The Truth (not the fish)about TA and why TA is promoted ...but not used by professionals!

Discussion in 'General Discussion' started by Tony Moore, Apr 12, 2018.

  1. Tony Moore

    Tony Moore Member

  2. status1

    status1 Well-Known Member

    Interesting but I don't see the part where it says that it's not used by professionals
    I understand that it may not work all the time that's why I have given up on TA a long time ago but I think those professionals that do believe in it I believe they use it or at least they have someone on their staff analyzing the charts and probably looking at more than one metric but when it's presented to an audience it's usually simplified so an average trader trying to do the same thing will most likely not have as good of a result as the professionals

    One of the things I don't like about TA is that it's mostly backward looking so looking at a certain pattern it's easy to see where you should have gone long or short but you have to wait for the pattern to complete before you do anything and even than it my not always work out
  3. Rtb

    Rtb Well-Known Member

    Read The Art and Science of Technical Analysis by Adam H Grimes. You will think differently about TA if you think all TA doesnt work. Adam H Grimes also has a free Technical Analysis Course on his website. I think the book/course are very good.
    Last edited: Apr 15, 2018
  4. status1

    status1 Well-Known Member

    I did not say it doesn't work I just don't use it because I find it unreliable
    Here is a post by someone else who mentions Adan H Grimes

    Adam Grimes has covered this issue quite well. The webinar he did for IB in February 2013, for example, shows how moving averages and Fibonacci have no statistical edge. If you really want to continue your Taleb inspired education then read Antifragile. by ACS

    This is an excerpt from his book in chapter 11
    There are many, many examples of pattern failures and discussion of the decisions that might have been made at various points in the trade’s life cycle. A trade is a process, not an event: from context to entry trigger to trade
    management, every part of the process must be mastered.

    So if you are comfortable and believe in TA by all means use it It's just not for me I don't trust it
    This also contradicts the idea of the title of this post that those that promote TA don't use it
  5. KiwiDon

    KiwiDon Well-Known Member

  6. TraderJ

    TraderJ Member

    I read that article when it first came out and thought it was very good. I especially liked this part:
    "Also, consider the following: Numerous quant funds and other organizations at the forefront of modern quantitative finance employ highly sophisticated mathematical algorithms (much, much more sophisticated and extensive than anything ever used in the TA world), with huge dynamic datasets, implemented on state-of-the-art large-scale computer equipment, and trading at millisecond and even microsecond levels. These computer programs mine every single morsel of real statistical information that they can find in a continual search for “alpha.” Furthermore, these competing quantitative programs are engaged in a very real “arms race,” because any strategy that produces statistically nontrivial profits is quickly mimicked by other programs from other organizations, with a result that any edge enjoyed by one firm or by one computer program evaporates rather rapidly. Indeed, this “war” partly explains why the resulting market price stream is almost entirely a random walk."

    To those thinking they can join a trading chat room, build short-term retail trader algos or otherwise use TA or even "simple price action" to "trade for a living" ... good luck...and don't quit your day job.

    The only long-term TA strategies I've seen that work at all are simple, very long-term momentum strategies. Most of these perform about the same as buy-and-hold but cut risk/drawdowns by avoiding parts of bear markets. They also get whipsawed during short-term corrections, though.
    KiwiDon likes this.
  7. Mark17

    Mark17 Well-Known Member

    I have not read Michael Harris' "book" but Kevin Davey wrote about the possibility of finding one profitable technical trading system for every 100-200 that I may attempt to develop. I view this as the TA challenge. Useful methods may be out there but it's really difficult (and beyond the capabilities of most of us due to inadequate statistical and/or coding knowledge) to find them. In the meantime, so many retail traders willy-nilly (not to be confused with "dilly dilly") click on this or that indicator and believe we are looking at actionable information. Some of this may have been actionable in the recent past and may continue to be actionable for a time until the luck runs out.
    TraderJ likes this.
  8. TraderJ

    TraderJ Member

    True, and Davey's "profitable" methods (which I'm sure did well in backtesting) haven't been profitable in real-time, at least those I've seen. Someone in a Market Wizards book said something similar to Davey--I believe it was "There are a million profitable ways to trade, and all of them are extremely difficult to discover." If anything, it's much harder to find profitable trading methods now than in the Market Wizards era (1970s-1980s). If you had a strong math/IT background or were willing to calculate indicators by hand, things like the Turtle trading method worked well back then. Now every retail trader has access to much more data/systems, and hedge funds, serious algo traders and HFT guys are on a completely different level altogether.
  9. KiwiDon

    KiwiDon Well-Known Member

    TraderJ likes this.
  10. ACS

    ACS Well-Known Member

    2000 to 2010 looks a lot like 1965 to 1975 and what the market is doing now sure looks like 1975 to 2000.
  11. TraderJ

    TraderJ Member

    Great article! I always thought it was funny to watch traders argue about trendlines in forums. "Your trendline strategy didn't work because you should connect 3 low points, not 2," etc. It's kind of like Elliot Wave "analysis." Ask five Elliot Wave followers which wave the market is currently in, and you'll get 5 different answers

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