The Science of Technical Analysis

Quote from rcanfiel:

You have it backwards. TA has been exhaustively tested by many, and it is constantly found wanting. The onus lies on the TA believers to PROVE it works. Null hypothese and other things have no value.

Either a multiyear application of an indicator across multiple values across multiple instruments shows a SIGNIFICANT outperform or not. This is statistics and fact.

Quoting someone from Tech An of S&C has little meaning. They are known to cherry pick examples. And many of these people are trying to get people to thier websites, so they cannot be considered as objective examples.
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Unfortunately all of your comments are inductive. You are using induction, unfortunately.

Since I have it backwards and am familier with what you hang your hat on, there is little I could write that would be worth your time reading.

Your "either" paragraph is very disappointing to have to read in this forum.

For making money using TA there is no "believer" factor on the table. The way it comes down looks to be that the SM generates TA that makes money. This is not a generalization about TA that is poorly derived.

Made money is simply taken out of the system and given value as a consequence of its economic value in its conversion to something with utility. Certainly, a person knows and uses the capacity of a market at any given time.; this requires that unused surpluses be put to use elsewhere.

Science is always at work in civilizations. Scientists use tools of the trade to produce excellence in applications. The null hypothesis is of value to these kinds of people and I am one of them. when there is no need for uncertainty, then why introduce uncertainty in the mix of things. I see from what you state that you are different from a person who has a scientific orientation.

You speak as though you are a "believer" in piles of numbers.
This is probabalistic induction and it is forever tagged with a black swan proviso. You may want to consider getting past the black swan that is in your space. I certainly had to take the black swan off the table (as do many people who are in the financial and business fields and who use the SM in their work).

Your TA (that TA in your mind and thinking) comes from what you read as you say. Science and the SM gives others TA that is not derived from induction no matter how minimized the induction seems to be.

Thank you for your post. It certainly helps me better define what you are opposed to. Statistical analysis is not an application of science when it comes to financial markets. It is merely an application of mathematics (often through software used in computer hardware) where the presumption is "the more the better".

Computers may also be used logically in a non probabalistic setting. The mathematics associated with this is the opposite of induction. Under these circumstances, what is going on in the markets in real time, is not a matter of crunching ever bigger data capacity. There is also the advantage of non AI information. Most all risk management is evidential by its required nature. Risk for most is probabalistic, but its application is the opposite of probable, it is hard and finite and available.

Trading doesn't have to be poker or inductive. Since there is a choice, why would anyone choose to go your route? You are playing a game using stats and I am mining an ore body using technology.
 
Quote from TraderSystem:

What do you think is the criteria for TA systems? Why is none of the above software suitable for it?

Has anyone read "Does The RSI Give you an Edge" by Larry Conners and Ashton Dorkins in the November issue of Technical Analysis. Any comments on that article.

I have played with a 3 day RSI before, and had some luck with it but never with a 2 as that seems too short of a time frame to me.
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2Q's and a request for comments.

Thank you for OP'ing the thread.

Q1 The criteria is using the Scientific Method to derive the TA elements and to derive their combined application in the TA system. QED.

Q2. The listed systems use the wrong mathematics. Since they do not provide the elements in Q1, they are unable to function to perform in a suitable way. The alternative is to use the correct math application and get the job done. QED.

Connors is a good guy in what he does. For a classic example See chapter 6 of Conners and Hayward. Take the trouble, however, to fix it so it has a neutral bias. As you see it it only works, unfortunatley, with a long bias.

Let me step up another level in my comments. There is no way that inductive assessments can have any value and especially have any value for an inductively derived indicator. This is called compounding in some forms of treatment.

At some point in time every trader has to look in the mirror and see "what the fuck am I doing?" facing him". It is a crude and terse moment where the correct answer is to probably not look in mirrors anymore and just keep hoping. There are some really famous hopers out there. But most hopers have completed their transition through the trading industry by going out the other side.

