Technical Analysis = CRAP

[ProfLogic]

Quote from ammo:

Prof, appreciate your and Bones input,my OPINION is that some folks overcomplicate things,end up with information oversaturation,and end up with,can't see the forest thru the trees,with your or bones mind,there's a tendency to stick it out there,or make the research more important than the goal,this isn't personal,just using the last few posts as a spot to observe in realtime,,it's more about each of us trying to counterbalance an over or under I.Q in your case,any ones strongest or weakest asset,ego for others,..an under I Q might be prone to under achievement and try to over compensate with trying for big scores,his life might easily see the forest thru the trees and he complicates it with his self image,some people get easily offended and offensive....we see this in 99% of the threads......that offensive,defensive,offensive personal stuff has so much to do with trading...its the largest common denominator in every thread....the inability to get past it for so many is where the gravy is for the rest ..it's easy to see the market when you get out of your own way,get past yourself

My goal when starting the process of problem solving a market/chart was to try to come to a simple solution to reading a chart. The process forced itself to disassembling a chart to its smallest parts and then putting it back together one piece at a time, eliminating the variable aspects of the chart along the way. What I ended up with was a very simple way to trade that took a complicated path to completion. The research isn't more important than the goal, the research proves the process so it validates the goal. I simply had the luxury of devoting more time and effort to this research than the average person could hope to do.

My whole point of figuring this out was not to get "big scores" but to simply be consistently profitable, limiting risk as much as possible and to allow the process to be self validating at the same time by anyone testing it. I've accomplished this, period.

I'm sorry you find offense with someone defending their many years of hard work against ignorance and stupidity but that is me. I know that if someone was wrongly belittling one of your children in front of a group of people you would probably stand there, point a finger at the children and laugh along with the rest but I would not.

I do not know anything about you other than the content of your posts and your biography. Up to this point I've respected that content. (typing skills ignored) Your comment on my intelligence assumes you know more than you think you know and I will leave it at that.

 

[logic_man]

Quote from ProfLogic:



A fund manager or market maker CAN'T execute an order, of any size, to permanently (only temporarily) throw a chart (not market) out of its present environment. Those individuals place orders based on their own research to make profit. They will never arbitrarily place orders that go 100% against their research simply to throw the market off kelter.

It is kind of odd that the implicit statement in the example about the fund manager placing a large order is that your method won't work because it can lead to losing trades deriving from unforeseen circumstances. In fact, it seems that the person making that argument is using that standard as the one against which to measure all trading approaches. Yet, as any successful trader will tell you, no trading method requires 100% accuracy to be profitable. Some methods will be profitable with as low as a 30% success rate.

Just this Thursday, I had an ES short trade trigger and was about 3 points to the good just before the announcement of the IMF-Greece agreement, which was sort of a "black swan" (or whatever, the tape moves because it moves), hit the tape. During the course of watching that trade play out (I never overreact and just stuck to my original trade plan), I got a long signal. Well, the short trade reached its stop and I got stopped out, while the long signal continued to profit until the European market open in the wee hours of the night here in the US. Loss on the short trade was 13.75 points. Gain on the long trade was 5.5 points. Net gain for the entire week was 23.5 points with one open trade with about 6 points of net exposure unless we gap down more than 6 points Sunday night.

Point being, trading methods shouldn't be judged on how they handle one specific trade, even a "black swan" trade, but how they perform over longer periods of time because unless you're betting everything you've got on every trade, one particular trade doesn't matter. I looked at every variable I track to see if there was some way I could say that short trade wasn't valid according to my methodology, but it was all in line with what needed to be there, so there was no OBJECTIVE way to say it wasn't a valid trade according to my methodology. It was just a losing trade, as will be approximately 150 other trades I place this year. Cost of doing business. If a trading methodology is robust, all you need is for a market to be open somewhere so you can place your trades. I consider a method "robust" if it forces you in to the market against your bias prior to a move which ends up being profitable. Many times I will shake my head in disbelief as a trade setup gets triggered and think to myself "Really? The market is ready to start reversing now?", yet, ~6 times out of 10, like clockwork, the signal is valid.

