Does technical analysis work or not?

[EnlightenedJoe]

But do you want to offer any enlightenment?

Enlightenments 'R us.

You are no doubt in it to make money. So you should not be surprised the entity who takes your bet is also in it to make money, unless it is proven that the entity is an ATM machine that will pay out when the right PIN is entered.

You should further not be surprised that the entity is richer than you, has more information than you, has greater ability to move the price than you. With all these non-surprises, would it not be extremely surprising they should lose their money to you in a business transaction despite all their advantages ?

It would be pretty silly for someone here plotting a chart and say yes he could predict your behaviour. It would be even more silly for him to use the same technique to predict the behaviour of an entity who is better placed than you in every which way, and who is proven to be profitable year-in year-out.

 

[tomorton]

Enlightenments 'R us.

You are no doubt in it to make money. So you should not be surprised the entity who takes your bet is also in it to make money, unless it is proven that the entity is an ATM machine that will pay out when the right PIN is entered.

You should further not be surprised that the entity is richer than you, has more information than you, has greater ability to move the price than you. With all these non-surprises, would it not be extremely surprising they should lose their money to you in a business transaction despite all their advantages ?

It would be pretty silly for someone here plotting a chart and say yes he could predict your behaviour. It would be even more silly for him to use the same technique to predict the behaviour of an entity who is better placed than you in every which way, and who is proven to be profitable year-in year-out.

Yes, in a competition to move price I'm always going to fail to score. And I will always have less information and analysis available than the professionals. But whoever I'm up against, in a liquid market they're still not big enough to be the only winner. All I need is for some entity or group of, whether colluding or not, to start making price move, and there you go, we have a market and I can profitably trade it.

But I don't think Michael Harris was talking about the unequal match of private investor v's international banks when he criticised TA so something on his findings would still be interesting.

 

[EnlightenedJoe]

But I don't think Michael Harris was talking about the unequal match of private investor v's international banks when he criticised TA so something on his findings would still be interesting.

Ok, it's to do with bots and the fact he's selling some kind of service:

===
Harris has committed a grave heresy against the Church of the MTA (Market Technicians Association) – admitting that technical analysis has become less and less useful in the presence of robots at this juncture.
===

I noticed a recent fashion in saying TA doesn't work in order to attract subscribers to things. It's a good strategy because people already know TA doesn't work and therefore able to identify with the people who say it.

To me at least, harris has given the game away by blaming the bots. The thing that stops TA working has been the same since the beginning of time. Blaming the bots is unnecessary other than for fashion. So it's just another marketing ploy and no value to be had.

 

[Sonicscooter]

Yes, because it's magic........😉

 

[darktone]

price dives to a level that drags your position under water for an unknown length of time !

In the mean time if you've bailed with BE or small loss, then go on to TP on a fresh new position within minutes

Did you do well getting out of the original position ?

Thats cool TJ but thats if youre offered the opportunity to get the second position on.
The point I was aiming at is the lack of value a stop offers and how the loss would be taken.

In the example:

Lets say your long at 50 with a stop at 20.
price dives to 15.
price recovers to 45.
then dives to 10.

The loss was booked at 20 for -30 (assuming there was no slippage).
The trader now has no position and no opportunity to seek better exit.
The market then went on to offer as much 45, a possible -5 for the trader who didnt use a 'stop'.
Both approaches would now have no position but would be free to take on another position if they get the opportunity. Its not the way i like to do things though.

If im long and averaged 20 units at 500 and the market puts in a move south. I end up averaged 20 units at 400 and ive booked -80 in doing so, then ive done well. If I book -30 or +50 ive done well. All depends on what the market offers you.
Another important point is that you always have a position, unlike the all in all out stop user. You cannot miss the favorable move.

Anyways. BJ seems happy enough 👍

 

[darktone]

The fencing continues. They parked the price above my cost for a day but did not give me an advantage by moving to the upper trend line where I wanted more size. Now it's a waiting game while they pay me interest every day including the weekend. They moved the price back below my cost to tempt me. But I am in no hurry.

Their fencing is very good, pro level.

Do you really believe that 'they' give the slightest f**k about youre doing in natgas? I mean seriously?

I was wondering. If im right, you receive 6%ish interest per day on the margin you put up in natgas. What size move would need to book to equal that sum as a 'short here - covered there' trade?

 

[tomorton]

Thats cool TJ but thats if youre offered the opportunity to get the second position on.
The point I was aiming at is the lack of value a stop offers and how the loss would be taken.

