Technical Analysis: Is it voodoo? Or does it work?

[walterw]

dalby : I think that what Soul wants to mean is that TA by itself its meaningless.... the market performance as he call it " price is king" is the true reality and TA its just a way of looking at it... thats what I understand as the spirit of the thread... cheers Walter.

[dalby]

"My biggest question is this: do technical analysis work when day trading the futures markets? From my personal experience specializing in the dow mini futures, the answer is no. Let me explain"

that's what i'm responding to. that's a pretty clear statement. he said TA does nt work when day trading the futures market. then, goes on to say how it DOES work - iow, contradiction.

fwiw, the study of PRICE is TA.

if ALL you are watching is tape (the purest way to see just price and nothing else) no charts, no indicators, etc.

that's TA

pivot points, support/resistance, etc.

TA

[walterw]

yes probably we would get into a stupid semantic discussion of what is TA .... now being an indicator junki and not understanding what the market its doing would be the negative TA interpretation, as being wise of what the market does and use a pair of good sound tools would be the positive TA interpretation... I think we all agree with that... put the name you more like it... but thats the lesson here... cheers Walter.

[Kiwi]

I'm with dalby.

Most arguments against TA are generated by first defining TA in some limiting way. And said limitations are almost always as wrong as they are convenient to the arguer. Now James's offence is less egregious than usual but he's still doing it. Bad boy Soul.

If its based on price or price an volume or some combination of these then its technical analysis.

FWIW I trade based on Price alone using a couple of mas as a prop to help me see what longer time traders perceive as recent value in a trend. No volume. No market profile. No volume at bid/ask. No reading action on the dom. Just nice bar charts with a couple of mas to prop up my sense of current value. It works on usindexes, commodities, bonds, estx50, bund, eurfx, nikkei, kospi and that fiend that would have pleased fu manchu, the HSI

[dalby]

i hate semantical wanks as well

i see a lot of people who use TA (especially market profile) want to distinguish THEIR form of TA (the alleged scientific non-voodoo kind) from other TA

the simplest way to look at it is - if it's not fundamental analysis - it's probably TA

and if it relies on price, or any derivative of same - it's TA.

thus, market profile is TA (although most MP users hate to admit that) etc.

fwiw, i love TA. and i trade the dow minis intraday

i also love fundies. i have bought some investments without even looking at any charts whatsoever.

but i would not do that with an intraday futures trade, needless to say

[brownsfan019]

	Quote:	dalby
	i hate semantical wanks as well i see a lot of people who use TA (especially market profile) want to distinguish THEIR form of TA (the alleged scientific non-voodoo kind) from other TA the simplest way to look at it is - if it's not fundamental analysis - it's probably TA and if it relies on price, or any derivative of same - it's TA.

I didn't realize certain types of traders using some form of TA argue that 'their' form of TA is not actually TA. Makes no sense to me whatsoever. If you are using price, some form of charting, and some analysis that does not look at market fundamentals, that's TA as far as I am concerned. It's either TA or FA, right? So, unless you are reading company reports, checking PE ratios, etc. you are using TA.

[dalby]

brownsfan, it is pretty common out there in the wild regions of the internet. of course here, on this exalted board, it is a lot more rare.

[Anonymous]

Before I get into the meat of the discussion, I would like a few terms DEFINED:

1. WORK : A skillful trader can throw darts at a dartboard and win 2 times out of 10, but if wins 10x as much on the winners as he loses on the other 8, he is break even. Now break even may not be "working", but there are other forms of TA that produce 7 winners out of 10 and the users LOSE money.

So let's first define WORK.

2. TECHNICAL ANALYSIS : Do all things NOT fundamental fall into this category? Market Profile may in fact fall outside our definition of TA. Moon phases are not fundamental, but should that method be placed in the same area as Volume Spread Analysis?

3. FUNDAMENTAL ANALYSIS : Management teams, account balances, position within a certain industry, domestic economy, interest rates, run rates, weather. These are fundamental factors, correct?

Although we first need to define TA: It is the fundamental tenant of Technical Analysis that EVERYTHING THAT IS KNOWN IS ALREADY REFLECTED IN PRICE. PRICE IS REALITY. Crop reports, GDP, the FED, all is ALREADY baked into price.

Auction Market theory would state that the sole purpose of the market(S) is to find that place where there is an agreement on PRICE and a disagreement on VALUE. Here Value does not refer to the Market Profile notion of Value Area.

ex. Trader 1 values the money he can get now more than the beans he has. Trader 2 values the beans more than the money he now has. Both traders disagree about value and the auction process will find the appropriate price.

but I'm getting ahead of myself................... .

[weiwei]

My experience on trading with TA indicators is this.

On swing trading,(using of daily chart, holding of more then 2 days). TA with price derived indicators do work, but a lot of work to find the right fit for the right market. I do have a few swing trading systems which are doing very well base on TA.

on Intraday trading: Lagging indicators, such as RSI, CCI ect, has not been working for me. Only after I switch to "Now indicators",(tape, Volume with price, inter-market relationships) market starts to make sense for me and my trading become stable.

weiwei

[dalby]

market profile does NOT fall outside TA

all market profiles are is a model of price/volume over time

which is exactly what ANY chart is. its just a different way of modeling it

this is what drives me nuts is this ninja superspecial religiosity when it comes to Market Profile and that it's not TA like those icky lagging indicators etc.

TA is the study of price, and information derived from price

clearly, no equivocation, MP is TA

2nd. i get really tired of this stupid meme that TA means EVERYTHING that is already known is reflected in price. that is complete and utter rubbish.

you can CLEARLY get an edge using fundies, just like you can with TA. *if* all knowledge was reflected in price, this would not be the case.

i love TA. i make my frigging living using TA. but i don't play that silly "all information is reflected in price" game cause it's simply bogus

enough information is reflected by price, such that skilled traders can use TA (the study of price) TO trade successfully.

it does NOT follow that all is reflected in price.

i have made my best returns this last year using fundies, where i did not even look at a chart. because my edge (in those stocks) came from fundamentals.

there is this little academic myth called efficient market hypothesis (still the rage among many academics) that markets are efficiently priced. it's rubbish

there is this other myth popularized among many TA adherents, that ALL information is reflected in price.

this is ALSO rubbish