As I mentioned above, I use price in a way quite similar to how you use volume, so your method isn't mine, but I think some of the criticisms being thrown at it miss the "big picture".

 

[ammo]

Quote from ProfLogic:

My goal when starting the process of problem solving a market/chart was to try to come to a simple solution to reading a chart. The process forced itself to disassembling a chart to its smallest parts and then putting it back together one piece at a time, eliminating the variable aspects of the chart along the way. What I ended up with was a very simple way to trade that took a complicated path to completion. The research isn't more important than the goal, the research proves the process so it validates the goal. I simply had the luxury of devoting more time and effort to this research than the average person could hope to do.

My whole point of figuring this out was not to get "big scores" but to simply be consistently profitable, limiting risk as much as possible and to allow the process to be self validating at the same time by anyone testing it. I've accomplished this, period.

I'm sorry you find offense with someone defending their many years of hard work against ignorance and stupidity but that is me. I know that if someone was wrongly belittling one of your children in front of a group of people you would probably stand there, point a finger at the children and laugh along with the rest but I would not.

I do not know anything about you other than the content of your posts and your biography. Up to this point I've respected that content. (typing skills ignored) Your comment on my intelligence assumes you know more than you think you know and I will leave it at that.

prof,i said it wasn't personal,i know your and bones IQ is high,i used your IQ,not you as an example,had i used your shoe size,something else about you that you can't change,you would not have been offended,the big score comment was directed towards a straw man,one of lower IQ,self esteem or some other seemingly less important quality or fact about oneself that might cause a lifetime of overcompensation,i have a freind who's 4' 6", a hell of an electrician/ carpenter,but because of his height,he always says he did more than he did,always over compensating for his inability to accept himself as he is,not overcompensating for his size.as the habit was at the beginning..i have ADD,it causes a person to run on and over explain ,i accept it,to compensate sometimes i just shut up,not enough ,but sometimes..... ...by the way...i do the same market break down as you except i start with the bigger picture and shrink it down to the minute...sorry if it came across as offensive,that was not the intent

 

[ProfLogic]

Quote from logic_man:

It is kind of odd that the implicit statement in the example about the fund manager placing a large order is that your method won't work because it can lead to losing trades deriving from unforeseen circumstances. In fact, it seems that the person making that argument is using that standard as the one against which to measure all trading approaches. Yet, as any successful trader will tell you, no trading method requires 100% accuracy to be profitable. Some methods will be profitable with as low as a 30% success rate.

Just this Thursday, I had an ES short trade trigger and was about 3 points to the good just before the announcement of the IMF-Greece agreement, which was sort of a "black swan" (or whatever, the tape moves because it moves), hit the tape. During the course of watching that trade play out (I never overreact and just stuck to my original trade plan), I got a long signal. Well, the short trade reached its stop and I got stopped out, while the long signal continued to profit until the European market open in the wee hours of the night here in the US. Loss on the short trade was 13.75 points. Gain on the long trade was 5.5 points. Net gain for the entire week was 23.5 points with one open trade with about 6 points of net exposure unless we gap down more than 6 points Sunday night.

Point being, trading methods shouldn't be judged on how they handle one specific trade, even a "black swan" trade, but how they perform over longer periods of time because unless you're betting everything you've got on every trade, one particular trade doesn't matter. I looked at every variable I track to see if there was some way I could say that short trade wasn't valid according to my methodology, but it was all in line with what needed to be there, so there was no OBJECTIVE way to say it wasn't a valid trade according to my methodology. It was just a losing trade, as will be approximately 150 other trades I place this year. Cost of doing business. If a trading methodology is robust, all you need is for a market to be open somewhere so you can place your trades. I consider a method "robust" if it forces you in to the market against your bias prior to a move which ends up being profitable. Many times I will shake my head in disbelief as a trade setup gets triggered and think to myself "Really? The market is ready to start reversing now?", yet, ~6 times out of 10, like clockwork, the signal is valid.

