TA - Objective or Psychological Skill?

[wrbtrader]

Quote from marketsurfer:

Nice to see you, Jem. It's not only harder now, it's become purely a game of chance daytrading via price action alone.

The paper is 14 years old, man, based on data 30 to 50 years old------ it's completely outdated and not relevant to modern markets. Is that all the TA folks have?

Peace,

surf

Very few academic research papers about TA have been written since 2009 that shows stats of TA working or TA not working. Maybe folks getting doctorate find other interesting topics to write about since the financial crisis of 2008.

You can still find new stuff via in-depth Google search via keywords like "technical analysis thesis", "empirical evidence thesis" involving markets I'm sure you don't trade (e.g. cocoa futures, Hang Seng futures, DAX futures. bond yields) and many other markets you don't normally see discussed at forums like Elitetrader.com

I find interesting is the footnotes of these articles that leads to other articles by academia. That raises questions, some articles support the merits of TA but their testing are on markets that most typical retail traders do not trade (e.g. cocoa futures).

1) If someone applies the same statistical studies to another market like Emini ES futures and determines there's no merits to whatever TA was being tested...does that imply some markets can be traded profitably via some types of TA while other types of markets can not be traded profitably via the exact same TA. ?

2) If the goal is to make money and someone wants to use TA as part of their trading plan...shouldn't the trader than trade a market that benefits from the application of TA even though the market isn't popular amongst retail traders (e.g. wheat futures, treasury futures). ?

Retail traders tend to trade whatever they can get cheap commissions, low margins, low cost data feeds and whatever is popular discussion amongst other retail traders (e.g. Emini ES futures).

3) Why is it that most of these articles are written from countries outside of North America ?

Just a few questions I want to throw out there especially since Google.com is not difficult to use to find these academic articles.

By the way, there are websites like those by Thomas Bulkowski that maintain live (current) stats on TA. You have been given direct link to that website in this thread and in past years debates...without any commentary from you unless I missed it.

 

[ammo]

Quote from wrbtrader:

Most retail traders do not use a thoroughly tested trading plan. Thus, most retail traders are doomed to failure not to the fault of HFT. Yet, minority of traders that are profitable, I'm sure HFT has an impact but not in a way it will turn someone into a losing trader.

Anyways, I don't know a lot of HFT such as how it suppose to be hurting retail traders except for a few online news articles. Yet, I will say that when I noticed those words "High Frequency Trading (HFT)" started being used by institutional traders in the late 1990's...

Back in the 90's, HFT was in seconds. Soon around the financial collapse of 2008...it was in milliseconds.

I started seeing more retail traders complaining about how difficult trading has become especially on those days of "technical glitches" in the markets resulting in sudden price spikes or sometimes via what's called flash crashes. Yet, there have been key changes in the markets too that have impacted retail traders and investors greatly that have nothing to do with HFT.

Simply, poor trading and poor investing is primarily caused by other reasons. HFT is just part of the problem for some and the solution (profits) for others.

Regardless, I'm convince HFT is behind strange high volatility/choppy price action I see a few times per month where the spread gets crazy out of whack with consistently large orders.

since lehman and bear were taken out by the larger powers, it makes it easier for those powers to fix pricing and move the market at will ,toss in the buying out of archipelago and the ease of seeing the retail players hand thru the electronic clearing stats and you might be able to make the argument that the hft's are getting the rap for something they may only have a small part in,similar th the subprime loan holders getting blamed for the 2008/9 dump whilst the offshore new products menagerie cleaned up

 

[marketsurfer]

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1181367

From 2010.

 

[wrbtrader]

Quote from ammo:

since lehman and bear were taken out by the larger powers, it makes it easier for those powers to fix pricing and move the market at will ,toss in the buying out of archipelago and the ease of seeing the retail players hand thru the electronic clearing stats and you might be able to make the argument that the hft's are getting the rap for something they may only have a small part in,similar th the subprime loan holders getting blamed for the 2008/9 dump whilst the offshore new products menagerie cleaned up

+1

 

[marketsurfer]

To add some value to the conversation--- Not so long ago I was fortunate to befriend a marketmaker at Knight in Jersey City. I spent several days with him on the massive trading floor photos: http://www.advancedtrading.com/photos/trading-floors/knight

What I learned was mindblowing. They use something called Level 3 which allows them to see multiple things that daytraders can not see. In fact, it turns the table on retail daytraders to such an extent that there is no chance against it.

