[HN Gopher] Is technical analysis just stock market astrology?
___________________________________________________________________
Is technical analysis just stock market astrology?
Author : zer0tonin
Score : 294 points
Date : 2023-07-25 15:49 UTC (7 hours ago)
(HTM) web link (alicegg.tech)
(TXT) w3m dump (alicegg.tech)
| sameOldPpl wrote:
| More like straight up fraud:
| https://www.reuters.com/article/cramer-interview/jim-cramer-...
|
| ^ 2007 Cramer spilled the beans
| m3kw9 wrote:
| Tech analysis esp on penny stocks is actually a type of self-
| fulfilling prophecy where almost every gambler there uses the
| similar analysis and see who can front run or get out the fastest
| when such pattern is forming. Other than that it's news that make
| it pop.
| aldanor wrote:
| Or, in other words, a typical positive feedback loop
| gadrev wrote:
| TA is a very broad umbrella, and forms of TA work. Day traders
| exploit it day after day. It doesn't require sophisticated
| technology or deep pockets. I see many people that necessarily
| aren't familiarized enough with the trading world argue
| otherwise, which is unfortunate since they're making categorical
| statements while being not very well informed.
|
| I'm a bit blunt because of this, but you have to remember that
| calling "SMA crossover" TA is like calling setting up the washer
| "programming" it and equating it with programming in a software
| developer sense. And both are available to a wide population!
| Guys, there's much more to TA than that (and similar super simple
| strategies that just rely on no or very simple market structure).
|
| I just had to reply. Someone down there said he spent time and
| said no indicator will reliably predict price. Forget about
| magical indicators, agreed. I have proved TA to myself, but it
| doesn't look at all like what the article or many of the comments
| describe. It's one TA system of many, though.
|
| I'm happy to answer questions if anyone disagreeing has any. I
| may not be able to do so for a broad variety of scenarios, since
| I'm talking specifically about day trading, but the "patterns"
| (it's not just patterns, it's patterns in a market structure
| context where you get the alpha from, otherwise I understand the
| "astrology" analogy presented here) apply to longer timeframes as
| well.
| nonethewiser wrote:
| Obviously the double camel hump pattern predicting a breakout at
| the 47 day moving average is bullshit.
|
| But I think its more interesting to find the least bullshit
| aspects of TA. Its not clear what constitutes technical analysis.
| Momentum is a real signal that can be seen on a chart. If you
| trade based off momentum is that TA? Momentum trading can be
| effective.
|
| I almost feel like the simpler the TA concept, the more
| beneficial it is. But then it's arguably less of a TA concept.
| throw0101c wrote:
| If anyone is interested in doing stock picking, at least
| seriously, I would recommend that they first read _A Random Walk
| Down Wall Street_ , which just celebrated its fiftieth
| anniversary and released its thirteenth edition in January:
|
| * https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street
|
| If you just want to have fun (5-10% of your assets/portfolio),
| then just have fun.
| JimtheCoder wrote:
| And then read Security Analysis (Seventh Edition just released,
| 1934 original publication) and understand why "A Random Walk
| Down Wall street" is mostly BS...
|
| *https://en.wikipedia.org/wiki/Security_Analysis_(book)
| throw0101c wrote:
| > _And then read Security Analysis_ [...]
|
| And then read (original co-author) Graham's last published
| interview ("A Conversation with Benjamin Graham", _Financial
| Analysts Journal_ , September/October 1976):
|
| > _In selecting the common stock portfolio, do you advise
| careful study of and selectivity among different issues?_
|
| > _In general, no. I am no longer an advocate of elaborate
| techniques of security analysis in order to find superior
| value opportunities. This was a rewarding activity, say, 40
| years ago, when our textbook "Graham and Dodd" was first
| published; but the situation has changed a great deal since
| then. In the old days any well-trained security analyst could
| do a good professional job of selecting undervalued issues
| through detailed studies; but in the light of the enormous
| amount of research now being carried on, I doubt whether in
| most cases such extensive efforts will generate sufficiently
| superior selections to justify their cost. To that very
| limited extent I'm on the side of the "efficient market"
| school of thought now generally accepted by the professors._
|
| * http://www.grahamanddoddsville.net/wordpress/Files/Gurus/Be
| n...
|
| There is probably even more "enormous amount of research"
| going in the decades since he said those words. Hedge funds
| are using satellite imagery to get an information edge:
|
| * https://newsroom.haas.berkeley.edu/how-hedge-funds-use-
| satel...
|
| * https://www.theatlantic.com/magazine/archive/2019/05/stock-
| v...
|
| What are you, as an individual investor, doing to get an edge
| over other market participants?
|
| With a much smaller portfolio it _is_ a lot easier to be more
| nimble, but you 're going to spend hours researching things.
| If you find that enjoyable, go nuts; but for most folks the
| market returns of index funds will probably allow them to
| meet their financial goals (e.g., retirement nest egg), and
| so IMHO the time is probably better spent with family and
| friends.
| jldugger wrote:
| >If anyone is interested in doing stock picking, at least
| seriously, I would recommend that they first read A Random Walk
| Down Wall Street
|
| tl;dr: Don't. And if you do, don't tell anyone about it or it
| will go away.
| broast wrote:
| Ask Jim Simons
| JVerstry wrote:
| Any serious (retail or not) investor must read 'Consequences of
| fat tails' by Nassim Taleb. Period.
| riffraff wrote:
| look a violation of the betteridge's law of headlines!
| Havoc wrote:
| The fact that enough people believe it makes it self fulfilling
| and thus true. And thus more believe it.
|
| Very odd overall
| [deleted]
| its_ethan wrote:
| If anyone wants an almost too on-the-nose astrology/stock market
| analysis, check out LunaticTrader
|
| https://lunatictrader.com/moon-cycles-in-the-markets/
|
| https://lunatictrader.com/performance/
| zer0tonin wrote:
| I had not seen the blog when writing the article. I think it's
| basically the same strategy as what I have backtested. I run
| the backtest on QQQ since this blog seems to be focused on the
| nasdaq and it's about the same: 0.20% CAGR and 0.07 sharpe.
|
| I don't know why they are somehow focused on counting green
| days vs red days, as most of today's market volatility is
| outside of the trading hours.
| jack_pp wrote:
| So then the astrologists are right, the phases of planets
| really do correlate to human behaviour
| chewz wrote:
| also worth checking
|
| https://github.com/financial-astrology-research
| ilc wrote:
| Author is playing a trick.
|
| By allowing the money to be in the market only 1/2 the time, it
| will not do as well. This is common sense to anyone who
| understands even the most basic thing about markets.
| m3kw9 wrote:
| Most stock trades including TA wins are attributed to skill when
| it's pure luck. Especially if there is a bull market
| fotta wrote:
| I present Bull and Moon[0], an app that pick stocks based on your
| astrological signs.
|
| [0] https://bullandmoon.com
| jakeinspace wrote:
| Technical analysis trivially cannot work for commonly known and
| widely used signals, because the market will correct eventually.
| For little known signals, it can work, but so can any trading
| strategy within a narrow window or with low probability. I think
| the union between seemingly successful TA anecdotes and random
| noise approaches 1.
| FrustratedMonky wrote:
| Yes
| ninepoints wrote:
| The primary metric I believe is important in evaluating the
| viability is TA is the number of people that "believe TA works."
| To the extent that other investors trade based on mystical
| figures on a chart, the price behavior may start to match
| investor movement and become somewhat of a self-fulfilling
| prophecy, at least until more meaningful fundamentals start to
| stabilize the behavior.
| momirlan wrote:
| wondering if anyone can definitely pass judgement on technical
| analysis, as it encompasses so many metrics. anecdotal evidence
| is just that, and it has no value. metrics that accurately
| describe market dynamics are definitely useful. an indicator i
| use often before placing an order is On Balance Volume, i find it
| relevant.
| trey-jones wrote:
| I can't believe how many haters there are of Technical Analysis
| here. Perhaps the connotation and possibly the meaning of the
| term has changed in recent years. I've been using Technical
| Analysis since I read Stan Weinstein's book here
| (https://www.amazon.com/Stan-Weinsteins-Secrets-Profiting-Mar...)
| and as you can probably tell from the cover, this is not a new
| concept. I can't remember whether Stan actually refers to it as
| TA, but that's what it is. Here is what it comes down to:
|
| Using TA, we can better determine when a stock is _in the process
| of becoming more valuable aka trending up_. We also can observe
| _when it 's likely that a stock will not become more valuable
| (the top)_ and even _when a stock is likely to become less
| valuable (trending down)_.
|
| Things like moving average crossovers might work for some people.
| I'm sure there are people out there that swear by the MESA Sine
| Wave or some obscure study like that. Personally I've had more
| success just keeping it as simple as possible, and that's what
| you might find in Stan's book (which is not a referral link, and
| I'm sure you can find the information elsewhere).
|
| This works because of Efficient Market Theory, which I do
| subscribe to. It doesn't invalidate other means of choosing
| investments, but for certain minds, it provides a good framework
| for making decisions. That's really why I'm confused about all
| the hate for TA in here: I was under the impression that hackers
| like to make decisions based on data. Maybe WallStreetBets has
| given it a bad name or something.
| soniman wrote:
| The only sane comment in this thread.
| pierat wrote:
| Wow, the meta-analysis of comments versus the actual astrology
| thread are stark: https://news.ycombinator.com/item?id=36840674
|
| Looking at both side to side shows how much the materialists
| influence places like this.
|
| 1. Astrology is seen as a "womanly lowly thing", but this has no
| people yelling such sexist connections.
|
| 2. Astrology has the underlying Hermetic beliefs that "As above,
| so below" and to know thyself, whereas this goal is "make money
| machine go brrr"
|
| 3. Astrologers/diviners know their art is imprecise and say so,
| whereas this Technical Analysis shrouds itself in "hard math
| badly applied" to fool people (including themselves).
|
| 4. The Materialists (anti-religion, anti-occult, anti-mystic) are
| absent, whereas in the Astrologer thread they were HOWLING.
| mellosouls wrote:
| I like your comment but it's also fair to point out the top
| rated comment in this discussion ridicules TA
| d--b wrote:
| Like everything in the stock market technical analysis works when
| a lot of people are doing technical analysis, which is why people
| doing it tend to talk about it and sell books, rather than keep
| their "winning" strategies to themselves.
|
| People seem a little smarter than they used to be (or they just
| bought crypto), so it doesnt work well now...
| Majromax wrote:
| This section tells me that the data is insufficient to draw
| conclusions:
|
| > The strategy goes as follows: we purchase SPY on a new moon,
| and re-sell it on the next full moon. And repeat that every lunar
| month.
|
| > Clearly, it fails at beating SMA crossovers. Or at doing
| basically anything, an investor using the moon phase strategy
| starting with 10.000$ would end up with only 11.110$ and a Sharpe
| ratio of only 0.09.
|
| Under EMH, technical analysis doesn't work, and under technical
| theories there's no reason to expect a wax on / wane off strategy
| to do anything. Our strong assumption should be that a strategy
| that has you in the market 50% of the time should produce 50% of
| the return with 50% of the variation.
|
| However, this arbitrary control strategy instead provided a
| strong return difference, somehow avoiding most periods of
| growth. If this backtesting period gives a false positive signal
| that this strategy differs from no strategy (appropriately
| weighted in-market investment), then the period is also likely
| insufficient to confirm the strength of the crossover technical
| strategy.
| GuB-42 wrote:
| That astrology managed to result in a significant loss compared
| to "buy and hold" shows that astrology is very effective, unlike
| the suggested "SMA crossovers" technique.
|
| A strategy that is based on pure chance is going to make, on
| average, as much as the "buy and hold" strategy, for the time you
| actually hold the stock. Looking at the "SMA crossover" graph, it
| looks like the stock is held for about 80% of the time, so, the
| result is about 25% better than 100% "buy and hold". Good but...
|
| The "moon phases" technique gets zero benefits even though the
| stock is held for 50% of the time, seems bad right? Now think
| about it, if it made nothing during the time you held the stock,
| it means all the valuation must have happened during the time you
| _didn 't_ hold the stock. So all you need to do is to do the
| opposite of what is suggested: buy on new moon, sell on full
| moon. In the end, you should get as much as the 100% "buy and
| hold", but because you only held it for 50%, it is actually twice
| as good.
|
| So to summarize, here is the ranking. The number corresponds of
| how much better it is to "buy and hold": - buy on
| full moon, sell on new moon => 0 - buy and hold => 1
| (reference) - SMA crossover => 1.25 - buy on new
| moon, sell on full moon => 2
|
| So, the article got it wrong, done right, astrology is clearly
| the best.
| rickreynoldssf wrote:
| In my experience technical analysis works ok at resolutions of 1
| to 5 minutes. i.e. if you want to grind at day trading watching
| the live candlesticks and have a reasonably fast trading platform
| you might make enough to get by. This assumes you are familiar
| with the asset and are up to date on latest news relating to it
| and use that as a lens to read the TA indicators. As the
| timeframe grows it's just alchemy. Applying to to asset activity
| over days is meaningless.
| notShabu wrote:
| Here are the best arguments for why TA works IMO:
|
| - The patterns are real in that they can be used to roughly
| identify groups of buyers and sellers who have price floors and
| ceilings. E.g. it's a way of gauging the momentum of a trend.
| However the signal:noise ratio is very high especially when
| traders try to act on these patterns so that their activity
| drowns out the original signal
|
| - The patterns then become a schelling point and those who can
| read the patterns faster can front-run those who read it more
| slowly. The patterns themselves become reality rather than just a
| representation of reality.
|
| The value is most likely fully drained from it in that there is
| no longer any alpha but remains sorta-kinda truish occasionally
| like "if they don't look you in the eyes it means they're lying"
| or "changing the lighting improves productivity"
| nemo44x wrote:
| "The patterns themselves become reality rather than just a
| representation of reality."
|
| This is known as a "hyperstition". It's a cool concept that I
| believe is more and more relevant as the world becomes more and
| more connected. Things like "meme magic", etc.
| zer0tonin wrote:
| I think in the context of finance, "hyperstition" is more
| known as "reflexivity".
| rkimb wrote:
| So to summarize, the opportunity of pattern trading is self-
| fulfilling, which also means if any become unfashionable then
| the signal will cease to exist. From that fact alone we can
| conclude there is no basis in the economic reality of the
| business or its public stock. Greater fool theory, essentially.
| drexlspivey wrote:
| It's very easy to tell if it works. If you go to an interview
| with Goldman Sachs and mention that you are an expert in TA
| what would be their reaction?
| nonethewiser wrote:
| This is not an endorsement of TA but look at what they do,
| not say. They are highly influneced by chart movements. Price
| predictions and buy/sell recommendations are constrained by
| recent trends and observed prices. Even if they want to say
| they are driven by fundamentals. These "fundamentals" change
| in reaction to price action.
| NovemberWhiskey wrote:
| > _This is not an endorsement of TA but look at what they
| do, not say._
|
| What they do is make-market, rather than conduct
| proprietary trades, and spend huge amounts of time, money
| and effort on risk management that's based on hedging the
| risk in the book rather than forming an idea about which
| way the market is going to move.
| PaulDavisThe1st wrote:
| > This is not an endorsement of TA but look at what they
| do, not say
|
| So _do_ they hire you, or _do_ they not?
| nonethewiser wrote:
| Goldman Sachs is a weird authority to appeal to. And even
| if you want to you'll be appealing to an authority that
| endorses aspects of TA.
| mcguire wrote:
| Yes. If you value a stock based on fundamentals, including
| estimates of the company's future performance, at $10 and
| the current asking price is $100 you don't want to buy it.
| Vice versa, you would.
| btilly wrote:
| Their reaction is likely to hire you to write a newsletter to
| their customers, to convince their customers to trade on your
| strategies.
|
| Brokers don't particularly care whether their customers make
| money. But they do like customers who trade early, and trade
| often.
| throwaway743 wrote:
| Why would you be interviewing for a job if you were
| successful in using TA?
