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View Diary: Technical Analysis & The Fallacy of a News Driven Stock Market (17 comments)

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  •  I have seen TA work. (1+ / 0-)
    Recommended by:

    I am a student of the Supply & Demand trading methodology.

    •  have you written code to test it against (0+ / 0-)

      historical data?  everything works sometimes.  Have you kept a running P&L of your trades?

    •  This is the thing though. We as humans (0+ / 0-)

      remember the 1% of the time it works and don't weigh that sufficiently against the 99% of the time that it fails.  TA is not rigorous, and it is a terrible foundation for a long term investment strategy.

      •  "Not Rigorous" (0+ / 0-)

        It's true, TA is "not rigorous" and much of it is simply a matter of interpretation.

        But I do hear a lot of talk from economists and investment bankers... and over the last 16 months they and their rigorous analysis have been dead wrong.

        Now, I've been predicting that the DOW would drop to 13800 since March... and some would say that raising the bond yield above 2.6% is going to bring GDP to zero. When and if the market loses 1,000 points, who will be vindicated?  Perhaps a pullback can rightly be attributed to bond yields, but how exclusive can that attribution be if I called it 3 months before they even raised the yield?

        So here's a challenge to all the naysayers who have criticized TA.  Put your reputation where your mouth is.   I've stated that the next stop for the DOW is 13,800 and then it's on to new highs.  What have you predicted?

        You will not rest, settle for less • Until you guzzle and squander whats left • Do not deny that you live and let die - MUSE

        by bondibox on Sun Jul 07, 2013 at 09:30:04 PM PDT

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        •  Making short term predictions is folly. If your (0+ / 0-)

          predictions are so correct, then why aren't you a billionaire yet?  Have you ever lived in Las Vegas?  Lots of people there also claim to have a system that helps them win at keno, craps, or whatever.  Yet they never seem to get ahead and spend more and more time hopelessly adjusting their system.

          TA is pretty much black magic, dressed up with a lot of fancy terms such as "cup and handle", "candlestick", etc.  If given the choice between engaging in TA and not investing at all, I would hang on to my own money.  After all, there is Las Vegas or the race track if I want to gamble.

          Technical Analysis is Stupid

          The more you dig, the weighter the evidence against technical analysis gets. An October 2009 study by New Zealand's Massey University tested more than 5,000 technical analysis strategies in 49 different countries. The result? Not one strategy generated returns that aren't predicted by chance.
          Why TA is the Astrology of Investing
          With TA, sometimes people win over the short-term, but over the long-term, TA does not allow one to consistently outperform.  Instead, practitioners simply convince themselves that their readings were correct...
          Buffett's 8-Year Long Mistake
          After eight years of trying, he concluded that it was the wrong way to invest. Then he focused on the teachings of Ben Graham, which stressed business fundamentals, finding a strategy that both made sense and, more importantly, worked.
          •  Then Riddle Me This (0+ / 0-)

            I wouldn't consider 1+ years to be a short term snapshot for 2 reversals but I suppose YMMV.

            And I can understand you not wanting to make any predictions (at least you weren't one of the ones claiming that their super-awesome methods were so awesome they couldn't use them for a gentleman's bet on the internet).  

            But if you're going to trash TA then you've got to at least be able to look back in hindsight over the same period I did and give a believable news-driven or fundamental explanation for the market's movements from Feb 2012 before it dropped to 12040 and reversed for the hyper-bullish leg 14500+ in 2013. EPS is already at unjustifiable levels, GDP has dropped 0.9% during that timeframe.

            You will not rest, settle for less • Until you guzzle and squander whats left • Do not deny that you live and let die - MUSE

            by bondibox on Mon Jul 15, 2013 at 03:28:03 AM PDT

            [ Parent ]

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