Wall Street = Casino. Minus Sum Game.

[zupcon]

What I also do is longer term trading and that is usually the place where newbies are told that TA is the one size fits all solution.

People are told that TA works best in longer timeframes, it doesnt. When your dealing with a probability based approach a sufficiently large sample size is required to allow the odds to play out. The most basic TA techniques offer only a very small edge, so its important that the edge is exploited at the highest frequency thats practically possible. More sophisticated TA approaches push the envelope a little further, but the general principle still applies.

The above does not mean that TA derived from longer term timeframes isnt important, because it is.

The basics of profitable trading are openly discussed in the most general of terms, for example, cut losses short, let profits run. The problem for most people is they never get to understand how to apply that methodology in any sort of practical way and thats because there's a continum of correct solutions, and conflicting advice.

The same basic generalisations are bandied about regarding any aspect of trading, and that includes technical analysis.

 

[robster970]

Using TA alone is like taking a shot on a pool table when you're not aware that somebody is about to tilt the table and help you miss the shot.

Over a statistically significant sample, I daresay that you might pot more balls than miss if your aim is good. Nevertheless, your pot rate is likely to improve if you check whether somebody is going to upend the table on you in the first place.

Trading requires a synthesis of skills and awareness. The more holistic your approach, the more likely you are to do better.

This is not about rubbishing TA or FA or whatever church you feel affiliated to. This is about appreciating that there is more to a subject than only once facet of it.

I have enjoyed the cut and thrust of this thread though boys - keep up the good work.

 

[Xeno]

Nevertheless, your pot rate is likely to improve if you check whether somebody is going to upend the table on you in the first place.

No it isn't. Apart from the fact that there is a huge body of opinion telling you to not add things to the strategy you've got, that's tested and that you're happy with, just because other people claim it'll improve things....

If you have a system that checks whether an impending piece of fundamentals is going to be beneficial for long or short positions with any degree of accuracy then you should already be a rich man.

In fact, with a reasonably high frequency, pure TA system, typical price shocks may have already been filtered out - as I mentioned earlier - the other alternative being that they have a similar probability to be beneficial or harmful, notwithstanding that stops may even improve the situation.

 

[robster970]

As a physicist/mathematician with 20+ years of system, computational and software engineering under my belt, I can categorically state with 100% certainty that humans can outperfom mechanical systems when it comes to complex decision making.

That's not to say that all humans can do this, most can't. That's not to say that mechanical systems are bad. Au contraire, human's are lousy at decision making in the main and computational systems of a complex nature, when built well, can do jobs humans cannot get near.

The huge body of opinion that says don't change your strategy are in the main right. Playing the edge through a consistent, statistically significant sample is the only hope for most of us. That does not mean that it is impossible to be better than a mechanical system by having a filtering mechanism incorporating a view that cannot be modelled or assimilated by a 'system'.

Why do planes still have pilots even though they can easily fly themselves? Why do engineers monitor the complex control systems that say run electricity supply and distribution? Why do air traffic controllers still have a job? I can go on.

The point is that there is a valid place for people to be able to improve decision making in life in and above a mechanical system because our tiny little brains can do things better than machines or any system if we are trained to do so and choose to do so.

 

[Xeno]

That does not mean that it is impossible to be better than a mechanical system by having a filtering mechanism incorporating a view that cannot be modelled or assimilated by a 'system'.

Yeah, we weren't talking about possible/impossible, we were talking about 'likely to improve'. You should know that as a long term expert in logic/maths ;-)

 

[robster970]

LOL - I'm just a believer that people can do great things and that if people have developed a discipline in the first place to trade consistently well, that they are probably capable of even better performance if they put in the effort to improve. I think that's really my only point tbh.

 

[Prawnsandwich]

These systems only exist in someone's imagination.

Maybe lack of imagination is the problem......

 

[Prawnsandwich]

In this case, the driver was there, that got you LOOKING at the stock. Order flow told you when the move starter and when it was coming to an end way before it appeared on the chart.

More than likely it would be very obvious that there would be a big move up at the open due to the large actual % gain and volume in premarket........the driver that got you looking would not normally be the news itself, but rather the premarket action....this saves you from having to analyse every piece of news that comes out to ascertain whether it will impact on the stock price or not.

.....leaving aside the premarket action many day traders will wait for the open and then look for a good entry...so in this instance the opening price / action will tell you that the stock is up....

This is ALL about the technicals - premarket, chart, Opening Range Highs, retraces to Moving averages... etc etc...absolutely nothing about Fundamentals.