| mcguire wrote:
| The best way to make money in finance is to manage other
| peoples' money.
| throwaway743 wrote:
| But if one can make money on their own, why let someone
| else own their time, unless they don't value their time
| as much?
| iopq wrote:
| Okay, do you want to make 100% of profit or loss on your
| portfolio of $1,000,000?
|
| or do you want to make 1% of $100,000,000 win or lose,
| you still get paid every year?
| malux85 wrote:
| Because if you work with other peoples money, there's a
| LOT more of it, so you can trade 100x more often and size
| your positions over a greater range.
|
| Source: I'm a quant
| phyalow wrote:
| xgboost
| belfalas wrote:
| To be pedantic and HN about it, "horary astrology" is _actual_
| stock market astrology. :)
|
| Disclaimer: I would not advise you try it as a way to get rich
| quick, but it's fun to read about!
| dogmayor wrote:
| If there are youtube/twitter/etc guys "teaching" you a "strategy"
| then it's one to avoid like the plague. True edge generating
| strats are held onto like state secrets.
| mjhay wrote:
| Yes.
| fullstackchris wrote:
| So... a lot of smug comments on both sides claiming what
| technical analysis is and isn't. Let's get something straight,
| there are only two ways of analysing markets: fundamentally or
| technically.
|
| I've been actively trading nearly every day for the past 6 months
| and can tell you there are people who extract profits from the
| market every single day (I'm not one of them yet, but I'm at
| least modestly profitable the past few months). Being profitable
| every day can ONLY be done using technical analysis. You're not
| going to profit every single day doing intraday trades on
| fundamentals. People think 'technical analysis' is as simple as
| what this blog post mentions - using something as rudimentary as
| SMAs. Unfortunately, this is case for most people. Come back
| when:
|
| - you know what auction market theory is (AMT)
|
| - you know what one time framing is (OTF)
|
| - you know what delta divergence is
|
| - you know what poor market structure / single prints / excess
| all are
|
| - you know what low / high volume reversals are
|
| All these are NOT fancy indicators or contrived signals but are
| quite literally real structures and residuals of actual BUYERS
| and SELLERS in a market (i.e. exactly what a market is, NOT
| astrology!) that can help show where the markets MAY go (of
| course the future is never certain)
|
| Further more, you have to synthesize the context of all of these
| things in real time as the session unfolds and block out any of
| the emotions or psychology of putting money on the table entails!
| To get to this top tier (being profitable nearly every day) is as
| hard and takes as much time as any other performance profession
| (athletes, sales, etc.)
|
| Of course you're going to have an extremely bad time if you try
| and implement something like a SMA crossover!
|
| Think of it this way: any automated technical strategy you can
| think up within even a few days of effort have been done over
| 1000 times by every financial firm on the planet - and you can
| guess they don't work - if they did there would be a lot more
| billionaires on the planet! Most of the automated strategies that
| are actually profitable are designed by engineers with the help
| of decades+ traders who have been consistently profitable. Even
| then, you'll be lucky if in a raw win/loss ratio is over 50% (but
| this gets into expected value of the trade, etc. too long to post
| about here, you can be profitable with just a 30% win rate, for
| example if you're reward to risk is 2:1)
|
| Anyway, thats my 2 cents from someone who trades with real money
| on the line. It's probably pretty easy to say that TA is made up
| and use it as a scapegoat when you YOLOed a bunch of money on GME
| and lost it a few years back.
| richardw wrote:
| We're pattern matching animals suited to staying alive by making
| snap decisions without perfect information. This works perfectly
| when we think there's a tiger behind a bush. Suboptimal when
| we're faced with the random movements of the market economy.
|
| "tendency to perceive meaningful connections between unrelated
| things"
|
| https://en.m.wikipedia.org/wiki/Apophenia
| reedf1 wrote:
| The answer is of course - yes. But the funny thing about markets
| is that if enough people believe a thesis it is effectively true.
| Go figure. People will trade a "vomiting camel" so best to be
| abreast.
| lordnacho wrote:
| It doesn't have to be. As long as you can specify what your
| system actually does, you can test it, and you can falsify it as
| a hypothesis about how the market works.
|
| However it has to be done in a statistically sound way. Just
| showing a backtest that makes money or beats the market is not
| enough evidence.
| ldehaan wrote:
| [dead]
| JumpinJack_Cash wrote:
| If enough people believe it then it works and hence it's not
| randomness and can be exploited to make money.
|
| Much like it's important to always say to your crush that you are
| the most compatible sign.
|
| All sorts of BS narratives dominate the stock market, TA can be
| thought of as a meta-narrative.
|
| Some quant hedge fund understood that sunny days in Manhattan are
| correlated with the market going up, TA could be the same, if
| some particular chart figure emerges then it prompts people to
| buy or sell thus creating the same effect of a sunny day in
| Manhattan.
|
| logically speaking both the sunny day and the peculiar TA chart
| appearing should not prompt people to buy or sell a security who
| are we to question their psychology? And most importantly why
| question it when we can exploit it?
|
| Other people would turn around and exploit our psychology when
| being in a good mood due to having made money on the stock market
| exploiting the TA meta-narrative , people in a good mood are
| notoriously more likely to spend on stuff and even overpay for it
| v64 wrote:
| Mandelbrot (of the set) studied the effectiveness of technical
| analysis and wrote about it in The Misbehavior of Markets: A
| Fractal View of Financial Turbulence. This PDF [1] has a summary
| of the findings.
|
| Spoilers: The math shows TA's bullshit.
|
| [1]
| https://users.math.yale.edu/users/mandelbrot/web_pdfs/getabs...
| cde-v wrote:
| Yeah but what about all the anecdotal evidence in this thread
| that it works??? /s
| Knee_Pain wrote:
| Yes, next question?
|
| Also, this is a really pitiful article. Very short, badly
| written, proves nothing. Why is it getting this many upvotes?
| gryn wrote:
| The people who up vote it are up voting the discussion of the
| topic, not the article itself.
| scrlk wrote:
| I prefer to look for the Bart Simpson pattern on my charts.
|
| https://www.bloomberg.com/news/articles/2020-06-03/bitcoin-b...
|
| https://archive.ph/teoSo
| theknocker wrote:
| [dead]
| jerf wrote:
| I tend to think so, because markets are anti-inductive:
| https://www.lesswrong.com/posts/h24JGbmweNpWZfBkM/markets-ar...
|
| That is, since everyone knows that everyone knows about technical
| analysis, the value it may have had is long since sucked out of
| it. And in any submarket where a participant has the market power
| to paint the tape, all following technical analysis will do is
| allow then to make traps for you and drive your trading activity
| in response to the technical analysis.
|
| It is possible that super-long-term technical analysis has some
| meaning, and there's some generalized principles about how to
| read things like depth of the market off of the tape, but I'm not
| convinced deeply about the utility of technical analysis in
| general.
| jonfw wrote:
| Keep in mind that the vast majority of the market is driven by
| institutional investors and the prices are largely set by those
| big players. Let's say that TA works, but it doesn't scale to
| that level (i.e. it only provides returns on marginal volume).
|
| TA would never grow large enough to compete with the
| institutional investors who are actually driving the market, it
| would never gain pricing authority, and the gains would
| continue to be available to anybody playing in the margins.
|
| As an analogy- you could say that you're scavenging for scraps
| behind a big fish. Sure, it doesn't scale. And sure, not
| everybody can do it or it would fail. But, if there are enough
| big fish, and you don't mind waiting for scraps, there's food
| to be had
|
| Note that this is no argument for or against TA, it may still
| be bogus. I just don't think you can assume it's bogus because
| it would get priced in
| blacksoil wrote:
| I wouldn't say all technical analysis techniques are "astrology".
| It depends on what method. Support and resistance for example is
| an economic optimization behavior where people would buy when the
| price is at the local minima and sell at local maxima. Other
| "non-astrology" technique is "riding the wave" which is following
| what large number of people / big volume traders are doing
| (selling or buying) in a way it's like how AI being the magic
| buzzword where VC would invest in at the moment, and hence it's
| easier to get invested in the area
| bob1029 wrote:
| Mostly. I've been known to get my hands a little dirty using
| historical pricing combined with deep due diligence efforts.
| Think of my use of TA like the cherry on top, not the actual
| cake. I already know I want cake or I wouldn't be sitting at the
| table. But, I might consume the cake a little bit differently
| depending on the nature of the cherry.
|
| For example, I'll listen to an earnings call or other investor
| presentation to determine if I even want to do business with some
| corporation. _After I have committed to my decision to purchase
| based upon DD_ , I might look at how the market has historically
| treated their business up until today to develop an actual
| strategy for acquiring a position (or more of a position).
|
| The most recent instance of this for me was AT&T and Verizon
| getting bad news raked over the coals last week. I already know I
| want to be in business with these organizations (already am), so
| I looked at how the market was reacting in near-real-time to the
| news and adjusted my cake-eating strategy accordingly.
|
| Ultimately, the outlook you are working with is what will drive
| all of this. I don't _ever_ sell stock. If I decide to buy
| something, I know I want to hold it for at least 3 years. Never
| selling and strategically buying seem to be a simple rule for not
| getting fucked over with how investors _typically_ try to use
| these tools.
|
| The least tortured analogy I can come up with is to compare pure
| TA investing strategies to poker. Is it gambling? Kinda yes. Is
| it also strategic? Maybe also yes. Really depends on the context
| and mindset of the participants going into it.
| sudosysgen wrote:
| The problem is that if you could actually time the best
| execution moment, you could make that profit trading options or
| futures as well. If you don't think you can, you might as well
| just buy now.
| nonethewiser wrote:
| Im not buying this argument. Hes not suggesting its foolproof
| so its reasonable that he would want a lower risk/reward
| vehicle.
| sixo wrote:
| I imagine, even if equity prices are imagined to have an ideal
| or true value based on fundamentals, nearly all of the work of
| making a profit comes from maneuvering appropriately relative
| to competition, and the data on that is nothing but
| "technical".
| [deleted]
| zmgsabst wrote:
| What's the distinction between quants and TA?
|
| I'm having trouble figuring out what specifically people are
| talking about; but everyone has apparently strong opinions on the
| subject.
| tech_ken wrote:
| I have a pet hypothesis that Fibonacci Retracements accidentally
| lines up with some reasonable noise quantiles (or something, I'm
| not a finance type) and thus is a sound strategy, but for the
| wrong reasons.
| sakopov wrote:
| Market sentiment is driven by a lot of factors including human
| emotion. So none of these tools are going to be accurate
| predictors of price movement. However, there are certain things
| in the market that are pretty solid indicators in my opinion. For
| example, RSI (relative strength index) shows when something is
| overbought or oversold and is a great tool to use. Typically an
| RSI of 70-80 is indicative of a coming sell-off or people taking
| profits after participating in the price appreciation rally (if
| RSI remains elevated for a period of time). Similarly, an RSI of
| 30, 40, 50 indicates that a company is over-sold and could
| present a good opportunity for starting a new position. Other
| things like head and shoulders and double top patterns are
| generally a crapshoot in my opinion. With that said, I do think
| that algorithmic trading uses these patterns, so maybe there is
| some merit to them.
| pyrrhotech wrote:
| TA is unlikely to produce alpha when used on its own, but it's
| certainly possible. However, combining TA with other indicators
| such as macroeconomic data, VIX futures curve, and tracking
| interest rates and Fed actions can lead to a consistently
| profitable model, as long as overfitting is kept in check and
| slippage is properly accounted for. It's much easier said than
| done.
|
| It took us years of 80 hour weeks to become consistently
| profitable at Grizzly Bulls, but the result is quite satisfying.
| Our top model, https://grizzlybulls.com/models/vix-ta-macro-mp-
| extreme, has produced +17.92% returns since launch in January
| 2022, vs. -4.15% for the S&P 500 over that same time period. TA
| plays a role in timing swing trades / hedges once other
| indicators align.
| jw887c wrote:
| Yes
| known wrote:
| [dead]
| Jaxkr wrote:
| This article is a rare exception to Betteridge's law
| BobbyTables2 wrote:
| [dead]
| tester756 wrote:
| Doesn't TA work just because some people believe in it, thus bet
| money basing on that? ;)
|
| Jokes aside, I'm only betting on stocks that im familiar with
| (e.g my hobby industry)
| bob1029 wrote:
| > I'm only betting on stocks that im familiar with (e.g my
| hobby industry)
|
| This is potentially the most valuable advice in this thread. If
| you invest in what you know, it will be _a lot_ easier to
| stomach downturns and other unexpected events. This is the only
| reason I held AMD through a few painful phases. I was 200%
| convinced their architecture would make all the other news
| irrelevant.
| [deleted]
| Temporary_31337 wrote:
| Well that was pretty shallow. Only a single pattern was included
| and even that performed worse than the index. If you were to
| include the transaction costs and the cost of time spent
| analysing that, the perf would be even worse. So a shallow
| article with a wrong conclusion. Since past returns are not a
| reliable indicator for future returns any back testing will only
| show if a thing would have worked in the past not in the future.
| 2020aj wrote:
| Yes, well the headline "Is this particular 50/200 day simple
| moving average crossover strategy just S&P500 astrology?" isn't
| a sweeping enough generalization
| Tycho wrote:
| Isn't technical analysis ultimately just reading patterns into
| trading exchange data - and don't quantitative hedge funds have
| strategies that make money from doing precisely this? (albeit
| automatically and at massive scale through the use of computer
| systems)
| Joel_Mckay wrote:
| Nope, the fact is a private individual has a very low probably of
| building wealth on the stock market due to numerous factors. Much
| like a casino the assumptions the naive make are leveraged
| against the ambitious and irrational.
|
| Traditionally, the homes and farms people earned would ultimately
| have better returns for individuals, but the primary mechanism
| was controlling for inflation and excluding debt bleeders on
| equity. These systems were slowly converted into commodities
| through investment hedge-funds, and are now the primary driver in
| speculative-markets (2008 crash mechanism was never mitigated).
| See Japan real estate if you would like to predict the logical
| conclusion of the naive commodity theory.
|
| When one has the epiphany debt has real consequences despite the
| political rhetoric, Your investment risk profile will improve,
| and seeing currency in a global trade context becomes clear.
|
| Rule #13: "Never reach out to a drowning man", as in their
| desperation they can push you under as well.
|
| Good luck =)
| manjalyc wrote:
| Looking for patterns in charts is stock market astrology, but
| technical analysis is a broad term that goes beyond just that. An
| analysis of 10,000 institutional portfolios found technical
| analysis provided a small but statistically significant return
| advantage [1].
|
| Perhaps the way most retail investors or get-rich-quick schemes
| use technical analysis (looking for patterns in charts) is
| astrology. But the big boys and institutional investors seem to
| profit from certain types of technical analysis. Highly
| reccomended watching this video by Benjamin:
| https://www.youtube.com/watch?v=ZN6P9ErUcOg
|
| Essentially:
|
| - Chart patterns are uselesss
|
| - TA by itself is useless
|
| - Using TA in tandem with a bigger strategy can (and is
| statiscally shown to) provide an edge
|
| [1]
| https://scholar.google.com/scholar?hl=en&as_sdt=0%2C22&q=Hea...
| whimsicalism wrote:
| If you stretch out the definition of technical analysis enough
| to include any predicting of the future from past patterns of
| pricing across multiple stocks, then sure market makers both
| use and profit from TA.
|
| But what people usually mean using TA, IMO does not work at
| all.
| SkipperCat wrote:
| TA is extremely useful for learning Python, Pandas and
| Matplotlib. The simple algos like MACD, RSI and SMA are easy to
| code and allow you to have a lot of fun learning how to build a
| simple trading system.
|
| Other than that, its pretty much as useful as tarot cards.
| yodsanklai wrote:
| Isn't it something that can be answered scientifically by
| statistical tests?
| adventured wrote:
| There are only two legal approaches to investing - available to
| average people and professionals alike - that have been shown to
| work over very long periods of time.
