Technical Analysis - scam or not?

[skeet2008]

OK. Who really thinks technical analyses are worth anything or are they just the greatest scam assembled by number-nerds and sold to the trading community? What do you think? They nake nice patterns but do they really predict anything? Are they over-thinking gone wild? Can algorythms protect us from common sense? (Don't want to hear from the trader that made $20 last week and is now an expert)

[bounced]

True, what you'll see in the stock markets is either a lot of noise, or the result of market makers/specialists/hedge funds conspiring together against the retail investor. That said, there's only so much that a stock can be artificially manipulated.

For example, a stock may be oversold after panic selling, with no change in the underlying fundamentals. Then, one can expect a sharp bounce or a bottoming out once the downward pressure subsides. Technical analysis isn't like a divining rod, but it's more like forecasting in the general ballpark in terms of direction and price.

[wallstreetsedge]

well, theres no perfect way to trade the market... anyone who claims so is lying to you. technical analysis is basically a way to help you improve your chances of winning in the market. afterall, if everyone is using the same method... no one would win right?

[Bolimomo]

OK. Who really thinks technical analyses are worth anything or are they just the greatest scam assembled by number-nerds and sold to the trading community? What do you think? ...


I am one of the short-term day traders who relies solely on chart patterns to place orders. It means I don't read any fundamental information, don't care about the news, and certainly don't trade on rumors or recommendations from others. "The chart tells me everything I need to know". And yes, I do this for a living.

Let me ask this: traders like me need to rely on some price points and patterns to trade off of. For those who think TA has no value - so theoretically you do not look at a chart at all. What do you trade off of? How do you place your orders?

[john_for_u80]

Technical Analysis is to know the psychology of how people react with that particular stock which is portrayed in form of graph. Learning that psychology will help you decide what can be the next move.

Many times you fail to know the health/psychology of that stock/market and the stock works against you but you can be more right than wrong as long as you learn how to use charts and how to improve on your failures/mistakes which takes time.

No matter how good the chart readers are still they learn something from their trades everyday. There is no end to the perfection(learning)!

[Survivor]

Oil is a good indicater, not full proof, but constantly changing by the
extreame shift in big money driven general commodity rip offs.

Cyclical charts help, matched by the Fed rate, GDP.

Goldman Sachs, JP Morgan, any news publication. IBD, Barrons,
WSJ are all tools used to pilfer your money by bigger money.
If their telling you to buy, run fast. Look the other way.
Fast Money too, if they say buy something, I'll bet their selling.
This may answer the question of why a stock goes lower when you buy it.
I may be wrong, just suspicious.
Where money is concerned there is no scruples.

Check the yield curve for when to invest, large or small cap stocks.
Fed bank of New York website.
Although, I may get shot down by the experts, what a surprise. 8O

[aiki14]

OK. Who really thinks technical analyses are worth anything or are they just the greatest scam assembled by number-nerds and sold to the trading community? What do you think? They nake nice patterns but do they really predict anything? Are they over-thinking gone wild? Can algorythms protect us from common sense? (Don't want to hear from the trader that made $20 last week and is now an expert)

I wouldn't trade without it. I don't know any successful traders who don't use some form of TA. I have been trading full time for 4 years and was skeptical at first. I understand the limits of what TA can do, but price and volume movements are well studied and there is little doubt that patterns emerge that can give you a statistical advantage. I only need a fairly small skew to make money, and I believe the TA that I do gives me that advantage. I have not had a down month in 3 years and only 11 down weeks in that time, and while I use fundamental analysis and what I feel is a sensible risk and money management methodology I attribute the majority of my success to good TA.

To someone who is unskilled in TA, or has had other factors cause his results to be unsatisfactory, TA can seem to be mystifying, or magical, or illusory. Also the investor mentality, and the "buy and hold" mantra, so frequently espoused by "investment professionals" is not trading, and TA has less relevance to this methodology. I would say the shorter your timeframe the more valuable TA is, and in my trading timeframe of intraday to several day holds, it is indispensable.

[ZaNoob]

The best technical indicator is WSE. When he says buy, you buy. When he says sell, you sell. 99/100 you make money!

[Riddicks]

The best technical indicator is WSE. When he says buy, you buy. When he says sell, you sell. 99/100 you make money!

I know that...:dito:

[wallstreetsedge]

The best technical indicator is WSE. When he says buy, you buy. When he says sell, you sell. 99/100 you make money!

lol... thank you, thank you

[dusouth]

I use fundamental analysis and what I feel is a sensible risk and money management methodology I attribute the majority of my success to good TA.

:dito: Can't agree more.......It's a must to use both.

[skeet2008]

Thank you all for your worthy answers. Bolimomo, I have not traded for 3 years. I lost interest, even after respectable gains, because I knew my successes were mostly dumb luck and in reality my results were random. I was a technical trader and relied solely on the graphs so that my decisions would be “pure”. I decided later that this was like driving a car by only looking at the speedometer and not through the windshield.

The stock market declines always get my interest and so I am tinkering again. It seems the technical analyses have been proliferating and some have the smell of gimmick How many ways to skin a cat can there be?

So are some of you saying that TA gives you a 52% chance of success rather than 50%? I really am interested in the merit of the TA industry.

[Bolimomo]

So are some of you saying that TA gives you a 52% chance of success rather than 50%? I really am interested in the merit of the TA industry.

I personally adopted the rule of 80/20. The methodologies that I follow (or I developed) have a typical success rate of 80%. I just need to be mindful of the 20% of the time when they don't work.

[billionairsclub]

I believe the TA that I do gives me that advantage.....While I use fundamental analysis..what I feel is a sensible risk and money management methodology I attribute the majority of my success to good TA. To someone who is unskilled in TA, or has had other factors cause his results to be unsatisfactory...I would say the shorter your timeframe the more valuable TA is, and in my trading timeframe of intraday to several day holds, it is indispensable.

This is the best definition toTA trading you will ever read! I agree with this man..

[ZaNoob]

Hehehe, every technique and method works... except when they don't work.

[Firesale]

As a noob to TA can somebody recommend some books both basic and advanced to educate myself with. Thanks

[eaglearb]

t/a is good to decipher trend, support, resistance, chart patterns, etc...however, that doesn't mean you can trade off the analysis, usually by the time there's a formation/setup, its too late and the risk/reward isn't there. That being said t/a is good when holding a position or useful when coupled with fundamental analysis, t/a by itself doesn't work, there isn't a single hedge fund using only t/a to deliver returns, its either trend following, value/macro, special situations or arbitrage.

[skeet2008]

Eaglearb - I am getting from this that you are a longer term strategy guy? that you dont consider day-trading worth it?