As I mentioned above, I use price in a way quite similar to how you use volume, so your method isn't mine, but I think some of the criticisms being thrown at it miss the "big picture".

I absolutely agree. Some of the set ups my method creates can produce profitable environments at a 30% or even lower win rate but that win rate can be and usually is psychologically devastating for a day trader. I filter the trades to give me both a reasonable win rate and consistent profitability.

Example: If I test 500 specific trade set up on a specific chart increment and symbol and of those 500, 100 give me consistent profits and between 25% and 50% win rate and a have 100 that produce an above 60% win rate and consistent profits, if I am day trading that particular chart, I will choose the over 60% win rate. I might choose a little lessor percentage if swing trading. The main aspect of this process is that I am in control of my risk and profit potential for every chart.

I've tested my method both backward (to achieve my list of set ups) and forward to test accuracy and profitability, and have done so extensively for years, not days or weeks.

No method is 100% accurate. All one can hope for is a consistently profitable method that greatly limits risk while at the same time allows the profit potential of each move to be capitalized on as much as possible.

 

[ProfLogic]

Quote from ammo:

prof,i said it wasn't personal,i know your and bones IQ is high,i used your IQ,not you as an example,had i used your shoe size,something else about you that you can't change,you would not have been offended,the big score comment was directed towards a straw man,one of lower IQ,self esteem or some other seemingly less important quality or fact about oneself that might cause a lifetime of overcompensation,i have a freind who's 4' 6", a hell of an electrician/ carpenter,but because of his height,he always says he did more than he did,always over compensating for his inability to accept himself as he is,not overcompensating for his size.as the habit was at the beginning..i have ADD,it causes a person to run on and over explain ,i accept it,to compensate sometimes i just shut up,not enough ,but sometimes..... ...by the way...i do the same market break down as you except i start with the bigger picture and shrink it down to the minute...sorry if it came across as offensive,that was not the intent

No worries, thanks for the clarification.

 

[bigarrow]

ProfLogic, I know you've probably told about your method but would you mind briefly saying what it is. It'd help following the conversation here. I'd do a search but that would be a ton of posts to look through. Thanks man.

 

[ProfLogic]

Quote from bigarrow:

ProfLogic, I know you've probably told about your method but would you mind briefly saying what it is. It'd help following the conversation here. I'd do a search but that would be a ton of posts to look through. Thanks man.

I'll start a thread soon to go over the particulars again. There is too much distraction in this thread.

 

[marketsurfer]

Common sense once again----


If your win rate is 30% or less than 50% --- there is no difference between that and random. In fact it's worse than random. Why not simply create a random entry system with solid money management?

Those who sell expensive books and seminars don't want to hear this, but it's the truth.

Surf

Ps. Be careful of stealth vendors selling promises. Watch your PM boxes if you ask questions on thi thread. Just a heads up.

 

[logic_man]

Quote from marketsurfer:

Common sense once again----


If your win rate is 30% or less than 50% --- there is no difference between that and random. In fact it's worse than random. Why not simply create a random entry system with solid money management?

Win rate is only one part of the profit equation for a trading method. The other part is the ratio of the size of winners to the size of losers. With a 4-1 winner to loser size ratio, 30% win rates are completely viable and so the systems with 30% win rates will typically have ratios like that. Otherwise, they would be discarded as non-viable.

This is so basic.

 

[luckybastard]

Just want to add to the thread, that I've never seen somebody make money with TA. I know a guy who was the prof analyst for a firm that writes TA reports for clients of certain banks, he tried to become trader at the firm I worked. He knew pretty much all there is to know about TA, yet, couldn' t make money as a trader....

I figured, if even he can't make money using TA, who can ... Besides him, I watched several people fail miserably, using TA and like said, I've *never* seen somebody succeed, with TA as a basis for his trading ...

To me, somebody using TA is the same guy who you see at the roulette table with a blocnote, writing down the numbers to 'calculate' when he should place a bet.