|
| 1) Buy the S&P500 via a very low cost index fund. Buy
| consistently, effectively cost averaging, over the long-term.
| Don't worry about valuations, timing, bulls or bears, recessions
| or euphoria, as that will all smooth out. Just keep buying over
| time. This is what works best for ~95%+ of all people and is one
| of the few ways to predictably build wealth (assuming enough
| income above expenses over decades of time).
|
| 2) The Ben Graham school of value investing. [1] This some takes
| time to learn and integrate. You have to build up a skill at
| understanding what represents a good value and you have to be
| able to have considerable discipline, understanding that you only
| need a few hits every so many years to fairly rapidly compound
| capital (ie that you don't need to constantly hit homeruns, so
| you properly grasp that you can safely afford to be patient and
| do not need to FOMO participate in market stupidity; with the
| first rule being do not destroy capital).
|
| This is why so few professional money managers on Wall Street can
| beat the market over time (despite all they have access to) and
| skilled independent value investors can. There is a system that
| works and most of the Wall Street players do not have the time
| (they want/need results asap) or discipline to put it into
| action.
|
| [1] The Superinvestors of Graham and Doddsville [PDF]
| https://www8.gsb.columbia.edu/sites/valueinvesting/files/fil...
| AlexandrB wrote:
| Given that HFT exists, I can't imagine technical analysis can be
| useful. Many of the rules it proposes would be easy to feed into
| a trading bot and you would expect firms to be making profits
| using these strategies already while being able to execute trades
| far faster than you can.
|
| So either:
|
| a. HFT firms are already doing this and what the retail trader
| sees is the left-overs with little profit left to capture.
|
| b. HFT firms are not doing this because it doesn't work.
|
| Neither option bodes well for doing retail trades based on TA.
| jacquesm wrote:
| Oversimplified: HFT is essentially front running in disguise.
| It has a technical component but it's better to think of it as
| someone running ahead of you to be first in line at the counter
| of the bakery to buy the thing you want to be buying so there
| is a bigger chance you'll be buying it from them or so that the
| increase in price when you are buying it will allow them to
| sell it to someone else at a profit.
|
| The main focus is on being able to outrun not just you, but
| also everybody else, hence the focus on latency. The next
| problem: which bakery to target first is where there is some
| analysis involved.
| WFHRenaissance wrote:
| TA is an egregore in that it is a concept that is only
| empowered/useful when everyone "believes" in it.
| slashdev wrote:
| From the comments here, I think most people just read the
| headline.
|
| The article looked at 50/200 day simple moving average crossovers
| on the S&P 500 index (using SPY etf). Which are really just
| indicators of momentum. Buy when going up, sell when going down.
| This underperformed just buying and holding the SPY 480% return
| versus 520% over the last 25 years. However, it avoided big draw
| downs, so the risk adjusted return was better. In other words, it
| works in a world with no trading commissions and no bid ask
| spread. Is it worth it in real life? Probably not.
| nonethewiser wrote:
| Except there are lots of commission free trading options.
| zer0tonin wrote:
| Transaction costs are not limited to broker fees, you also
| pay the spread and eventually slippage. That's why I didn't
| include them in the article, that's too many variables and
| I'm lazy.
| nonethewiser wrote:
| Slashdev explicitly differentiated between commissions and
| spread which is what im responding to. So my point stands.
| amerkhalid wrote:
| That is very recent though.
| fantasticshower wrote:
| How many people really buy and hold and don't question their
| strategy when the 30%+ drawdowns come? We know sticking to your
| plan is key to long term success. Can the masses stick to
| simple buy and hold long term?
| bryananderson wrote:
| Me! I've only ever bought total market index funds and
| they're just gonna sit there for as long as I live, no matter
| what. If the world's total stock value crashes permanently,
| I'm probably worried about something other than my retirement
| plans.
| nonethewiser wrote:
| Almost no one that trades for a living, including finance
| professionals.
|
| Lots of people saving for retirement do though.
| fantasticshower wrote:
| Lots of people have stronger stomachs for drawdowns than I
| do then!
| nonethewiser wrote:
| It's basically just determined by how closely you are
| watching the market.
| Zetice wrote:
| Your stomach should turn more by actually realizing those
| losses rather than just letting it ride.
|
| Market downturns mean nothing! You lose literally
| nothing; you still own the same things you did in the
| morning, and will own those things again in 5 years (or
| more based on splits/dividends).
|
| Honestly yeah, this is kind of a critical part of
| profitable investing; if you can't hold through
| downturns, you ought to find someone who can and then
| forget about that money entirely.
| sxg wrote:
| You don't have to have a strong stomach if you don't pay
| attention to the market. Buy and hold or "set and forget"
| are legitimately good strategies at least in part because
| of this reason.
| fantasticshower wrote:
| Of course you also have to believe the theory of buy and
| hold is sound and likely to work in the future. I think
| that's another part of why I struggle with it.
| phil21 wrote:
| It's why having a plan and a strong conviction of that
| plan (for me this means having to schedule time to
| purposefully "sit down" with myself quarterly to ensure
| the plan is still accurate) is so important. When the
| shit hits the fan you want to be able to realize you are
| dealing with emotion, and to go look at your pre-flight
| checklist so to speak before you sell anything. If pre-
| set conditions aren't met, you have no decisions to make.
|
| If you go into a "situation" thinking you are already
| overleveraged or whatever, you are much more likely to do
| something silly vs. if you went into the same situation
| comfortable in the logic of how you have your finances
| configured.
| Eridrus wrote:
| I don't know about how _many_ people keep holding, but we
| just experienced a 30%+ fall in tech stocks (and 25% fall in
| sp500) last year. I held all my stocks because, well, what
| else was I going to invest in? And if I don 't have a
| different preferred allocation, then I'm just trying to time
| the market.
|
| My experience (thankfully not paid for with real money, but
| fake trading) has shown me I am not good at market timing,
| particularly knowing when to get back in, so I don't bother
| trying.
|
| It doesn't really take restraint so much as an acceptance
| that I will likely not do better than buy & hold. I don't
| enjoy seeing my balance go down, but I am not close to
| retirement, so I accept that I need to wait it out to catch
| market rallies because I am not paying super close attention
| to markets.
| foobarian wrote:
| I have your mind set now. But it took me multiple painful
| lessons over the years until the learning stuck :-) Luckily
| I was much poorer back then or I would really be bummed
| right now.
| nameless912 wrote:
| Anecdotally, all my moderately- to very-well paid tech
| friends have a robo investor and don't touch anything ever
| until they need to withdraw. I'd say most people don't play
| the day trading game, and that includes HODL'ing (man, that
| term is literally the only thing that came from crypto that I
| like) during bad downturns.
| mcguire wrote:
| _Raises hand_
|
| This is, by the way, the intended strategy behind most index-
| based retirement funds.
| fantasticshower wrote:
| I find it interesting that most of the popular index funds
| are market-cap weighted, and that's just how it is. Why is
| it that way? Why do we think that owning the biggest
| companies should be the default?
| saltcured wrote:
| Aren't there two main reasons?
|
| 1. You need some way of normalizing shares to produce a
| statistical sampling of the market, and capitalization is
| the obvious, existing market mechanism to do this.
|
| 2. You need to resist brute attacks on the index
| investment strategy. I.e. if a giant fund is known to
| just consider all shares equal, you could soak them by
| doing wild stock splits to put more of your shares on the
| market. Or if they consider all companies equal, you
| could soak them by bringing lots of empty shell companies
| to the market.
| NelsonMinar wrote:
| The folks selling technical analysis systems are much more
| effective scammers than astrologers.
| kneebonian wrote:
| Not really, being the royal court astrologer was a pretty
| lucrative business back in the day. Hell being the Persian
| Kings court astrologer could eventually be leveraged into being
| the chief advisor.
| vasco wrote:
| If a meteorite hits earth, aliens are discovered, quantum
| computing breaks encryption, someone launches a nuclear bomb,
| etc, any of those will affect the stock market by a lot.
| Technical analysis can't predict a meteorite or any of those
| other things, therefore it cannot work.
|
| It "might work if nothing significant happens" but that is just a
| weasel way of saying it doesn't work.
|
| Now if you're saying you decided to invest in something and
| you're trying to get an entrypoint and you spot a moment of large
| deviation from the mean and you use that to influence your
| operational buying mechanics like how you space out your buys or
| time them, that I can definitely see. But online you always see
| these two very different things mixed together.
| gruez wrote:
| >Technical analysis can't predict a meteorite or any of those
| other things, therefore it cannot work.
|
| This feels like you're attacking a strawman version of
| technical analysis. The claim isn't that you can predict future
| price movements with perfect accuracy, it's that you can
| predict it well enough that you can make some money from it.
| None of our economic models can predict a meteor hitting the
| earth either. Does that mean we should conclude that all of
| them "cannot work"?
| stouset wrote:
| The fundamental problem is that everyone else--particularly
| people with unfathomably deeper pockets and much better
| access to information to you--can do the same TA as you. To
| whatever extent it does work, that opportunity is rapidly
| exhausted.
|
| So all that's left is the unpredictable bits, and those are
| what you're at the mercy of. And the unpredictable bits are
| happening constantly.
| DoodahMan wrote:
| Something to be said about playing in pockets of the market
| those fat cats stay away from due to lack of the liquidity
| needed, market cap constraints, etc. There it can be a more
| level playing field for us minnows.
| stouset wrote:
| I would be willing to bet significant sums of money that
| virtually 100% of your trades, in any any of these
| "pockets of the market", have one of those fat cats as
| your counterparty.
| mcguire wrote:
| On the other hand, for those same reasons, there is less
| information available about those markets.
| ActivePattern wrote:
| Right, and that's a legit argument against Technical
| Analysis. The meteor argument makes no sense, for the
| reason above.
| username332211 wrote:
| In this case profit exhaustion doesn't really work. The
| assumption of technical analysis is that those with the
| deeper pockets move the market in certain ways and patterns
| and it's the job of the short-term speculator to anticipate
| those ways.
|
| But if you assume enough rich people do technical analysis
| and pattern day trading you can earn money by doing what's
| essentially technical analysis, but with different patterns
| - ones designed to capitalize on the old patterns used by
| the rich.
|
| Keep in mind, I'm not saying technical analysis works. I
| don't think it does, but that's without seriously examining
| the evidence. I'm just saying that the diminishing profit
| argument doesn't work. At least not as presented.
| stouset wrote:
| > The assumption of technical analysis is that those with
| the deeper pockets move the market in certain ways and
| patterns
|
| If those with deeper pockets had reliably exploitable
| trading strategies, other teams with equally deep pockets
| _would be exploiting them_. You need to simultaneously
| believe that widely known and understood patterns exist
| which are profitable to exploit but also that nobody with
| large sums of money and a financial incentive to profit
| is interested in taking that easy money.
| ImPostingOnHN wrote:
| _> The assumption of technical analysis is that those
| with the deeper pockets move the market in certain ways
| and patterns and it 's the job of the short-term
| speculator to anticipate those ways._
|
| if this were the case, it seems likely that _others_ with
| deeper pockets than you, perhaps other high frequency
| traders, would rapidly exhaust _those_ profit
| opportunities
| pclmulqdq wrote:
| Which they do. Many kinds of HFT trading strategies
| actually look a lot like a more mathematically rigorous
| version of technical analysis. It is very likely that
| they take all of the alpha that TA traders used to get.
| vgatherps wrote:
| HFTs generally consider shorter timescales (both in the
| feature set and the forward horizon) than human TA would
| lean on, and make tremendous use of microstructure
| information rather than outright price movements.
|
| Having said that, "let's take difference to EMA" is
| pretty the one-size-fits-all solution, and there are no
| shortage of firms looking at minute to hour long trades
| to gobble up anything human TA practitioners would ever
| try to trade.
| stouset wrote:
| > HFTs generally consider shorter timescales than human
| TA would lean on
|
| This just further emphasizes the point that retail
| investors relying on TA are having their lunch eaten.
| HFTs are picking the minute opportunities because _that
| 's all that exists_. If there were longer-term strategies
| that were reliably profitable, do you think they simply
| ignore them?
| vgatherps wrote:
| sub-minute opportunities are absolutely not all that
| exist, in many ways it's the opposite. The hft
| opportunity space is extremely competitive, and much more
| zero sum than the mid/low frequency space. A relatively
| small set of players compete for the lions share of
| anything one might consider high frequency. The set of
| trades you compete for and the relevant information to
| generate forecasts is limited / similar across firms, and
| table-stakes on engineering side are very high.
|
| > If there were long term strategies that were reliably
| profitable, do you think they would simply ignore them?
|
| Yes? Mid frequency trading (say holding period of 5
| minutes to ~1 hour) is a totally different class of
| quantitative trading, from the features you use to how
| you build portfolios (if at all) to how you execute on
| forecasts. At least one top-of-the-game hft firm (that
| already relied on forecasts instead of speed) got burned
| on their first attempt to enter mid frequency.
| stouset wrote:
| > At least one top-of-the-game hft firm (that already
| relied on forecasts instead of speed) got burned on their
| first attempt to enter mid frequency.
|
| Put differently: "A bunch of smart people who have proven
| to be able to reliably extract profits from microsecond
| trades tried their hand at exploiting patterns on longer
| timescales and were unable to. Even though I have less
| money, information, access to markets, and am just one
| person, I believe I can succeed where they failed."
| username332211 wrote:
| The thing is there's no reason why new patterns can't
| exist, created by the patterns of the HFTs, who could
| create new profit opportunities for other HFTs or day-
| traders.
|
| Now, perhaps each new generation of patterns would have
| diminishing returns over the previous generation. My
| intuition is that this almost certainly true. But either
| an argument or evidence has to exist for it and I'm not
| aware of any.
| ImPostingOnHN wrote:
| _> The thing is there 's no reason why new patterns can't
| exist, created by the patterns of the HFTs, who could
| create new profit opportunities for other HFTs_
|
| correct, exactly what I'm saying, any opportunities,
| including those derived from other opportunities being
| seized, would themselves be seized by such deep pockets
| and HFT firms
|
| _> ...or day-traders._
|
| unfortunately I doubt it, due to the above
| gadrev wrote:
| You're wrong in your conclusion, even though the argument
| looks good.
|
| The opportunity is there for the average person to take,
| but it needs sufficient skill / training, like any other
| skill. I can't "prove it" to you, but I already proved it
| to myself and many people in the trading community did.
|
| You don't need any sophisticated tools or huge amounts of
| money. It's bloody difficult though, not just for the
| technical reasons (there are many strategies but most go
| beyond a MA crossover, even though I'm not denying even
| that can produce alpha -- I don't know or care), but mostly
| for psychological reasons. And psychology is what's behind
| many of the patterns you see in the markets.
| stouset wrote:
| > but I already proved it to myself
|
| Every year there are people who beat the indexes and
| there are people who perform worse than the indexes.
| Every successive year some proportion of the winners stay
| winners and some become losers. The interesting thing to
| note is that--if you look at the statistics--winning one
| year has almost no bearing on whether or not you win the
| next year.
|
| Still, there are participants who flipped that weighted
| coin year after year and caught heads five years in a
| row. It doesn't mean they have a successful strategy. It
| just means that if you flip a 45/55 coin five years in a
| row, two out of one hundred people will get a string of
| heads.
|
| I've personally witnessed all of my day-trading friends
| go through this (I almost said "learn this lesson" but
| I'm not sure they have). For a while they beat the index
| and they're convinced their strategy is sound. One day
| something unexpected happens and they're suddenly in the
| hole. Often this is compounded by having an enormous tax
| bill on "gains" that no longer exist, necessitating
| selling off holdings that are deep in the red, making it
| even harder to get back to positive.
|
| Do some individuals exist who can reliably beat the
| markets? Sure. They just are exceedingly likely to not be
| you, and none of them are offering their services to you.
| DoodahMan wrote:
| I'm not aware of any way to predict a black swan, TA or
| otherwise. Sometimes shit just happens and no one sees it
| coming.
