Hi folks,
On a serious note, TA is a lagging tool. I used to use it too thinking it held the key but for some time now only look at levels and observe some Pivot Points and Fib retracement areas.
I'm not saying PPs, Fib levels work or don't work. Just simply that if I have to pick some random R/S levels, based on my history and charts often Fib levels and PPs coincide along with graphic S/R levels observed by the naked eye. Ultimately they must do as PPs and Fib Retracements levels are all obtained from the numbers on the bars represented by the price graph. Anyhow, without going into lots of mathematical detail as if it adds legitimacy to TA that's what they are useful for in my limited opinion. Mainly for identifying targets for S/R levels.
Momentum/MACD/RSI and a host of other indicators but not very useful. I'd only give them 5% weighting in making any market entry or exit decision. TA is well overrated.
If you want to trade like a professional trader it's Fundamentals and News that drive price movements. As indicators go market breadth and volume are heavy weights in determining direction. Information is key. Usually, the professionals have access to this level of info. Citizen Joe trading off some SB charts is kidding himself if they think they are on par with the professionals.
As for embedding some future edge into TA well as mentioned before not possible. TA is a lagging indicator. Has to be observed before it can be input / output into any process one desires to observe. There lies the crux of the matter. Who ever has the information first has the edge. Insider knowledge, big players, secrets, the old boy network is what gives the winners the edge. The rest of us are simply laggards in the system. Big fund managers talk to their buddies and they move together and they have the money to shift markets.
CEO's of big blue chip companies play golf and they talk about numbers to their brokers who talk to their rich clients. Somebody somewhere always knows something you don't. Hence, the price moves. By the time news gets out to Private Investors, it's kind of been well used and abused.
People talk about theoretical perfect information about supply and demand being available to everyone in determining price but that is simply not true. It sort of gravitates to that sort of sentiment but the guys who make the big money always know before anyone else does. Accountants are another group of people who are in the know and good to tap on ie the big boys.
So who ever talks about cracking TA in making calls and devising systems to beat the market, I have to laugh. You are not the first and certainly not be the last to think it so. I like candle sticks and simple three candles can give good insight into market forces between bulls and bears. However, even here, one is still looking at a lagging indicator which says nothing to sentiment now, especially after some new piece of news is released.
If anyone is interested in formulating a trading system then subject to the instrument one is trading then I would look at daily, weekly, monthly, quarterly numbers on selected and relevant market sectors. ie. If you are trading coffee look at sales as well demand and supply for tea, the weather, medical research and demographic factors. Looking at some past historic lines on a graph trumpeting power of TA will tell you zilch about where price is going tomorrow.
Equally important focus on psychology and trading discipline fighting ones demons; greed and fear and manage risk. Even here professional traders have an edge or perhaps not really so but it is perceived that way. This is because their risk levels are managed on how much they can bet and a bank or institution will have accumulated collective risk exposure to any instrument. So their psychology and temperament may be sh!t like any other trader here but the systems and their trading positions which will always be monitored will have constraints and limits set on them by external administrative processes established by that trading dept.