As a hoper, you may want to take a moment and look in the mirror. Rcanfiel looks at stat tests instead of looking in the mirror. He hopes someday to find something somewhere that will pass his stat criteria and after that he will be faked out in his shorts by his induction errors.

Here is the straight poop on things. There is no value in considering anything but the PRESENT in trading. So the only value your list of elements have is in displaying raw data in a convenient form. There are other needs besides the display. Trading is done in markets in ways that are much faster than humans do trading. Humans extend themselves with tools. Notice that the items on your list do not have human extension tools, especially with regard to improving the conscious sensory rate. People are "lagging indicators" it turns out.

So you read that RSI..... and you invent RSI's........ the mag will have articles every month by people who are noted for their work to various extents. So what.

See why RSI does not speed up your sensory process and help you not lag the markets as a human operating system. the articles do not help either.

It is not an OODA thing either.

The science of TA deals with all of these problems. Maybe the thread will turn to using science as it relates to extending the human sensory process and eliminates the "lagging" characteristics of human beings as they examine the displays depicted by the providers on your list.
 
I suspect that our shared readership is as tired of reading my learned critiques of your oeuvre as they are of you endlessly and obscurantly rehashing it. And I should just let it lie, but on some nights when I cannot sleep, offering a little balance to your bizarre views is somehow a palliative to insomnia.

One tiny point, and I shall cease. For someone who espouses the scientific method, your writings are remarkably devoid of mensuration. The scientific method is not qualitative, that is for the unsocial sciences. The scientific method is quantitative. For example, one would be amazed to see you make a statement like this:

"For instrument X, and for the most astonishing imaginable news, the population of active market order traders in that instrument cannot sustain a volume velocity greater than Y units per second for more than Z seconds without a retrace."

And for someone whom presumably studied quantum mechanics in its heady days, as I did as a child, you have never made the connection to market action. So don't tell us you employ the scientific method in trading. Over the years I have seen precious little evidence to support that assertion, other than a pervasive misuse of mathematical terms.

Now I can sleep.
 
Shit. I still can't sleep. Maybe if I say something nice about you.

For all your slamming of inductive logic, some of your best work involves real-time deduction. One of the few things I have taken from you was "What wasn't that?" and its consequences. Even though I read it first in Alan Farley, who credited it to Sir Arthur Conan Doyle, it stuck when you cited examples. So thanks for that. But it doesn't balance out all the rat holes I went down behind you, and as Alan says, came up empty handed. You are indubitably the Lewis Carroll of trading. When I read your stuff Grace Slick sings in my head:

"And when you go chasing rabbits,
And you know you're going to fall,
Tell 'em a hookah-smoking caterpillar
Has given you the call."

Guess it's time for a little Gloria.
 
Quote from cd23:

Unfortunately all of your comments are inductive. You are using induction, unfortunately.

Since I have it backwards and am familier with what you hang your hat on, there is little I could write that would be worth your time reading.

Your "either" paragraph is very disappointing to have to read in this forum.

For making money using TA there is no "believer" factor on the table. The way it comes down looks to be that the SM generates TA that makes money. This is not a generalization about TA that is poorly derived.

Made money is simply taken out of the system and given value as a consequence of its economic value in its conversion to something with utility. Certainly, a person knows and uses the capacity of a market at any given time.; this requires that unused surpluses be put to use elsewhere.

Science is always at work in civilizations. Scientists use tools of the trade to produce excellence in applications. The null hypothesis is of value to these kinds of people and I am one of them. when there is no need for uncertainty, then why introduce uncertainty in the mix of things. I see from what you state that you are different from a person who has a scientific orientation.

You speak as though you are a "believer" in piles of numbers.
This is probabalistic induction and it is forever tagged with a black swan proviso. You may want to consider getting past the black swan that is in your space. I certainly had to take the black swan off the table (as do many people who are in the financial and business fields and who use the SM in their work).

