Unbelievable but true: CFTC declares Technical Analysys as FRAUD :D!!!

Quote from Scientist:


TA, properly used, is more than 90% precise. Not because it works - But because everybody uses it. Simple as that.
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I disagree. Let's say you have pattern XYZ. This pattern produces positive results with a hit rate of 80%. Everyone knows this pattern, everyone trades it. Soon people would try to get in before the "dump money" and this would go on until the pattern wouldn't work anymore.

The answer, at least to me, why successful trading is possible - the game of GO or Poker. Even with huge processing power it should prove difficult to build a programme that beats a very good player.

The point gets interesting when you distinguish between pure mechanical trading and trading with a little human input.

TM
 
Quote from Trustme:



I disagree. Let's say you have pattern XYZ. This pattern produces positive results with a hit rate of 80%. Everyone knows this pattern, everyone trades it. Soon people would try to get in before the "dump money" and this would go on until the pattern wouldn't work anymore.

The answer, at least to me, why successful trading is possible - the game of GO or Poker. Even with huge processing power it should prove difficult to build a programme that beats a very good player.

The point gets interesting when you distinguish between pure mechanical trading and trading with a little human input.

TM
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First, this would presume that ALL traders figure out a pattern that works SOON. Patterns change all the time.

But you're right on the "dump money". This happens every day, on every stock - Everybody tries to get in "before"!

However, this is not the point - While ppl might be trying to get in "before" in their respective timeframe, there's always going to be a larger timeframe that overpowers that timeframe and thus makes people follow them religiously. You wouldn't try to go long just because you've broken a 5-minute resistance, while a 10-or 60- minute or even daily resistance is approaching, would you?
However, price will tend to move within these trend channels.

Assuming your theory would be to assume that people all trade in the same timeframes, as to battle for the same patterns. They don't. They all do their own thing in their own time, which is why regression channels, S/R and different MA's, for example, work.

Ever heard of the Indian (Hindu) belief that we're all little circles turning within larger circles, which in turn are turning inside even larger circles again? This is their perception of cosmos and god.
Certainly applies many times in trading.

If you want to argue that, I can prove it to you :D


Now - To mechanical trading - There are many advantages to mech trading , one of them being that human subjectivity is disregarded, the other being that you can, once the system is programmed, keep throwing in different parameters and declare different if = then / else functions etc to account for all different kinds of situations you might otherwise not be prepared for if you were trading purely discretionary.


Happy Trading,
~The Scientist. :D
 
Even some who might not believe in Technical Analysis still use a crude form of it. They look in thier newspaper for the last price.:cool: Believable and true.

I like the Jack Schwager debate, with ''Wallet Street Week''
Louis Puneyser the pun maker moderated ;

Professor Coin of the Random Walkers debated
Miss Faith * Trend.

:D
 
Quote from Trustme:

The answer, at least to me, why successful trading is possible - the game of GO or Poker. Even with huge processing power it should prove difficult to build a programme that beats a very good player.
TM
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It's not difficult, it just needs to factor in all the varieties and idiosyncracies of people's discretionary playing. The problem is that a computer will always do the BEST thing, while a human will do what he FEELS or thinks from EXPERIENCE has worked best in the bast - Almost like genetic algorithms, which brings us to the neural networks debate.

If you had a chess program that plays lets say 10 or 20 games VS Garry Kasparov, analyzing his strategy utilizing neural nets, it would quickly find the weakest spots of his playing style through genetic progression / to say inheriting and reproducing valid parameters and coupling them with each other, VS killing those strategies that don't work. That way, the computer would very very quickly reduce it's processing load enormously by simple eliminating billions of possibilities.

This is not bullshit, this actually works, and it's been proven by beating Garry Kasparov himself with IBM's "Big Blue" now a few years ago. At the time, everybody thought a computer could never beat a good human player. You bloody bet it can.
All you have to do is reduce it's processing load.


~Scientist.
 
Just posted this on TheStreet where this decision is taking on a life of its own. As far as I can tell, this has been completely blown out of proportion. I couldn't find any additional CFTC enforcement action on the subject for the past 3 years. ALJs are the judicial babies in the system.

This discussion on the CFTC decision is taking on a life of its own, but it isn't based on reality. The original comments/decision, which were quoted here (and on another board which I suspect both Steven and I lurk upon) was issued in 1997 or 1998 by an Administrative Law Judge (ALJ). This judicial level does not create, generate or contribute to the writing of law. His decision regarding the actions of the particular company were upheld but the TA comments were secondary and minimized in the appeal commentary. This reminds me of the Net panic when it was widely report that the USPS was about to start charging postage for e mail. Here is the link to the 1999 appeal decision.

http://www.cftc.gov/ogc/oporders99/ogcr_wtechnical031699.htm
 
Alan,

Thanks for that link. I thought I remembered that case from a few years ago when the Commission was on a mission to force s/w vendors to register as CTA's. I'm reasonably sure it went on to the Court of Appeals. Not sure where this issue stands now however and I don't have time to research it right now.

I'm not a real big fan of the CFTC but I do support their efforts to prosecute vendors who falsely claim to be profitable traders or who use fraudulent claims to sell stuff. In fact, I think they should routinely order restitution in such cases, rather than let the offenders off with a small fine.

This case and the SEC case that is referenced in the CFTC opinion illustrate one of the iron laws of the federal government, namely that an agency will always act in a manner designed to increase the activity under its jurisdiction. Both agencies wanted to regulate the dispensation of financial advice, the SEC with newsletters, the CFTC via software, despite ambiguous at best statutory justification.
 
ultimately it doesn't matter of course. They can't stamp out all technical analysis without stamping out the markets. Anybody can use any method they damn well please.
 
Same folks trying to 'shut-down' Oscar Goldman and his enterprises - Trader Tech University (TTU) and Vestec (commodity data feeds, graphs, commentary and outstanding TECHNICAL ANALYSIS).

Who are these folks? Whose interests are they serving??

Are we losing our 'freedoms' in the marketplace?
 
Of all markets, the futures market is MOST EFFECTIVE with TA!! Because alot of futures traders trade using TA and thus it becomes self fulfilling!


CFTC should know better!
 
Quote from Jordan:


You are missing the point. A moving average is derived from price and therefore follows price, but it also will act as a barrier to price because it is widely followed. Any stock chart will demonstrate this. Of course your eyes are stuck on the NQ so you might not see it.

You are a fan of trendlines and "properly drawn support and resistance" db. Are you saying that they are inconsistent? No you are not or you wouldn't rely on them as heavily as you do. How many times have you seen price move to a previously drawn S/R or trendline, touch it and reverse? To deny that is to deny everything your trading style is about.
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It's baloney to suggest that any "line" will act as "a barrier to price", whether it is widely followed or not. If that were true, everybody would be following and trading off the same line.

As to being "stuck on the NQ", I traded stocks since '89.

As to trendlines, they don't provide support or resistance either. They show the direction and strength of whatever trend may be in place.

As to "properly drawn support and resistance", if that references previous prices paid, then, yes, it is more likely to provide support or resistance unless there has been a change in the environment, such as an earnings surprise.

It is not enough to say that an MA or a Fib level or a BB provides support or resistance sometimes more or less. Either it does or it doesn't.
 
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