In the example:

The loss was booked at 20 for -30 (assuming there was no slippage).
The trader now has no position and no opportunity to seek better exit.
The market then went on to offer as much 45, a possible -5 for the trader who didnt use a 'stop'.
Both approaches would now have no position but would be free to take on another position if they get the opportunity. Its not the way i like to do things though.

That's alright for you but sad to say my positions that are opened long at 50 and dive to 15 don't usually recover to 45. Of course, that wouldn't matter if either:
a) I hadn't used my full risk tolerance in terms of capital loss when I opened the position, or
b) I don't need to close the position in the foreseeable future until price gets back into the black no matter how long it takes
c) I will be immune from impact no matter how low price falls
But these sound like strange guidelines for running a business.

I understand the principle that a tight stop is just asking to be hit and I do see people tempted to finesse their stops to inflate their r:r. But still.

 

[dbphoenix]

I understand the principle that a tight stop is just asking to be hit and I do see people tempted to finesse their stops to inflate their r:r. But still.

The stop is placed at the level where one knows he was wrong if price reaches it. Whether or not it is "tight" depends on what the trader wants to see and how well he understands the instrument he's trading.

Db

 

[tomorton]

The stop is placed at the level where one knows he was wrong if price reaches it. Whether or not it is "tight" depends on what the trader wants to see and how well he understands the instrument he's trading.

Db

That's just what I mean - the TA has to drive the stop but a lot of people are so aggressive with stops that they just think in terms of pips in tiny amounts. They think this is super accurate trading and of course it makes their r:r look fabulous but it is wrong.

 

[forker]

That's just what I mean - the TA has to drive the stop but a lot of people are so aggressive with stops that they just think in terms of pips in tiny amounts. They think this is super accurate trading and of course it makes their r:r look fabulous but it is wrong.

How can you give a sweeping statement that this is wrong? Maybe the person using this strategy knows that trades will turn at a level and the ones that don't doesn't matter because they get enough of these with enough reward to pay for the losers and some.

 

[tomorton]

How can you give a sweeping statement that this is wrong? Maybe the person using this strategy knows that trades will turn at a level and the ones that don't doesn't matter because they get enough of these with enough reward to pay for the losers and some.

True in theory but most people using this approach don't know what price will do - so they use very tight stops so they can kid themselves they weren't very wrong - and they certainly don't know their long-term win rate with sufficient accuracy to be able to discount risk in the way you put forward. So I'm not saying it can't be done - its just that like tightrope walking, most of us can't do it, therefore it is effectively the wrong method to select to get from A to B.

 

[forker]

I don't know if it's accurate to say that most can't do it. Tight stops with high reward ratios can grow an account with a low win rate. I can understand many people won't tolerate losing most of the time even if it is profitable over time.

 

[dbphoenix]

I don't know if it's accurate to say that most can't do it. Tight stops with high reward ratios can grow an account with a low win rate. I can understand many people won't tolerate losing most of the time even if it is profitable over time.

Key word being "can". Lots of things can happen in theory, like entries don't matter. Practical application is a different story.

Db

 

[new_trader]

Tight stops, small loss, preserve capital

That's just what I mean - the TA has to drive the stop but a lot of people are so aggressive with stops that they just think in terms of pips in tiny amounts. They think this is super accurate trading and of course it makes their r:r look fabulous but it is wrong.

Stops can be tight AND driven by TA. The two are not mutually exclusive.

 

[tomorton]

Stops can be tight AND driven by TA. The two are not mutually exclusive.

Oh God yes I know that and you know I know that and I know you know that - but most losing traders don't know that and don't do it.

I'm going to characterise losing traders in two ways which I'll bet covers the majority - but the underlying reason they lose is self-delusion - its not poor TA or market rigging or their stops being spiked -

Type 1 - pinball traders - death by a thousand cuts - numerous small trades with tiny tight stops - control freaks who think they're being super-accurate: they likely have really large r:r: they say their risk is managed because each trade has such a low capital exposure: over-focused on entry signals and always seeking new exotic markets to generate ever more signals: stops calculated by dividing their desired pips profit by 3 or 5;

Type 2 - kamikaze traders - get into a losing trade with no stop or a stop they widen as price looks like hitting it: hold on to the bitter end with hope price will come back: no regard to TA once they're in: very interested in margin/leverage: may possibly have healthy win rates (as they don't ever close and book a loser): never talk about previous accounts they blew: probably use or have used doubling-down: very angry about all this market manipulation that's going on.

 

[tokyojoe]

Thats cool TJ but thats if youre offered the opportunity to get the second position on.
The point I was aiming at is the lack of value a stop offers and how the loss would be taken.

