the basic assumption of TA

[neutrino]

Quote from seesound:

Many technical analysts believe that the chart tells us everything including the fudenmentals.

I agree with it insofar as charts(indicators) may reflect the information in the PAST. However, charts just cannot reflect the information in the FUTURE. In other words, good pattern has nothing to do with the future bad news. TA just analyzes one of the aspects.

Just when I was typing these words, I came up with the thoughts that TA just gives you a higher chance of being right given anything else constant. am I right? just cannot figure out it thoroughly.

I am just a new comer to the trading world and soemtimes a bit critical and curious about whatever happens in the trading. Thank you for your patience and enlightenment.

TA is a useful tool. You cannot predict the news or the future with it but you can make an educated guess about the buying and selling patterns of the traders and investors. You will take a lot of losses using TA but that is OK because if you use it correctly and consistently you will be right enough times to cover the losses and get ahead of the competition that tries to avoid losses at any cost and goes after the "easy" money. The same applies to fundamental analysis.

Basically the more factors you consider in your analysis (which means the more you know and the more research you make) the better edge you will have over your competition and the more money you will make in the long run. You can use a simple moving average crossover to enter and exit and I am sure that you can beat the market by a little margin over time. But you may also do a research about a certain company and find out the the CEO is a very, very competitive person, very smart, very disciplined and devoted to the future of his company, you may also find out that he managed to assemble a really good team of hardworking and motivated people, and that the company is very well positioned in a certain marker niche, has a very strong brand or some other competitive advantage, and if nobody else shares your opinion, you may want to buy shares in that company and you might end up much, much better than the crowd which jumps from hot stock to hot stock or from one fancy indicator to another.

What you need is a focus on a certain strategy that makes sense to you and you can answer every question about it and why it should work, then use it and get some real experience with it and you should be fine

 

[aPismoClam]

assumptions of t/a? you gotta pay to play.

 

[Lamont_C]

Quote from kut2k2:

You keep missing the point. Everybody is NOT looking at the same chart for TA.

Actually, they are, more or less. But they don't all see the same thing.

 

[kut2k2]

Quote from Lamont_C:

Actually, they are, more or less. But they don't all see the same thing.

True. I for one couldn't care less about 'support' and 'resistance'. I look at market direction. And it doesn't hurt that I look at both volume and price, not just price alone. TA is almost like a mirror; people get out of it what they're willing to put into it. Follow the crowd, you get what the crowd gets. Follow your own path, you can make some amazing discoveries.

 

[jgfutures]

I always love the TA debates. There will always be TAers who make money, and then there will always be FAers who make money. Many have pointed out that a solid combination of both will increase the odds of survival.
But going back to the original question, "will TA enhance my odds of being right (profitable) while all else being constant?" Well, it depends if you have an edge in TA. Personally, my edge lies in TA. I never opened a chart until 2000, trading news and the like instead. Now, charts are all I see and I use very mechanical systems. Very little discretion, but that just matches my personality.
Ultimately, your appreciation/distaste for TA will relate directly to how much success/failure you have while learning every discipline of trading. I, for one, cannot believe I used to trade without opening a chart, but different strokes for different folks.

 

[Grob109]

first you said:

Quote from seesound:

Many technical analysts believe that the chart tells us everything including the fudenmentals.

I agree with it insofar as charts(indicators) may reflect the information in the PAST. However, charts just cannot reflect the information in the FUTURE. In other words, good pattern has nothing to do with the future bad news. TA just analyzes one of the aspects.

Just when I was typing these words, I came up with the thoughts that TA just gives you a higher chance of being right given anything else constant. am I right? just cannot figure out it thoroughly.

I am just a new comer to the trading world and soemtimes a bit critical and curious about whatever happens in the trading. Thank you for your patience and enlightenment.

then you said:

{QUOTE]Maybe I'd better clarify my thoughts. What i want to know is the TA's logic and thinking process. When I am going to believe in "something", I absolutely should know what is the underlying reasoning behind that "something".


TA focuses on the repetition of the chart (indicator) based on the human behavior. I somewhat agree with that. However, it has nothing to do with the future bad news. Some good pattern may totally ruined by the unanticipated bad news. Of course , whatever analysis we are doing, we can never anticipate the "unanticipated". So the TA's logic is based on given anything else same, TA is better than other analysis method in terms of probablity .

If this is really true(hypothetical), my first conclusion is that even if TA can give you higher probablity of being right, you should always try to avoid the "the happening of unanticipated information".. Such avoidance can be achieved by closing your position before the announcement of some crucial economic indicators or just doing the daytrading . Another conclusion is that when using the back-testing on certain trading system, one should remove the impact of all factors other than the pattern or indicator combinations you are examing. Only then the result is "pure".

All above are only my "best guess" Any critics and recommendations for the readings which can solve my puzzle are highly appreciated.[/QUOTE]

You are moving in the right direction rationally and logically speaking.

Don Bright did a pragmatic commentary on his alternative to the "something" you are seeking.

he said have a pie of "thinking processes"; the composition includes entry/exit, fundamentals, news events, and competition in a setting of a two sided market where you seek anomolies to make money.


The "something" you seek is what is behind the surface tangibles you and Don mention. The way to get to it is look behind everything or go the historical route way on back the where all the surface tangibles came from over time right up to the present contemporary scene.

Want to take both trips or do you have a preference?