| paxys wrote:
| It's a lot more simple than that. You don't need to discover
| aliens to move the market in unexpected ways. A crop failure
| halfway across the world, a border skirmish between two
| countries, discovery of a new oil reserve, a ship blocking a
| canal, a tech company not selling as many phones as anticipated
| in a quarter...all have ripple effects through the economy and
| can screw all market projections. Stuff like this isn't a
| "black swan"...it happens every month.
|
| If you want to use math and statistics to get an edge in the
| market then become a quant trader. People who aren't smart
| enough for that but want to feel smart get into "technical
| analysis".
| PartiallyTyped wrote:
| Cicada populations in two different countries emerge the same
| year, decimating sesame crops while Indonesian crops remain
| unscathed and the futures shoot through the roof.
|
| Yet, similarly to brownian motion, the thousands of events
| that cooccur more or less cancel each other out in the grand
| scheme of things.
| overtomanu wrote:
| From : Peter Gregory "Cicadas" - silicon valley
|
| https://www.youtube.com/watch?v=kxh2X6NjuhY
| chewz wrote:
| I can assure you that long after aliens or nuclear bomb will do
| with humanity algorytmic trading will go on using the same
| price patterns as always.
| sidlls wrote:
| While I agree that TA is an invalid method for investing, I
| disagree with your take on it. What you describe are,
| charitably, outlier events. Statistical models generally aren't
| useful for predicting singular events, even if they aren't
| outliers. So you aren't really invalidating the use of TA with
| that argument.
| carabiner wrote:
| Does non-technical analysis work for those events? Nope. TA can
| incorporate all currently known information about the
| likelihood of those events though. As they say on WSB, it's
| priced in.
| mywittyname wrote:
| You can predict situations like crop failure - if you're an
| expert in agriculture and have access to data that impacts
| crop yields.
|
| Some things, like weather and major political issues are
| easily obtained bits of information and are high-impact
| events. Data like satellite imaging of fields are available
| at a price and will tell an awful lot about what best-case
| production figures will be like. Lastly, insider information
| is around too - asking companies what they planted, sales
| data on seeds/fertilizer, etc. If a disease is hitting one
| company, it's probably hitting a lot of them, especially true
| with live stock.
|
| People do pay for this information, and they use it to trade
| futures. Which is how it eventually gets "priced in."
|
| Forecasting is a huge factor in a successful agriculture
| business. Which is part of why a lot of niche industries tend
| towards vertical integration - it's much easier to forecast
| demand when you produce a lot of derivative products. Buy
| your own stuff; if you planted a surplus then create new
| products / markets, if there's a shortage, cut production on
| lower profit items.
| 99_00 wrote:
| >You can predict situations like crop failure - if you're
| an expert in agriculture and have access to data that
| impacts crop yields.
|
| Experts predict crop failures, big money acts on those
| predictions and moves securities price and volume, which
| technical analysts examine.
|
| Therefore, the experts prediction is input for technical
| analysis.
| mywittyname wrote:
| It can be an input, but is it a significant input?
|
| If I know for a fact that a company is about to collapse
| and I establish a short position, will anybody notice? It
| depends on a lot of factors, but I could make an assload
| of money on puts without nudging the market.
|
| Technical analysis is all about answering the question:
| are you able to filter who know something vs those that
| don't merely by looking at a buy signal? The answer: no,
| not really. Insiders acted well in advance of the SVB
| issues being made public, and there are lot of other
| examples of people making guaranteed bets that weren't
| obvious in the technicals. The noise is just too much.
|
| By the time the signal is clear, the market has "priced"
| it in, and now you're just trying to predict the random
| actions of the know-nothing crowd.
|
| Technicals are always after-the-fact. Since enough people
| with deep knowledge have to have already moved on that
| information in order for the market to have reacted to
| it.
|
| It's much like trying to predict a fire by watching a
| crowd running away and hit the fire alarm. You didn't
| predict the fire and you can't have predicted the fire.
| Maybe you could have noticed one person booking it for
| the exit and follow along, but you still didn't know what
| was happening and were going on blind faith.
| 99_00 wrote:
| >If I know for a fact that a company is about to collapse
| and I establish a short position, will anybody notice? It
| depends on a lot of factors, but I could make an assload
| of money on puts without nudging the market.
|
| Assuming you are the only person who knows for sure that
| this company will collapse, technical analysis is the
| wrong tool to use and all other strategies, experts, big
| money players will also fail.
|
| Assuming you aren't the only person who knows for sure
| that this company will collapse the price will reflect
| this knowledge.
|
| >It's much like trying to predict a fire by watching a
| crowd running away and hit the fire alarm. You didn't
| predict the fire and you can't have predicted the fire.
| Maybe you could have noticed one person booking it for
| the exit and follow along, but you still didn't know what
| was happening and were going on blind faith.
|
| It's nothing like that at all, and reasoning with analogy
| is pointless because the discussion becomes about the
| analogy not the issue at hand. But I will try. If people
| running away is people selling stock, it doesn't matter
| if there is a fire or not. Selling stock impacts price
| regardless of if the event is real or not. And as you
| know, having been in a building where the fire alarm was
| activated, people don't rush to the exists. Some small
| number leave right away. The vast majority won't enter
| the building. The remaining people look to others and as
| more leave the momentum builds until the mass moves out.
|
| And once the fire department arrives and gives the ok
| they will go back in. But since we are talking about
| stocks, not all buyers won't be waiting for that. They'll
| have put their money elsewhere, money may go back into
| the stock slowly. Obviously this won't work on the top 3
| most popular stocks in a raging bull market that everyone
| is paying attention to. In that case, people will be
| waiting to jump back in.
| stouset wrote:
| By the time you have this information and are reasonably
| act on it, it has already been priced in by participants
| with deeper pockets, better access, and rapid processing
| of relevant information sources.
| 99_00 wrote:
| The prediction of a crop failure isn't a binary event and
| money isn't deployed in a binary strategy. It becomes
| more or less likely over time.
|
| Also, the situation is very dynamic with an unknown and
| very large number of variables, even with something as
| seemingly simple as a crop failure. Such as such as a
| countries deciding to ban exports to secure food
| security, lack of access to fertilizer due to sanctions
| against major fertilizer producers in wheat producing
| countries, the politics of national and local water
| rights.
|
| All these factors have parties with inside information
| acting on them (see members of congress trading stocks)
| which no player with big pockets will have access to but
| is all reflected in the price.
| stouset wrote:
| Nobody is saying these things are binary events. But
| betting that you're going to more accurately guess the
| odds of these events than dedicated players with enormous
| sums of money behind them and who are supported by
| professional research teams is... maybe not a strategy
| with positive expected value.
| Tuna-Fish wrote:
| Doing that is not technical analysis. Technical analysis is
| predicting stock prices strictly from the previous price
| history.
|
| The steel-man position for technical analysis is that humans
| are herd animals, who tend to do things in similar,
| predictable ways. Such as, people who pick stocks like to
| sell and take profits after the stock reaches some nice,
| round number. When enough people do this, it can result in
| repeatable, predictable patterns in prices.
|
| The massive caveat there is of course that while that might
| be true in the absence of outside stimuli, any news always
| trumps that. It doesn't matter how nice your patterns are, if
| it comes out that the company somehow did worse than
| expected, it's price is going to fall, and if it did better
| than expected, it's going to rise. Trading on technicals
| might be something that works if you are really fucking
| careful, but it seems to me like you are picking quarters in
| front of a steamroller, in a way. The actual reliable profits
| from technical analysis are always going to be small, and the
| risks of investing with no understanding of the fundamentals
| seems fraught.
| kenjackson wrote:
| > Technical analysis is predicting stock prices strictly
| from the previous price history.
|
| Is this true? For example, is using AI models that take
| into price history, current and historical events, insider
| and/or institutional trading, analyst opinions -- would
| that not be considered technical analysis? I know this is
| just a matter of semantics, but curious as to what is
| considered TA nowadays.
| AnotherGoodName wrote:
| Not really. When you add that much information that gets
| into 'analysis' rather than 'technical analysis'. A bit
| like medicine vs traditional medicine.
|
| Technical analysis is specifically the stupid line
| drawings you see on stock charts that try to predict
| trend lines from the motion of the previous lines
| kenjackson wrote:
| That's helpful. OK, I'm in the "it's closer to astrology"
| camp then.
| vasco wrote:
| How does drawing a teacup on top of a chart incorporate "all
| currently known information" about anything whatsoever?
| carabiner wrote:
| Burgers' equation models traffic flow. Traffic comes from
| humans and humans behave in patterns. What difference does
| it make if it's a PDE or a teacup?
| 99_00 wrote:
| The collective knowledge and opinion is dynamically
| reflected in the price and volume chart.
| JimtheCoder wrote:
| Because you are not drawing a teacup, you are looking at
| price patterns. IF you believe in efficient markets, price
| should be an indicator of "all currently known information"
| ivalm wrote:
| If you believe in efficient market and things being
| priced in then there is no past price information that
| can affect future price as future price is entirely
| martingale. You can't both believe in technical analysis
| and in market efficiency.
| Tenoke wrote:
| I think TA is bad because it's priced in but your argument
| seems like nonsense.
|
| It boils down to "the market is probabilistic and you can't
| know for sure it won't get impacted by things" but if TA gives
| you even a couple % edge (with black swans averaging out in
| both directions) it would have been worth it.
| BlandDuck wrote:
| You're right, but you don't need all that ...
|
| ... when you draw the figures use in technical analysis, the
| predictions will depend on the relative scales you choose for
| the x- and y-axis.
|
| Case closed.
| [deleted]
| brockwhittaker wrote:
| You're conflating micro and macro price movements. Sure, you
| can't predict black swan events with technical analysis, but it
| wouldn't be out of the question to predict short term
| fluctuations based on a mixture of market psychology and herd
| thinking.
|
| I don't employ any technical analysis in trading, nor am I a
| strong advocate, but technical analysis is more about
| reactionary psychology than about predicting the future. In the
| most micro sense, the market is dictated by single individuals
| buying and selling stock, and in the broadest sense, it's a
| statistical result of millions, or billions of unknowns. Those
| are two totally different games.
| throwaway743 wrote:
| To add, it provides a general measure of sentiment. It's a
| measure of actions taken rather than words. It's not a
| crystal ball, but does give a slight edge if you figure out
| which indicators to use.
|
| I've used it for years and had very good success when I was
| actively trading (traded longer timeframes. Usually made
| weekly/monthly trades) to the point I was able to live off of
| it. The last couple of years I've taken off from trading to
| focus on developing my business, but will likely jump back
| once that launches and is in a good enough place, as it's
| both a time and emotional drain.
| jjoonathan wrote:
| If two people at an auction get into a bidding war, do the bids
| tell you nothing about their psychology?
| Art9681 wrote:
| Behavior is different at different scales but I see your
| point. I typically walk to my car after an event, but if I
| see a group take off running with urgency I will probably do
| the same thing. Know what I mean?
| teeray wrote:
| You may think so, until it's revealed that one of the bidders
| makes all bidding decisions by roll of a die / flip of a coin
| (you can invent some scheme for doing so).
| jjoonathan wrote:
| A coinflip that causes a bidding war is a loaded coin.
| There is information in that.
|
| More importantly, it's backed by genuine human intent to
| buy whatever the coin says. There is information in that
| too.
|
| This is very far from the zero information situation that
| you were trying to set up, lol.
| patmorgan23 wrote:
| Not necessarily. A truly random coin could land on head
| 100 times in a row. Such is the nature of randomness
| pessimizer wrote:
| You don't get "genuine human intent" from the results of
| a coin flip. You don't even get to know it's a coin flip.
| jjoonathan wrote:
| All models are wrong, some models are useful.
|
| The goal of technical analysis is to find pools of supply
| and demand at different price points, much like a
| clustering algorithm. It is reductive by its very nature
| but it's still a useful approximation because big
| interpretable clusters can absolutely drive price action
| and it's helpful to have a model for that. On a good day,
| you might get the biggest 2 or 3 clusters correct to
| within 10% and miss several others totaling 1000000x the
| size and importance of a hypothetical bozo trading based
| on a coin flip, and this highly imperfect outcome would
| still be enormously valuable and worth pursuing.
|
| It's like politicians assembling a platform by
| considering the sizes and interests of voting blocs. This
| strategy was always going to be a reductive, imperfect,
| noisy mess but that doesn't make it irrational or
| useless.
| AlexandrB wrote:
| It depend on whether they are also trying to use each other's
| bids to determine each other's psychology. At that point you
| may be observing a recursive system (I know that he knows
| that I know that he knows...) and can't be sure how many
| layers of reasoning each actor is employing.
| pessimizer wrote:
| Not with the prices alone. You need a context to use the
| prices for insight. They could literally be using the bids as
| a channel to communicate with each other because they are
| colluding, or as a performance for observers.
| hn8305823 wrote:
| > aliens are discovered
|
| There is a UAP disclosure hearing in the US House tomorrow:
|
| https://www.theguardian.com/world/2023/jul/21/ufos-congress-...
| bgirard wrote:
| Watch for a Nancy Polosi trade predicting aliens.
| lesuorac wrote:
| What do you trade if Aliens are real?
|
| Are you shorting Tech on the idea that w/e we have now is
| inferior to theirs?
|
| Do you go long on War on the idea that we'll start fighting
| them?
|
| --
|
| Perhaps more difficult, what do you trade if Aliens aren't
| real?
| time0ut wrote:
| If they are real? Ya, long on Raytheon et al and pray we
| win the Seven Hour War...
|
| If they aren't, I dunno? Business as usual cause its
| already priced in.
| throwaway743 wrote:
| Potentially LMT, material science companies, and
| companies producing anxiolytics.
| somenameforme wrote:
| I'm all in on Durex.
| pieter_mj wrote:
| Aliens are real. Aliens that spawn as a blurry instance
| on a US military base are not.
| paxys wrote:
| Depends on how "real". A microbe discovered on some rock
| 60 trillion miles away isn't really going to move the
| markets. An alien attack fleet entering our solar
| system...maybe go long Raytheon.
| TinyRick wrote:
| I've always found it amusing that people think humans
| would be any match for an NHI species that has technology
| capable of reaching our solar system.
| paxys wrote:
| Read https://www.eyeofmidas.com/scifi/Turtledove_RoadNotT
| aken.pdf to get a new perspective on this.
| time0ut wrote:
| This is where my thoughts went as well. Harry Turtledove
| is prolific at coming up with scenarios where aliens are
| capable of interstellar travel but not good at war. His
| World War series sets up a slightly more plausible
| scenario. If you haven't read it, it's worthwhile and I
| don't want to spoil it here. An interesting aspect of it
| though was the aliens having finite resources with very
| long delays in resupply. They underestimate humanity who
| takes advantage of this to slowly turn the tide.
|
| Not very realistic, but interesting nonetheless.
| yreg wrote:
| Paxys thanks for the short story, I truly enjoyed that
| and it was also rather funny.
|
| Regarding the case for lowtech interstellar travellers: I
| can accept the idea that there is some symple physics
| trick to make a jump drive that we haven't discovered,
| fair enough. Just as in the story, there would also had
| to be a similar undiscovered trick for antigravity, since
| otherwise they have no way of getting to orbit.
|
| Can you however build a ship that can resist vacuum and
| provide life support with 16th century tech? I guess
| perhaps your species might be able to live in vacuum,
| needs only a bit of heat and doesn't need to breathe
| gasses?
|
| - - -
|
| Anyway, I'd like to recommend another book. High Crusade
| by Poul Anderson[0]. In the first chapter pacifist aliens
| land in 13th century England and get immediately
| massacred by the locals. Now the king has a starship.
|
| [0] - https://en.wikipedia.org/wiki/The_High_Crusade
| Tommstein wrote:
| I have bad news regarding the future performance of
| Raytheon and its stock if an alien attack fleet has come
| rumbling into the solar system . . . .
