Technical Analysis Doesn't Work

increasenow · Jul 17, 2007

the real issue is, what works for you!...develop a proprietary system and go for it!...only 1 ES point will bring HUGE gains...do a search for the discussion on "only 1 ES point"

Landis82 · Jul 17, 2007

Quote from optioncoach:

You claim criticisms of TA studies are unfounded but you provide no intelligent discussion of why a logical criticism has no merit.

Bottom line you do not like TA so it is ironic that you refute every argument blindly with no justification and blame everyone else for doing just that. I cannot have a realistic discussion with a hypocrite.

I am not trying to be rude with that last comment, but you use studies to support your position which are funamentally flawed and cut down evidence to support the other position as fundamentally flawed so your bias sets up a discussion where you only see your view anyway.

What is the point of closed-minded discussion? If you believe what you beleive what is the point?

This pretty much sums up the entire discussion for me, especially the point that you make in calling "rcanfield" a hypocrite.

Last week, I started a thread on how Elliott Wave is predicting 1559.09 as the top of this latest rally given the rules of equality in which Wave 5 often equals the length of Wave 1. While most people were piling on the Bear case and looking for a plunge below 1500 and the previous lows near 1484, I was looking for a .618% retracement level to hold at 1503.45 The intra-day low actually wound-up being put in at 1506.10 In any event, I used an Elliott Wave approach to come to the conclusion that the market had not only made yet another short-term low, but I also came up with a Wave 5 target for the SPX of 1559.09

[Should Wave 5 = the 74.91 points that appeared in Wave 1, given the assumption that the low for Wave 4 ended at 1484.18 ( 74.91 + 1484.18 = 1559.09 ), we are able to obtain the latter target for the SPX to end this sequence.]

In any event, Mr. Canfiel appeared on the thread and immediately criticized my claim ( and other traders claims, such as Pabst ) that Paul Tudor Jones used Elliott Wave in a most successful manner. Canfiel cited an interview that he read about PTJ; an interview that made no mention of Elliott Wave Theory, as if this was the ONLY interview ever recorded on PTJ in the history of mankind and therefore was all-encompassing with no margin for any other facts to ever become part of the public record regarding PTJ.

Canfiel was incredibly disruptive to the thread, also stating that I offered no substantiatioin regarding Paul's tremendous track record. I told him that it was his choice not to view the thread and to simply ignore it. Yet, his highly insecure EGO was unable to allow him to do so.

When I stated that I had at one time been Paul's COMEX floor-trader at Tudor Investment Company and was all too aware of his use of analogs, pattern recognition, moving averages, fib ratios, and Elliott Wave, Mr. Canfield simply turned a blind-eye and continued to question the credibility of my claim.

Furthermore, when I offered Page #130 of Jack Schwager's book, "Market Wizards" and his interview of PTJ in which Paul stated that he "attributes a lot of his success to the Elliott Wave approach," Mr. Canfiel was not able to accept it.

IN other words, Canfiel was shown to be DEAD-ASS WRONG.

And instead of accepting that he was wrong and leaving the thread ( like a dog with his tail between his legs ) so that others and I could discuss how the market was unfolding in terms of Elliott Wave, . . . he instead chose to go off on yet another rant, pouting like a 4-year old that just had his candy bar taken away by his Mommy.

This is the kind of guy that you saw back in high school ( and sometimes college ) that would argue just for the sake of arguing, thinking that he was the next Perry Mason or something.

Talk about a huge EGO and being incredibly insecure with typical hypocrisy . . .
This guy takes the cake.
Period.

marketsurfer · Jul 17, 2007

thanks for that post, landis. very cool that you worked with PTJ---however, i'll bet he no longer uses his old methods--- would you happen to have any info in this regard?

it is true that PTJ used elliott and other esoteric methods to forecast the 1987 crash. j. paul getty used an astrologer, also. her name was evangeline adams-----

however, these incidents do nothing to prove the validity of TA or Astro.

regards, surf

arealpissedgoy · Jul 18, 2007

Quote from marketsurfer:

thanks for that post, landis. very cool that you worked with PTJ---however, i'll bet he no longer uses his old methods--- would you happen to have any info in this regard?

it is true that PTJ used elliott and other esoteric methods to forecast the 1987 crash. j. paul getty used an astrologer, also. her name was evangeline adams-----

however, these incidents do nothing to prove the validity of TA or Astro.

regards, surf

You forgot the best one.

