The Science of Technical Analysis

[TSGannGalt]

Quote from agtrader777:

My goal as a trader is to be an accurate observer of what the market is telling me and use the tools available to exploit that observation. While it may be gratifying to predict market activity, it is ultimately a lost cause!

LOL... Is this thread about you and your goals?

But I'll bite a bit...

So you observe the market THEN... You use the tools to exploit it.

Can you explain to us, how you observe the market before the tools?

Or are you saying that the "MARKET IS the CHART", if so... care to explain what the MARKET is?

 

[TSGannGalt]

Quote from ProfLogic:

Really?!

No, it's the Grand Theory of Everything (Markets). It's beyond Super-string theory.

 

[ammo]

you know when your wife gets up,when she goes to bed,so scientifically you could call those facts and you could chart them,what she does in between getting up and going to bed you can't predict only react to and try and keep the peace,you slowly get better but you never quite master it,there in lies the truth and the problem with ta, the only constant are the tl's, they can be defined, the rest you slowly get better at, there is no system,just a lot of tricks that you pick up along the way as you would in any job or marriage

 

[ProfLogic]

Quote from TSGannGalt:

No, it's the Grand Theory of Everything (Markets). It's beyond Super-string theory.

Maybe you should study the charts more and read less. It really helps one's real-time perspective.

 

[TSGannGalt]

Quote from ammo:

you know when your wife gets up,when she goes to bed,so scientifically you could call those facts and you could chart them,what she does in between getting up and going to bed you can't predict only react to and try and keep the peace,you slowly get better but you never quite master it,there in lies the truth and the problem with ta, the only constant are the tl's, they can be defined, the rest you slowly get better at, there is no system,just a lot of tricks that you pick up along the way as you would in any job or marriage

Of course, there's a system.

Objective of the System is to keep your wife (GF happy)... (as making money trading the market):

System #1:
Buy gifts and plan trips on anniversary and birthdays.

System #2:
Tell her you love her, everyday. Before you goto work and sleep.

System #3:
Scan monthly data for that cyclical... that time of the month. Reduce risk and be conservative.

etc. etc.

It's not the grand no-risk system. But it's part of the portfolio of systems.

 

[TSGannGalt]

Quote from ProfLogic:

Maybe you should study the charts more and read less. It really helps one's real-time perspective.

What should I study the charts based on?

I only see a bunch of lines telling me where someone traded at a certain time.

 

[IndexSwing]

Quote from TSGannGalt:

What should I study the charts based on?

I only see a bunch of lines telling me where someone traded at a certain time.

You see a bunch of lines. What I see are price trends from the past. The best evidence that some forms of TA can work are the professional money managers who exclusively use TA and have achieved extraordinary returns. Ed Seykota is one example. If you read Market Wizards and New Market Wizards you will see a lot of other examples.

 

[TSGannGalt]

Quote from IndexSwing:

You see a bunch of lines. What I see are price trends from the past. The best evidence that some forms of TA can work are the professional money managers who exclusively use TA and have achieved extraordinary returns. Ed Seykota is one example. If you read Market Wizards and New Market Wizards you will see a lot of other examples.

I'll bite a bit more:

Point A:

1. Ed Seykota busted his account (at least) twice after the Market Wizard interview.

2. Most of the Wizards are retired. They can't trade the current market anymore. The top players have changed at least twice since their days. So the "read the Market Wizard" example is outdated and holds no relevancy in 2008.

The last Big TA hedge fund was with Quadriga Super Fund, but the manager (Gunther) left the firm and sold to it a few years back due to their expired "strategy". Obviously, you don't hear much about them except that they're a Sell-side "B*tch" Fund ran by a few monkeys.

There are few names left in the business, like Tudor and Hite. Though, the majority of their portfolio is ran by Quants. or trading other styles.

---------------------------

Point B:

You see price trends in charts. Well... people see price trends and patterns on random data:

http://www.elitetrader.com/vb/showthread.php?s=&threadid=118599

Now... "Science" says that it's our innate nature to find patterns, in all things. So are you telling me that the TA Fund Managers can trade random data?

 

[ProfLogic]

Quote from TSGannGalt:

What should I study the charts based on?

I only see a bunch of lines telling me where someone traded at a certain time.

Really.
I see.
Never mind.

 

[epetrov]

I think that TA is not only science tool. It is a mixture of science and art.
TA works fine but not in a way described in the books of TA.
It best works with combinations with FA, too.
If you analize TA scientificely you will get to conclusion that TA is pure nonsence. BUT, there a a lot of people making a lot of money with that.

How to explain that?
Cheers.