| greatwave1 wrote:
| I think a more compelling argument against technical analysis can
| be found by considering the outcome of a semi-efficient market,
| and how unlikely it is that simple, purely momentum-based signals
| haven't already been arbitraged away by the other participants in
| the market (who have significantly more sophistication and speed-
| of-execution than anyone publishing technical analysis strategies
| online)
| the88doctor wrote:
| The Market Wizard series has several good interviews with
| traders with verified records that significantly outperformed
| for decades. The ones who used TA invariably say that it used
| to work but became less and less effective as computers became
| more prevelant.
|
| I wonder if the crossover strategy would still outperform (on a
| Sharpe Ratio basis) starting in 2005 instead of 1998.
|
| I also wonder if the crossover strategy would fail to
| outperform (on a Sharpe Ratio basis) once transaction fees were
| considered.
| zer0tonin wrote:
| It still overperforms after 2005 (0.63 sharpe vs 0.55 for
| buy&hold). It gets kinda awful after 2015 (0.47 sharpe), with
| the V-shaped 2020 crash and recovery.
| ethbr0 wrote:
| I always assumed any momentum effectiveness was arbitrage on
| trader volume scales differing by order of magnitude.
|
| E.g. a major player rebalancing a position created distortions
| that allowed much smaller players to profit, but no distortion
| on the scale that would allow others trading at major volume to
| profit
| throw0101c wrote:
| > _I always assumed any momentum effectiveness was arbitrage
| on trader volume scales differing by order of magnitude._
|
| It's an area of active research:
|
| > _Students of financial economics have largely attributed
| the appearance of momentum to cognitive biases, which belong
| in the realm of behavioral economics. The explanation is that
| investors are irrational,[4][5] in that they underreact to
| new information by failing to incorporate news in their
| transaction prices. However, much as in the case of price
| bubbles, other research has argued that momentum can be
| observed even with perfectly rational traders.[6]_
|
| * https://en.wikipedia.org/wiki/Momentum_(finance)
|
| * https://en.wikipedia.org/wiki/Carhart_four-factor_model
|
| Though the market, size, and value factors appear to explain
| >90% of returns (at least using US data):
|
| * https://www.ifa.com/articles/momentum_fourth_factor
| tutfbhuf wrote:
| This question can essentially be simplified to: "Is the stock
| market truly random?", as randomness is defined as the absence of
| patterns and TA is all about patterns.
|
| Currently, the random walk hypothesis remains just that - a
| hypothesis. There is no definitive evidence to confirm that the
| stock market operates in a random manner.
|
| On the other hand, many believe that there are some long-term
| patterns and invest huge chunks of money based on that belief.
| For example, one such belief is that the S&P 500 will continue to
| have an annual average return of something between 8% - 10% in
| the decades to come.
|
| If the movements in stock charts, including ETFs like SPY, were
| truly random, such a pattern could not exist. Consequently, our
| expected average annual return from the S&P 500 should be 0%.
| This is because in a genuinely random environment, the likelihood
| of a rise and a fall would be precisely equal.
| nameless912 wrote:
| Well...random with a positive trendline can still be random.
| The fact that there's a positive trend globally doesn't change
| the fact that the local behavior is indistinguishable from
| random noise. The way I tend to think about it is that the
| deltas day to day are completely random, but shifted up from
| neutral by just a touch, so that the overall trend is upward
| but the micro behavior is unpredictable.
| tutfbhuf wrote:
| If I understand you correctly, you believe that "micro
| behavior is unpredictable", thereby suggesting that technical
| analysis (TA) is not possible on shorter timeframes. However,
| you seem to allow for some applicability of TA on larger
| timeframes, such as the concept of a "positive trendline", a
| term that occurs quiet frequently in TA. That's an
| interesting perspective.
| vgatherps wrote:
| The existence of players that generate high-sharpe consistent
| returns is a sort of empirical proof that the market is not
| actually random (although these tend to be relatively short
| term trades, I.e. < 1hour holding periods, turnover portfolio
| multiple times a day, etc).
| nonethewiser wrote:
| I think this is where the question of "what is TA really" comes
| in. I think most people would grant there are underlying
| patterns but there are just so many factors and they are
| dynamic. Whether the patterns are discernible or not is another
| matter but in theory if they exist they are be chartable in
| some form.
| nkrebs13 wrote:
| It can be and some people treat it like that. But it can also be
| a tool used to identify trends and trend changes. The chart takes
| into account everything: financials, narrative, public opinion,
| future earning potential, etc. All of these inputs are
| probabilistically weighed against each other in real time. Keep
| the TA simple and it's an extremely useful tool. Anyone who
| dismisses TA entirely is leaving money on the table.
| nradov wrote:
| There is no reliable evidence that TA generates alpha. In
| reality you're just fooling yourself with confirmation bias. If
| TA actually worked then sophisticated institutional traders
| would quickly arbitrage any advantage away before retail
| traders could even put in an order.
| JimtheCoder wrote:
| "There is no reliable evidence that TA generates alpha."
|
| To be fair, there is no reliable evidence that anything
| really generates alpha (efficient markets, random walk, etc),
| but there are hedge funds who consistently outperform
| (Renaissance, Two Sigma, DE Shaw, etc).
|
| So, maybe there are things that work in practice, but there
| is no way to produce reliable evidence that they work besides
| looking at track records...
| nradov wrote:
| Public markets are fairly efficient, although not perfectly
| so. The hedge funds that consistently outperform aren't
| using anything so simplistic as TA on a single ticker.
| Instead they employ an army of experts armed with enormous
| computing resources to identify correlations with data
| outside those markets that no one else has noticed
| (arbitrage opportunities). They also do proprietary
| research by commissioning researchers to go out and gather
| real world data that no one else has, so they are working
| with an information asymmetry.
|
| Of course, there are also persistent rumors of insider
| trading. Maybe just sour grapes from inferior traders, but
| who knows?
| JimtheCoder wrote:
| Yes, I agree. But, none of this means that TA isn't
| useful, or that it is comparable to astrology...
| ethbr0 wrote:
| "Alpha" is an odd benchmark for efficacy.
|
| A lot of technical analysis's value, in the sense that I
| understand it and believe most retail traders use it, is
| based around predicting intermediate timespan _market_
| changes to time trading. It 's less about beating the market
| and more about taking its pulse.
|
| Looking at TA statistics generated from daily, weekly, and
| monthly points, effectively aren't those momentum? Which
| collapses the question down to "Do stocks exhibit momentum or
| not?"
| criddell wrote:
| Is stock momentum the same thing as a hot or cold streak in
| professional sports?
| nradov wrote:
| I don't understand your point. If TA can't generate alpha
| then why bother? Whether stocks exhibit momentum or not is
| irrelevant if you can't profitably trade off of it.
|
| Look at it this way. TA is fundamentally a matter of
| pattern recognition. If it actually worked then you could
| program a computer to recognize the patterns and
| automatically put in trades. But if everyone does that then
| any profit opportunity is almost instantly arbitaged away,
| and thus TA quickly stops working (if it ever worked at
| all).
| Analemma_ wrote:
| Yes. And what's more, not too long ago this was common knowledge.
| Every professional trader knows that TA is crystal-ball-tier
| nonsense. But the influx of morons in cryptocurrency and WSB
| memetrading have to learn this lesson all over again (and in an
| adversarial environment, since there are tons of '''gurus'''
| poisoning the well with bad info, insisting that _their_ TA is
| totally legit and anyone saying otherwise probably has
| "political motivation")
| booleandilemma wrote:
| All of the technical analysis in the world won't predict
| something like Musk tweeting "use signal", causing a 438%
| increase in some random company's stock price.
|
| _A thinly traded device maker called Signal Advance soared for
| the third consecutive trading session after Elon Musk said to
| "use Signal," even though he was referring to a messaging app
| that has nothing to do with the company._
|
| https://www.cnbc.com/2021/01/11/signal-advance-jumps-another...
| kneebonian wrote:
| Yes. In fact we'd be surprised how much of our modern world is
| just attempts to guess the future, like the ancients, but instead
| of reading goat entrails or judging the alignment of Venus and
| Ursa Minor we instead worship the god of "statistics" and "the
| science". I don't want it to seem as if I am anti-science, not at
| all, but "the science" is the cargo cult that Feyman warned us
| of.
|
| And lest you think I am off some examples:
|
| The diet and nutrition studies constantly getting pushed are the
| new fertility rituals, and the last one didn't work because it
| didn't please the diet gods, but atkins, or paleo, or weight
| watchers, or whatever will really work this time.
|
| Econimics is worshiping the god of the harvest to ensure a
| bountiful crop, and when their predictions fail to come to pass,
| it's because the goat entrails were read wrong, or the math was
| off, never because the whole thing is useless.
|
| Psychology is self evident if one examines the replication
| crises.
|
| The point is we aren't really that much superior to the ancients
| in many ways. Sure we've figured out some of the fundamental laws
| of nature and are able to use them better, but that's mostly been
| the work of a few geniuses over the past 400 years and much less
| because we as humanity are far superior.
| RyanAdamas wrote:
| What regulates the valuation of stocks as legit? Well, there's
| your answer.
| defphysics wrote:
| Novice: "technical analysis is legit!"
|
| Intermediate: "technical analysis is total BS!"
|
| Pro: "technical analysis is legit."
| ImPostingOnHN wrote:
| It's stock market cloudgazing
| ignorante wrote:
| both are not a science. Stock market is social science, which is
| not even a science since there is no LAW that regulates it,
| compared to physic.
| JimtheCoder wrote:
| So, the author picks the most basic indicator applied in a way
| that most would not use it in modern times, questions its
| usefulness and compares it to astrology.
|
| Why do people bother writing blog posts void of insight? This
| isn't even useful for SEO...
| Renevith wrote:
| I'm surprised that this made the front page. This is the
| investing equivalent of someone new to programming writing a
| single benchmark of some if statements versus a switch and
| blogging about which one was faster. The results are far more
| likely to be random noise than anything meaningful.
|
| I think this type of calculation is valuable exploration for
| anyone to try out if they are interested in investing, and is a
| great way to get some hands-on learning with real data. I'm glad
| for the author and for anyone who reads this and decides to
| replicate it or extend it for their own practice and leaning.
| It's just that the results are not notable in the slightest.
|
| Though it's a rare counterexample to Betteridge's Law of
| Headlines!
| ijidak wrote:
| Question. The below, taken from a comment on this thread, is a
| common statement regarding stock price movement.
|
| > Stock price movements are literally text book examples of
| unpredictable (or more specifically, random walk)
|
| I never understand the above.
|
| How is this possibly true on long time scales?
|
| I can say with relatively strong confidence that Tesla is going
| to be worth more than $1 trillion in three years.
|
| In March, it was clear NVIDIA would boom in the scale of one
| year. Just, nobody knew how soon and how fast.
|
| So the walk is not random in these cases...
|
| So in what way are stock prices a random walk?
|
| Is the walk pseudorandom?
|
| Random with a bias?
| trappist wrote:
| I think that it is, but I perform a lot better when I pretend
| that it isn't, probably because it imposes some discipline,
| however arbitrary.
| renewiltord wrote:
| The whole point of TA is to create a distributed pump and dump.
| You tell everyone to take some action when something behaves a
| certain way and you will have made some percentage of volume
| predictable.
| OhMeadhbh wrote:
| I think there's something to technical analysis, but am skeptical
| it is the be-all / end-all. Consider this:
|
| 1. The dollar is a mildly inflationary currency, by design.
| (though recent events show us that sometimes it is more mildly
| inflationary than others.) The fed engineers the dollar to be
| inflationary so people don't park their value in dollars in bank
| accounts. The modern concept of a currency is that it circulates.
| Liquidity is generally believed to be good for an economy. So...
| over the long run you'll always have inflation that, all other
| things being equal, will cause security prices to go up. I think
| that part of econometrics is not astrology.
|
| 2. Many of the metrics people commonly use, notably the previous
| 30, 90 or 180 day averages and when they cross each other _are_
| tied to _real_ events. Publicly traded companies publish
| quarterly results, so it always seemed to me that these averages
| have _something_ to do with the aggregate sentiment regarding a
| security 's performance (i.e. - the wisdom of the crowd will lift
| or lower a security's stock price based on the crowd's aggregate
| interpretation of the quantitative and qualitative aspects of
| that company's behaviour.) Does this mean it's a science and not
| astrology? I say "Largely, but not completely," as there are
| still numerous fools out there. And maybe there are whales out
| there trying to tilt the market for later financial gain? And
| sometimes people are just wrong when they interpret a financial
| statement.
|
| 3. But there are higher order effects. Everyone seems to know
| about basic quantitative measurements and it's not hard to find
| people to analyze a security quantitatively. So... if _everyone_
| is using the same metrics, then shouldn 't _everyone_ come up
| with the same buy /hold/sell signals? Of course not. Not everyone
| has the same risk profile or understanding of the context of the
| markets (i.e. - you don't have to be an insider to know what the
| macro-economic situation is, and there are a lot of insiders.)
| That part of technical analysis may _seem_ like astrology because
| people are telling you what they think will happen based on their
| own view of the market, the economy or a particular security, but
| they 're not telling you how they came up with their analysis
| criteria. I don't think it _is_ astrology, because somewhere,
| someone is making a decision based on what they think are
| rational reasons. But you don 't know what they are, so like an
| astrologer of old, you're left trying to decipher the
| relationship between causes and effects and people often see
| relationships between the two that really aren't there
| (especially if they have small data sets.)
|
| 4. And there are probably some people out there who are
| buying/holding/selling at random. Maybe there are enough of them
| to affect the popular technical indicators.
|
| So... is technical analysis just stock market astrology? No. Not
| at it's core. But without sufficient information about what
| market participants are thinking, it may be indistinguishable
| from astrology in many cases.
| retrocryptid wrote:
| And none of this seems to apply to startup valuation because
| startup "notional stock price" is based on the valuation of
| what the next round of investors think the company is worth,
| not the market. Does technical analysis only work if the stock
| value is based on the greater fool theory?
| nologic01 wrote:
| No. That comparison is an insult to astrology.
|
| While the made-up character is similar, Astrology is far richer
| in concepts, orchestration and story telling.
|
| Technical analysis is the ultimate dumbification of market
| structure and dynamics, which in itself is a major dumbification
| of the formal economy, which in itself is a major simplification
| of the stuff-that-matters(TM).
|
| The objective of technical analysis is to get as many low-
| information actors as possible to transact with as low-cost as
| possible technology (I would totally not be surprised if current
| "technical analysis" verbiage is 100% automated).
| mikkom wrote:
| Well you have to first define what is "technical analysis" and
| be quite clear with what you mean..
|
| There are lots of giant trend following and quant funds that
| will likely fall into "technical analysis" category.
| flappyeagle wrote:
| I don't understand this isn't high frequency trading 100%
| technical analysis?
| btilly wrote:
| According to the efficient market hypothesis, information can
| only be valuable until there has been time for information to
| circulate through the market, and the market price to reflect
| that information. This seems to happen in under 15 minutes.
| That's why 20 minute delayed ticker prices are generally
| available for free.
|
| HFT lives on happening so fast that the market price has not
| had time to catch up to the information that a trade is
| available. But it is a race against others in the same
| market. And an incredible amount of effort has gone into
| winning that race and making profits off of the increasingly
| narrow slice of time that markets are profitably inefficient
| for.
| 3abiton wrote:
| Algo trading is a hoax?
| AnotherGoodName wrote:
| In general the goal of trading is to know more than other
| traders.
|
| High frequency trading is knowing about recent trades sooner
| than others. That's where the profit comes in.
|
| I see a difference here to technical analysis. HFT clearly
| has a data edge over those who just look at historical trend
| lines.
|
| I think it's reasonable to say this isn't technical analysis.
| It's not the historical analysis that gives the edge. It's
| the extra knowledge they have that gives the edge.
|
| Technical analysis is very much rooted in purely the
| historical price. If you have a way to predict prices with
| more knowledge than just the historical price you're getting
| outside the realm of technical analysis and into the realm of
| plain regular analysis where you take as much knowledge as
| you possibly can about the stock and figure out the price
| based on that huge volume of knowledge.
