"Why Technical Analysis is Nonsense"; Views?

[marketsurfer]

Quote from Trend Following:

I am curious to see the diversity of opinion about <a href="http://seekingalpha.com/article/59187-why-technical-analysis-is-nonsense">this post</a> from the "Prince of Wall Street".

i have a direct contribution to make, not to the article however, but rather to Mr. Covel's writings in response to the the article, namely the predictive v reactive statments.

Mr. Covel appears to believe that "reactive TA" is somehow different than "predicitive TA". I am confused by this-- as ALL TA is MUST BE predictive, otherwise what value would it have? Reactive is predictive as to the future move occuring after entry.

All TA must also be reactive, as one is reacting to something prior to entry, no entry trigger would exist otherwise.

I am predicting that Mr. Covel will counter with its the change in trend that is being reacted to by entry--this makes no sense in a future "predictive" sense as one doesn't know that the change in trend will continue after entry.

Thank you,

surf

 

[powerfade]

Quote from marketsurfer:

interesting POV. actually its the direct opposite, and im confused with your statement.

TA is not quantifiable, nor math based. it is subjective art form that allows for numerous interpretations of data---where as quantatative methods are math based providing for one result.

As long as we're being all didactic, it's quantitative, not quantatative. Too bad that 'i' is so far from the 'a' or you could claim fat fingers .

Let me guess. You're a Malkiel fan, right?

The myth that quantitative methods 'provide for one result' has certainly resulted in some spectacular blowups, from LTCM on.

With regard to the claim that TA is art - sure, I'd agree with that to some extent, but it's basically analytical. TA not math based? Does any of this look like math to you?

http://en.wikipedia.org/wiki/Moving_average

The practice of mathematics, at its highest level, involves creativity. So does art.

 

[toc]

Give even a nonsense to winner and it will be turned into a pot of gold.

If TA was nonsense, it would have been totally discarded long time ago.

 

[marketsurfer]

Quote from powerfade:

As long as we're being all didactic, it's quantitative, not quantatative. Too bad that 'i' is so far from the 'a' or you could claim fat fingers .

thanks for correcting my moronic spelling error. i should know better than to post while sleeping.

i'll address your cogent points soon.

best,

surf

 

[whitster]

"TA is not quantifiable, nor math based"

false. some is, some isn't.

there are plenty of systems, for example that are completely quanfitiable (and quantified).

personally, i almost never trade SOLELY on TA (and i don't use any indicators for my TA), but it's part of what i look at in the short term.

i don't use any setup with real money until i've extensively tested it. so, some TA is most definitely quantifiable.

i've made some (longer term investments) without even considering a chart. others (an intraday scalp that lasts under 5 seconds) is almost exclusively TA based.

TA is just a tool to model order flow over time.

 

[HedgefundTrader2]

Quote from Trend Following:

I am curious to see the diversity of opinion about <a href="http://seekingalpha.com/article/59187-why-technical-analysis-is-nonsense">this post</a> from the "Prince of Wall Street".

Technical Analysis is the heart and soul of any trading system. I make a living out of it and it never fails me. Short Term traders cannot do without Technical analysis. Fibonnaci retracement, trendlines, support and resistance they are for real.

 

[toc]

'Technical Analysis is the heart and soul of any trading system.'

Agree, TA can be very valueable if cultivated with thorough research and followed with discipline.

 

[Bitstream]

surf can always claim to have been creative and use the latin neutral plural of 'quantum', that is infact: 'quanta'. lol

Quote from powerfade:&#10;&#10;As long as we're being all didactic, it's quantitative, not quantatative. Too bad that 'i' is so far from the 'a' or you could claim fat fingers

 

[crgarcia]

To start with who is him?

Warren Buffett, George Soros, Jim Simons, Paul Tudor Jones, etc. All they use his real name. The Wall Street community calls him Prince? No he calls himself!

A prestigious college? Which one?
http://seekingalpha.com/author/prince-of-wall-street
A gmail address? My god!

Hedge funds don't use charts?
To start with, you show some simple charts to your clients, to get their approval (and their money).

Fundamental analysis almost never gives exact entry and exit points, in a hedge fund, having losses extending for some months, would mean clients withdrawing their money.

You cannot blame market conditions, you're supposed to be able to profit in bull and bear markets (or at least stay in cash and earn modest money market interests).

Don't hear what a self proclaimed, anonymous "Prince" said; hear what Paul Tudor Jones said: "technical analysis made way over half of my money..."

 

[crgarcia]

"If a portfolio manager calls or meets with an institutional investor and tells them they are going to employ technical analysis, the institutional investor is going to laugh or hang up."

Again, wrong.

They would actually ask for past performance, then you show some simple charts.
Not for an in-depth analysis, they just want to see that the chart resembles more or less an uptrend, just to sleep easily at night.