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Old 05-23-2012, 01:38 PM   #1

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TA Debunked

The cult of technical analysis and day trading seems to grow and grow. The Web is crawling with technical analysis (TA). Tax changes have created a boom in spread betting, and hundreds of courses have sprung up to teach traders to read short term 'technical' chart set ups. All of this - coupled with the ongoing use of the terminology by market commentators and practitioners - may make you wonder whether technical trading rules are profitable and worth using in your own investing? Given its popularity, is there something to all this TA, basically?

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Old 05-23-2012, 02:42 PM   #2
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Re: TA Debunked

All interesting .....but its a bit of a tired old argument (like passive v active investing, EMH) with each side pushing their barrow.
It rather simple IMHO - you use the best tools - and thats all they are, that are available to you at the time. Whether its fundamental analysis, or technical analysis, or quant analysis.

FA is debunked a lot as well, especially when it comes to most people, as they dont have the resources, time, knowledge, patience, funding, ability to tell if the accounts and management are lying etc; etc.

I have not got any on me, but there are plenty of reports to show if you look at the fundamental calls most research analysts make they are pretty much similar to technicians - win some loose some.

There is more to this game than analysis, and number crunching.
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Old 05-23-2012, 03:06 PM   #3

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Re: TA Debunked

Might not work if your analysis looks like this (from the comments under the op's link
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Everything to the left on your chart is free information

EVERYTHING hidden in plain sight is the smoking gun TRUTH
Open your eyes, see the LIES right in front of you.
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Old 05-23-2012, 05:44 PM   #4

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Re: TA Debunked

The funny thing is, in the final section of the text the author admits that TA works, as it will help with "timing of investments" and "understanding why a stock moves"... well, that's enough reason for me to use mainly TA

Also, it is not true that empirical evidence for TA is negligible. There are many well-known equity market anomalies which are recognized by efficient market theorists (that's why these are called "anomalies").

Though, I agree that the right, i.e. profitable, application of TA is more art than science. Hence, it is difficult for some to grasp.

By the way, in the first Market Wizards book there was - as far as I recall - only one pure FA guy (J. Rogers) and he had such a long investment horizon that timing was almost irrelevant (> 2 years in most cases). The rest were all TA focused guys. That says also a lot.
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Old 05-24-2012, 08:51 AM   #5

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Re: TA Debunked

Just different sides of a coin really. Focusing and choosing to prefer once side over the other helps to get at the very root of what deludes most traders. Isn't the ultimate goal to figure out the core (fundamental) aspects of what drives the market, then see what entries and exits (technical) can allow us to best extract profits?

We assert preferences to the market, and attach ourselves very heavily to these preferences. As long as you get to the end goal, and can duplicate the results, does it matter what adjective we use to describe the process.

edit: see new post

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Old 05-24-2012, 09:01 AM   #6

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Re: TA Debunked

This is an age old argument but I would take TA on a monthly and weekly chart over any crap most fundy analysts come out with.

Get the bias from those high time frames trade the m15 using that bias.
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Old 05-24-2012, 09:11 AM   #7

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Re: TA Debunked

followup: the article point number 2 (Reason 2: Empirical evidence for TA is negligible) confirms what former Turtle Trader Curtis Faith emphasized that, besides ensuring the entire process of trading was mechanical (and therefore objective, testable, measurable, etc), position sizing is the most important aspect that the user has under their control. Not spending countless hours on predicting the best point of entry.

I eventually got the hang of this, and developed a spreadsheet to assist in formulating a proper money management strategy; one that can handle all market conditions according to the size of my trading account.
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Old 05-24-2012, 10:11 AM   #8

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Re: TA Debunked

"But if there is, it's escaped the attention of any rigorous academic study on the topic that we've come across, especially for stocks."

Didn't bother reading beyond this line.

Academics don't live in the real world. If they can't measure and quantify something, in their minds it doesn't exist.

My trading account says otherwise. Many others as well.
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