This really doesn't prove anything. For one this company experienced sustained growth over most of this time period. Try the same system on a company that went out of business, or better yet backtest your system on all the US stock data and see how it fares. I'm suspecting not very well. I can pick the worst system in the world, but I bet if I tested it out on Microsoft since their inception I would have made a lot of money. I think the key to proving a system works is by testing it in suboptimal conditions.
"Why Technical Analysis is Nonsense"; Views?
- Thread starter Trend Following
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This really doesn't prove anything. For one this company experienced sustained growth over most of this time period. Try the same system on a company that went out of business, or better yet backtest your system on all the US stock data and see how it fares. I'm suspecting not very well. I can pick the worst system in the world, but I bet if I tested it out on Microsoft since their inception I would have made a lot of money. I think the key to proving a system works is by testing it in suboptimal conditions.
I disagree here because you are expressing the type of system you like versus the type of system he likes.
There are many profitable traders that ONLY trade one trading instrument and nothing else.
Therefore, they do not need to prove anything concerning other markets they don't trade.
However, if they do plan on applying their method to other markets than they obviously need to show to themselves that it still works in other markets.
In addition, the best traders (consistently profitable) know when to apply their method and when not to apply their method because they have a strong understanding of the market they are trading.
For example, lets pretend you are using a trend following system and you know your system performs poorly in range like market environments.
Further, lets pretend you have a strong understanding of the price action you are trading.
Thus, when your trading instrument is trending...apply your trend following method.
Then when the your trading instrument is range bound...stay on the sidelines or whatever.
Therefore, that type of profitable trader could care less if his system doesn't work in range bound markets because he/she isn't applying it in range bound market conditions.
However, those that want to use a system in different types of market conditions...
Yes, I strongly agree with you when you said that the key to proving a system works is by testing it in suboptimal conditions.
Simply, test it in different types of market conditions (e.g. bull, bear, trend, chop, range, high volatility, low volatility et cetera).
In fact, traders that have a strong understanding of the price action along with knowing what type of markets their method performs well and what types of markets their method doesn't perform well...
They can exploit this knowlege for consistent profits.
Therefore, if he's only trading MER and knows what type of market condition his system performs the best in while trading MER...
There's no need for him to prove it works in other markets he doesn't trade nor prove it works in market conditions he avoids trading.
I'll say it again...
Its an edge to be able to exploit the weakness of your method because you know what not to do to allow you to continue making profits while others try to design a holy grail like system...
One size fits all.
My point is that profitable trading isn't all about the entry signal nor about a method that is one size fits all.
To understand the above statement and apply it will allow you to be a consistently profitable trader while others are running around worrying about markets they don't trade (you don't trade) or looking for a method that performs well in all market conditions as in one size fits all.
Thus, to not understand the price action you're trading...
Your entry signals will have a tough time avoiding drawdown periods because you won't have the ability to see a punch coming sort'uv speak.
The goal is to be profitable...not a genius.
P.S. I'm a price action only (no indicators) trader that uses TA along with other stuff.
Mark
Quote from Worldcrusher:
Here is a pertinent quote from Marty Schwartz regarding TA:
âI always laugh at people who say, âIâve never met a rich technician.â I love that! It is such an arrogant, nonsensical response. I used fundamentals for nine years and got rich as a technician.â
So there is at least one!
May the Schwartz be with you.
Sincerely,
Daryl
the art world has van gogh, picasso, and da vinci----can't compare them to the millions of "artists". same logic applies.
best wishes,
surf
Let's break this chat down to step by step statements of TA beliefs:
fact #1. TA is an illustration of the past by definition
fact #2. TA true believers "believe" they can determine future price movement by studying the illustration of the past.
am i correct thus far and if not, what am i missing??
surf
fact #1. TA is an illustration of the past by definition
fact #2. TA true believers "believe" they can determine future price movement by studying the illustration of the past.
am i correct thus far and if not, what am i missing??
surf
I chose Merrill Lynch stock symbol MER and Countrywide Financial stock symbol CFC because they are in the news lately. I am surprised that all the stochastic variations listed show profitable outcomes but that is how it turned out.
I thought rather than arguing about if TA is nonsense I could code the stochastic indicator, run some tests with historic price data and observe simulation results.
I thought rather than arguing about if TA is nonsense I could code the stochastic indicator, run some tests with historic price data and observe simulation results.
allow me to ask a specific question:
am i correct in believing, that you believe that all TA other than your specific method is hogwash--primarily due to the non specifics of the "environment" to use your term.
surf
I do not believe that I predict the future. I construct a financial check valve, similar to a heart valve. The valve allows money to flow mostly into my account and occasionally only a little bit out. When money flows in the profitable direction the valve opens (I enter my position). When money flows out of my account the valve closes (I exit my position). No prediction of the future is necessary.
You are way off. "belief" has little to do with trading, even for TA traders. It usually deals with statistical edges.
"An illustration of the past."-You are technically correct, but all things and lessons learned in life are "illustrations of the past." But not illustrations in visual terms, but in data terms. If in real life eating at a bad Mexican restaurant and having diarrhea an hour later have a high correlation, then the logical response is to stop going, and not say everything was random. The method of life is to see what has worked in the past and repeat it. Nothing changes when working with capital markets.
Your main problem with attempting to dispute TA is that you are attempting to frame your argument against the worst characterization of TA. If your claim is "successful TA does not exist" ,it is impossible to prove a negative, and only one example is needed to prove your claim wrong. Some people use discretionary chart-based TA, others use statistical mechanical TA. The smartest people are not talking on internet forums. I know for a fact that extremely exhaustive and intuitive TA systems exist with very high expectancies.
Statement #1. TA is an illustration of the past by definition
This isn't fact by the sheer and pure definition of Technical Analysis. This is your opinion. Analysis of techincal data first, is the research and dissemination of data from the occurances of action, oscillation and movement in price and indicators on that environment.
The research is only as good as the research environment.
The optimum of any test is to do it in a controlled environment. That means a non varying stable environment.
Second, the data that is created by that research is then combined and checked for consistency and accuracy. Take a picture with a camera with oil on the lens and you will see the same pitcure as a shot with a clean lens but with a whole lot less clarity.
Statement #2. TA true believers "believe" they can determine future price movement by studying the illustration of the past.
TA practitioners make informed intelligent decisions based on the confidence they have after seeing and applying occurances that repeat with great consistency in the price action of tradeable markets. This is something we teach ourselves through successfully trading highly repetative oscillation occurances. Some practitioners utilize a higher repetative technique than others but the main idea is to have utter confidence in their choices.
You can't fathom the existence of such a method because you will never personally test it and you have to, in order to understand it.