Jesse Livermore shot his brains out after the Black Cat he based his trades on died.

http://books.google.com/books?id=zW...ts=bMal5LMtwp&sig=V-1fQO78vA945ICpd5Z4An3YVPQ

Landis82 · Jul 18, 2007

Quote from marketsurfer:

thanks for that post, landis. very cool that you worked with PTJ---however, i'll bet he no longer uses his old methods--- would you happen to have any info in this regard?

it is true that PTJ used elliott and other esoteric methods to forecast the 1987 crash. j. paul getty used an astrologer, also. her name was evangeline adams-----

however, these incidents do nothing to prove the validity of TA or Astro.

regards, surf

Surf, I have not spoken to PTJ in ages.
Thus, I am unable to comment on what he currently uses regarding trading methodology. My guess, is that he is still very much of a technician, employing all sorts of historical data "set-ups" and analogs.
But that is just an educated guess on my part.

Good Luck to All tomorrow.
It should be a most exciting day!

NihabaAshi · Jul 18, 2007

Quote from marketsurfer:

...however, the evidence is greatly weighted toward TA being subjective, non testable, and an art form at best.

when individuals use anecdotal evidence, etc as 'proof' is what needs to be addresed--not someone's success or lack thereof in using any trading method. different topics. hope this makes sense.

regards, surf

Define specifically what you consider to be anecdotal evidence.

For example, if a particular price action ONLY TA pattern appears a few times each year with specific rules for entry to exit that can be tested on the S&P 500 Index, SPY or ES.

Also, regardless if you can computer code the pattern or not while being able to manually test the price action ONLY TA pattern...

Will that do?

If not, define what you consider to be anecdotal evidence.

I just want to get you on record exactly what you mean by anecdotal evidence while you consider someone's success in trading the pattern for many years with verifiable proof not good enough as evidence.

I'm starting to realize now that there are four camps of proof at ET.

A) Give me your method so I can backtest it.

so I can use it and trade it to become a profitable trader without your knowledge nor permission.

Note: I remember two traders at ET started down this path with one giving his word he won't use the method for his own personal use.

B) Show me verifiable profit/loss statements, audit documentation and IRS tax returns.

C) Post your trades in realtime for me to see.

D) All the above must be submitted.

With that said, it sounds or seems like your saying if someone is using a particular TA method profitably for many many years and if you can't backtest it...

It's subjective (art form) regardless if they have specific rules for entry to exit.

Thus, your not interested in the above B) form of proof that TA works even though anybody that's ever traded will tell you that backtest results and real trading are two completely different things.

At least we have gotten away from the typical ET challenge that's usually tossed around here of go to the chat room and post your trades live for all to see crap.

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term

feb2865 · Jul 18, 2007

Quote from rcanfiel:

[ and probably Volume.]

Seems like volume could have some value, please explain

The consideration of Price action, free of all indicators or other philosophies mentioned above, is not included in the definition for purposes of this thread. This seems to be one of the few ways that many successful traders use that actually works.

Will you care to explain why price action works and why you're not including for definition purposes??

Those dissenting will usually try to defend TA via some of the following methods:

1) Stating "of course method a or indicator b has value. You just have to know how to apply it."

2) Anecdotal or testimonial evidence (often unverifiable or presented in an unrealistically positive light), in which a poster says "it works for me" or "I know a successful trader who..." or other variations on this theme. Often the person known may only use a certain technique or a (small) part of his trading method.

3) Throwing mud at a well-designed test by pointing out a perceived flaw or parroting the fine print of such a test. Usually, the poster will ignore other parts of the survey and offer little evidence of their own. This is mostly a distractive technique, not something that would hold up under academic/scientific rigor. To fully discredit something requires equally rigorous evidence, that is accepted by the other knowledgeable individuals in the invest community.

4) Point to some successful guru "who I know used it" However, rigorous independent monitoring is usually absent and longterm tracked performance results will generally be missing, spotty, ancient, or questionable. Or again, the particular method might only be a fraction of the trading methodology, where something else such as money management might explain the outperformance.

5) Use other distracting or verbose arguments that have little value if examined "under the hot lights."

6) Point to a few well-chosen examples of success, when a true test requires a large sample to demonstrate value.

None of these arguments would hold much weight as compared to longterm, rigorous statistical sampling & testing of a mentioned method or indicator, over a diversity of markets and market time periods.

It is further noted that since some 95% of leveraged traders are said to lose their trading capital, and that technical analysis is the preferred method by most traders, that there is a primary link between these two facts.

