the basic flaws in TA

dac8555 · Nov 22, 2005

look guys. pure fundamentals or pure technicals are both a waste of time. You cant use one without the other. It is like a doctor taking vitals but not looking at the patients chart. Even supposed "pure technical" traders get out of positions if there is a major economic annoncement, and pure "fundamental guys" will look at charts to see where the price has been, or where the general trend is.

I do agree that some of the technical indicators are grossly over done, way to technical and ignore some important fundamental factors that effect prices.

Walther · Nov 22, 2005

Quote from Thunderdog:

1/Oh, come on. Comparing arrow trajectory with price movement is a very poor analogy.

2/ I think that your elegant laws of physics get crowded out in the turmoil.

1/I have compared a physical movement to physical movement, you compared physical price movement to human behavior. I think you are finally getting it or at least thinking about it.

2/Those laws are not mine( I have only discovered proper application to price movement ) and they are ruling the world around us. They will never get crowded out. Are they influenced by variables ? Absolutely.

Cheese · Nov 22, 2005

Technical analysis is analysis.
This is the 'how' not the 'why'.
Such analysis is an examination of price in order to know how price behaves. Therefrom, the purpose of traders is to be able to anticipate or expect fairly accurately what price will do next on the basis of how it is currently behaving or how in the past it has behaved.

Analogies with physical laws or human behavior, while no doubt a self satisfying debate, are to do with the 'why' of price behavior and are either not relevant or not relevant in producing practical questions and useable answers.

illiquid · Nov 22, 2005

Just go re-read Kovner's interview in Market Wizards. Here's a bit:

"Technical analysis, I think, has a great deal that is right and a great deal that is mumbo jumbo. . . There is a great deal of hype attached to technical analysis by some technicians who claim that it predicts the future. Technical analysis tracks the past; it does not predict the future. You have to use your own intelligence to draw conclusions about what the past activity of some traders may say about the futures activity of other traders."

And judging as how the trader who said this in 1989 is still earning 9 figures at the present day, I think his opinion is as good as any to hang your trading cap on.

cnms2 · Nov 22, 2005

Quote from illiquid:

Just go re-read Kovner's interview in Market Wizards. Here's a bit:

"Technical analysis, I think, has a great deal that is right and a great deal that is mumbo jumbo. . . There is a great deal of hype attached to technical analysis by some technicians who claim that it predicts the future. Technical analysis tracks the past; it does not predict the future. You have to use your own intelligence to draw conclusions about what the past activity of some traders may say about the futures activity of other traders."

And judging as how the trader who said this in 1989 is still earning 9 figures at the present day, I think his opinion is as good as any to hang your trading cap on.

This is a great quote! Obviously the question that remains is: knowing the past how accurately can you predict the future?

'Who controls the past,' ran the Party slogan, 'controls the future: who controls the present controls the past.' - George Orwell "1984"

When you flip a coin the probability to get a tail is 50% even when you know the past. With markets seem to be a little different: based on the past you may have a better than 50% probability to forecast the future. Technical analysis provides you tools to help you with this.

Thunderdog · Nov 22, 2005

Quote from Cheese:

Analogies with physical laws or human behavior, while no doubt a self satisfying debate, are to do with the 'why' of price behavior and are either not relevant or not relevant in producing practical questions and useable answers.

Human behavior is not an analogy of price action, as you suggest. Price action is the product of human behavior, specifically, the buying and the selling. The buying and selling may well have a valid economic basis, but that need not necessarily be the case. There is no "why" in this observation, as you suggest. Whether you personally find it relevant or not does not change the fact.

Cheese · Nov 22, 2005

Quote from Thunderdog:

Human behavior is not an analogy of price action, as you suggest. Price action is the product of human behavior, specifically, the buying and the selling. The buying and selling may well have a valid economic basis, but that need not necessarily be the case. There is no "why" in this observation, as you suggest. Whether you personally find it relevant or not does not change the fact.

You are attempting to answer the 'why'.

Civilization is the product of human behavior. Your posts are the product of human behavior.
So sweet.

Thunderdog · Nov 22, 2005

Quote from Cheese:

Your posts are the product of human behavior.

Thank you. Perhaps yours will be someday, too.

Spxdes · Nov 22, 2005

Quote from Thunderdog:

Human behavior is not an analogy of price action, as you suggest. Price action is the product of human behavior, specifically, the buying and the selling. The buying and selling may well have a valid economic basis, but that need not necessarily be the case. There is no "why" in this observation, as you suggest. Whether you personally find it relevant or not does not change the fact.

Thats dead on. The market place is fueled by buying and selling. Its simple supply and demand. Thats it. What makes more people buy rather than sell at a given time or vice versa? Thats for traders to determine. Physics has no part in it....actually, I take that back....You could say that the stock price will remain in motion, say, going up until an opposite force comes in. The seller. Or maybe just a lack of demand, so the price falls (call it gravity

)

-spxdes

maxpi · Nov 22, 2005

Quote from Spxdes:

Thats dead on. The market place is fueled by buying and selling. Its simple supply and demand. Thats it. What makes more people buy rather than sell at a given time or vice versa? Thats for traders to determine. Physics has no part in it....actually, I take that back....You could say that the stock price will remain in motion, say, going up until an opposite force comes in. The seller. Or maybe just a lack of demand, so the price falls (call it gravity )

-spxdes

Call it opposing vectors and the only thing physics and prices have in common is that they can be represented the same way