Modern Day Technical vs Pre 1997 Price Action

[Doomberg]

Personally i'm a technical trader, but after a few discussions i have come to question "what do the charts actually mean?" of course it doesn't discount what we do but the patterns on the chart, are they just a direct reaction of supply and demand? A guy i was speaking to who has traded for a long time says that charts are a waste of time.. he was trading pre 1997 (before trading was computerised) and had experience on trading floors where all you had was a simple price like in the pic below, that was it. Somehow he says that it was much easier to trade then than it is now which i find crazy because he was working with much less? My main question, if we were to feed the data from pre 1997 on to charting software, would the charts look and move the same? Or are the charts now moving in a different way because people see things that were not once seen, and act on things that never existed.

Interesting topic i think and i really can't get my head round it, all these signals we trade off when trading technically... did they even exist before the charting software was created? Or were they something that followed through and people picked up on, for example the Doji, did "word get round" that the direction may change if we see one, so people started to choose direction when seeing one? I mean how could you of even seen any signals like the Doji without charts its impossible?

What are your opinions?

 

[new_trader]

Tape reading is the purest form of trading and practitioners don’t use charts. It is a case of less is more. I wouldn’t say charts have only come into existence because of computers, traders have been using charts to trade stocks for at least 100 years but without the power of computers and software they might have only been daily charts, but they definitely used them. I have trading books that were first published around 1911 and the author writes about charts with a few examples.

 

[Albert Carey]

Charts are difficult to decipher. Algorithms are difficult to design. The choice is yours.

 

[wackypete2]

Point and figure charting is over 100 years old. Traders applied crude technical analysis back then too, although as NT suggests it was most likely plotted on a daily basis. Pivot levels are also used without charts and still used today.

I also traded pre-online days. I agree with your friend it was much easier then. I did my own daily charts in Lotus 123. The markets rarely whipsawed intraday. Charts were cleaner and trended all day in the same direction or just ranged tightly.

IMO opinion online trading and charting is NOT the reason charts look different, it the mega volume high frequency trading programs that whip the market around. Back when I started an entire day's NYSE volume was barely 100 million shares.

I could do a whole memory lane thread about how I traded way back when! lol

Yikes, am I that old already??

Peter

 

[wackypete2]

BTW...IF you want to compare charts use mid 80's or earlier to compare to today. Charles Schwab introduced a very primitive software that was way ahead of it's time sometime around 1984-85(??). I think it was called a Schwab One Equal account or something similar. I remember receiving the software in the mail on an 8 inch floppy disk! I was PO'd because my computer didn't have the required 8k of memory (YES, 8k!) and I had to get a new one. The software had stock quotes and crude order entry but no charts. My memory fails me at this point...I think the quotes were 20 minute delay, not sure though, but I had a tough time trying to day trade with it.

Peter

 

[Doomberg]

Sounds like you have been trading a loooong time, when did you start pete?

 

[new_trader]

IMO opinion online trading and charting is NOT the reason charts look different, it the mega volume high frequency trading programs that whip the market around. Back when I started an entire day's NYSE volume was barely 100 million shares.

IMO: The volume growth has nothing to do with HFT and everything to do with the growth in the general population and especially the explosion is desktop computers which has given retail traders DMA. I don’t buy into the HFT hysteria or I certainly don’t think it is anything new. Perhaps someone with a single computer can now do what it took a pool of investors and a few brokers to achieve back in the day ie/ Wash trading, painting the tape etc.

 

[DionysusToast]

It's fairly simple.

Anything you see historically on a chart is effect. It is the reaction.

You will of course see cause too if you look for it. Not for all price action but for a lot of it. Most people don't look for it. They try to look for patterns and indicator combinations and use that information. They don't think of cause at all. They look for various effects and try to use them as cause.

Pre-1997, Post-1997, Pre-1887 - why would the game change significantly? There always has been money in making suckers out of people. Do we think people were too polite to do such a thing 10, 20, 100 years ago?

 

[robster970]

You will of course see cause too if you look for it. Not for all price action but for a lot of it. Most people don't look for it. They try to look for patterns and indicator combinations and use that information. They don't think of cause at all. They look for various effects and try to use them as cause.

Very eloquently put.

I suspect it was simpler to trade pre-97 primarily because people watched the auction process and understood what the cause of the price movements were intuitively (is there an agreement on value or does big money disagree)?

Since the advent of charts, I suspect people have distilled the trading 'problem' into something entirely pattern/statistical which means they are looking at the past to predict the future. At best this leads to poor/late trade entry/exit and at worse, death by 1000 cuts as you are constantly on the wrong side of the cause of the price movement.

Ultimately it's all about understanding the meaning of the orderflow as it happens and the further you abstract this away from trading via visual/statistical means, the more likely you are to fail if you don't have an informational/quant/computational advantage.

 

[barjon]

Well, I've been at it for around thirty five years - probably got wackypete beat - and I don't think price action has changed a lot, whether you viewed it by numbers or by pictures.

