I love TA. We use it all the time to describe things to investors--it is ideal for this purpose.
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Why do traders still use lagging indicators?
- Thread starter TSLexi
- Start date
I love TA. We use it all the time to describe things to investors--it is ideal for this purpose.
Only traders I know that uses order book are scalpers and they usually aren't around in a trade 5mins or longer. In fact, I've recently met a scalper that uses algorithms that uses info from order book.
Algorithm trades usually open and closed in micro-seconds.
I feel compelled to address this, since I've seen this "TA indicators are on Bloomberg, therefore they are a commonly used thing by institutions" too many times now.
Bloomberg is massive. Any individual user will only use 1% of the functions on it. Pretty much any time someone asks for a new function it will get added; they are rarely removed. Hence BB grows larger and larger (and I pity the poor tech support people who have to support this). I mean heck, there's a whole section on BB related to Law (much larger than the set of TA functions). That doesn't mean institutional traders use legal precedents to decide what position to be in.
People are paying $2000 a month not for TA charts that you can get for free, but for the 1% of the functions they actually use and more importantly the access to a large quantity of data in a common feed, plus the messaging services, blotter, and broker screens that are used to organise OTC trades.
So for example in the 10 years I so I had a Bloomberg terminal in front of me I never once used a single indicator plot.
Note this isn't to say that some institutional investors don't use TA indicators (during those 10 years I spent seven working for a hedge fund that used systematic technical analysis; but we had our own software for doing that). And because they're systematic, the charts on BB are at least better than staring at the lines until you can see a rising sword or whatever your stupid pattern name is.
It's just that it's false logic to say that their presence on Bloomberg has any serious significance, or constitutes proof of anything.
GAT
The reason I answered this is to say that I know myself in the 20 years I worked for banks know a bunch of professional traders that did use the indicators and used then on that terminal.
Now implying that any useless option will be added to the Bloomberg just because a traded asked for it.... well I do not know what to say...
It proves those who desire Bloomberg can't get BB without all those indicators.
Proof of something is sufficient to prove a logical fallacy exists within your false proof of logical fallacy ;-)
Thank you for stating your experience at a hedge fund that you indeed did use systematic technical analysis that is also confirmed that other professional firms like Credit Suisse and BNP have traders that used technical analysis although they used other resources for their decision making process with the technical analysis. Unfortunately, there's a group of traders at this forum that have consistently been lying (fanatic behavior) that hedge funds do not use TA and that other institutional financial firms do not use TA. Yeah, many don't use it but some do like the one you've worked at. Regardless, I've been keeping count now...you and wizard are among 15 other ET members that have stated for fact that you used TA while working for a financial institution.
I think its funny that some of the technical analysis awards have mainly been claimed (awarded) to professional institutional traders in comparison to a rarity given to retail traders. Therefore, the question that I sometimes think about is what do the pros using TA have that retail traders using TA do not have ? Only answer I can think of is that the typical retail trader that uses TA is mainly using it alone whereas the professional traders are using other resources with their use of TA in the decision making process.
As to the data vendors like Bloomberg, CQG, Reuters and other top tier data firms...they promote their product via the merits of the data itself and other tools not typically used by retail traders. They don't put much emphasis on their "indicators" that comes with the programs. In contrast, lower tier data vendors put more emphasis on "indicators" in their advertisements. In fact, I once did a comparison between Bloomberg and eSignal. eSignal mentions the word "indicators" 8x more than Bloomberg in advertisements. In contrast, Bloomberg talks about the merits of their data 12x more than eSignal.
I too agree that people paying Bloomberg are using it for other reasons than "indicators" although every person I know...they used the charts to help them make trade decisions. Also, you mentioned their messaging services...a lot of financial institutions were getting too many complaints about what their institutional traders were discussing (e.g. planned positions). They now no longer allow their traders access to the messaging services and that includes not allowing them access to twitter and stocktwits...just do a research on recent manipulations in the FX markets via the biggest institutions on the planet...some of their traders in private chat rooms and private messaging called themselves "the cartel".
A lot of games being played out on twitter and stocktwits. In fact, I recently read in a algorithm trading magazine that there are now algorithms that scans twitter...scary stuff out their being used by professional trading firms and its obviously they're taking notice to twitter and stocktwits to help them make decisions not just about investments and trades...they also pay attention to bad behavior on those social media by any employees (e.g. Deutsche Bank, Citigroup, Barclays fired a bunch of folks from their FX desks due to manipulation.
You definitely do not want your name to get associated in the wrong way within the professional network via social media like twitter.
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TA is descriptive for investors? That's total horseshit! You are flogging them the idea that you're so advanced that you do not implement TA in decision making, yet you choose to show them explanations that depict TA. What total nonsense that is. If you were to lure me to invest by promising a proprietary method, but showed explanations using common charts I would tell you to piss off.
What I don't understand is why TA must be used to describe anything at all if not used in the decision making process. Wouldn't using the methodology employed as the descriptive vehicle be more approriate?
ofc the reply will be "proprietary" and the words "we believe" isn't credible.
This is correct, unfortunately.
Anyone who knows the first thing about it can see that that's laughable, of course, but I suppose they do so in some sort of attempt to influence those who really don't. Anyone who has ever actually been on the trading-floor of any financial/trading institution appreciates that the claim that "institutional traders don't use TA" is pure nonsense.
Meanwhile, the conversation in this thread is suffering in places from a (customary around here) confusion between "TA" and "indicators", obfuscating the reality that plenty of useful TA has nothing to do with indicators at all.
I happen not to use indicators, myself, but all my trading is heavily TA-determined.