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Technical Analysis Doesn't Work
- Thread starter rcanfiel
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Quote from marketsurfer:
im not 100% certain, but i believe AG results are self reported, whereas the other info is audited results. correct me if im wrong.
thanks, surf
If they are registered as CTA it doesn't matter, because the figures have to be correct. Otherwise you're in deep trouble.
I supposed they were registered as CTA.
In the right upper corner they talk about CTA's.
Quote from spike500:
Depending on your source you can prove anything.
http://www.autumngold.com/Statistics/RankingReport.php?sort_by=2&desc=1&for=1&type=
On this site the 40 best performing CTA's do on average 18.16% YTD. So not 0.71%.
Except, I listed since 1990. A one year average does not really make a comparison. In 1990, THIS site had over 35%. But they also had a negative year.
Quote from rcanfiel:
Except, I listed since 1990. A one year average does not really make a comparison. In 1990, THIS site had over 35%. But they also had a negative year.
Indeed, a one year average says nothing.
What i wanted to show is the huge difference even on 1 year between the two lists. I would never rely on any of these two figures.
<b>An interesting blog entry:</b>
July 31, 2007 - Does Technical Trading Work with Commodity Futures?
Do relatively low transaction costs and ease of short selling enable profitable technical trading in commodity futures markets? In their recent paper entitled "Can Commodity Futures be Profitably Traded with Quantitative Market Timing Strategies?", Ben Marshall, Rochester Cahan and Jared Cahan investigate the effectiveness of 7,846 quantitative trading rules from five rule families (Filter, Moving Average, Support and Resistance, Channel Breakouts, and On-Balance Volume) for 15 kinds of commodity futures contracts.
They test these rules for cocoa, coffee, cotton, crude oil, feeder cattle, gold, heating oil, live cattle, oats, platinum, silver, soy beans, soy oil, sugar and wheat futures. Their testing includes two bootstrapping methodologies, adjustment for data snooping bias and evaluations over different time periods. Using daily price and volume data for 1984-2005, they conclude that:
Across the entire sample, nine of 15 commodities have positive mean daily returns, and all exhibit positive kurtosis (fat tails). The best trading rule for each commodity yields statistically significant profits. However, adjustment for data snooping bias eliminates reliable profits for 14 of 15 commodities.
The best moving average rule generates profits in excess of reasonable transactions costs for oats even after adjusting for data snooping bias. However, this profitability disappears in the 1995â2005 subperiod.
Overall, results indicate that technical rules are not profitable as standalone commodity futures trading methods, but they do not rule out the possibility that such rules might compliment some other trading strategy.
In summary, market timing based on technical analysis is not reliably profitable for commodity futures.
July 31, 2007 - Does Technical Trading Work with Commodity Futures?
Do relatively low transaction costs and ease of short selling enable profitable technical trading in commodity futures markets? In their recent paper entitled "Can Commodity Futures be Profitably Traded with Quantitative Market Timing Strategies?", Ben Marshall, Rochester Cahan and Jared Cahan investigate the effectiveness of 7,846 quantitative trading rules from five rule families (Filter, Moving Average, Support and Resistance, Channel Breakouts, and On-Balance Volume) for 15 kinds of commodity futures contracts.
They test these rules for cocoa, coffee, cotton, crude oil, feeder cattle, gold, heating oil, live cattle, oats, platinum, silver, soy beans, soy oil, sugar and wheat futures. Their testing includes two bootstrapping methodologies, adjustment for data snooping bias and evaluations over different time periods. Using daily price and volume data for 1984-2005, they conclude that:
Across the entire sample, nine of 15 commodities have positive mean daily returns, and all exhibit positive kurtosis (fat tails). The best trading rule for each commodity yields statistically significant profits. However, adjustment for data snooping bias eliminates reliable profits for 14 of 15 commodities.
The best moving average rule generates profits in excess of reasonable transactions costs for oats even after adjusting for data snooping bias. However, this profitability disappears in the 1995â2005 subperiod.