In my opinion nothing in the past tells you what's going to happen in the future with any certainty and the idea of "forecast signals" whether by tape or chart is the trap too many fall into. All we do, in fact, is to use something to make an assumption - however much that assumption is based on historic expectation - and it's what we do from thereon that really matters.

jon

 

[bbmac]

It is probably true to say that to some lesser or greater extent technical analysis is self fulfilling, eg market participants may see a doji or a 50% fib or an H&S etc and act accordingly etc...but whether this is true or untrue - if you believe that patterns repeat and there is much evidence for this - then chart patterns howsoever made up (price/tech studies) repeat - and these graphically represent patterns of market behaviour that repeat...this can give us an edge.

The advance in technology and charting/TA has probably made it easier to spot more patterns and more often and maybe it is this that is the difference in the time periods discussed.

G/L

 

[robster970]

I would be suprised if price action had changed Jon.

I'd be interested in BBMAC's view on this as he's entirely technical and entirely successful too.

e2a - as if by magic, he responded whilst I was typing this..............

 

[Splitlink]

Point and figure charting is over 100 years old. Traders applied crude technical analysis back then too, although as NT suggests it was most likely plotted on a daily basis. Pivot levels are also used without charts and still used today.

I also traded pre-online days. I agree with your friend it was much easier then. I did my own daily charts in Lotus 123. The markets rarely whipsawed intraday. Charts were cleaner and trended all day in the same direction or just ranged tightly.

IMO opinion online trading and charting is NOT the reason charts look different, it the mega volume high frequency trading programs that whip the market around. Back when I started an entire day's NYSE volume was barely 100 million shares.

I could do a whole memory lane thread about how I traded way back when! lol

Yikes, am I that old already??

Peter

Lotus 123 and Smartsuite? Me, too. Would not like to go back to that,though, I've got lazy and yes, you are getting bloody old---like me!

These days, we are able to use all kinds of indicators that we could not use then. Even if we were bright enough, we did not have the time. Talking about being bright enough, I don't think that 10% of traders can explain what on earth they are using today ,only that, "It works alright for me" but, then, because we had to build our own macros, we knew what we were doing, which is a form of consolation.

 

[robster970]

I can't understand how Pete has been doing this for 20+ years - he looks about 10. I bet his parrot is older than him.

On the other hand, having met Jon, I can confirm he probably has been doing this for 30+ years.

 

[new_trader]

I can't understand how Pete has been doing this for 20+ years - he looks about 10. I bet his parrot is older than him..

I bet his parrot is doing the trading, Pete is just the perch.

 

[brewski1984]

I bet his parrot is doing the trading, Pete is just the perch.

I bet if you asked him where he got it from, the parrot would reply "from the zoo, there's loads of them!"

 

[neil]

Well, I've been at it for around thirty five years - probably got wackypete beat - and I don't think price action has changed a lot, whether you viewed it by numbers or by pictures.

In my opinion nothing in the past tells you what's going to happen in the future with any certainty and the idea of "forecast signals" whether by tape or chart is the trap too many fall into. All we do, in fact, is to use something to make an assumption - however much that assumption is based on historic expectation - and it's what we do from thereon that really matters.

jon

Using a handful of "somethings" to act as a trigger to trade or exit a trade. You can call the "somethings" anything you like i.e. Pinbars, cosolidation, triple cross, Bert -whatever you like. All these "somethings " do is to limit your actions so that you are not randomly entering the market because you are bored or gambling. So you need patience whilst waiting for "something" to turn up.
Simplistic, I know, but it will do for now.

 

[DionysusToast]

Using a handful of "somethings" to act as a trigger to trade or exit a trade. You can call the "somethings" anything you like i.e. Pinbars, cosolidation, triple cross, Bert -whatever you like. All these "somethings " do is to limit your actions so that you are not randomly entering the market because you are bored or gambling. So you need patience whilst waiting for "something" to turn up.
Simplistic, I know, but it will do for now.

No it wont and that is why you aren't making any money.

Cause & effect. Cause & effect. Cause & effect.

Think about it - you are 100% focused entirely on effect. You think you can combine a bunch of effects & make a cause out of them?

Do you know anything else in life that works that way?

 

[barjon]

No it wont and that is why you aren't making any money.

Cause & effect. Cause & effect. Cause & effect.

Think about it - you are 100% focused entirely on effect. You think you can combine a bunch of effects & make a cause out of them?

Do you know anything else in life that works that way?

toastie

er, if there's a truck bearing down on me at 50mph and 50 feet away I'm pretty certain "the effect" is gonna be that I'm squashed flat unless I jump out of the way. I'm not sure I'd spend much time musing about whether "the cause" is that the driver's asleep, his brakes have failed, his accelerator's stuck or whatever - I'm 100% focussed on the effect thanks very much

jon

 

[DionysusToast]

toastie

er, if there's a truck bearing down on me at 50mph and 50 feet away I'm pretty certain "the effect" is gonna be that I'm squashed flat unless I jump out of the way. I'm not sure I'd spend much time musing about whether "the cause" is that the driver's asleep, his brakes have failed, his accelerator's stuck or whatever - I'm 100% focussed on the effect thanks very much

jon

how many years of the 30 have been profitable Jon?

you are still 'playing' with SB accounts, right?

don't think it's time to change something?

you must be the poster boy for NOT focusing on effect.