What is Real and What is Not in Technical Analysis

[TheDude 10]

This guy has something to say about charts too (jest....)

 

[DbPhoenix 42]

DBP - you seem to look at everything as either TA or FA.

 

There are other ways of looking at the market, especially for a day trader.

 

Take a look - traders at work. Note they have some charts in the background, but they are not the focal point of what they are looking at.....

 

I don't suppose there's any point in my saying this again, but charts are not TA. Charts are a tool. TA existed long before charts. The videos you've posted show guys following price in the context of demand and supply. That's basic TA. Your choosing to define it some other way doesn't make your definition true. At most, it makes your definition one of at least three, one of which you find useless.

 

And, yes, it's either TA or FA, even if one is following one or the other by proxy, such as a newsletter. If you've found some other way of assessing the market, please explain.

 

Db

[zdo 20]

TheDude,

 

re:

"Take a look - traders at work. Note they have some charts in the background, but they are not the focal point of what they are looking at.....

 

...and

 

This guy has something to say..."

etc.

 

TA is when a trader opens a chart or other visual* representation of a tradable instrument and then makes a trade decision based upon any information they get from that representation

http://www.traderslaboratory.com/forums/markets/14627-what-real-what-not-technical-analysis-2.html#post165971

 

Still not clear what you're arguing about.

 

You said that.

Thx.

 

 

 

 

 

 

 

 

 

* or auditory... or vibratory :rofl:

[TheDude 10]

This is the issue folks -

 

You guys seem to insist on calling *anything* TA. Even fundamental info is now TA to you folk.

 

DBP makes me laugh when he now claims reading order flow off a DOM is now also TA. I think he may be losing the credibility he spent so long building up pretty quickly saying things like this.

 

This I believe is simply because most here insist they must be right, so they move the goal posts to include *everything* to come under their umbrella of definition so they can never be called out.

 

It's like some phoney religion or cult.

 

Freud had a similar strategy: I'm right, and if you say I'm wrong, then that also shows I'm right as it really means you're in denial.

 

Nice try.

 

Please folk, do get a grip. TA is charts. TA is drawing silly lines on those charts, shapes etc. It isnt fundamental info displayed in graphic format etc.

 

If I read an e-mail with some guys opinion of the markets, that isnt TA. This post is not TA.

 

I can only assume the only reason some here want 'everything' to be included as TA is because they have realised TA doesnt work, so rather than slaughter their sacred cow, they move to something else, include that as TA so as not to lose face or something.

 

No wonder success eludes most here.

[johnw 10]

Definition of 'Technical Analysis'

A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.

 

Read more: Technical Analysis Definition | Investopedia

[DbPhoenix 42]

And the definition of Fundamental Analysis, also from Investopedia:

 

A method of evaluating a security that entails attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors. Fundamental analysts attempt to study everything that can affect the security's value, including macroeconomic factors (like the overall economy and industry conditions) and company-specific factors (like financial condition and management).

 

The end goal of performing fundamental analysis is to produce a value that an investor can compare with the security's current price, with the aim of figuring out what sort of position to take with that security (underpriced = buy, overpriced = sell or short).

 

This method of security analysis is considered to be the opposite of technical analysis.

[johnw 10]

And the definition of Fundamental Analysis, also from Investopedia:

 

A method of evaluating a security .................................................

 

I wondered who would be first to post FA Investopedia .... it was a 50/50 call as far as I was concerned

[zdo 20]

TheDude,

 

 

I can only assume the only reason some here want 'everything' to be included as TA is because they have realised TA doesnt work, so rather than slaughter their sacred cow, they move to something else, include that as TA so as not to lose face or something.

Thanks. I’m kinda slow but finally getting it.

To you - "TA is charts" (with maybe some extra squigglies and lines)… a rather narrowed ,neurotic (according to Sigmund :razz: ) definition

To us, TA is charts - plus “other tools” , other representations (visual and beyond) of information to include ticker tapes, doms, etc etc. with which to make trading ‘decisions’…

For most I think you'll find it's more a matter of being as inclusive and realistic as possible, instead of "moving on" to protect a cow

 

If I read an e-mail with some guys opinion of the markets, that isnt TA. .

...actually, some guys opinion is TA... it's a very small statistical sample.

 

This post is not TA.

... because it provides no information with which to make a trading 'decision'.

Edited November 13, 2012 by zdo

[DbPhoenix 42]

I wondered who would be first to post FA Investopedia .... it was a 50/50 call as far as I was concerned

 

Well, it is pretty basic Trading 101. I'm sure whatever beginners read this thread will be able to determine what has a link to reality and what does not.