Overall, results indicate that technical rules are not profitable as standalone commodity futures trading methods, but they do not rule out the possibility that such rules might compliment some other trading strategy.
In summary, market timing based on technical analysis is not reliably profitable for commodity futures.
whatever everyone believes works! Follow the paper!
and the paper is short at 1482-1495
Quote from rcanfiel:
<b>An interesting blog entry:</b>
July 31, 2007 - Does Technical Trading Work with Commodity Futures?
Do relatively low transaction costs and ease of short selling enable profitable technical trading in commodity futures markets? In their recent paper entitled "Can Commodity Futures be Profitably Traded with Quantitative Market Timing Strategies?", Ben Marshall, Rochester Cahan and Jared Cahan investigate the effectiveness of 7,846 quantitative trading rules from five rule families (Filter, Moving Average, Support and Resistance, Channel Breakouts, and On-Balance Volume) for 15 kinds of commodity futures contracts.
They test these rules for cocoa, coffee, cotton, crude oil, feeder cattle, gold, heating oil, live cattle, oats, platinum, silver, soy beans, soy oil, sugar and wheat futures. Their testing includes two bootstrapping methodologies, adjustment for data snooping bias and evaluations over different time periods. Using daily price and volume data for 1984-2005, they conclude that:
Across the entire sample, nine of 15 commodities have positive mean daily returns, and all exhibit positive kurtosis (fat tails). The best trading rule for each commodity yields statistically significant profits. However, adjustment for data snooping bias eliminates reliable profits for 14 of 15 commodities.
The best moving average rule generates profits in excess of reasonable transactions costs for oats even after adjusting for data snooping bias. However, this profitability disappears in the 1995â2005 subperiod.
Overall, results indicate that technical rules are not profitable as standalone commodity futures trading methods, but they do not rule out the possibility that such rules might compliment some other trading strategy.
In summary, market timing based on technical analysis is not reliably profitable for commodity futures.
Doing research doesn't prove that your results are the holy truth.
If you have no knowledge you can research as much as you want, you will never be able to find anything. That's probably why those who did the investigation are no traders, but writers.
I did the following test:
i used 25 different hammers, 127 different nails and 276 different sorts of wood. The purpose was to get the nail in the wood. Well i didn't succeed in any of the possible combinations. So it is clear that it cannot be done.
After discussing with my neighbourhood things changed dramatically. He told me to try it his way: put the point on the wood and knock on the head of the nail. I must admit that that was far better than knocking on the point of the nail with the head of the nail on the wood. My limited knowledge caused my conclusion that was completely wrong.
I can prove statistically that they are wrong, but due to experiences in the past i'm not interested in proving that i'm right.
First i will have to show my personal results, what i will never do.
Second the results will be disputed.
Third the period will be considered to short.
Fourth the market will probably have been favorite for what i did and it will not work in the long run.
Fifth i should probably be the richest man in the world.
Sixth, what works now will stop working soon, because no system ever kept on performing.
Seventh..............
Eight..................
Nineth................
In short, believe what you want. Those who know have no interest in showing anything. It will bring them no financial advantage. The only thing that will happen is that they will be bashed. And as they need counterparties for their trades it is better to leave the others in their "wisdom". Why create competition for yourself?
i'm not igor at gelber three years ago putting 8000 on it is not that hard anymore!
Quote from rcanfiel:
This is a thread dedicated to the principle that Technical Analysis (by and large) has little to no value. It is contended that people continue to learn, sell, promote or believe in technical analysis, contrary to the many studies that continually demonstrate little to no <i>special</i> predictive value from TA indicators or chart patterns [also including Fibonacci levels, Elliott Wave, Gann, and probably Volume.]
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.
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>
Q: If you take a person that can successfully make trading decisions based on technical analyses and another that states that technical analyses doesn't work, then in that case what opinion can we be of a person that arrogantly disputes a fact by proving his personal inability?
A: An idiot.
Technical analyses is not exact science, but a probability study based on personal research and in most cases theoretical, practical and financial hardships.
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