I would agree that this does give you potential movers for day trades.

On top of this, some understanding of the market is required. For instance, the role of the market maker/specialst and how he makes money, when he loses money and how and WHERE he may attempt to recoup those losses is important. This in my opinion is not TA. It is knowing your market.

No not all, daytrading big gainers on news requires absolutely none of the above....it requires good entries, exits and stop management. I do it all the time.

would also say that day trading has more to do with order flow and could be considered more technical - but it is NOT about trading chart setups.

?????????? What about entries ,exits stop placement ...are you suggesting that you pay no attention to the chart and just issue a buy market order and then sell at some stage later ? What criteria do you use for same ??????????

In fact, it stands to chance that even within this thread - most all of the defenders of 'it's all in the charts' are also not making money from it.

I have already said that TA works very well for me, which means I am profitable....and at least two of the pro-TA posters here appear to be profitable and also knowledeable about what they are talking about....

What about you - are you making money ? The method in your signature link....what are the stats / expectancy for this ? What % gains has it given you ? Perhaps you should provide some firm statistics before pawning it off on newbies.

The concept of confluence is an amusing one. The more indicators saying the same thing, the more likely the move, right ? Well - considering that all of the indicators are based on the same set of data, surely them all indicating the same thing is to be expected. This doesn't make a prediction based on them any more likely to be correct.

I'm glad you find it amusing given your lack of understanding of even basic TA and FA principles.....Im not going to even bother getting into this but I would say that many far smarter and richer people than you or I understand it perfectly well.....

 

[Prawnsandwich]

A TA purist would not have been looking at the rumour that Barnes & Noble were going to have their app on the new Apple Tablet.

This thread is in danger of turning into Panto.

So what is it that TA is supposed to tell us ? Is it Supply and Demand scenario ? If so, why is it that TA does not distinguish between markets with finite supply and those with infinite supply ? Stocks have a finite float whereas futures do not. This has an impact on how the price moves. How is it that TA provides a global framework considering such different supply scenarios ?

Is TA telling us about market psychology ? If you look at 2003, you can see a lot of market swings in the build up and after the inception of the Iraqi war. If TA is meant to reflect market psychology. It would make sense that the specific psychology in play at that time would be irrelevant to todays markets. The patterns and support/resistance zones made in that period would effectively be meaningless. How many TA people that backtest take this into account ? What about other, similar periods where some crisis was driving the markets.

TA purists may be using discretion about the current geopolitical/news situation to make decisions but how many look at past data in context ? How can it be necessary to use todays news but not necessary to use the news on the past charts you were looking at

Finally - what on earth is the explanation to esoteric stuff like Fibonacci ? Numbers that occur in nature ?

I would venture that if most home traders traded off moon cycles, then you'd see thousands of ebooks, courses and instructors teaching the merits of astrology for trading.

So there you have it - you just dont have any understanding of TA. Why do you incorporate any elements of it all into your method?

TA works because of the following reasons -

Charts are visual representaions of traders / crowds / human psychology acting in the marketsTraders have memories, and so remember previous price levels where price stalled or where there was plenty of overhead supply or demand ie support / resistance et

TA reflects human and crowd behaviour

Self-fulfilling prophesy - if everyone is looking at the same thing on their charts eg a resistance level...and the chart indicates that price tend to stall or reverse at this level , then it is more likely that different traders will look to exit longs at this level, and / or there will be a lack of buyers at this level.....and this is where confluence also comes in - the more factors which indicate the same thing, the more traders will act on it, increasing the self-fulfilling aspect

 

[Mr. Charts]

"More than likely it would be very obvious that there would be a big move up at the open due to the large actual % gain and volume in premarket........the driver that got you looking would not normally be the news itself, but rather the premarket action....this saves you from having to analyse every piece of news that comes out to ascertain whether it will impact on the stock price or not."

If you are talking about the BKS move the above is NOT correct.
Here are the facts:
Pre-market only a total 3650 shares were traded in sizes of 450, 1000, 1000,100,500 and 600. Apparently only six trades. The stock opened only 0.92% higher than when it closed the evening before, well within the previous day's range.
Hence there was NO "large actual % gain and volume in premarket" to provide a "TA" indication of what was to follow.
An anaysis of pre-market action would NOT have alerted you to anything out of the ordinary.
Personally I do not find it at all arduous to glance through pre-market news stories. Sometimes it takes me 10 minutes, sometimes 40 minutes, but I have found over ten years of trading this way that such minor effort is repeatedly very well rewarded financially and that some of the time there is no TA indication whatsoever in pre-market activity.

