Quote from rcanfiel:
Couldn't have said it better myself:
"The only thing we know for certain about technical analysis is that it's possible to make a living publishing a newsletter on the subject."
Martin S. Fridson, Investment Illusions
"Technical analysts are the witch doctors of our business. By deciphering stock price movement patterns and volume changes, these Merlins believe they can forecast the future."
William Gross, Everything You've Heard About Investing is Wrong!
The one principal that applies to nearly all these so-called "technical approaches" is that one should buy because a stock or the market has gone up and one should sell because it has declined. This is the exact opposite of sound business sense everywhere else, and it is most unlikely that it can lead to lasting success in Wall Street. In our own stock-market experience and observation, extending over 50 years, we have not known a single person who has consistently or lastingly made money by thus "following the market." We do not hesitate to declare that this approach is as fallacious as it is popular.
Benjamin Graham, The Intelligent Investor
"Technical analysis is doomed to fail by the statistical fact that stock prices are nearly random; the market's patterns from the past provide no clue about its future. Not surprisingly, studies conducted by academicians at universities like MIT, Chicago, and Stanford dating as far back as the 1960s have found that the technical theories do not beat the market, especially after deducting transaction fees. It is amazing that technical analysis still exists on Wall Street. One cynical view is that technicians generate higher commissions for brokers because they recommend frequent movement in and out of the market."
William A. Sherden, The Fortune Sellers: The Big Business of Selling and Buying Predictions
Give Park and Irwin (2004) a read. They reviewed 92 studies.
Among the 58 successful ways to use TA to make money that they reviewed, it turns out that prediction can be crossed off the list as a requirement to trade successfully.
Also cross off using statisitics as a necessary tool for doing TA.
It is very common for people to think as you do. The reason most often is repeated failure using TA improperly. As we review your trading record and posts, we see why you screwed up with TA.
It is not necessary to use an entry/exit strategy while incorporating TA into a trading strategy. You will notice that it is a habitual preactice of those who screw up analyzing TA's applications to do the following:
1. leave one of the market variables out of the analysis. Usually volume.
2. To feel it is necessary to predict. It is NEVER necessary to predict. What purpose does prediction serve. besides it not working what purpose could it serve?
3. To focus on entires and skip considerations of exits. Using entries and exits is unnecessary in the applications of TA to trading.
A few of the deeply proven aspects of TA include:
1. Support and Resistance.
2. Price movement from S to R and R to S in trends.
3. Gap retracements.
4. Computerized trading.
The foundation of market operation is a two part statement. The statement is in a particular mathematical form that also happens to dictate a very good mathematical means for designing and implementing trading strategies.
Let's say you think.
You read an hypothesis. You think through and formulate a proof for the hypothesis.
For any person who thinks and can solve rational opportunities, there are consequences. A common one is wealth and riches.
Hypothesis: trends are contained within one another. The slopes of the trends go from steepest to least steep according to the realm of the containment.
If you can think, you get to find out something. Be pragmatic and look at three concurrent trends in a moment of time. In market terms, using the mathematics of the fundamental market operating statement, there are 8 combinations of the three trend shells.
How hard is it to think about this? When do you (or a thinking person) get to the point where you understand the consequences of proving the hypothesis?
What would it be like if anyone in ET could do it?
Or if anyone at Goldman Saks could do it?
Or if any quant could do it?
Because the slopes of the shells have only one possible relationship, it is simply like having the Law of gravity for the solar system. It is simply like having the Maxwell equations for electro mag theory. It is like having the stong and weak force and all of the above to know that symmetry is not part of quantitative physics.
If you could think, what would it be like to come to understand what controls price movement? How long does a person who thinks go before he determines where market control lies? TA is what allows people to come to understand how markets work.
There are 32 types of traders listed in a commonly used heirarchy of traders. Guess what? It is clear for each type of trader how TA is used to do the trading.
It is almost possible to imagine that you still do not even know what kind of trader you are still trying to be. It may be likely that before you pooped out mentally, that you never understood much of anything about how markets work.
Failure causes problems. Repeated failure causes irreversable problems. Are you conducting a fight to get back across a line that is impossible to come back over? Repeated failure causes fear, anxiety and anger. the same people who proved that TA works also have proven that a person who is screwing up trading exhibits fear, anxiety and anger. And they proved that this combo diminnishing trading performance in a statisitcally significant way. These kinds of people often try to out trade people who are operating using support, comfort and confidence as their touch stones. It doesn't work for these people, ever.
You ignored my prior post that introduced the results of Park and Irwin (2004). Why? was it fear, anxiety or anger with the fact that Park and Irwin totally refute you in spades?
A wasted mind is a terrible thing. Get into some other kind of endeavor if it is possible.
