Quote from FinStat:
are markets truly effecient........it would seem not.
is most TA a load of bunk.......it would seem so.
Analysis of price/time would seem to be very useful. however, most 'indicators' have zero predictive power.
I think markets are NOT as efficient as academics would like to think. Yet, on the other hand, it's NOT as inefficient as most traders would like to think.
Sure, TA is useful stuff. But don't attach too much predictive power to it than warranted. No method is perfect. TA is just one of the many ways to look at the market. If it was so perfect then everyone here would be rich. But we ain't. It's EASY to recognize an inefficiency AFTER the fact. Not so easy AT THAT MOMENT in time. Someone mentioned the high flying Naz stocks like JDSU, Enron, Worldcom as an example of inefficiency. But how many of you actually saw that inefficiency and SHORTED back in 2000 and HELD? How many? If you did you will be multi-millionaires many times over. So, apparently it ain't so easy to recognize inefficiency is it?? HAHA!
For the most part, it's pretty difficult to beat the market over the LONG RUN. Even the best of the Market Wizards succumb to it ie. Richard Dennis and many others.
And it's easy to say your particular method of TA works because you've made money. I used to think like that too until you sit back and think about it for a minute. The market offers SO MANY patterns - perhaps MILLIONS of them - that any weird ass concoted pattern or method would seemed to work over certain time period. Because it's so close to random noise, that any interpretation of pattern WILL YIELD somewhat succesful results and even trading profits if trade correctly(risk mgmt, positon sizing, etc.)
But it doesn't mean it works forever or that's the market is even nonrandom. A random number generator can create myriads of seemingly nonrandom price patterns. This is what Jack Schwager called the "well chosen example". And that's why trading systems vendors can sucker newbie traders into buying their system because the backtested results were chosen PRECISELY to fit the system and only during those time period. Most commercial fail miserably in practices.
But a lot of academics and quants trading methods are actually pretty close to TA, but I'm sure they wouldn't dare admit. They like to called it "statistical arbitrage" , which is nothing but data mining for statistical valid patterns and trading on them. But its' a bit more precise and scientific than TA, but in principles it would be the same.
I'm sure my ex quant employers and MIT profs would roll over in their offices if they hear me say this. Haha. But I think in effect it's the same in principle though probably not in practice.
But I think the big big picture is NOT all about TA and price pattern. Sure, you can make some decent $ with TA and you will even get rich and hopefully don't go bust one day. But the real real $ is made with fundamental foresight a la Buffett. I'm sure Buffet doesn't even look at a chart. And guess who is the 2nd richest man in the world?
And how come NO ONE, NO ONE on Wall St even APPROACHES Buffet's wealth even with all of quants, computers, and tons of supposedly talented staff, well paid researcher, and traders,etc.??? No one approaches Buffett. And all he uses is a simple calculator.
That tells me most of what's done on Wall St is bullshit. I came from that environment. I know how it was and is. Sure you can make $ with it. But to truly beat the market over the very very long run(30yr track record) you need a real edge. And there's NOT enough TA, quant math models, or analyst fundamental analysis can get you there unless you really know what you are doing a la Buffett!
He rules!