 

[Prawnsandwich]

Originally Posted by Prawnsandwich
"Not sure I understand - you say that there was no prior TA sign whatsoever of the move, but then go on to say that TA enabled people to spot a possible move BEFORE it happened ?" says prawnsandwich

"A TA purist would not have been looking at the rumour that Barnes & Noble were going to have their app on the new Apple Tablet." says DT

DT is correct.

I read news stories prior to market open and decide to put some of them on my watch list. That also consists of other stocks chosen for different reasons. I then watch and wait for one of the dozen set ups I use to occur and then read order flow and prints and buy/sell pressures on depth of market looking for an entry where the probability is high that the trade goes into immediate profit.
Even using simple TA there was money to be made on BKS. Doing what I do frequently puts me ahead of the game, a powerful edge.
It's a combination of the right tools at the right time in the right way. That, imho is the essence of what DT is saying (correct me if I'm wrong, DT ) and he is correct; not just in my opinion, but in my experience of trading for a living for the last ten years. That is not to denigrate what anyone else does (well, maybe I should make exceptions of fcta and everyonerich )
Richard

OK I'm not sure why you are saying DT is correct here, perhaps because you appear to know each other quite well, when it appears that what you are saying is that "even using simple TA there was money to be made " ie you would not have used any aspect of Fundamental Analysis to get into this position

(putting a stock on your watch screen due to a rumour is not FA - alternatively premarket / opening gainer data could have been used, again nothing to do with FA - I would say this is all Technical because all that is of interest is that the price is up strongly, with no regard to analysis of the intrinsic value of the company.

You could have absolutely no clue about what the company is about in order to do this. This is what I do also.

 

[Prawnsandwich]

"More than likely it would be very obvious that there would be a big move up at the open due to the large actual % gain and volume in premarket........the driver that got you looking would not normally be the news itself, but rather the premarket action....this saves you from having to analyse every piece of news that comes out to ascertain whether it will impact on the stock price or not."

If you are talking about the BKS move the above is NOT correct.

Here are the facts:
Pre-market only a total 3650 shares were traded in sizes of 450, 1000, 1000,100,500 and 600. Apparently only six trades. The stock opened only 0.92% higher than when it closed the evening before, well within the previous day's range.
Hence there was NO "large actual % gain and volume in premarket" to provide a "TA" indication of what was to follow.
An anaysis of pre-market action would NOT have alerted you to anything out of the ordinary.
Personally I do not find it at all arduous to glance through pre-market news stories. Sometimes it takes me 10 minutes, sometimes 40 minutes, but I have found over ten years of trading this way that such minor effort is repeatedly very well rewarded financially and that some of the time there is no TA indication whatsoever in pre-market activity.

I was not referring specifically to BKS, but to stocks which are generally very active due to news.... either in premarket or at the open...

IN the case of BKS if there was no premarket activity, the opening volume / price would certainly have provided an alert that something was up..

 

[Xeno]

LOL - I'm just a believer that people can do great things and that if people have developed a discipline in the first place to trade consistently well, that they are probably capable of even better performance if they put in the effort to improve. I think that's really my only point tbh.

And that's a good point. All I'm saying is that if your skill, knowledge and success is in pure TA systems, your return on investment (in the broad sense) is not likely to be bigger by incorporating an FA filter instead of improving your existing system with more TA, or writing a new one.

I have nothing against FA - in fact I'll quite happily use it in some automated systems - but it's not that easy to backtest an FA filter, and some people like their systems to be properly backtested

 

[Prawnsandwich]

What beats me is why anyone thinks one tool fits all.

Nobody said that one tool fits all - thats not the point of the discussion. The point of the discussion is DTs assertion that nobody is making money from TA without some degree of Fundamental Analysis. Quoted from Post 141 :

"Imagine you could put youself in the shoes of the people making decisions in a company & understand how their own self interests would sway things. Sounds tough, right ? Sounds like we'd make bad calls, right ? Much better to spend years trying to figure out which combination of oscillators, lookback periods to use in order to eek the cents out.

TA in the abscence of discretion has NEVER been proven. It just gives you a fixed set of rules to hold onto to avoid thinking too much. That's OK & you will be succesful with that ONLY if you end up adding discretion/FA to your system. "

Clearly from DTs posts and his reference to "all that TA crap" he has closed his mind to TA , despite there being at least 3 posters on this thread who have confirmed that they use TA profitably.

