Technical Analysis - is it more than just a Self fulfilling prophecy?

trdes said:
"Things always come back to the fundamental side" right there is your problem, that means whatever you're using for TA has no true mathematical edge because if it did you would have a proper way to determine the actual underlining strength of what you're trading and the fundamentals wouldn't matter because once "X" amount of selling or buying comes in you would pick up on that and than know to trade in that direction.

Which is the smart way to do it anyways because "fundamentals" can take days, weeks, months, years or even decades to play out. Plus you have to take into account other peoples ignorance if you want to trade fundamentals, which is pretty much impossible to do consistently. Meaning people in general will keep buying or selling irrationally for a multitude of reasons(that may have nothing at all to do with current fundamentals).

The fundamentals can be hidden or take forever to play out, people's emotions cannot be hidden and will show on the chart letting you know when to take action (instead of guessing and waiting). Separately institutions buying and selling a lot as they work to get a net weighted average on their positions is also possible to pick up sometimes on the charts.

If day trading is your primary source of income and you intend on being consistent and successful long term you better have some type of math somewhere giving you an edge.
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There are over 40 000 Securities traded in the World (not counting OTC). There will be opportunity and market corrections to fundamentals each day. You can inflate stock prices/postpone the correction with herd behaviour BUT we have rules and regulations when it comes to Accounting. You can only bend those so far and they will mean revert. If you inflate your Quarter/Halfyear/Year by X, you will have to pay for it in the near future(1 year most of the time). That's why you see stocks shooting up or going down significantly when earnings are released. If you are a fan of HFTraders/Quantsm they trade those too
 
HFT/Quants trade price movement. By their very nature crunching the numbers so fast funnymentals mean just about nothing to them. Other than "watching"/preparing/anticipating news time releases.

Same for daytrading. The funnys only help longer term supplementing TA.
 
What is interesting -
If right TA analysis would be correct most of the time, the market could not work:

Each and everyone would trade the same way...
At least the big players & fonds.

That's why sentiment, news & all kinds of fundamentals are important.
 
Tribute to the late Kenny Rogers.
Trading such a difficult skill to acquire.


TA is just another tool. Using it effectively is another skill altogether.
 
Atikon said:
Price discovery downwards will be stopped out at some point/beyond the backstop. But most of my daily trading is selling options, so for me it's puts writing time right now and I use the backstop as my exit/delta.
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I don't trade nor truly understand options, but i do know they are a great way to lose money.

Particularly selling options, where the risk is unlimited. This is how people go out of business.

Anyways i hope for your own sake, that you actually know what you are doing(not think). Selling options + Betting on fundamentals in a bubble... I could imagine things going wrong.
 
Atikon said:
So my trading methology is based on Fundamentals. I use TA only for Entries and Exits.

TA for me is a Chicken or Egg thing when it comes to it's inception. I believe that ppl are looking for and acting on patterns. A consensus was formed when and how a stock pattern was to be interpreted and the market participant reacted accordingly or lost money. The rise of quants/automated trading solidified TA as part of trading.

However, I know that if we should have learned anything from the market corrections of the 2008 & 2001 is that things will always come back to the fundamental side of things. Seeing ppl make comparisons based on TA between the 1929 makes me smh bc of the entirely different kinds economies and Fiscal/CB reactions.

I see TA as a Self fulfilling prophecy but I'm open to see your POV
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A friend of a friend did very well with TA. Made millions and bought a ranch in Colorado.
 
Methinks that the absolute shortest timeframe for fundamentals is one month; many institutional funds balance once per month on fundies.

This overlaps with shorter time horizon styles, like swing, week, or momentum trading.
 
Atikon said:
There are over 40 000 Securities traded in the World (not counting OTC). There will be opportunity and market corrections to fundamentals each day. You can inflate stock prices/postpone the correction with herd behaviour BUT we have rules and regulations when it comes to Accounting. You can only bend those so far and they will mean revert. If you inflate your Quarter/Halfyear/Year by X, you will have to pay for it in the near future(1 year most of the time). That's why you see stocks shooting up or going down significantly when earnings are released. If you are a fan of HFTraders/Quantsm they trade those too
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Well I day trade and to be clear that is what I am talking about. So, if you're talking about anything other than day trading I will not challenge you. If you're talking about day trading everything I said stands 100% factually correct, as you cannot consistently use fundamentals to day trade and use it as your primary source of income. Even in your own words you're saying sometimes in can take 1 year. One year may be a close future to someone who doesn't day trade and is already financially set. One year is a lifetime to a daytrader who is using it as his primary income source.
 
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