TA - Objective or Psychological Skill?

[NoDoji]

Quote from Mr Super Trader:

When we talk about double tops, triple tops , wedges , flags all these types of CLASSIC T/A that people charge money to teach and write books about.

The last thing I am going to do is post real time as my strategy is my work not free to the public.

And your disproving of T/A is only based on classic chart patterns that guru's rip new investors off on a daily basis.

So yes a lot of these patterns are ambush's.

My mentor taught me classic TA patterns for free. These patterns are available for free (http://www.daytradingcoach.com/daytrading-technicalanalysis-course.htm), and in inexpensive books.

I have an individual method of trading off these classic TA patterns. I've posted my strategies via annotated charts here on ET. I've taught my strategies to several others. None of the people I've taught them to have been able to make a living off them. It has nothing to do with their trading plans (all good plans); it has to do with their inability to trade their plans because of a desire for more certainty.

These strategies have been working for the 3 years I've been trading them and they appear to have worked for my mentor for many more years than that. Since they've been around for at least a few decades, I can see they've been working at least that long.

The only adaptation I've had to make to my core TA-based trading plan is when the volatility died down last year in the instrument I trade, I reduced my stops and targets accordingly.

Every one of these patterns are ambushes at times and always have been.

That's what risk management rules are for.

 

[marketsurfer]

Quote from NoDoji:

TA is predictive. It allows one to predict the odds of price movement A occurring before price movement B.

By combining these odds (win rate) with the ratio between the price movement A and price movement B, one can find technical price action patterns that offer positive expectancy sufficient overcome trading expenses and result in a net profit over each series of N trades.

I addressed this in another thread yesterday:

http://www.elitetrader.com/vb/showthread.php?s=&postid=3829797#post3829797

FWIW, I think I saw a unicorn on ET recently:

http://www.elitetrader.com/vb/showthread.php?s=&postid=3829840#post3829840

His reply --- hourly candlestick price action --- makes it sound suspiciously like he's using charts and candlesticks and the action of price (all of which is illustrative hindsight stuff) to generate a profit that ET's resident Dad, EMG, has deemed impossible with just 2 contracts of ES and no adding to losers.

No, it's not and can not be predictive. Even the MTA disagrees with you ( to the best of my knowledge). If it was predictive, why wouldn't the super computers that search non stop for such patterns, find them, exploit them and cause them to cease being predictive?

 

[Lucrum]

Quote from marketsurfer:

I love TA but only for what's its for. It's not for what you use it for, making trading decisions in real time. Rather, it provides a context from which to make a decision instead of a buy/sell. Yes/no decision. Does wise trade work? That's based on TA---- Red light sell, green light buy all from objective TA. You know it doesn't work. So why would any other objective TA work? You want me to think you are special, have secret powers?

Sounds like a matter of opinion to me. Who made you and your long history of blow ups the arbiter of what TA can/cannot be used for?

 

[NoDoji]

Quote from marketsurfer:

No, it's not and can not be predictive. Even the MTA disagrees with you ( to the best of my knowledge). If it was predictive, why wouldn't the super computers that search non stop for such patterns, find them, exploit them and cause them to cease being predictive?

My personal hypothesis is that all the programmed trading has made them more predictive than ever. I'm often astounded at how many times in a row a particular setup will hit my profit target before hitting my stop.

Keep in mind that the big money that moves price can't just jump in and out all at once; they have strategies for building positions and exiting positions. These strategies become apparent when you study price action and develop your own plan around it.

I don't need to trade 50, 100, 500, or 1000 oil contracts at a time, so I don't have to worry about becoming the "mark" for market makers or about outsmarting another large entity that has to trade that kind of size to scale in and out of longer term positions/hedges.

I can trade my piker size, latching onto the big bad sharks like a little remora:

"The remora benefits by using the host as transport and protection, and also feeds on materials dropped by the host."

 

[marketsurfer]

Quote from Lucrum:

Sounds like a matter of opinion to me. Who made you and your long history of blow ups the arbiter of what TA can/cannot be used for?