 

Which I suppose brings us full circle back to the OP, more or less.

 

Db

[johnw 10]

Well, it is pretty basic Trading 101. I'm sure whatever beginners read this thread will be able to determine what has a link to reality and what does not.

 

Which I suppose brings us full circle back to the OP, more or less.

 

Db

 

Most probably.

If each of us can devise a means of moving the uncertainty of trading in our favour then

we should call it what we want, since trading is as much about managing freedom as it is about managing uncertainty.

I call my approach 'the family pet' since it seems to offend almost nobody and induces a sense of humour ...

[DbPhoenix 42]

Most probably.

If each of us can devise a means of moving the uncertainty of trading in our favour then

we should call it what we want, since trading is as much about managing freedom as it is about managing uncertainty.

I call my approach 'the family pet' since it seems to offend almost nobody and induces a sense of humour ...

 

I agree, and perhaps one of the reasons why gurus tend to come up with such cutesy names for their setups (another is to give potential subscribers the impression that the setups are something new).

 

But there is also the issue of communication. I've seen threads go on for hundreds of posts without anybody ever troubling to define just what it is they're debating. But if one has no interest in communicating with anybody else, he can call what he does glommitching, and who's to argue?

 

Db

[johnw 10]

I agree, and perhaps one of the reasons why gurus tend to come up with such cutesy names for their setups (another is to give potential subscribers the impression that the setups are something new).

 

But there is also the issue of communication. I've seen threads go on for hundreds of posts without anybody ever troubling to define just what it is they're debating. But if one has no interest in communicating with anybody else, he can call what he does glommitching, and who's to argue?

 

Db

 

The fact that so few people have the capability to define themselves has more to do with social conditioning than stupidity IMO but there is only a very fine line of separation.

 

This being the case then all that weakness needs to be knocked out of them before they can proceed, but of course it never happens and this in turn leads to the sometimes hilarious posts that TL provides.

 

But all jokes aside, the first step in retail trading is to define and master freedom.

The first taste of freedom for most people is the freedom to become lost and rather than identify this challenge and address it, they discover the welcoming bosom of TL and all it's anonymity.

Their game is over before it has even started.

 

God, who I am convinced, has a wicked sense of humour, gave Retail Traders PCs to assist them in their daunting task, and at the same time created Trading Forums to further tilt the playing field against them without being caught red-handed in doing so..

 

The rest is history I am very much afraid ... in no time at all the Forums were ring fenced by shanty communities of Vendors all pitching their wares in the blind hope that they could eke out a living without having to go near the markets they so fear.

 

Mind you if you thing that trading is weird how about the situation facing the US.

 

US Voters chose the Candidate who they felt would treat them most kindly and gently over the next four years.

To hell with the reality facing the Country .. that sort of rational did not suit the majority and so they reshaped their rational to suit their emotional needs/desires.

Should all prove interesting to watch.

 

In defense of Trading Forums ... everything a person needs to become a successful Trader is right here

[SunTrader 10]

Science is the great antidote to the poison of enthusiasm, superstition and TA.

—Adam Smith

 

(BTW - he was talking about my definition of TA, not yours!!)

 

That is obviously your definition of Adam Smith.

[bakrob99 11]

I wondered who would be first to post FA Investopedia .... it was a 50/50 call as far as I was concerned

 

Was that 50-50 determined fundamentally or technically?

[bakrob99 11]

... In defense of Trading Forums ... everything a person needs to become a successful Trader is right here

 

nicely hidden behind everything that will make them unsuccessful. The ability to determine the difference between the 2 is the "holy grail".

[johnw 10]

Was that 50-50 determined fundamentally or technically?

 

 

Fundatech .. I used Fundatech.

 

When you don't know FA about TA and when TA merges with T&A, try using Fundatech.

 

I am considering offering it for sale.

I owe it all to DbP when he mentioned "give a system a cutesy name" and it is as good as money in the bank

[johnw 10]

nicely hidden behind everything that will make them unsuccessful. The ability to determine the difference between the 2 is the "holy grail".

 

Yes ... I think that People should learn market structure to begin and then there is a chance, just a vague chance, that they may realise that price did not begin as a graph, let alone a candle or a bar.

 

This may just help them appreciate all the decisions they must undertake before they load the pretty red line onto a candle, bar, line, tic, vol, range chart ... and all this assumes they have decided to trade from graphs

[SIUYA 10]

Here is an interesting article that is very topical - i will also post it in a few other threads - for those who miss it.

 

DeMark Fibonacci Charts Embraced by Steve Cohen Lure Investors - SFGate

 

More so for the the diverging comments from quants - the headline article is not the whole story

[SunTrader 10]

Diverging? In what way.

