Technical Analysis Doesn't Work

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1)I think you are just some guy that lost your back trying to use TA but couldn't find the right aspect to apply to the right market.

2) I myself have been using it for ages and I do pretty well with it and know of loads of guys around me that use it day in day out to pay for their sports cars...

3) The only TA studies you read are the failures, the studies that find a method and make a million aren't going to be published for that little bit of honour and the $2000 publication fees... they go straight to the bank's algo desk for a far larger amount.

4) Linda Raschke uses it and she rocks!

5) If trading were pure random then how do you explain guys looking at charts making money month in month out.

6) There are loads of succesful Tech traders, check cta for their members and where they work...

"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."

--> This is where you prove that you completely msised the point. Patterns happen for a while, they might even last for a couple of months but they don't last forever and they definitely dont work for every product...

"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."

1) You have to be kidding... this is you being worse than your own argument 1... you do realise you are refering to a group of people that leverages at 20:1 and find it surprising they can't beat the experience of banks/hedgies/experience? And how do you explain the 5%? seems about right for guys leveraged at 20:1

2) In everything as highly compettive as trading 95% will fail, you are up against the best and if you think that reading a book and applying it to any market will make you money then yeah I understand why you started this post.

- Do I believe TA works? yeah... and why? Just like someone else has already mentioned it increases your probabiity... If you are a believer that trading is 50/50 then I am sure I can find an indicator or trendline, or candlestick, or bollinger band, that will make it 51/49... enough to justify the analysis and it seems there are a couple of places in vegas that seem to do pretty well taking the right side of 51% bets day in day out as many times as they can...

Good luck (as I also believe luck plays a prt) and I can't wait for your review of, fundamental analysis adds no value 90% of investment recoomendations from sell side analysts provide no extra predictional power over the direction of equity trading!
 
Hi Guys,
I'm new to this forum and this just so happens to be the first thread that caught my attention on the home page, and so this is my first post.

Of all the books I have read of successful traders (and there is probably a good reason why this ratio is the way it is), the majority have been written by traders who used both types of analysis (fundamental and technical).

Now when I say there's a good reason why most of the books I have read are based on both sorts is because this has always been my interest (i.e. I'm reading on topics I love).

So I guess in my view, if you have a love for technical analysis, you'll make it work and if you have a love for fundamental analysis, you'll make that work, either way you'll read what you need or want to read to fulfill that desire. If you're looking for a magic bullet, nothing will work and you'll read anything.

My first was a book by a forex trader from South Africa, who learnt his fundamentals from his previous careers in the financial industry and bond markets. He then devised his own technical analysis - that is, no one else uses the same tool as him. This tool tells him how to trade his view.

My second book was by a forex broker from Australia (you may have guessed now my favourite market is forex - I guess that's why I read books by forex traders), who learnt his fundamentals from working for several of the large investment houses over the last two decades. He created his own technical tool based on his own resources (i.e. time available), and that of energy theory and buyer/seller exhaustion. His technicals are based on prices behaviour after news etc, as he feels this is the best way to tell the markets overall position, and as such it's potential (he calls this technical analysis).

My own trading style is also based on both styles, but here's the real eye opener for me. I HATE TRADING! And when I say trading, I mean the application of my technical analysis. Although for me and my set of circumstances, I find it's the best tool I have to trade actual set-ups (that are in line with my fundamental analysis), I find the process and absolute bore. My real love comes from the process of creating my longer term view in which I them apply my technical tool in order to trade.

It's like my friend who always seemed to have a new girlfriend every time I saw him. I asked him, 'why have you always got a new girl?', he replied, "I only enjoy the chase. Once I catch her, the excitement is gone!"

The biggest problems for me, that effect my bottom line the most actually come from mistakes (i.e. placing stops in the wrong spot, not double checking an order entry, using the wrong leverage etc) and all of this in my view is part of the technical process. That is, in order for me to trade my view (my fundamental analysis), I will wait for price to exhibit a particular behaviour on the chart (technical analysis - boring!!!!), and then determine how much, when to enter, stops (once again, technical analysis because my entries/stops are in effect a function of me playing my fundamentals based on price itself, which on a chart is a technical indicator, and if I am wrong they are designed to get me out)

So if you don't like technical analysis, or it doesn't work for you, don't use it, however, how else are you going to get in the market unless you're an investor. Technical analysis for me is like having an employee who works hard but never smiles!

Dean
 
i wasn't going to post a reply. i usually am just a reader because i need the humor. but i just couldn't help myself. maybe i drank to much this afternoon.

so TA doesn't work? but you don't include Price Action in TA?
are you for real?

so please, please give me an idea of how to use price action oh great guru. wait a minute, i think i have it.

lets see price action is nothing more than numerical data that represents the consensus of the market at any given moment in time. we can debate this one if you want to.

we have a movement component, even if none at all. there is volume for the most part and a trading range. lets see there's a a vector. i see acceleration and deceleration. add in volume as a mass component. no volume, then there is at least a range. we can use range as mass.

my, my....this looks a little like physics...which is, oh wait..could it possibly be technical? let me check webster's. by george i think it is.

95% of traders lose money, because they have been duped by system sellers and promoters. come into this game under funded, over leverage, and dream of retirement in a few months. they don't understand that entry and exit is not the secret, and boom the account is gone.

their failure is due to greed without due diligence, and has nothing to do with the validity of TA.

it is not the indicator or TA that does not perform across all markets and/or time frames. it is the complete strategy. a strategy developed for EOD trading of equities, doesn't work swing trading futures. what works swing trading futures, may or may not work day trading FX. at least i never got them to work.

i do successfully trade equities, futures, and FX. i use TA across the board. while the trading plan is different for each, the underlying principle is the same.

so if you were hoping i would tell you exactly what i do to prove it works, i have to disappoint you. i am not going to. but i will make you a promise. stay in touch, and in 11 years i will.

where's my beer.
 
>rcanfiel

If you truly believe it when others say that TA does not
work, you should obviously make every effort to master
TA and then do just the opposite of what it indicates!
 
Quote from learner2007:

>rcanfiel

If you truly believe it when others say that TA does not
work, you should obviously make every effort to master
TA and then do just the opposite of what it indicates!
More...
What does TA indicate?
 
Quote from atozcom:



If TA can be proven to work on its own better than 50% of the time, lets say, 51% of the time, there would have been teams of programmers producing TA program for trading, which would be like a money machine.

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Thats naive.. with slippage and commissions it's more like a minimum of 60%
 
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>
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Don't use technical analisys, watch the news, they will help direct your investing ideas.
 
Quote from trader225:

But you don't need TA to know the trend.
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If you see a "trend" then you used TA in your brain to come to that conclusion. The only way NOT to use TA is to never look at a chart either physically or mentally and trade purely on fundamental information or rotate in and out of trading instruments at pre determined times with no regard for price. Those who do this are usually long stock all the time with short hedges.
 
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