Extensive research and close business relationships with real traders who make real money over the last 20 years. Just look at dealer based FX shops who profit when you lose--- they all push TA and offer free charts etc. remember, these firms profit from your losses so by teaching TA, they know there is no edge provided. Can it get any simpler? Rather than running in circles with hindsight charts nd stupid claims why not really study honh market really works --- if you don't, you will keep losing.

 

[Lucrum]

Quote from marketsurfer:

...hence my issues with TA...

Lets be honest smurf, you have two basic "issues" with TA.

1) You've been unable to successfully use it yourself. Hence you arrogantly and ignorantly presume no one else could possibly be able to use it.

2)You're something of an attention whore, for lack of a better description.
You assume that if you can convince the unwashed masses at ET to ignore TA. They will subsequently flock to your journal in droves and hang on your every word. An attention whores wet dream.

 

[Mr Super Trader]

Quote from NoDoji:

My mentor taught me classic TA patterns for free. These patterns are available for free (http://www.daytradingcoach.com/daytrading-technicalanalysis-course.htm), and in inexpensive books.

I have an individual method of trading off these classic TA patterns. I've posted my strategies via annotated charts here on ET. I've taught my strategies to several others. None of the people I've taught them to have been able to make a living off them. It has nothing to do with their trading plans (all good plans); it has to do with their inability to trade their plans because of a desire for more certainty.

These strategies have been working for the 3 years I've been trading them and they appear to have worked for my mentor for many more years than that. Since they've been around for at least a few decades, I can see they've been working at least that long.

The only adaptation I've had to make to my core TA-based trading plan is when the volatility died down last year in the instrument I trade, I reduced my stops and targets accordingly.

Every one of these patterns are ambushes at times and always have been.

That's what risk management rules are for.

Good for you! I never said they don't work. You also mentioned that you have an individual method which implies some sort of originality with your trade management. My argument exactly. You only need the slightest edge to make money trading. If you read my previous posts you would see that I totally agree with you. I believe that classic T/A does have an edge over random entries. I will say though I can guarantee that this website does not teach you how to manage the trade. That's where your intuition came on how to manage a trade. Even trading something as simple as pivots with correct trade management can reap substantial gains.

I personally don't trade double tops and so on. I feel I have a greater edge trading a completely original strategy based on naked charts combined with a few other variables.

 

[NoDoji]

Surf, I'm curious about something. If you believe there's no way to predict the odds of a directional price move based on the technical analysis of what price has been doing, then why do you think certain patterns repeat so much more often than they fail?

I'm looking at a daily chart of the ES going back to June 2012 and I see price pull back down to the rising 50-day moving average on 6 consecutive occasions and result in a directional move of 50 handles or more without closing below that 50EMA, meaning very low risk for significant reward.

How is it a pattern can repeat that often without a fake-out or "ambush" or outright failure?

 

[NoDoji]

Quote from marketsurfer:

...remember, these firms profit from your losses so by teaching TA, they know there is no edge provided.

They profit from your gains just as much as your losses.

 

[Mr Super Trader]

Quote from marketsurfer:

As you can see from Ms. Doji--- she claims classical, basic TA is predictive--- hence my issues with TA --- it is fact that there is no edge in classic objective TA yet folks claim to earn a solid living using it??? This is why, I believe they win despite TA not because of it and the edge is in money management only. Obviously, that's assuming they are telling the truth. surf

I think there is a slight edge and that is where we agree to disagree. The thing is surf a lot of profitable traders only have a slight edge. To keep things simple with an even risk reward you just need to have slightly over a 50% win ratio to cover commissions. This with high frequency trading and the combination of compounding can be highly successful.

Also Surf people can pick and choose their entries. If you look at a chart and back test every double top set up you may be right that they are very difficult to profit from. A trader with good set of rules can pass on a trade setup that they may not see fit due to other variables being used. So in reality algorythm's that trade these setups may not prevail. But traders like Doji can.