[SIUYA 10]

Diverging? In what way.

 

some of the quants that have used prices in their analysis distancing themselves from TA, and while the article points out that its about the 'golden mean' the basis for most of the data they all use is the same. .....neither uses FA, and each of them will argue there is value in their analysis..... that is all. Personally I have a broad definition of TA and most quant stuff seems to fit into that IMHO. I was put onto the article from another forum that found the distancing (maybe diverging was the wrong word) interesting.

[johnw 10]

“One of the strengths of technical analysis is that it captures sentiment,” says Lo

 

I can relate to this, but I must admit I have never had much luck with fixed inputs such as fibs, 4 or 9 or 18 ..... but I do believe in 50% of a significant channel, because I see it several times every day.

I can't help but wonder if 38.2 and 61.8 are nothing more than an over-run of the 50% line.

As for the 200 day line and the 50 day line, they are too large for me to take an interest in.

 

Our minds are always seeking relativity and we need to be aware of this.... many is the time that we identify relationships that may be close, but they do not stand up to accuracy tests ... fractals in time frames being a classic IMO .... the relationship between TFs may be almost fractal, but that is as close as it gets.

 

The golden ratio may well occur in nature and we may very well carry it forward into architecture because it proves to be both structural and pleasing on the eye, but I cannot make the leap from this into Trading.

 

However the litmus test as always is ... are they making good consistent money from their trading

[SunTrader 10]

some of the quants that have used prices in their analysis distancing themselves from TA, and while the article points out that its about the 'golden mean' the basis for most of the data they all use is the same. .....neither uses FA, and each of them will argue there is value in their analysis..... that is all. Personally I have a broad definition of TA and most quant stuff seems to fit into that IMHO. I was put onto the article from another forum that found the distancing (maybe diverging was the wrong word) interesting.

Ok I see what you mean.

 

I read this originally on Bloomberg and posted it, in defense of Tom DeMark and his techniques, on Elite Trader. Not tht he needs defending nor cares what some troll on ET

says though.

[SunTrader 10]

The golden ratio may well occur in nature and we may very well carry it forward into architecture because it proves to be both structural and pleasing on the eye, but I cannot make the leap from this into Trading.

 

I can, often .

[wciszak 10]

Interesting thread but I see a lot of references to insights, beliefs and opinions about TA. What about actual testing? It seems to me that if you discover a valid technical pattern (one that repeats and is predictive) than it MUST work, by definition. If things are not working out for you, perhaps you are relying on false, untested patterns.

[SIUYA 10]

Interesting thread but I see a lot of references to insights, beliefs and opinions about TA. What about actual testing? It seems to me that if you discover a valid technical pattern (one that repeats and is predictive) than it MUST work, by definition. If things are not working out for you, perhaps you are relying on false, untested patterns.

 

This is one of the key issues - but here in lies a lot of context.....not all patterns are the same, and often if you are too selective costs and slippage will kill you.

A breakout from a range to the upside is not the same when a market is in a downtrend, an uptrend, a range, at the end of a trend, middle, just before an economic release, just after a big spike, (and then how do you define this).

A lot then has to do with measuring losses v how much you expect to get out of it.

 

The one thing that keeps repeating itself for me and it appears others (apologies if name against ideas is general) is context - it might be because of momentum, hinges, cycles, elliot, DeMark ( - who i also like but am not an avid user - for Suntrader and i got that article off a trend following site ), Heavy Metal (thanks Mitsubishi), MA, no charts, support and resistance, a trend line, swings, pullbacks, wide range bars, correlations, news items, long term trend.....etc etc.

 

One thing that you might have to do - and this is slow, tedious and most often not done properly - is test the pattern by hand.

Its easy to get a computer to test certain patterns - but how do you get it to test patterns in context. Is a MA cross over valid to the downside, when the market is in a big uptrend and has just pulled back but not yet made a lower high, or had some consolidation.

 

Now maybe this goes back to the heart of defining TA etc.and getting something that works for you.....even if you dont take every trade. (Are you better taking trades selectively if it improves your bank account as opposed to being a purist and taking every trade but loosing money?)

 

I also dont think because of context that each pattern is exactly the same - the setup might differ, the ultimate trigger might be the same, but the possibilities differ a lot - something beyond most our our computing skills maybe. When do you know when to chase, when not to chase, when to wait, or panic. etc; etc. Plus if you chase, do you cut quickly or take profits because you managed to catch a move that happened super quick....all of this is hard to test.

Edited November 22, 2012 by SIUYA