One definition of Technical Analysis is:

<i>Technical analysts (or technicians) identify non-random price patterns and trends in financial markets and attempt to exploit those patterns. While technicians use various methods and tools, the study of price charts is primary. Technicians especially search for archetypal patterns, such as the well-known head and shoulders reversal pattern, and also study such indicators as price, volume, and moving averages of the price. Many technical analysts also follow indicators of investor psychology (market sentiment).

Technicians seek to forecast price movements such that large gains from successful trades exceed more numerous but smaller losing trades, producing positive returns in the long run through proper risk control and money management.

There are several schools of technical analysis. Adherents of different schools (for example, candlestick charting, Dow Theory, and Elliott wave theory) may ignore the other approaches, yet many traders combine elements from more than one school. Technical analysts use judgment gained from experience to decide which pattern a particular instrument reflects at a given time, and what the interpretation of that pattern should be. Technical analysts may disagree among themselves over the interpretation of a given chart.</i>[/b] [/B]

for now I will give you a complete benefit of the doubt meaning I will assume you're right in your whole statement.

but still if TA doesn't work
what works??

price action (assuming price action is not considered TA)??

fundamental analysis???

all I see here is one side of the coin

You're warning us about a disease but you're not giving us a cure

Its true that some people are making money on the markets consistently......something has to be working for them don't you agree???

astrology perhaps??

show us the other side so we could have a better view

As I mention in a post before no offense intended just looking for an educated conversation

Thanks

NihabaAshi · Jul 18, 2007

Quote from feb2865:

for now I will give you a complete benefit of the doubt meaning I will assume you're right in your whole statement.

but still if TA doesn't work
what works??

price action (assuming price action is not considered TA)??

fundamental analysis???

all I see here is one side of the coin

You're warning us about a disease but you're not giving us a cure

Its true that some people are making money on the markets consistently......something has to be working for them don't you agree???

astrology perhaps??

show us the other side so we could have a better view

As I mention in a post before no offense intended just looking for an educated conversation

Thanks

You might want to read my first two replies in this thread to him.

He has specifically stated that TA methods involving price action ONLY methods are excluded from this discussion.

My assumption is that he can't code these types of methods and is the reason why they are excluded...see below commentary about system designer.

He is a system designer and has found 1% of the stuff (+1,500 methods) he has tested to have value.

Does that mean that 1% of the TA methods he's tested have an edge???

The above should give a big hint of what he really wants...see my prior statement about give me your method.

He states that s/r levels and trendlines are useful (I think he considers this as price action only TA and/or subjective).

Simply, there's a contradiction (hypocrisy) in the above that others in this thread have noticed.

Therefore, via all the links he has posted here at ET as references to his theory...

All have involved traditional indicators ONLY (ex. rsi, macd, cci et cetera).

Mark

bigbadbaz · Jul 18, 2007

Quote from jack hershey:

continuation....

You've never gone on record except to lose 26% in a trading contest you didn't have the courage to finish

If you have not put yourself or your method on the line at this advanced stage of your life then you are never going to

You live in theory.. because you cannot influence in any practical or meaningful way

In short Jack..

discontinued

feb2865 · Jul 18, 2007

Quote from NihabaAshi:

You might want to read my first two replies in this thread to him.

He has specifically stated that TA methods involving price action ONLY methods are excluded from this discussion.

My assumption is that he can't code these types of methods and is the reason why they are excluded...see below commentary about system designer.

He is a system designer and has found 1% of the stuff he has tested (+1,500 methods) to have value.

Does that mean that 1% of the TA methods he's tested have an edge???

The above should give a big hint of what he really wants...see my prior statement about give me your method.

He states that s/r levels and trendlines are useful (I think he considers this as price action only TA and/or subjective).

Simply, there's a contradiction (hypocrisy) in the above that others in this thread have noticed.

Therefore, via all the links he has posted here at ET as references to his theory...

All have involved traditional indicators ONLY (ex. rsi, macd, cci et cetera).

Mark

So he's giving us one side of the story.

Well that explains everything.

Well as far as I know, when you talk TA you have to throw everything on the mix.

You're either a fundamentalist or a technician. There's no limbo side in here.

So he's a system designer/tester using indicators??

so he found and edge of 1% of all the systems he has tested and he said that S/R and trend lines are useful

So Mark, correct me if I'm wrong but in my 27 years of trading, I always though that S/R and therefore price action is probably the foundation of technical analysis. Is there any change???