|
| This is why technical analysis is dumb. It assumes all the
| knowledge is in the price already and there's no way for some
| investors to know more than others outside the scope of that.
| HFT is in fact a great counter to that. Some people know
| incoming trades before the rest of the market. That extra
| knowledge allows for vast profits.
| hammock wrote:
| >High frequency trading is knowing about recent trades
| sooner than others. That's where the profit comes in.
|
| btilly's comment has a good practical explanation of HFT
| that expands on this
| AnotherGoodName wrote:
| I very specifically said knowing about recent trades -
| note the past tense.
| chollida1 wrote:
| This is not front running.
|
| You having a faster computer and network is just your
| alpha.
|
| Front running is where I take your order to buy a large
| amount of a stock and buy some for my self first before
| executing your order.
|
| Being faster is perfectly legal.
|
| Trading Based on a clients order is not.
| _fizz_buzz_ wrote:
| High frequency trading is front running.
| yxhuvud wrote:
| Front running is illegal, so no.
| worik wrote:
| > Front running is illegal, so no
|
| Yes
|
| Front running is illegal
|
| HFT is front running
|
| There are very good reasons to believe that. The earliest
| proponents of HFT may have made money by more efficiently
| using price information. But now there are so many of
| them that is no longer possible
|
| It is crime.
|
| The most useful model for understanding international
| high finance is "organized criminal networks"
| chollida1 wrote:
| You are confidently incorrect.
|
| Front running is when you take an order from a client and
| before executing it out your own order in first so you
| benefit from the bumpe or drop in stock price that the
| client would cause.
|
| The key here is you have advanced knowledge of the order
| before it hits the market and you have a legal
| requirement to execute client orders before your own.
|
| I believe it's also been ruled to be front running if you
| get knowledge of the client order in advance of it being
| sent to the market by a third party.
|
| But having a faster network and computer to allow you to
| react faster than others is not front running.
|
| Take this is an extreme, if I watch a market ticket and
| react manually with in 20 minutes to news and you read
| about the news in the paper the next day, did I front run
| you by trading before you?
|
| It's the duty to execute a client order before your own
| and not tell others abouT the order before it hits the
| market that is the requirement for front running.
| ragebol wrote:
| Not a 100% AFAIK, there's some sentiment analysis on news as
| well and I suppose every other piece of machine-interpretable
| piece of information one can get their hands on. Along with
| human guidance still.
| jboydyhacker wrote:
| The article there looks at ONE use of technical analysis which
| is a moving average crossover. The nicest houses I know are
| owned by traders who know how to use technical analysis. it is
| very interesting that such an uniformed opinion is the top
| rated comment on YC tho.
| ddq wrote:
| Anecdotal. The houses of people you know are not informative.
| taffer wrote:
| How do we even know how these traders make their money? Maybe
| they make their money through commissions, i.e. trading other
| people's money, who maybe believe in technical analysis. Or
| maybe they make their money through arbitrage or market
| making. Just because someone "knows" technical analysis
| doesn't mean they make any money doing it.
| bilater wrote:
| Actually it totally makes sense. Most people here are/will
| never be rich. It's the software equivalent of the business
| professor who talks a big game in class but has never made
| money or built a business.
| jacobsenscott wrote:
| The people I know with the nicest houses are doctors and
| lawyers. I don't think either of us have a large enough
| samples size. Those who do take a large enough sample will
| see technical analysis is just a rain dance.
| highfrequency wrote:
| Perhaps the worst houses are also owned by traders who use
| technical analysis ;)
| hattmall wrote:
| The worst houses are owned by landlords that rent them to
| poor people.
| o0o0o wrote:
| > The nicest houses I know are owned by traders who know how
| to use technical analysis
|
| That's a good point. Best traders know how to use technical
| analysis, they just don't use it to invest their own money.
| Ekaros wrote:
| I always found it strange. You get to charge money win or
| lose. And then take percentage winnings... No wonder low
| fee index funds made so much sense...
| TheOtherHobbes wrote:
| This is the correct answer. Selling "advice" and managing
| portfolios is by far the easiest legal way to make money on
| the markets.
|
| There was a newsworthy situation in the UK a couple of
| years ago where a star manager crashed and burned. He
| locked his trading account, with everyone's money still in
| it, _and continued charging fees._
|
| Apparently this is quite legal.
| mcguire wrote:
| This is a key point. The best way to make money in the
| stock market is to do it with other people's money.
| cirgue wrote:
| I've always loved technical analysis discourse because it's
| the starkest example of how to _actually_ make money in
| financial markets, and that's to actively cultivate
| information asymmetry among other market participants. If
| technical analysis were a successful strategy, it would, like
| most other techniques that can actually generate sustainable
| alpha, be a closely guarded secret. But it's not. It's
| something people shout about from the rooftops trying to get
| rubes to follow the bait. It's the same kind of play as
| wallstreetbets, where you're tying to increase the amount of
| stupid, predictable money in your corner of the market.
| nameless912 wrote:
| Right. Technical analysis makes money in the same way that
| LuLaRoe makes money; someone else becomes the bigger fool.
| xorcist wrote:
| In fairness, that's true for _any_ kind of market
| trading.
| hattmall wrote:
| There's plenty of trade secrets in TA as well though. A lot
| of it comes out because eventually it's beneficial to have
| fundamentals understood by a larger population so that
| there's a pool of people to develop the internal tools.
| Only some of the fundamental TA is common knowledge.
| andersentobias wrote:
| "The market" is just a set of order books. I don't find it
| weird that technical analysis work some times in some
| markets.
|
| Fully systematic traders exist and make money. Efficient
| Markets Theory says they shouldn't, but they do anyway. EMH
| is probably written under stricter/ideal conditions though.
|
| If one wants to take a systematic/technical analysis
| approach though, I would look at the entire universe of
| stocks, whereas use a fundamental approach in individual
| stocks.
|
| But yeah. I'm just an amature. What do I know.
| stale2002 wrote:
| > Fully systematic traders exist and make money.
| Efficient Markets Theory says they shouldn't, but they do
| anyway.
|
| The post you are responding to already answered this
| question.
|
| Here is the answer: "it would, like most other techniques
| that can actually generate sustainable alpha, be a
| closely guarded secret"
|
| So, to answer the question, the important stuff in the
| trading strategies that you mentioned, include
| information asymmetry. Those systemic traders have hidden
| information, and hidden strategies that they use, and
| they don't just given everyone open source access to
| their code.
| cowthulhu wrote:
| I think it's more down to adverse selection... while some
| really smart people might be making decent returns via
| technical analysis or whatever, they'll never disclose
| their strategies since someone else could frontrun them.
| Instead, the only strategies we get exposed to are the ones
| that don't work, since the best way to make money on a
| strategy that doesn't work is to find someone to sell it
| to. Like - it's clearly possible to make money trading,
| because a very small amount of people seem to be able to do
| so somewhat reliably. But if someone is trying to sell you
| a trading course, they're almost certainly more of a scam
| artist than a genius trading savant.
| felix318 wrote:
| I don't understand how it's possible to make money in the
| stock market unless you have inside information. I deeply
| suspect the whole game is rigged and there are ways to do
| insider trading without getting caught, and the real secret
| to be a successful trader is to find out how to join the
| club.
| JumpCrisscross wrote:
| > _nicest houses I know are owned by traders who know how to
| use technical analysis_
|
| On the sell side, sure--you know when they'll under or
| overpay. Anyone buying retail flow should be running these
| models.
|
| Technical analysis just looks at the surface of the order
| book--the transaction layer. If you're integrating the book,
| you can see when the surface is misleading and profit from
| it. There are technical heuristics, _e.g._ dead cat bounces,
| round-number tendencies, _et cetera_ which are based in
| reality, part flow of funds and part psychological. But
| technicians ' sole reliance on stock charts necessitates
| blindness to those underlying conditions.
|
| In summary, a stock's near-term price history can, on its
| own, provide information that predicts the next tick. It's
| just a known subset of a broader set of signals. That the
| delineation is known makes those relying on these strategies
| possible to arbitrage.
| pinkmuffinere wrote:
| To be fair, the fact that [some traders own nice houses]
| doesn't imply [technical analysis is a good method]. It's
| possible that the profit from this sort of trading is
| essentially random, and there are a few people that get a
| large profit from that random distribution. I've frequently
| heard this sort of argument, but I don't have the expertise
| to determine whether it's true.
| fnovd wrote:
| Lottery winners owning fancy houses should not be taken as an
| endorsement of their wealth acquisition strategy.
| suaptpickle wrote:
| I buy a lottery ticket for a dollar.
|
| I don't win; I'm out the dollar.
|
| I buy a stock for a dollar.
|
| It goes down 50% tomorrow. Then up 25% the next day and so
| on it fluctuates like a train going through the mountains.
|
| One point in time it is low and another point in time it is
| high. I prefer to leave the train when it is high on the
| mountain.
|
| i e. Picking a stock is a gamble but unlike the lottery I
| get to play the same game with the same money everyday
| until I win or die.
| meheleventyone wrote:
| Stocks can and do tank and get delisted or never regain
| the value at which you put in.
| pixl97 wrote:
| Buy high, sell low, the WSB way.
| Ekaros wrote:
| WSB goes to options. So you multiply wins, possibly
| losses or end up with nothing on your yolo bets as your
| options expire worthless... Like a casino...
| worik wrote:
| > Buy high, sell low, the WSB way.
|
| Only part of it....
|
| Buy low, sell high, use other people's money
| [deleted]
| NovemberWhiskey wrote:
| > _The nicest houses I know are owned by traders who know how
| to use technical analysis._
|
| If you have a large group of people who take risks while
| trading, and they form strategies indistinguishable from
| flipping a coin (like technical analysis), then at the end of
| the day you're going to have a lot of ex-traders who failed
| to make money and a few that look like rock stars - because
| taking large risks and being lucky is a "good" way to make
| money fast. It's the very definition of survivorship bias.
| amluto wrote:
| I don't know about the nice houses, but technical analysis
| has one thing in common with astrology: one can make a living
| selling the ideas to other people.
| DontchaKnowit wrote:
| Ah this is silly. Technical analysis hmis grounded in sone
| level of useful information and technique. But it is ultimately
| a game of informed guessing, so in that respect, its a bit like
| astrology
| dheera wrote:
| Technical analysis is an insult to technology and should be
| rebranded to "untechnical analysis".
|
| Technical people would do analysis with state-of-the-art tools,
| from LLMs applied on github repos to discover lurking security
| bugs likely to bring stocks crashing, to vision models applied
| to satellite images to analyze business activity.
| klabb3 wrote:
| Indeed. Why spend $10 doing something useless when you can
| spend $10000?
| marcosdumay wrote:
| It the GP is a joke, that's the joke.
|
| But I have to say, I'm not sure if it's a joke at all.
| wruza wrote:
| A serious question now: if we take all the mainstream news
| articles (or headlines) for 20 years and correspond them to
| OHLC data with e.g. hour and day granularity timestamps,
| could some sort of AI make hourly or daily predictions?
|
| If modern AI can generate average-human-like text and images,
| couldn't it day trade as well?
| manojlds wrote:
| I would think some basic TA is good for investing. Which is
| what the TFA is concluding I thought?
| Scubabear68 wrote:
| Yes, the glut of websites with stock "analysis" or "news" is
| almost 100% automated based on a number of financial and
| technical measures of any given stock. They are, as you say,
| pretty much worthless.
| cde-v wrote:
| Glad to see this is the top comment. It frustrates me to no end
| to see people lapping up TA like it is remotely useful when we
| spent our first semester on finance at university essentially
| disproving TA signals. It was literally Finance 102.
| Atlas22 wrote:
| If you expected to learn useful finance at a university, you
| already failed as soon as you applied. If anyone there knew
| what they were doing financially, they wouldnt be there, and
| especially not teaching Finance 102. In case you were not
| aware, nearly all professors hate teaching lower level
| classes, so they naturally get forced on the worst performing
| professors (the ones that are closest to getting fired).
|
| Concluding that the entirety of TA can not be useful (the
| Null hypothesis is true for all input signals) just from
| seeing that a few strawman TA in finance 102 not work is
| beyond absurd.
| cde-v wrote:
| The fact that you think a finance degree is centered around
| trading stocks tells me all I need to know about you and
| your beliefs. And even on the topic of stocks/derivatives,
| are they teaching the wrong dividend discount model? Or the
| wrong black-scholes model? Did they get the equation wrong
| or something? Or are you just mad because they aren't
| teaching TA?
|
| And just wondering, using TA, how would you calculate how
| much to change an M&A offer in order to compensate for
| including a poison pill?
| btilly wrote:
| If some version of TA worked, then as soon as enough
| traders adopt that version of TA, it would stop working.
|
| That is not to say that no versions of TA will work. After
| all Long Term Capital made a fortune on reversion to the
| mean...right until they went bankrupt. (And then their
| portfolio went on to make a fortune again. Too bad they
| were insolvent.) But it will only continue to work if the
| trading strategy is not widely known, or comes with trading
| risks.
| npsomaratna wrote:
| Out of curiosity, what would you consider Finance 101?
| patmorgan23 wrote:
| Time value of money, discount rates, etc
| themodelplumber wrote:
| Does that mean you spent time in university "disproving" e.g.
| mean regression? Or was it some unrealistically hardcore
| definition of TA like "any given indicator taken in isolation
| should lead to profits every time?"
|
| Just curious about the details, thanks.
| [deleted]
| amelius wrote:
| The entire idea behind technical analysis is that it's a self-
| fulfilling prophecy. The more people believe in a certain rule,
| the more that rule turns out to be true.
|
| It might work that way with astrology too, but it's not so
| clear.
| raincole wrote:
| Astrology would be a self-fulfilling prophecy if enough
| people took it seriously.
|
| For example if everyone agreed on that Gemini means good at
| science and Leo is good at art, the whole education system
| would be designed around this belief and it would hugely
| impact how children think of their own potential.
| azalemeth wrote:
| There's a very good episode of The Orville essentially
| based on this premise in disguise and it goes as horribly
| wrong as you think it would.
|
| Humans would totally do this. If anything, I'm pleased by
| the fact that we don't do it quite as much as we could...
| lisper wrote:
| I wrote a blog post about exactly this about three years
| ago:
|
| https://blog.rongarret.info/2020/09/can-facts-be-
| racist.html
| antognini wrote:
| There is a good example of this in Ancient Rome. By around
| the time of Augustus Romans were fervent believers in
| astrology. One of the most notable cases of astrology
| becoming a self-fulfilling prophecy has to do with the
| death of the emperor Domitian.
|
| An astrologer named Asclation had earlier predicted that
| Domitian would die on September 18, 96 AD, and Domitian's
| enemies used this as a sort of nucleation point to organize
| his assassination. So although the date was made up, it had
| the effect of focusing the efforts of the assassins on a
| particular date, and they were successful in assassinating
| him on September 18.
|
| The full story that survives probably has some
| embellishments, but is entertaining. As the day approached
| Domitian became increasingly nervous. On September 17, he
| called Asclation before him and asked him if he stood by
| his prediction. Asclation said he did. Domitian then asked
| Asclation how Ascaltion himself was to die. Asclation
| responded that the stars said that he would die by being
| torn apart by dogs. Domitian then had an idea, and
| condemned him to death by burning.
|
| Asclation was immediately led to a public square, tied to a
| stake, and a bonfire was built underneath him. Not long
| after being lit, however, it suddenly began raining and the
| downpour quenched the flames. In the wet mess, Asclation's
| stake tipped over and a pack of dogs found him and devoured
| him.
|
| This development naturally did not put Domitian's mind at
| ease. The next day he became a nervous wreck. Around noon,
| he asked an attendant what time it was. The attendant, who
| was part of the conspiracy, lied and said that it was an
| hour later. Seeing that the danger had passed, Domitian
| relaxed and decided to take a bath. As he was about to go
| out, an official rushed in and asked for his signature on
| some documents. The official appeared to have an injury to
| his arm, but this official was also in on the conspiracy,
| and his sling concealed a dagger. When he got close to the
| emperor he stabbed him to death.
