TA - Self-fulfilling prophesy?

[rodden]

Quote from oddiduro:



All traders need a framework in which to base trading decisions on.

This is what TA is, and it is as mythical as the markets are.

After all, what is a futures contract, really? It is an instrument that is essentially a figment of our imagination, just as money is. It exists only because we think it does.

TA is merely framework for a trader to establish "decision points", places where the trader will buy or sell.

Most traders fail because they keep changing their method of making decisions, so probability never gets a chance to work in their favor.

Of course, all of this is just philosophical rambling about reality

I think that our ponderings might be more applicable than mere philosophical rambling. If you accept the notion that the whole market collective is drifting away from fundamentals (and it appears that you do) you won't be as inclined as those who take the current market rationale seriously to be taken by surprise by seemingly irrational future developments.

Sooner or later fundamentals prevail over theory.

 

[formikatrading]

I think most critics of TA only consider the basics of TA, such as price patterns, trendlines, etc., whereas those who are actually making money at it incorporate a variety of indicators into their analysis -- and each is applying TA differently -- each person applying TA has a different mindset, confidence / fear level, and time frame. So let's assume that TA is an art and not a science.

The market has changed, and maybe that's your point, but still, the masses of people in the market exhibit behaviors similar to those of the masses in the past. That's why TA can still be used to make money in the markets.

 

[rodden]

Quote from Specul8r:

Rodden,

Ever read GEB?

PEACE and good-specul8tion...

No. Due to vision problems I can't read for extended periods. I've been turned off books because it takes me half an eternity to make my way through one of them a paragraph or two at a time.

Is that an Escher? Beautifully apropos. Thanks.

Oops - There it is right in the web address.

 

[Specul8r]

Yes it is an Escher. GEB is Godel, Escher, and Bach; an eternal golden braid -- written by Douglas Hodfstader. It is an absolutely amazing book that focuses heavily on "feedback" loops. Sorry to hear you have vision problems, what a pitty

PEACE and good-specul8tion

 

[Specul8r]

Quote from oddiduro:



After all, what is a futures contract, really? It is an instument that is esentially a figment of our imagination, just as money is. It exists only because we think it does.

I thought all the good mescaline died in the 80's? Where you get that shit man?

 

[rodden]

Quote from formikatrading:

I think most critics of TA only consider the basics of TA, such as price patterns, trendlines, etc., whereas those who are actually making money at it incorporate a variety of indicators into their analysis -- and each is applying TA differently -- each person applying TA has a different mindset, confidence / fear level, and time frame. So let's assume that TA is an art and not a science.

The market has changed, and maybe that's your point, but still, the masses of people in the market exhibit behaviors similar to those of the masses in the past. That's why TA can still be used to make money in the markets.

You're talking about a pretty sophisticated style of trading; the more power to you.

My main concern is the longer-term implications of what I perceive to be a drift away from fundamentals. When systems change they usually don't simply transmogrify - they collapse, then arise from the ashes, unlike the phoenix, in a new form.

We're still in the old system, but it's drifting further and further from its fundamentals. The market has changed, yes, but not as dramatically as it might in the not-too-distant future.

 

[rodden]

Quote from Specul8r:

Yes it is an Escher. GEB is Godel, Escher, and Bach; an eternal golden braid -- written by Douglas Hodfstader. It is an absolutely amazing book that focuses heavily on "feedback" loops. Sorry to hear you have vision problems, what a pitty

PEACE and good-specul8tion

No pity. We all have problems. Some people die of starvation 6 mos. after coming into the world.

I've seen a reference to GEB on this site before - accompanied by a D. Hofstader quote to the effect that 'behind the mask of order is an eerie disorder, and beyond that disorder an even more eerie order'. I hope my paraphrasing isn't mangling the gist of this rather fascinating idea.

It brings to mind another intriguing quote to the effect that 'the Universe is not only stranger than we imagine, it is stranger than we can imagine' . Again, I'm paraphrasing, and I don't know who said it.

Truth to tell, having bad eyes is a beautiful excuse to let others wade through tomes of wisdom and epitomize their findings for me. My eyes compliment my laziness rather neatly.

Good luck. And good reading.

 

[OddTrader]

Quote from rodden:

Once upon a time TA was simple - and it worked.

my 2 cents: TA would work in the past, now and in the future.

One of the main objectives of TA is to catch the trends and their timing of price movement (generally, in order for traders to make profits).

It would be appropriate to define that any analyses or techniques that are used to achieve this objective (or related) can be part, if not all, of TA.

Nobody (except the one who has got unlimited money prepared to lose in the markets) who is aiming to make profits from the markets would be interested (whether yesterday/ today/ tomorrow) to spend time/money/energy to fade the above mentioned TA.

 

[rodden]

Quote from OddTrader:



my 2 cents: TA would work in the past, now and in the future.

One of the main objectives of TA is to catch the trends and their timing of price movement (generally, in order for traders to make profits).

It would be appropriate to define that any analyses or techniques that are used to achieve this objective (or related) can be part, if not all, of TA.

Nobody (except the one who has got unlimited money prepared to lose in the markets) who is aiming to make profits from the markets would be interested (whether yesterday/ today/ tomorrow) to spend time/money/energy to fade the above mentioned TA.

Agreed - TA still works, but because it's largely self-referencing now it's a lot more complicated than it used to be. Simple formations used to be more reliable because there was less feedback in the system. My opening statement for this thread was unfortunate; it does imply that TA doesn't work now. I should have said that the simple TA of yesteryear is no longer dependable - that more sophisticated technique is required today.

My main point is that TA Feedback is stressing the system and may lead to strange market developments.

Lastly, I'm not as confident as you appear to be that TA will always work; TA Feedback may eventually make the system so complicated that it becomes incomprehensible - and ripe for collapse.

Meantime, however, it sounds like you're not having any problems.

 

[formikatrading]

Quote from rodden:



You're talking about a pretty sophisticated style of trading; the more power to you.

My main concern is the longer-term implications of what I perceive to be a drift away from fundamentals. When systems change they usually don't simply transmogrify - they collapse, then arise from the ashes, unlike the phoenix, in a new form.

We're still in the old system, but it's drifting further and further from its fundamentals. The market has changed, yes, but not as dramatically as it might in the not-too-distant future.

Okay, I think I may now understand your point a little bit better. For example, people used to buy stocks with a major focus on dividends. From that standpoint, fundamentals mattered. Now it is just generally accepted that everyone should invest in the stock market because it always goes up in the long-run, and with 401k's, IRA's, etc., a much larger part of the population is "in the market" now in comparision to pre-1980's/1990's bull market. I could go on and on about this, but I just want to see if I'm getting closer to your point.