breaches that low this morning with a capitulation red extended range candle and significant pierce of lower BB and reverses for a $ 5.50+ move. Where does it stop? $ 574.49. Why does it stop there? Nothing to do with indicators. Look to the left from yesterday-- big capitulation move up with a large bb pierce to $ 574.60...then boom, price reverses for over a $ 2.00 move... goes back up but fails to make a higher high..continues to go lower from there. Fast forward to today-- the next candle after the pierce is a huge extended range candle to the downside...the initial move over the next 15 mins is $ 3.50 approx.
Now price eventually revisits the low of the day but stops $ .19 short at $ 569! Despite no bb pierce this time-- a valid long entry exists here. Why? Again because of demand on the chart and how price left that level. A $ 2.46 move back up. Now keep going to the right of the chart-- price revisits again... WITH A PIERCE! Why does price breach the low this time? RELATIVE WEAKNESS.... AAPL started to make lower highs while the market was making higher highs... PRICE DIVERGENCE. Multiple BB pierces occur at this point as it continues to go lower. There was no reason to go long here due to PRICE ACTION AND THE CHART INDICATING WHERE TRUE SUPPLY/DEMAND IS LOCATED. However-- when AAPL finally makes a new low of $ 567.33 it reverses...why? Look back to 6/14... THE LOW OF THE DAY WAS $ 567.26!! From there price reversed with 3 large candles back up to $ 572.25...all the way to the upper band with another bb pierce! Price then reverses again down to the $ 569.02 mentioned earlier.... because SUPPLY EXISTED OVERHEAD from earlier on 6/14.
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And here is a link to my real time call on AAPL's break of the then current low:

http://www.elitetrader.com/vb/showthread.php?s=&postid=3559964#post3559964

Trust me.....TA using simple supply and demand rules and price actions works....
 
Quote from intradaybill:

Academics are naive but traders using TA are even worse bacause they get no fixed monthly sallary like them.
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Mafia guys don't have monthly salaries either but they seem to have some money!!
 
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