| LesZedCB wrote:
| or as the classic joke Zizek likes to tell
|
| > you ask some parents about santa clause. they say we are
| athiests, but we pretend to believe in santa clause to make
| our child happy. then you ask the child about santa clause,
| and they say i pretend to believe to make my parents happy.
| abeppu wrote:
| Is there a name for this joke format?
|
| I think it descends from a line about labor in the USSR:
| "We pretend to work, and they pretend to pay us." Tony Judt
| in "Thinking the Twentieth Century" had a line about Moscow
| needing its satellite states to avoid loudly or
| conspicuously disagreeing with party ideology even if in
| practice they were able to diverge. "You pretend to believe
| and we'll pretend to believe you."
| LesZedCB wrote:
| having not found one, i propose "mutual disbelief"
| amelius wrote:
| "It is difficult to get a man to understand something, when
| his salary depends on his not understanding it."
|
| -- Upton Sinclair (?)
|
| This is how it works for the child and Santa.
| nine_k wrote:
| If the Santa Clause is null and void in your belief system,
| other Clauses, including the Presents Clause, remain in
| force to the fullest extent possible.
| trey-jones wrote:
| It's definitely not the entire idea. It plays a part, but
| that's just human psychology. The same reason that round
| numbers tend to act as support and resistance. These rules
| are not mystical; they are provable. There are a _lot_ of
| metrics in Technical Analysis, and most of them I know
| nothing about. Technical Analysis doesn 't claim to know the
| future (only the liars and fools), but embraces efficient
| market theory, which is about the present.
| whimsicalism wrote:
| If there was actually tradeable alpha in technical analysis
| it would have been arbitraged away a long time ago.
| imnotlost wrote:
| There is a well-worn joke in the economics profession
| that involves two economists - one young and one old -
| walking down the street together:
|
| The young economist looks down and sees a $20 bill on the
| street and says, "Hey, look a twenty-dollar bill!"
|
| Without even looking, his older and wiser colleague
| replies, "Nonsense. If there had been a twenty-dollar
| lying on the street, someone would have already picked it
| up by now."
| whimsicalism wrote:
| Replace the twenty dollar with the tens of millions at
| minimum if basic technical analysis (ie. dead cat bounce
| level stuff) is leveragable and yeah I think you have a
| pretty close approximation to reality: more likely you
| are hallucinating than you found $20 million on the
| street.
| highwaylights wrote:
| I try not to read these inevitable rebuttals as:
|
| 1.) You don't get it.
|
| 2.) Let me explain.
|
| 3.) Science and maths.
|
| 4.) I'm no expert I believe in 3 though.
|
| 5.) Nothing is 100% accurate.
|
| 6.) Full Deepak Chopra.
|
| But it's hard to do that when something disproves its own
| validity so utterly.
|
| If someone has a strategy to predict any amount of value
| from the market, it would be automated immediately (we're
| mostly programmers here so that part's kind of our bag),
| and so doing abstract that value away to a machine housed
| at JP Morgan or Citigroup.
|
| tldr; It's astrology for finance bros.
|
| At least the crypto hype has died down again for another
| while. They _perfected_ the above during Covid.
| whimsicalism wrote:
| Short term trading is an adversarial, not cooperative, game.
| amerkhalid wrote:
| Didn't Renaissance Technologies made all their money from
| technical analysis? Who cares if it is simplification of
| something, if your goal is to make money, not understand it.
| dogmayor wrote:
| No, they were/are running a far more sophisticated shop.
| Certainly not solely tech analysis techniques. Read "The Man
| Who Solved the Market" by Gregory Zuckerman. Here's a review:
| https://www.nytimes.com/2019/11/13/books/review/the-man-
| who-...
| nologic01 wrote:
| TA means something very specific, its not a proxy for all
| quantitative analysis. Actors with privileged access to
| information and superior execution capabilities may from time
| to time "beat the market". The rest are noise traders that
| are just being systematically fleeced.
| thanatropism wrote:
| Astrology has more of a culturally evolved or emerged nature.
| Of course, it's peddled by entrepreneurs who have an incentive
| to "make it up". Yet it's oddly coherent (with itself), at
| least from the POV of an uninterested person who encounters it
| a few times over decades.
|
| Technical analysis is literally made up.
|
| I think there's a gradient where technical analysis is in the
| far right and psychonalysis in the far left, with astrology in
| the middle. I can't discern it clearly on an empty stomach
| right now though.
| ydnaclementine wrote:
| If astrology isn't real, why does literally every Scorpio I
| know have their birth date in October or November?
|
| Checkmate atheists
| anigbrowl wrote:
| >not using Chinese astrology where every person born in
| that year has the same characteristics
|
| ngmi
| foolswisdom wrote:
| On the contrary, if it was real, wouldn't you expect every
| scorpio to be born in the _same_ month of the year instead
| of the same _two_?
| btilly wrote:
| Only if the calendar and zodiac agreed on the month
| boundaries.
|
| Sadly the actual zodiac and astrology do not agree on the
| month boundaries. And that is because astrologers are
| using an out of date calendar.
|
| https://www.astronomy.com/astronomy-for-beginners/why-
| your-z...
| lo_zamoyski wrote:
| Sorry, what does this have to do with (a)theism? The
| growing interest in astrology among the young correlates
| with their growing atheism.
|
| Also [0].
|
| [0] https://www.newadvent.org/cathen/02018e.htm
| TFortunato wrote:
| It's just a silly meme used when making a silly argument
| https://knowyourmeme.com/memes/checkmate-atheists
| epiccoleman wrote:
| "checkmate, atheists!" is an old meme. I think it might
| have originated from this video (but maybe it predates
| it): https://youtu.be/P47OC439x88
|
| I've only ever seen it used sarcastically by atheists
| making fun of the kinds of arguments that religious folks
| make. It was a bigger thing during the heyday of new
| atheism, I don't see a lot of discourse on the topic
| these days.
| glitchc wrote:
| This feels unnaturally harsh and likely incorrect. You seem to
| be suggesting that statistical tools are useless at predicting
| trends in time-series data.
|
| If the assertion is true that this is useless for the stock
| market, that would imply the assertion is equally true for
| macro-economics, and extending further, climate change.
|
| We are collectively deciding how to spend trillions of dollars
| based on the outputs of these models. Should we not bother
| then?
| em500 wrote:
| Stock price movements are literally text book examples of
| unpredictable (or more specifically, random walk) time series
| in university time series courses. A proper statistics course
| teaches you that you can predict with great certainty that
| the mean of the fraction of heads over many coin flips
| converges to 1/2, while you cannot predict anything about the
| outcome of the next flip. A good statistics course will also
| teach you how both can be true. TA is like trying to use
| statistics to infer something about the outcome of the next
| coin flip.
| ijidak wrote:
| > Stock price movements are literally text book examples of
| unpredictable (or more specifically, random walk)
|
| I never understand the above argument.
|
| How is that possibly true on long time scales?
|
| I can say with relatively strong confidence that Tesla is
| going to be worth more than $1 trillion in three years.
|
| In March, it was clear NVIDIA would boom in the scale of
| one year. Just, nobody knew how soon and how fast.
|
| So the walk is not random in these cases...
|
| So is the walk pseudorandom? Random with a bias?
|
| It clearly can't be purely random.
| em500 wrote:
| The standard model is not a plain random walk, but a
| random walk with drift. (Actually a geometric random walk
| with drift, but thats besides the point.) The drift term
| for the broader US stock market is usually assumed around
| 8% (long term average gain based on around a century of
| data). That works out to around 0.022% a day, which is
| not what TA traders are looking for.
| saltcured wrote:
| Doesn't "technical analysis" mean pretending that you can
| ignore that it is Tesla or NVIDIA and just believe that
| the time-series itself tells you what comes next. I.e.
| you believe that there is some "nature" of stock ticker
| data independent of the financials and business
| environment of the particular company.
| codethief wrote:
| If stock prices are so easy predict, why aren't you
| putting your money where your mouth is? :P Or are you?
| Then I'd love to hear about that obscene fortune you've
| made so far. :)
|
| In all seriousness, though, there is an entire field of
| research whose results substantiate GP's point. This is
| not to say that you can't beat the market but the
| challenge lies in doing so consistently.
| wruza wrote:
| They may have missed it this time, but if you look at a
| recent stock market history, it was impossible to not
| make a fortune out of a pretty obvious portfolio. /s
| ignorante wrote:
| 100% agree
| sidlls wrote:
| Technical analysis is based on statistics the same way
| astrology is: that is to say, it incorporates some of the
| jargon and features shallow, surface-level incorporation and
| features. TA is worse because it affects more people.
| paxys wrote:
| > You seem to be suggesting that statistical tools are
| useless at predicting trends in time-series data.
|
| No, the suggestion is that technical analysis is useless at
| predicting future trends in stock prices.
| nologic01 wrote:
| While we should be sceptical of any and all "models" of
| reality, we can't lump them all together.
|
| Macroeconomic models have had spectacular fails but are
| fundamentally a semi-honest attempt to understand how the
| economy evolves (Only "semi" because ideology can be quite
| limiting).
|
| Climate change models have a strong physical component that
| is neither made-up nor manipulated, but may suffer from not
| capturing biosphere dynamics all its complexity. Thats why
| there is uncertainty range around scenarios.
|
| Long term investment decisions are in any case never based on
| TA. That technique is really a made-up pseudoscience tailored
| to provide comfort and talking points to the widest possible
| trading audience.
| BaseballPhysics wrote:
| > You seem to be suggesting that statistical tools are
| useless at predicting trends in time-series data.
|
| TA doesn't use "statistical tools" in any actually meaningful
| or predictive way. It's digital phrenology. Data-driven tea
| leaf reading. Programmatic palmistry. It deserves only scorn.
| unyttigfjelltol wrote:
| Textbook TA uses a lot of voodoo which, itself, is helpful
| for understanding market psychology. The fact that maybe
| 20% of market participants give significance to a simple
| moving average calculated from a certain number of days or
| weeks-- useful explanatory information!
|
| But the core proposition of TA is that a scientific
| approach to analyzing past price movements will at least
| _hint_ at the future, sometimes. Not all the time. That 's
| not controversial, and wouldn't be in any other discipline
| either. Whether it can be profitably exploited at a
| particular scale or by a particular person-- another
| question entirely.
|
| The interesting thing about applying TA to live markets is
| ... its adversarial. A pattern becomes known, and that
| leads it to change. If it doesn't change, we can consider
| it based in fundamentals. For example, markets are more
| volatile, on average, in the Fall. Why? Well, it's got to
| be fundamental because everyone knows this pattern and yet
| it very often repeats. TA is helpful because we would not
| identify the fundamental mechanism without first observing
| the historical cycles of prices.
| codethief wrote:
| You have phrased your comment very carefully and I agree,
| sometimes there might be some value in looking at simple
| trends, if only for the reason that other market
| participants do the same.
|
| > But the core proposition of TA is that a scientific
| approach to analyzing past price movements will at least
| hint at the future, sometimes. Not all the time.
|
| Will those "hints" be correct more than 50% of the time,
| though? I mean, if TA did beat coin flips, you could
| exploit this consistently with a profit. That, however,
| would be news to me.
| BaseballPhysics wrote:
| You seem to be confused between descriptive, predictive,
| and explanatory models.
|
| TA is not predictive. It can't help you anticipate the
| future. If it was, you could make consistent profits by
| using it, and no one has. If it's right, it's just as
| often wrong, in which case it's no better than a coin
| toss or throwing bones or reading tea leaves.
|
| It's not explanatory. It provides no hypotheses for _why_
| the market behaves in certain ways. If it did it might
| have some hope of being predictive, but alas, as I
| already mentioned, it 's not. And thus it can't teach us
| anything about market behaviours or their underlying
| causes.
|
| TA might reasonably be thought of as descriptive, in that
| it gives a (voodoo) framework for describing observed
| market behaviours. As you say, we might observe the
| market is more volatile in the fall. But because it
| offers no explanatory power, we have no way to know why,
| and since it has no predictive power, it can't tell us if
| next year will be the same as this year. You're simply
| expected to believe that, well, it's always been that
| way, so I'll assume the future will be the same as the
| past.
|
| As a result, it's frankly not that useful or interesting.
| hammock wrote:
| >Technical analysis is the ultimate dumbification of market
| structure and dynamics
|
| Technical analysis is the macroeconomics (macroeconomics, the
| discipline taught in school etc) of the stock market! It's like
| drawing aggregate demand and supply curves and imagining that
| they move around monolithically as they drive the economy. Tail
| wags the dog
| napoleon_thepig wrote:
| I don't think you understand macroeconomics (or the undergrad
| level curves you're mentioning)
| btilly wrote:
| The "tail wags the dog" bit makes me think that the
| commenter understands both. And shares my distain for
| macroeconomics.
| JimmyRuska wrote:
| 95% of the professional asset managers, for example those in
| wealthion, blockworks, paid macro people like 42macro and
| themacrocompass, nearly all of them, said stocks would most
| likely touch 4300 on the S&P and probably cycle down again to
| prior lows, as manufacturing PMIs, housing, etc weaken, as the
| long and variable lags from Fed tightening, credit environment,
| start to hit.
|
| Instead, right after the debt ceiling, there was a massive short
| squeeze, parabolic AI tech pump, and we're at 4567 on the S&P.
|
| As it turns out the people just trading off momentum, technical
| analysis, and liquidity expectations, did way better than those
| betting on certain industries to go down. Sure, it can still go
| down, but there are plenty of money managers, macro experts, that
| looked at the big picture based and made data driven decisions
| based on historical data, and still got completely burned because
| they were trading against the technicals (massive upward momentum
| since after October).
| ArtTimeInvestor wrote:
| Some dude is having their first naive thoughts about the stock
| market, writes a shallow post about it and gets onto the HN
| frontpage.
|
| In general, investment discussions on HN are very shallow.
|
| Is there some investing discussion forum on the web with
| substance?
| rybosworld wrote:
| It does seem like HN has a lot of this surface-level stock
| market discussion. I wonder how much crossover there is here
| with r/wallstreetbets.
|
| > Is there some investing discussion forum on the web with
| substance?
|
| I've personally searched for something like this quite a bit in
| the past and I think ultimately it's the wrong question. It
| seems to me that a forum of people discussing stock market
| dynamics is always going to be doomed from the start. I think
| that's because the ideas actually worth discussing are too
| complex for even people with above average
| intelligence/capability.
|
| TLDR: In my opinion, there's basically no where on the internet
| that you will find an "edge". All of the discussion is too
| shallow.
|
| Assume that there are ultimately just two approaches you can
| take to financial trading: fundamental analysis & technical
| analysis.
|
| Fundamental analysis is _almost_ a solved problem. This is why
| stock picking is so hard and Warren Buffet types are so rare. I
| think this is because FA is infinitely more understandable than
| TA. Companies are evaluated based on their balance sheets /cash
| flows and compared to peers. It's not simple per se, but it's
| the sort of thing most people can grasp. It's well established
| that beating an index fund is difficult and that _most_ stock
| pickers will not beat an index fund. Investing forums are full
| of people thinking they will be the exception but we know that
| most of them will underperform the benchmark.
|
| Then there's technical analysis. Technical analysis of any
| substance requires a very strong mathematical background. The
| original post only mentions moving averages. That's essentially
| a pre-school level understanding of TA and I have strong doubts
| that a moving average strategy has _ever_ been profitable.
| Basically any strategy that involves buying /selling based on a
| moving average or one of it's cousins _is_ more shallow than
| astrology.
|
| A more advanced practitioner of TA might get into pairs
| trading/statistical arbitrage. In developed markets
| (stocks/forex), an individual _cannot_ succeed at this even if
| they understand how it works. It 's just too competitive. Just
| a few years ago you could be profitable doing this in under-
| developed markets (.e.g crypto) but I'm not confident an
| individual could compete in crypto markets anymore.