Your TA (that TA in your mind and thinking) comes from what you read as you say. Science and the SM gives others TA that is not derived from induction no matter how minimized the induction seems to be.

Thank you for your post. It certainly helps me better define what you are opposed to. Statistical analysis is not an application of science when it comes to financial markets. It is merely an application of mathematics (often through software used in computer hardware) where the presumption is "the more the better".

Computers may also be used logically in a non probabalistic setting. The mathematics associated with this is the opposite of induction. Under these circumstances, what is going on in the markets in real time, is not a matter of crunching ever bigger data capacity. There is also the advantage of non AI information. Most all risk management is evidential by its required nature. Risk for most is probabalistic, but its application is the opposite of probable, it is hard and finite and available.

Trading doesn't have to be poker or inductive. Since there is a choice, why would anyone choose to go your route? You are playing a game using stats and I am mining an ore body using technology.
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Damn. Good post.


Sick of people "proving" TA doesn't work.

Well, whatever the hell it is I'm doing that's putting money in my account works. That's all that matters at the end of the day.

The bank doesn't refuse to clear my check if they find out that I made my money using TA. They will not deny the tangibility of my money because it was made using something that "doesn't work".

Rcanfiel is bitter over something, not sure exactly what, but damned if it ain't one the most ignorant things I've ever heard for someone to keep saying the same ol shit about TA.

How can someone "prove" it doesn't work when the very fact that I make money using it fucking PROVES that it DOES work??

That's like back in the day they said cigarettes don't cause cancer because tests "proved" they were safe. Well lo and behold, they caused cancer whether or not the scientific community accepted this as fact....which they did of course years later, but the point is that research and theory does not refute plain as day fact.
 
Quote from marketsurfer:

it tough to have a scientific view on anything that isn't even defined. migt as well speak of the science of modern art you may have better results.
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Trading is a process with rules defined by an individual. Technical analyses is simply a set of tools, just like you have a shovel to dig up a hole in the ground. Why do you fail to understand that is beyond me. The more you write and make comparisons to science of modern art (art btw is a 100% subjective form of expression) the less I think of you as a trader. I don't mean to insult, it's just that you somehow fail to see the difference between a tool of trade and actual strategy which includes risk management, probability analyses, etc.

I am a pure technical trader, I only use MACD's histogram, I have been trying to master it for quite some time now. I can post trades in real-time all you like and prove you wrong by doing so. Would you still be saying that TA is useless?

Or maybe you managed to find another proprietary non technical form of analyses that is better? :)
 
For years my hammer did not work correctly, it was always in the workshop being repaired.
The head was replaced numerous times and I lost count of the new wooden handles that I paid for.
Despite all this, the bloody thing would just not work correctly.

One day a seasoned experienced carpenter with many years of successful building behind him, saw my struggles and very kindly offered me some advice.

"f9, he said, you are meant to hold the hammer by the wooden handle and hit the nail with the metal head".... up to now I had been holding the metal head and hitting the nail with the wooden handle.

You know, since that day my hammer has never given me a moments problem.

The lesson in all this .......
It is the tool and the tradesman together which produces the outcome.
On it`s own, the tool just stays in the box

regards
f9
 
Quote from Bitstream:

all that boring convoluted talking to say just nothing....

what a post full of crapola.
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You make my earlier point to a tea.
The more "work" or "thinking" is involved in the process. The more people run away from it like rabbits.
 
Quote from cd23:

Unfortunately all of your comments are inductive. You are using induction, unfortunately.

Since I have it backwards .
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Unfortunately, your reasoning is stupid. The markets don't operate on proof by contradictions, inductive proof or anything else. The fact you struggled with what I wrote is not encouraging. I will try to simplify:

"When TA is subjected to rigorous studies to look for significant outperform ability, it pretty much fails."

Please stop trying to show off your math, computer science, logic and other coursework. I have an MS in comp sci. Your arguments don't prove anything here
 
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