Realizing that folks have access to dark pool liquidity and that you are only seeing partially what is happening is one of the first steps to understanding how markets really work. The other side is your enemy based on what I have observed. I couldn't believe such advantage could be legal----

surf

 

[NoDoji]

Quote from marketsurfer:

What I learned was mindblowing. They use something called Level 3 which allows them to see multiple things that daytraders can not see. In fact, it turns the table on retail daytraders to such an extent that there is no chance against it.

Realizing that folks have access to dark pool liquidity and that you are only seeing partially what is happening is one of the first steps to understanding how markets really work. The other side is your enemy based on what I have observed. I couldn't believe such advantage could be legal----

surf

Surf, I'll try once more to get you to provide just a little something to back up your claims:

Can you post a few charts of, say, SPY or a stock index futures contract from "back then" and from more recently showing how these multiple things day traders cannot see, and the proliferation of high frequency trading, and dark pool liquidity access have changed price action in such a way that we have no chance against it?

I think it's interesting that a prop trader I met back in 2008/2009 joined a chat room to learn how to trade using technical analysis because the "dark pool liquidity" edge that had produced a substantial annual income for her was disappearing.

 

[marketsurfer]

Quote from NoDoji:

Surf, I'll try once more to get you to provide just a little something to back up your claims:

Can you post a few charts of, say, SPY or a stock index futures contract from "back then" and from more recently showing how these multiple things day traders cannot see, and the proliferation of high frequency trading, and dark pool liquidity access have changed price action in such a way that we have no chance against it?

I think it's interesting that a prop trader I met back in 2008/2009 joined a chat room to learn how to trade using technical analysis because the "dark pool liquidity" edge that had produced a substantial annual income for her was disappearing.

I think I am being misunderstood. I KNOW you can still make money short term trading--- its just like a game of chance in the time frame you trade--- i even think you mentor Big Hog stated this---catch the short term move, you will make money, miss it and you will not--- TA and its repeating pattern ideas does not provide any edge in today's market-- BUT this does not mean that some people will not be succesful.. I hope this clarifies what I mean.....

I will try to post some examples of what you request when things settle down around here-- moving to Pbeach and wife about to have baby---- i really even shouldn't posting now! thanks for your paitence.

bighog qouted <b>What we do in a game of chance is find what works FOR "ISH" and care less how fast a few outfits can front run each other and play a bitch game. </B>

 

[Lucrum]

Quote from marketsurfer:

To add some value to the conversation--- Not so long ago I was fortunate to befriend a marketmaker at Knight in Jersey City. I spent several days with him on the massive trading floor photos: http://www.advancedtrading.com/photos/trading-floors/knight

What I learned was mindblowing. They use something called Level 3 which allows them to see multiple things that daytraders can not see. In fact, it turns the table on retail daytraders to such an extent that there is no chance against it.

Seriously smurf, you only just heard about level III?

Level III
This is a trading service consisting of everything in Level II plus the ability to enter quotes, execute orders and send information. This service is restricted to NASD member firms that function as registered market makers. Level III allows you to enter bid/ask quotes as the trades are being executed right in front of you. It is the fastest way to execute a trade and is typically found only on the trading floors of brokerage firms and market makers.

 

[marketsurfer]

Quote from Lucrum:

Seriously smurf, you only just heard about level III?

Level III
This is a trading service consisting of everything in Level II plus the ability to enter quotes, execute orders and send information. This service is restricted to NASD member firms that function as registered market makers. Level III allows you to enter bid/ask quotes as the trades are being executed right in front of you. It is the fastest way to execute a trade and is typically found only on the trading floors of brokerage firms and market makers.

Sure, I knew all that was published about it-- BUT I never witnessed it in action-- it is an absolutely DEVASTATING advantage over day traders. so much so, I am shocked it was legal-- as it tilts the advantage so far to be extremely unfair.

surf

 

[wrbtrader]

Quote from marketsurfer:

Sure, I knew all that was published about it-- BUT I never witnessed it in action-- it is an absolutely DEVASTATING advantage over day traders. so much so, I am shocked it was legal-- as it tilts the advantage so far to be extremely unfair.

surf

surf, you talking about stocks while debating against most here that are futures traders ???