sums it up...
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tecnical trading, why it works, and why not
- Thread starter drasfs
- Start date
sums it up...
Quote from drasfs:
Furthermore, no single indicator can generate profits by their own...
That about sums up the problem with TA right there.
If an indicator cannot make profits on its own, then it is useless.
You may disagree, but that is because you do not appreciate the significance of this.
If something is random (cannot generate some form of profit), throwing it together with other random things is a useless endeavor.
At this point, it is a belief, not a viable trading method.
drasfs:
After I wrote my above comments, I thought to place a trade in currencies to provide something concrete. Below is a file that shows the result. Have a look at prices before the trade, and after the trade. I can tell you why I sold, but I also analyzed the situation from the other side.
I took my profits so that it may imprint on the mind that it is money that was taken off the table.
Ponder the question of who paid, pays or will pay for those profits?
1. the opposite side of the shown transaction
2. a trader in a future transaction
3. a trader from the past
4. either of the above
5. a combination of the above
6. any other case?
After I wrote my above comments, I thought to place a trade in currencies to provide something concrete. Below is a file that shows the result. Have a look at prices before the trade, and after the trade. I can tell you why I sold, but I also analyzed the situation from the other side.
I took my profits so that it may imprint on the mind that it is money that was taken off the table.
Ponder the question of who paid, pays or will pay for those profits?
1. the opposite side of the shown transaction
2. a trader in a future transaction
3. a trader from the past
4. either of the above
5. a combination of the above
6. any other case?
Attachments
Quote from TraderZones:
That about sums up the problem with TA right there.
If an indicator cannot make profits on its own, then it is useless.
You may disagree, but that is because you do not appreciate the significance of this.
If something is random (cannot generate some form of profit), throwing it together with other random things is a useless endeavor.
At this point, it is a belief, not a viable trading method.
You did not consider this: a reader of price action who uses his mental tools with the assistance of indicators to determine a profitable subsequence of prices. The mental tools may not be easy to automate, and/or the holder of such knowledge may prefer to keep it for himself/herself.
Quote from riskfreetrading:
Someone else in this world (it is not me) may be saying the same thing about someone like you. What makes you think that that someone is not right, and that you are right? I am not saying that you are wrong, I am just asking what proof do you have that guarantees to you that you are right and that others are not right.
I am willing to take the time to understand all aspects of trading and assimilate what I find is profitable into my tool box of strategies. I will never claim to know everything about trading, or discredit the knowledge of others without first learning and trying and seeing for myself.
They are wrong because they aren't willing to learn, they aren't willing to try and experience, they are stagnant ignorant fools.
That's how I know i am right. It's got nothing to do with profit or technique, it's got everything to do with openness and experiences. That said, I'm not going to waste my breath or time on someone that isn't willing to learn - i've tried too many times - fk 'em, I'll keep the profits for myself.
By the way, I am more than happy to listen and understand to your comments, to see if they will help me.
pneuma
Quote from pneuma:
I am willing to take the time to understand all aspects of trading and assimilate what I find is profitable into my tool box of strategies. I will never claim to know everything about trading, or discredit the knowledge of others without first learning and trying and seeing for myself.
They are wrong because they aren't willing to learn, they aren't willing to try and experience, they are stagnant ignorant fools.
That's how I know i am right. It's got nothing to do with profit or technique, it's got everything to do with openness and experiences. That said, I'm not going to waste my breath or time on someone that isn't willing to learn - i've tried too many times - fk 'em, I'll keep the profits for myself.
By the way, I am more than happy to listen and understand to your comments, to see if they will help me.
pneuma
Good points in your post. You are right, openess, desire to learn, etc are a must in trading. Happy trading.
Quote from drasfs:
Man, I've been arguing with someone who says it doesnt work. His arguments and my answers:
He:You can't predict the future based on historical data
Me: It's not about predicting the future, but rather having the odds on your side, by making more informed decisions.
He: there have been thorough research that show that tecnical trading is useless
Me: well, these researchers are certainly not real traders with lots experience. Furthermore, no single indicator can generate profits by their own, since there is no such thing as a holy grail. And using tecnical indicator is not just about applying them and then try to see price correlations, but rather, a big part is using the right combination of indicators, but most importantly, trying to interpret the results/signals from tecnical indicators in the right way, and the skill to judge them correctly usually takes years of experience. Therefore, it doesnt surprise me if amateurish scholars havent found statistical evidence that proves that tecnical trading work. Being a trader is about creating an overview, and get a feeling for the situation most of the time, and in the process of getting an overview of the market, these tecnical indicators are usually only a part of the tools a trader use.
Lots of tecnical indicators also work because they become self fulfilling prophesis. If lots of people believe in pivot points, lots of people will place their stops at 60(if that is the pivot point), and therefore stops will be triggered, and prices decrease, not being able to penetrate the support at 60.
He: In that case, Tecnical analysis wouldn't work in the beginning.
Me: well Tecnical analysis has become popular because people want something to look for, which give them confidence to do something, whether or not Tecnical analysis work or not.
This guy drives me crazy.
you need to explain to him that "technicals" are really just another way to show where buyers and sellers are likely at. i doubt he will understand it and i don't think you really understand it. technicals aren't magical things. the simplest things in TA are the best...support and resistance. support being a 5 million share bid...resistance being a massive offer at a whole number.
you look at a chart. you look at it's relative strength in the short term and long term. you look for bases of support or ceilings of resistance. you judge the speed with which the move has taken place. you look for any major moving averages the stock may be pulling into. you look for patterns where people are buying a selling the stock. these are technical ways to view the market.
these patterns often have basis in the fundamental world where XZY mutual fund feels XZY stock is at a proper value to buy or sell. or perhaps they have a certain forumla for buying and selling that certain stock that they want to get in or out of.
i hope you get the gist since i just typed this out reallly quick. maybe your friend will too.
Quote from riskfreetrading:
You did not consider this: a reader of price action who uses his mental tools with the assistance of indicators to determine a profitable subsequence of prices. The mental tools may not be easy to automate, and/or the holder of such knowledge may prefer to keep it for himself/herself.
The discussion was about indicators, not price action or mental states.
When someone uses an indicator, it needs to have some predictive ability on its own. In other words, if you categorize a large number of trades by various readings of the indicator, then each category should have some different set of aspects, such as one category tends to go up or down or stay sideways more than other categories.
If the categories are essentially random or similar, then the indicator is useless. And most users of such indicators are oblivious to this fact, and keep using their beliefs instead.
Quote from TraderZones:
The discussion was about indicators, not price action or mental states.
When someone uses an indicator, it needs to have some predictive ability on its own. In other words, if you categorize a large number of trades by various readings of the indicator, then each category should have some different set of aspects, such as one category tends to go up or down or stay sideways more than other categories.
If the categories are essentially random or similar, then the indicator is useless. And most users of such indicators are oblivious to this fact, and keep using their beliefs instead.
With the exception of the following I think you and I agree on indicators taken alone:
1. Mental state is not the same as mental tools. These are conceptual and reside in the brain of the trader.
2. The mental tools in the head of the trader, I believe, need the technical indicators as helpers. Without them, the mental tools may not work.