Why do traders talk about TA as if it is physics ?
- Thread starter traderwald
- Start date
make some predictions of the market for the future. let's put that to the test
Fixed that for you.
It is not physics - it is the holy grail.
Seriously, I pay attention to charts but some people are seriously overdoing it. To the detriment of some good indicators, some price action traders deny the validity of certain indicators. Not that indicators alone are the holy grail...
Seriously, I pay attention to charts but some people are seriously overdoing it. To the detriment of some good indicators, some price action traders deny the validity of certain indicators. Not that indicators alone are the holy grail...
Its an understandable error in thinking.
Traders are faced with uncertainty. They need to make decisions with limited information: some of it is contradictory. They look at their previous or non-trading experience for guidance - success in various fields comes from knowing more and more detail. The most successful and powerful professionals outside trading are the people who know the most. They don't make mistakes: meanwhile, all the way from school, we are conditioned to examine our mistakes more and more closely, hoping to eliminate them 100%.
As Mark Douglas used to teach, this is how almost all educational and professional experience prepares us to fail in trading.
Traders are faced with uncertainty. They need to make decisions with limited information: some of it is contradictory. They look at their previous or non-trading experience for guidance - success in various fields comes from knowing more and more detail. The most successful and powerful professionals outside trading are the people who know the most. They don't make mistakes: meanwhile, all the way from school, we are conditioned to examine our mistakes more and more closely, hoping to eliminate them 100%.
As Mark Douglas used to teach, this is how almost all educational and professional experience prepares us to fail in trading.
Yup. Basically, acting like it's certainty is for two reasons:
A) They are promoters rather than traders trying to instill a false sense of certainty in people to get them "trading".
or
B) It's a thought simplification that helps some traders execute. E.g. "we will get a bounce off this resistance level" can help the decision maker execute a system of which that is an entry detail. Never mind the fact it might fail 50% of the time - that's noise to the decision maker (as opposed to the strategist which has to both proactively and retroactively ask if that's a part of a valid strategy - of course traders frequently don both hats).
There's an entire history of technique that is collectively termed technical analysis. Names like Dow, Gann, Elliott, Wilder, Wyckoff, Ehlers, and a hundred more.
TA is a part of markets just like futures, options, stocks, and bonds are a part of markets. It's a way to learn the language of trading. That language is key.
Rally, break, swing, consolidation, reversal, trend, channel, volatility or all of the various candle terminology (I don't even know them). Knowing the lingo is a huge part of gaining any real skill.
Most of it's useless, but some of the best ideas are also in there. Detrending, relative volatility, price action, and volume stuff.
Personally, the best thing I've found is something I made using a bunch of ideas from TA and some higher level math and finance stuff.
It uses a regression differential spread against a smoothed price lag.
TA is a part of markets just like futures, options, stocks, and bonds are a part of markets. It's a way to learn the language of trading. That language is key.
Rally, break, swing, consolidation, reversal, trend, channel, volatility or all of the various candle terminology (I don't even know them). Knowing the lingo is a huge part of gaining any real skill.
Most of it's useless, but some of the best ideas are also in there. Detrending, relative volatility, price action, and volume stuff.
Personally, the best thing I've found is something I made using a bunch of ideas from TA and some higher level math and finance stuff.
It uses a regression differential spread against a smoothed price lag.
Well if millions of other traders are trading based off of TA then TA has relevance. It doesn't matter what you think of the market, it matters what everyone else thinks.