You yourself have confirmed your method as set out on this forum is effectively pure TA.....

 

[DionysusToast]

Using TA alone is like taking a shot on a pool table when you're not aware that somebody is about to tilt the table and help you miss the shot.

This I like !

 

[robster970]

This I like !

The terrible irony of it all is that about an hour later, I took one of the dimmest trades I've done for a while thus exercising my 'finely honed' discretion in a completely cr@p way.

 

[DionysusToast]

More than likely it would be very obvious that there would be a big move up at the open due to the large actual % gain and volume in premarket........the driver that got you looking would not normally be the news itself, but rather the premarket action....this saves you from having to analyse every piece of news that comes out to ascertain whether it will impact on the stock price or not.

.....leaving aside the premarket action many day traders will wait for the open and then look for a good entry...so in this instance the opening price / action will tell you that the stock is up....

This is ALL about the technicals - premarket, chart, Opening Range Highs, retraces to Moving averages... etc etc...absolutely nothing about Fundamentals.

I had BKS up before the pre-market opened

No not all, daytrading big gainers on news requires absolutely none of the above....it requires good entries, exits and stop management. I do it all the time.



?????????? What about entries ,exits stop placement ...are you suggesting that you pay no attention to the chart and just issue a buy market order and then sell at some stage later ? What criteria do you use for same ??????????

Correct - for day trading the exits and entries are not on the chart, all based on order flow.

I have already said that TA works very well for me, which means I am profitable....and at least two of the pro-TA posters here appear to be profitable and also knowledeable about what they are talking about....

What about you - are you making money ? The method in your signature link....what are the stats / expectancy for this ? What % gains has it given you ? Perhaps you should provide some firm statistics before pawning it off on newbies

Yes I am, thanks. If you are, then you are using more than TA.

 

[DionysusToast]

So there you have it - you just dont have any understanding of TA. Why do you incorporate any elements of it all into your method?

TA works because of the following reasons -

Charts are visual representaions of traders / crowds / human psychology acting in the marketsTraders have memories, and so remember previous price levels where price stalled or where there was plenty of overhead supply or demand ie support / resistance et

TA reflects human and crowd behaviour

Self-fulfilling prophesy - if everyone is looking at the same thing on their charts eg a resistance level...and the chart indicates that price tend to stall or reverse at this level , then it is more likely that different traders will look to exit longs at this level, and / or there will be a lack of buyers at this level.....and this is where confluence also comes in - the more factors which indicate the same thing, the more traders will act on it, increasing the self-fulfilling aspect

Step 1 - People buy a stock based on fundamentals, this is the start of the move
Step 2 - The more savvy technical traders jump on the move
Step 3 - The trend is your friend traders jump on
Step 4 - People at step 1 get out.

TA is all about following a move.

If TA is about psychology, then how do swings S&R points created in times of war/crisis have any bearing on the psychology of traders later on ?

Thing is - it's the news that moves the stocks and the news will have a different psychological impact depending on what it is.

You have already stated that OF COURSE you watch the news, which means the news must move markets, otherwise you'd ignore it. Yet - how TA many people consider the news that created the moves that are looking at in the past ? I would guess not many.

So - how can current news be relevant and past news not relevant ? Hoe can it reflect psychology without considering the state of the economy, consumer confidence, wars, disease at the time ? Do these things have no impact on the state of mind of investors ?

It makes no sense.

 

[DionysusToast]

And that's a good point. All I'm saying is that if your skill, knowledge and success is in pure TA systems, your return on investment (in the broad sense) is not likely to be bigger by incorporating an FA filter instead of improving your existing system with more TA, or writing a new one.

I have nothing against FA - in fact I'll quite happily use it in some automated systems - but it's not that easy to backtest an FA filter, and some people like their systems to be properly backtested

Well - backtesting only shows you what worked yesterday.

I don't think you can filter for FA. I have seen some software used in PR that guages sentiment but it's not about adding a few more numerical ratios like P/E to your code.

It's about wondering why all the directors suddenly dumped all their shares last week, why the earnings are steady but sales are down. It's building up a picture to tell you whether this is a pig in a poke or not. It is pure not math.

 

[DionysusToast]

The terrible irony of it all is that about an hour later, I took one of the dimmest trades I've done for a while thus exercising my 'finely honed' discretion in a completely cr@p way.

Ouch ! Well - winner on the forum, lost on the trade. I'd say you are even :whistling