|
| Then there's even more advanced strategies that are employed at
| places like Renaissance Technologies. The people that work
| there tend to have advanced degrees in math/physics.
| jacquesm wrote:
| One thing you can be 100% sure of: if someone has something
| that _actually_ works they are going to keep dead quiet about
| it for as long as possible.
| cde-v wrote:
| Any discussion of TA is shallow because TA itself is very
| shallow.
| seizethecheese wrote:
| No, one could imagine a much more sophisticated article
| evaluating TA.
| KRAKRISMOTT wrote:
| The funny thing is, HN is one of the few forums where the
| average user has close to enough mathematical maturity to
| discuss this sort of finance. Quantitative finance folks rarely
| come from a pure finance background, it is very different from
| investment banking or typical bread and butter bulge bracket
| work.
|
| To do well in quant finance you need the same intuition and
| talent as a reinforcement/probabilistic learning practitioner
| -- good grasp of statistics and instinct for complex systems
| with feedback loops like differential equations and dynamics.
| Market making for example can be formulated as a bellman
| equation.
| Retric wrote:
| Not really. Sharing specific useful investing information
| renders it largely useless. That's an oversimplification, but
| the incentives are just very different.
|
| So, it's hard to go beyond shallow advice without everyone
| screaming about the latest bubble.
| [deleted]
| traceroute66 wrote:
| Short answer yes.
|
| It's a simple reality that you can't just trade shares based on
| technical analysis alone. You are trading in a company, so you
| can't ignore what's going on with the company or the regional
| market.
|
| The only place technical analysis might work is the forex market.
| Because the volumes are so enormous, and there is no centralised
| exchange.
|
| But even then, you're still at the mercy of world events. Look
| what happened when the SNB pulled the peg on CHF overnight[1].
|
| Sure the HFTs and Quants do it, but they do it on minuscule
| timeframes, and they have an enormous budget and even more
| enormous risk appetite.
|
| As the old saying goes. Time in the market is better than timing
| the market. Oh, and "only invest what you can afford to loose".
|
| [1] https://www.reuters.com/article/us-swiss-snb-brokers-
| idUSKBN...
| jcq3 wrote:
| Everything is wrong about this article. TA is just an indicator
| of market psychology, automating trades based on setups (sma) is
| a nonsense for a trader as it doesn't include execution which is
| the most important part. No trading bot have performed better
| than human traders, ever. Bot doesn't have glut feelings.
| groby_b wrote:
| Sigh. A lot of the arguments here amount to "there is no
| heuristic that's 100% correct, so heuristics are useless". That's
| not how that works.
|
| TA ultimately is supposed to give you insight into how the
| overall market is currently thinking about a specific stock. Of
| course it doesn't work by itself, because yes, new info changes
| attitudes.
|
| And yes, some heuristics are worse than others. Some are more
| sophisticated than others. But they _help_ paint a picture.
|
| Sometimes, the picture is "hey, the market seems currently full
| of people making irrational decisions, they all disagree with
| me". That's a signal you look at your fundamental assumption to
| figure out if you're the fool, or they are. That's where TA makes
| sense. It's a way to highlight where to look, not a way to make
| decisions.
|
| In the complete absence of any other analysis? Probably not so
| much. Though I'd certainly love to see more thorough backtesting
| than one stock, one metric.
| dkrich wrote:
| Well, the thing is that it once had value. But before computers
| and the internet and real time data made creating all sorts of
| charts _really_ easy. Jesse Livermore is regarded as an early
| technician in that he would spot price patterns that he
| interpreted to signify behavior. For example if he saw a lot of
| buying while people were bearish he would reason that there were
| insiders who knew something driving the buying. And yes, he did
| hand chart stock prices meticulously according to a particular
| system. But again, in those days it took a tremendous amount of
| work.
|
| Hell, stock indices which we all take for granted today were
| largely created because it was so difficult to know at a given
| moment what the overall market was doing and tabulating those was
| a ton of work by today's standards.
|
| But now technical analysis has been democratized and everyone has
| access to the same indicators. So the value has been destroyed.
|
| This brings me to a larger point. Markets are constantly evolving
| to take what used to be hardly noticed and difficult to
| understand and make it the focal point of everyone after it
| works. But people fail to realize that because so much attention
| is now placed on it that it changes the market in the process so
| that that thing no longer has significance.
|
| One recent example- the fed used to not even tell you that they
| had changed the fed funds rate! So some clever market observers
| would follow the prime rate and figured out that there was a
| relationship between that and the stock market. Eventually
| everyone caught on and so the fed itself became politicized and
| so now they telegraph to the market what they're going to weeks
| and sometimes months in advance. So what the market might only
| begin to price in after like a rate hike now gets priced in
| months before they start hiking. This has caused market cycles to
| be thrown out of whack and very few can make sense of it because
| they believe market should continue to behave with similar timing
| as before.
| KRAKRISMOTT wrote:
| > _But now technical analysis has been democratized and
| everyone has access to the same indicators. So the value has
| been destroyed._
|
| Oh no, the Efficient Market Hypothesis strikes again!
| dkrich wrote:
| It's demonstrably true. Do you really think you have an
| advantage in the market because you spotted the same breadth
| thrust everyone else is talking about? Same reason why people
| can't understand how market is rallying with a yield curve
| that's been inverted for almost a year.
|
| It all stems from this delusion that everyone else is dumb
| when in reality most people are following the path of least
| resistance, they just don't realize it.
| theonlybutlet wrote:
| Technical analysis is basically just taking advantage of people.
| All for the benefit of creating short-term liquidity. I feel the
| cons outweigh the pros. But it is difficult to draw the line.
| nomilk wrote:
| To quote Adam Robinson [1]:
|
| > My only concern about empowering individual investors is that
| when you invest as an individual, you are entering the fieriest,
| gladiatorial arena ever invented and you're competing with highly
| incentivized participants around the world who are out for your
| lunch and going to eat it if you don't have an edge.
|
| It seems profits are _possible_ with technical trading; it 's
| just that they're zero sum, and there are extremely few (although
| big) winners.
|
| This numberphile video gives an interview with someone who was
| successful at it:
|
| https://www.youtube.com/watch?v=gjVDqfUhXOY
|
| [1] https://tim.blog/2018/06/22/the-tim-ferriss-show-
| transcripts...
| throw0101c wrote:
| Jim Simmons. Recent biography on him:
|
| * https://www.penguinrandomhouse.com/books/557104/the-man-
| who-...
|
| * https://www.goodreads.com/book/show/43889703-the-man-who-
| sol...
| paxys wrote:
| Quantitative trading != technical analysis. They couldn't be
| more different.
|
| A quant trader analyzes _real world events_ , both inside and
| outside the market, to predict stock prices. This is a proven
| and successful strategy, and in some ways it is essentially
| automating what people already do with fundamental analysis,
| just getting an edge by being faster.
|
| Technical analysis involves looking at a single data point -
| the past price and volume of a stock - and making a future
| projection.
|
| When a company releases an earnings report a quant algorithm
| will analyze it and make trades before you can even click on
| the link. A technical analyst deems the earnings report
| useless. Where the stock will go depends on how it has traded
| for the last N periods, nothing else.
| nomilk wrote:
| Do we know for sure he doesn't mean technical analysis? When
| discussing his strategy (6m 30s) he says:
|
| > Looking at the patterns of prices, I could see that there
| was something to study, maybe some ways to predict prices
| mathematically and statistically.
|
| And shortly after he speaks of doing way with 'the
| fundamental stuff'. And also:
|
| > Gradually we found more and more anomalies, and you put
| together those anomalies and you get something that predicts
| pretty well.
| paxys wrote:
| Every trading strategy involves looking at the past price
| of a stock. Technical analysis involves looking at the past
| price _and nothing else_. That 's quite literally the
| definition. Everyone is going "oh you can do that but also
| do XYZ other things". Well sure, but at that point it isn't
| technical analysis.
| nomilk wrote:
| Technically (no pun) technical trading is looking at
| historical prices _and_ volumes. But that 's not really
| important.
|
| I guess you're right and I misinterpreted the comments
| made in the video to mean he finds mathematical patterns
| in the price/volume data. But now I revisit that
| evaluation I think it's almost certainly wrong; he almost
| certainly would use other data too (I mean, why not use
| everything available to you). It makes sense that he's
| probably using many, many other data sets and not relying
| on price/volume alone, and hence it's probably (almost
| certainly) not technical analysis.
|
| Thanks for the correction.
| RC_ITR wrote:
| >A quant trader analyzes real world events, both inside and
| outside the market, to predict stock prices. This is a proven
| and successful strategy, and in some ways it is essentially
| automating what people already do with fundamental analysis,
| just getting an edge by being faster.
|
| You're being very loose with language here, to the extent
| that your entire point is suffering.
|
| Systematic Market Trading (the sole strategy of the RenTech
| and Two Sigma's of the world) is _almost exclusively_ trading
| on _systematic market data_ that is largely neutral to the
| underlying tickers. Sure, they 'll do some Alpha Factor
| modeling in some trades, but look at the CV's of the people
| that work at those shops and you'll see people talking about
| modeling momentum, crowding, pairs, etc.
|
| Speed matters in the sense that you're operating in an
| adversarial market, but _plenty_ of quants just have better
| ideas (I think you 're confusing market-making HFT with quant
| - they're related but separate things)
|
| Fundamental analysis is a _completely_ different ballgame
| where the ticker does matter. These are the Citadel Equities,
| Tiger, Coautes, etc. of the world that emphasize the value of
| a human stock picker over all else (they have small quant
| trade execution teams, but it 's a rounding error in terms of
| headcount).
|
| >Technical analysis involves looking at a single data point -
| the past price and volume of a stock - and making a future
| projection.
|
| If this is how you define TA, then sure, that's not what
| Systematic Trading is, but that's not how most people define
| TA (The most common example of TA is a form of momentum
| trading).
|
| >When a company releases an earnings report a quant algorithm
| will analyze it and make trades before you can even click on
| the link. A technical analyst deems the earnings report
| useless information. Where the stock will go depends on how
| it has traded for the last 3 years.
|
| This is a gross mischaracterization. Some quants do NLP and
| sentiment analysis, but that is a small part of the
| landscape.
| [deleted]
| PaulDavisThe1st wrote:
| Not really, since all stock market analysis is about as woo-ful
| as astrology. No need to consider any sub-genre for the title.
|
| I really don't understand how, decades after "A Random Walk Down
| Wall St." was published, there is anyone who can take any sort of
| "stock market analysis" seriously.
| anonu wrote:
| Dorsey Wright was acquired by the NASDAQ for over $200m in 2015.
| [1] They made a business of selling asset allocation and sector
| rotation model portfolios, mainly using RSI (Relative Strength
| Index). They are probably a bigger business now than when they
| were bought.
|
| So the question of whether technical analysis makes money: Yes,
| for the right people it does.
|
| As a long time trader and markets practitioner, I can also tell
| you that YMMV with technical indicators. Because many people use
| them, they are self-fulfilling in a way. The signal exists
| because people think there is a signal.
|
| Another way to think about it, is technical indicators can be
| generalized to other well known price-based or volume-based
| indicators or factors such as momentum, reversion, etc...
| Understanding how volume interplays with price is also quite
| important. Big price moves with little volume may not have
| support. Technical indicators aren't bad. For "visual thinkers"
| it may be a great way to segway into a more "closed-form"
| solution or explanation of how a particular market works.
|
| Also, to the folks who are poo-poohing the "simplistic" blog
| post: yes, the analogy to astrology is a bit contrived. But the
| point on using SMA for better risk-adjusted returns is excellent.
| This would be a great foundation for building a higher-Sharpe
| S&P-like replication strategy.
|
| [1] https://ir.nasdaq.com/news-releases/news-release-
| details/nas...
| itsthecourier wrote:
| Reducing technical analysis to SMA crossovers is like questioning
| the effectiveness of physics by just mentioning strings theory
| friend_and_foe wrote:
| As someone who has dabbled in this sort of thing for a few years,
| dived pretty deep, and begun my journey into quantitative
| analysis I can tell you that all TA is pretty much useless. There
| are fundamental mathematical reasons as to why, but in a nutshell
| there is no TA indicator (that I'm aware of) that is a leading
| indicator. You simply cannot use technical analysis to glean any
| useful information about the future.
|
| That isn't to say that you cannot use mathematics to glean useful
| information about the future. The medallion fund exists. People
| are doing it. But you're going to have to get very, very good at
| very domain specific math involving statistics, signal theory,
| information theory and the like, it's much more involved than TA,
| theres a reason quants make 7 figure salaries, you're not making
| useful predictions drawing triangles on a linear price chart.
| eimrine wrote:
| I have a very little experience in trading crypto and the only
| helpful/working for me kind of technical analysis is a moving
| average. I am excited about learning similar moving-something
| things.
| jasfi wrote:
| There are always posts on r/algotrading that debate this sort of
| thing. As in, can it work or not? There are always those that
| have found some success, even if it doesn't always last.
|
| Full link: https://reddit.com/r/algotrading
| [deleted]
| snitzr wrote:
| Reddit stock gurus do the opposite of what a legit person would
| do. Unlike "world's smartest billionaire" Jim Simons, who's
| operations are super secret, finance influencers share their
| picks as a way to grow followers and sound smart. If the modern
| equivalent of haruspicy (technical analysis) worked as well as
| claimed, these con artists would realize they could make more
| money keeping quiet.
| superfrank wrote:
| Except for the "stock gurus" like these guys who were running
| pump and dumps (https://www.sec.gov/news/press-
| release/2022-221). They buy early, hype up a stock, and then
| bail after they've convinced enough other fools to buy in
| snitzr wrote:
| Yes, I feel it's the new golden age of scammers.
| 01100011 wrote:
| Yes. Also no.
|
| First, no system is perfect. If you're a trader, you want
| something that will shift your odds from 50/50 to 55/45. Can some
| forms of TA do that in certain market conditions? I believe so.
| When the market is driven by certain factors, say, retail
| traders, TA likely performs better simply because other people
| are using TA. Doing TA can tell you what the morons are doing.
|
| Also, I believe it was "The Long, Good Buy" book which covers the
| advantages of mean-reversion strategies and provides backtested
| analysis. If a stock moves by a large amount in a short period of
| time, it will likely mean-revert somewhat and you can take
| advantage of that.
|
| Do I think any of us computer folk should mess around with this?
| No. The best trade is to improve your skills and get pay raises.
| marcrosoft wrote:
| Just a side note: you can be highly successful with less than
| 50% win rate. Many trend following strategies are 30/70 but are
| still profitable due to how much they win when they are right
| and how little they lose when they are wrong. The expected
| value is what matters not a high win rate.
| gbasin wrote:
| Yes, insofar as awareness of it may influence your own behavior
| which gives it some predictive power
| 1270018080 wrote:
| Technical analysis is neither technical nor analysis
| Tepix wrote:
| Yes it is, but groupthink sometimes makes it self-fulfilling.
| yCombLinks wrote:
| The comments for this article are surprisingly shallow. A much
| more interesting article about Technical analysis can be found
| here : https://elite.finviz.com/help/technical-
| analysis/backtests_r... They also found the SMA indicator to be
| useless. Hardly worthwhile to say all TA is useless since SMA is
| useless, when people that are in favor of TA say SMA is useless.
| NickC25 wrote:
| I would think so, because if it was indeed that straightforward
| (pattern X reveals future movement Y), it would inherently mean
| that the stock market is easy to predict and that markets are
| rational.
|
| Markets aren't easy to predict (that's why people who DO predict
| them correctly make bank) nor are they rational.
|
| TA can provide historical reference points, sure, and in some
| cases can indicate that something is likely to happen (to a
| degree, anyway), but cannot accurately predict anything
| consistently.
| etchalon wrote:
| A rare counter-example to Betteridge's Law of Headlines!
|
| (The answer is Yes)
|
| https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headline...
| [deleted]
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