Technical Analysis Doesn't Work

[Paulds11]

Quote from Paulds11:

Quote from rcanfiel:

...Published studies are the results of a lot of work, serious inquiries and exhaustive examination and significant review by other organizations to prove their validity...
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rcanfiel

..hmm considering your previous input I am "surprised" you now admonish the iissues central to argument.. do we see a softening of your approach.. a need for you to clarify based on the issues ONLY? a deference to engaging head on on with strong counter argument without the need to emotionally chastise others seemingly more educated (at least verbally) than you??... this could be a rather refreshing change from your usual overtly emotional vitriole and if so.. we welcome it.... and all of a sudden your argument gains more listeners..(with no guarantee it will be accepted any more.. but at least now more are listening... isnt that better than unadulterated vitriole?.. I think you should agree...

 

[BlindLemonBoosh]

Quote from kut2k2:

Talking out of your ass doesn't make you a smartass, it makes you a dumbass.

The fact that you can't - yes, CAN'T - explain how you supposedly test for a trading edge without consideration of position size makes you nothing but a fool with delusions of cleverness.

The big smile at the end of your post doesn't detract from the fact that your statement is wrong. Position sizing is quantified AFTER evidence of the edge has been established. One can merely assume fixed position sizing when testing for the edge. Then, using win%, max drawdown, etc...etc...a risk management schema (which includes position sizing) is formulated. Position sizing need not be considered until evidence of "the edge" exists. To do otherwise would be an utter waste of time.

 

[kut2k2]

Quote from BlindLemonBoosh:

Position sizing is quantified AFTER evidence of the edge has been established. One can merely assume fixed position sizing when testing for the edge.

Exactly my point. Apparently there is some semantic disagreement here on what is meant by "position sizing."

My point is that your results are dependent on what you assume as the trade size when you test for the edge. As the wrong-odds coin-flip scenario illustrates, assume the wrong size and you can miss the edge completely. The edge is still there, but you've effectively neutralized it by overbetting, or overtrading, as the case may be.

 

[Thunderdog]

Quote from marketsurfer:

...every permutation of TA tested...

Uh-huh, sure. And not only that, but with a suitable money management strategy appropriate for each and every one of those "permutations," right?

 

[rotflmao1]

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>

I think you need to see this:<object width="425" height="350"><param name="movie" value="http://www.youtube.com/v/ihD93bGoXXA"></param><param name="wmode" value="transparent"></param><embed src="http://www.youtube.com/v/ihD93bGoXXA" type="application/x-shockwave-flash" wmode="transparent" width="425" height="350"></embed></object>

 

[rcanfiel]

Quote from kut2k2:

For those who care about the truth, here's the only passage concerning trade size in the last paper rcanfiel trumpeted:

That was covered several times but you still are clueless about how irrelevant that and you are

 

[rcanfiel]

Quote from Paulds11:

Quote from rcanfiel:

...Published studies are the results of a lot of work, serious inquiries and exhaustive examination and significant review by other organizations to prove their validity...
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rcanfiel

this is exactly why I despise you.. read your own English and the sentiment therein.. you explain an issue threefold... your not educated. and you dont see it do you?..

MS - Comp Sci - PSU, tech writer by trade - many years. (sorry for the rez, but you have no grasp of reality) There is no education nor english problems on my end. The only problem, is you are thick

 

[BlindLemonBoosh]

Quote from kut2k2:

My point is that your results are dependent on what you assume as the trade size when you test for the edge.

When I test for an edge, I use fixed position sizing - an equivalent bet on each trade. Thus, if an edge is found, it is not something that results from money managing hocus-pocus - rather, it is a viable setup upon which a trading strategy (including position sizing / risk management) can be formulated. The edge has already been identified before the issue of proper dynamic position sizing is tackled. On any given trade, the relationship between position sizing and returns is simply a 1:1 linear correspondence. This relationship is wholly irrelevant to determining the existence of the edge itself.

Quote from kut2k2:

The edge is still there, but you've effectively neutralized it by overbetting, or overtrading, as the case may be.

Right. You have just stated that the EXISTENCE of the edge is not dependent upon other variables. You're coming along nicely.

 

[kut2k2]

Quote from BlindLemonBoosh:

Right. You have just stated that the EXISTENCE of the edge is not dependent upon other variables. You're coming along nicely.

The DETECTION of the edge is dependent on other variables, specifically, money management.

Look, all we're talking about is the difference between arithmetic growth and geometric growth. If you choose arithmetic growth, fine, you'll find an edge if there is one AND your trade size is significantly larger than slippage plus fees. If you choose geometric growth, you better be careful or you can completely counteract the edge, even without factoring in slippage plus fees.

The TA researchers are going all in. Guess what type of growth that is.

 

[kut2k2]

Quote from rcanfiel:

Quote from kut2k2:

For those who care about the truth, here's the only passage concerning trade size in the last paper rcanfiel trumpeted:

That was covered several times

You're off your meds. That wasn't covered before I posted it. Clearly further attempts at communication with you are pointless.

Have a nice day