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

[torero]

	Quote:	dalby
	kiwi, great post. i think that puts it very well btw, i can't understand people who won't hold a stock for more than 2-3 days? there are so many wonderful INVESTMENTS out there. sure, i scalp YM for a living, but i INVEST for the longterm.

I don't trade stocks, it's why my holding is no more than 1 week. If I did trade them, it would be a better way to longer term. I gave up stocks a while back ever since I found eminis and cannot devote enough time to do all the homeworks (scans, calendar of earnings, etc).

[walterw]

	Quote:	Horus
	What is price driven by then? Its not driven by price itself!! Its driven by technical, fundamental, emotions and news. I dont even need to look at the price of SP to trade it... Nor do I need the volume. So I guess your assumptions are not entirely true. OddBall System is proof of the fact that you do not need to look at charts to predict direction in a consistent manner to make money. Overbought and oversold (Bullish/Bearish consensus) conditions do exist, and are driven by fear and greed. Emotions and news drives price which cause these conditions. And can be measured to an extent which provide a statistical bias one way to other. Price is an important factor in any analysis style, however not key to making consistent profits and Profits are the goal of any trader. (at least it should be!!)

Horus : can you explain what the odball does, never heard about it, thanks Walter.

[Anonymous]

	Quote:	Kiwi
	Awwww commmonnn ... the facts are getting fuzzy as hell. "Technical are derivates of price and can not therefore drive price. They are calculated on past prices so how can they lead future price?" Rubbish (to Horus too). Price can drive price (and thus so can derivatives of price) ... see the typical overreaction in the marketplace ... that's not just driven by fundamentals and news, its frequently driven by peoples reactions to what's happening to price. "This is especially evedent in the indecies, where no contract is made until a buyer and seller come together." Presumably you mean in futures contracts based on the future value of indexes. Still wrong really. Sure you need a buyer and seller (of kinds) to create the contracts in the first place but most day to day trading doesn't require the creation of new contracts. "We ask 10 people if they are bullish. They all say yes and they are long. Well, there is a bear on the other side of the trade (the seller). Therefore the amount of bulls and bears is equal." Here we go again. Frequently in a market move up the buyers are bulls but the sellers are not bears ... they are people who went long at a price they perceived as value and are now unloading positions for a profit. So they are hardly bears and in fact after a pull back and the re-establishment of value may be active bulls again. Come to think of it, substantial elements of an up move are driven by bears who sold too early and are thus buying back contracts as cascading stops are smashed. They may still be bears, just bears in pain. There's more but that's enough from me.

And the sun doesn't actually rise: the earth rotates. lol

True, during a day you can have one new bull enter the market and the seller can be already long, but liquidating. BUT THAT TRANSACTION HAS ONE BUYER AND ONE SELLER.

The market will bring them together at a point where their disagreement on value is at an agreed upon price. Therefore every price will be valid and has two sides. Hence No overbought or oversold condition can exist.

Since all prices are valid, as each party in a two side transaction are willing to do business at that level, markets can not overract.

Anybody that says the market is overreacting (to the upside) is saying "price has move further than I thought it would". Or, "I am short and getting my a** handed to me".

Like you said , a new contract is not necessarily created on every transaction. But every transaction has two sides and so a new buyer still has to be let in by a seller. Now if the seller is not a "bear" as you posit, then you only further prove that Bullish/Bearish consensus does not exist as it is would not correctly reflect market reality. That is: two bulls here, but only 1trade made so the market is still equal from the standpoint of 1 buyer and 1 seller.

[Kiwi]

PivotProfiler,

You are anthropomorphising the the market and imposing your beliefs on it. So your first statement of your beliefs does appear representative of you market views as well: "And the sun doesn't actually rise: the earth rotates."

Please come and trade the HSI some time.

[Thoth]

	Quote:	walterw
	Horus : can you explain what the odball does, never heard about it, thanks Walter.

im not hourus and im not an expert on the oddball system but i can tell you that the guy who published it proved beyond a doubt that you dont need the price of the sp to determine buying and selling the sp.

the oddball somehow uses the advancing issues of the nyse to predict buy and sells on the sp. i never traded it myself but for two years the thing made zillions in real time on a free web site where the trades were for anyone to use.

active trader magazine has back articles on it and you can look on the web i think there are some postings as well on a second oddball system he published latter in the same magazine. i am serious when i say the system predicted the sp moves, it was amazing. then one day the web site was gone and the guy disappeared.

Thoth

[walterw]

well no rocket cience, that would be timing entries with an internal.... lot of people trade that way.... any way can get tricky.... think internals should only be a backup analisis....

[TheBramble]

	Quote:	walterw
	Horus : can you explain what the odball does, never heard about it, thanks Walter.

Just finished reviewing the system so I'll jump in if that's OK.

You work with the close on the the hourly of the Advancing Issues (NYSE) data with a 7 period (7 trading hours) ROC. It's an 'always on' system in that you're always in the market (which disqualifies it immediately from my toolkit).

According to the published details, you review and potentially take a position every hour, which indicates potential pyramiding, but elsewhere it refer to a 'constant number of conteracts' so I guess I'm reading that part incorrectly.

Where the RoC on the Advancing issues is greater than a 3 percent increase, you close any short and take a long.

Where the RoC on the Advancing Issues is less than a 1 percent increase, you close any open longs and take a short.

It is suggested you use the S&P futures to allow the NYSE close Advancing Issues data to be utilized on that day in the futures.

It has performed well and it has perfomred badly on my back-test review. Pretty much the same as my randon coin toss system has.

YMMV

[torero]

I think stop-and-reverse strategies (always in the market) tend to have very high drawdowns. Although using a Advancing/Declining Issues is a not a bad tool, it's different than the typical indicators (stochs, MACD, etc).

[Horus]

	Quote:	walterw
	well no rocket cience, that would be timing entries with an internal.... lot of people trade that way.... any way can get tricky.... think internals should only be a backup analisis....

The rocket science is using internal data without ever looking at the emini data at all! This is the first ever application of internals in this format which was disclosed to the public.