In the example:

The loss was booked at 20 for -30 (assuming there was no slippage).
The trader now has no position and no opportunity to seek better exit.
The market then went on to offer as much 45, a possible -5 for the trader who didnt use a 'stop'.
Both approaches would now have no position but would be free to take on another position if they get the opportunity. Its not the way i like to do things though.

If im long and averaged 20 units at 500 and the market puts in a move south. I end up averaged 20 units at 400 and ive booked -80 in doing so, then ive done well. If I book -30 or +50 ive done well. All depends on what the market offers you.
Another important point is that you always have a position, unlike the all in all out stop user. You cannot miss the favorable move.

Anyways. BJ seems happy enough 👍

Hey Dt, I have been doing this long enough now not to take a -30 hit, this would be totally unacceptable to me these days. If I enter long & spot the trap too late I would rather let it take my -5 to -8 (no pre-set stop) & let the trap play out. (believe it or not it has actually taken me ages to let the off side position go) If it drags down to -30 then I am in a position to take the second long position at a more favorable price.

This all depends of course how the play is presented, as often I will switch my bias..........the -5 to -8 loss can be flipped if the flow is truly down & my grey matter sees the obvious "do not fight it"......the short trade is then triggered, we all know how quickly the sick bucket is often needed, if it wants to poke a cluster of long stops hard & deep....then I want in !

Reverse scenario for the northward march.

One thing that has become second nature is reading Dma feed along side, well "you know what"

You are quite right in saying it all depends on what the market (or MM "you know what") offers us.
I guess for me, I personally want my money out of the market as much as possible, I want to know very quickly if my entry will be smashed to bits or not. They say scared money don't make money, well my experience so far has proved to me that if it smells like sh1t, it is sh1t......the whole cycle day in day out is a series of bluffs & double bluffs.

Day in day out I see this scenario, I do get where you are coming from & perhaps my method will see me picked to death one day (it happened last year, I lost control, so I never say never).

Ps "darkpool explained !!!" you are one sick puppy....keep em comin'

 

[tokyojoe]

Oh God yes I know that and you know I know that and I know you know that - but most losing traders don't know that and don't do it.

I'm going to characterise losing traders in two ways which I'll bet covers the majority - but the underlying reason they lose is self-delusion - its not poor TA or market rigging or their stops being spiked -

Type 1 - pinball traders - death by a thousand cuts - numerous small trades with tiny tight stops - control freaks who think they're being super-accurate: they likely have really large r:r: they say their risk is managed because each trade has such a low capital exposure: over-focused on entry signals and always seeking new exotic markets to generate ever more signals: stops calculated by dividing their desired pips profit by 3 or 5;

Type 2 - kamikaze traders - get into a losing trade with no stop or a stop they widen as price looks like hitting it: hold on to the bitter end with hope price will come back: no regard to TA once they're in: very interested in margin/leverage: may possibly have healthy win rates (as they don't ever close and book a loser): never talk about previous accounts they blew: probably use or have used doubling-down: very angry about all this market manipulation that's going on.

Can I please ask you to characterise 2 types of winning traders ??

I can try for you : type 1. the person who takes what he is given
type 2. the person who takes what he is given

rinse & repeat with a sprinkle of get out of dodge.

 

[dbphoenix]

type 1. the person who takes what he is given
type 2. the person who takes what he is given

Which of course can and often means bending over and grabbing one's ankles.

OTOH, there is the winner who assumes much more control over what happens during his trading session and assumes full responsibility for the outcome. The chief characteristic of both beginning and experienced traders is guessing.

Db

 

[Oscar Reed]

IG's Tech expert for the DAX from the weekend.
Think he need's to turn his chart up side down.

Christian Henke
DAX in a superior downward trend

The German stock market started a technical countermovement in February.

But the Fibonacci retracement (50.0 per cent) at 10,065, the psychological price level at 10,000 and the weighted 200-days moving average at currently 9992 could not be overcome.

After that the Fibonacci level (61.8 per cent) at 9741 was broken down. We see further downside potential to the lower trend line of the downward trend channel at 9150. Below this price level the next psychological barrier at 9000 would be the technical target price.

In view of the moving averages the mentioned scenario is very likely. The mid-term weighted 200-days moving average and the short-term weighted 10 and 20 days at 9.780/9.671 moving averages shows an intact downward trend and are at the same time resistances.

 

[dbphoenix]

It appears that Mr. Henke has stepped through the looking glass . . .

Db