# On why traditional tech analysis stopped working and on when it shall start again...



## sinner (27 May 2015)

http://www.priceactionlab.com/Blog/2015/05/fooled-by-persisting-market-conditions/



> Many classical chart patterns worked well in the 1970s and 1980s due to the high serial correlation. The shape of the patterns was mostly irrelevant although some behaved better than others due to their duration. The key behind their performance was that there was high probability that up days would be followed by up days and down days by down days. As a result, a double top or a head and shoulders worked as long as they were confirmed. But that is not the case any longer and false breakouts prevail. Thus, chartists of the 1970s and 1980s were fooled by high serial correlation. When the serial correctional became negative, charting along with most indicators stopped working. The market was ruthless in that respect and took the money of naive technical traders. Some still struggle with such methods, not doing their homework. Some others hope that serial correlation will return to the markets before they are too old to trade. I hope it will because there should be some form of wealth redistribution among traders. But the situation is much more complicated and instead of a return to high serial correlation we may see something else.




I endorse this analysis.

This also means that if you can find assets with high serial correlation, traditional tech analysis should work well. I normally use tools like the TSI to find assets of this variety.

http://www.nonrandomwalk.com/Blog/tsi.html

https://engineeringreturns.wordpress.com/tsi/

(and it works in the opposite function too, low TSI score assets have low/negative serial correlation and generally make for good mean reversion trades).


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## tech/a (27 May 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

TSI ?


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## peter2 (27 May 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

TSI = Trend Strength Indicator

TSI is described in the second reference.

Thanks sinner, you've mentioned the work of David Varadi before and you've rekindled my interest in his work again.


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## tech/a (27 May 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

I see this as nothing more than saying T/A works better when trading with a trend. 

Rising tides float boats.

Changes in conditions particularly a change relative to past price action and your system could fail.

TSI is a technical filter.

How it helps keep a system on the right side only you know.
Unless you have some tests to show us?

Perhaps the adaptation of T/A hasn't kept up with market changes (Particularly in his case)
But as the DJIA in the 70s and 80s Basically went side ways at around 1000 
and from then till now went 1000-18000 pretty well vertical

I cant see where he's coming from.
Any proof of concept?

*Click to expand*


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## tech/a (28 May 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

*On TSI*.

I see this as just another lagging oscillator.
Used as a filter as suggested above 1.65 being the value 
range in which T/A is likely to "Work" only has meaning if it stays above
1.65.

*Practical application *
Putting the idea to work.

Shown is the chart offered up as evidence of how it works.
About half the trend is captured.

But put the oscillator on a search and you'll find at least 50% of prospects that fail.(Say after 6 mths)
So the question arises 
How do you apply it profitably to trading technically. Few are going to continue above or below 1.65 as seen on the chart offered.

*Click to Expand*




My argument is that this indicator is no better than any other as a filter---you could use an M/A,RSI,Stochastic.
Bollinger band,Trend line.

After 20 yrs of trading T/A my view is that its as valid today as it was when it was first discovered---*whatever form* of T/A or F/A one adopts.

What is also constant is the number of exponents of *ANY ANALYSIS* who know how to apply it profitably.
I've seen some really bad application of T/A on this forum and some really bad application of F/A on the same forum.

I argue its about *the applier of analysis* not market correlation. (Which is a simple cop out that anything works in a screaming Bull/Bear market.---actually many seem to be able to fail dismally here as well!)


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## DeepState (28 May 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

My 

What is required for this to be useful is for the TSI to be highly persistent beyond the lag effects inherent in its construction.  If high TSI today predicts high TSI in 100 days from now, that's when you can have confidence that application of trend following techniques can be profitable in the series.  If low TSI can be expected to persist, then you can be somewhat confident that reversionary methods are likely to be profitable.

Is there any suggestion that the TSI is sticky beyond lag effects?  If so, is this stickiness regime dependent (eg. stickiness might be expected if the series were cheap and getting more expensive as value and momentum considerations create a strong trend, but not over a full cycle on average).  If so, then you ultimately need to know the regime...

In line with T/A, I can agree that it is an historical observation of trending behavior.  For it to be useful for money making, it also needs to be a predictor.  Is it?


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## sinner (28 May 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



tech/a said:


> I see this as nothing more than saying T/A works better when trading with a trend.
> 
> Rising tides float boats.
> 
> ...




*sigh*

Yes tech, TSI is a technical filter. No, it is not like an MA, or stoch or Bollinger or whatever. It is simply an average of the measure of absolute returns divided by an approximation of volatility. It doesn't help to keep you on the right side of a trade. Its job is to help keep you in the right *kind* of trade. You have stated yourself that you manage your portfolio in such a way that low trend participation stocks are sold for stocks with better trend participation. This is simply an attempt to quantify that. You can also simply use serial correlation.

The fact that you can't see where he is coming from does not surprise me, since it's obvious you didn't bother to read anything I posted. Yes, there are lots of tests, done by the inventor (Frank Hassler) using the tool in various things from short term index mean version to using it as a ranking component in relative strength systems. *You can see the results of those tests in the link I already posted.*.

David Varadi also has extensive tests on his blog.



> I see this as just another lagging oscillator.
> Used as a filter as suggested above 1.65 being the value
> range in which T/A is likely to "Work" only has meaning if it stays above
> 1.65.




The actual threshold which defines "trending" versus "not trending" is different depending on the asset class. The implication of "trending" state is simply that serial correlation is higher (i.e. up days are proceeded by up days) and implication of "not trending" state is that serial correlation is lower (i.e. up days are proceeded by down days).

How you make use of that is really up to you, but I personally find it useful in conjunction with traditional trend following to break the "regime" of the asset in question down into four states:

Uptrend with no participation
Uptrend with good participation
Downtrend with no participation
Downtrend with good participation

Can you guess which regimes breakout systems work best in? And which regimes have the highest probability of breakout failure? Do you get that breakout success is due to high serial correlation and that breakout failure is due to low serial correlation?

You can't do this quantitatively (at least not as simply) with only trend following tools. 



> Practical application
> Putting the idea to work.




As mentioned above, in the links I provided (and via a tiny tiny bit of googling) you could easily find smart people who have used this tool as a component in trading systems which have holding times ranging from 1 day to 31 days. 



> Shown is the chart offered up as evidence of how it works.
> About half the trend is captured.




Again, the point is not to capture the trend.



> But put the oscillator on a search and you'll find at least 50% of prospects that fail.(Say after 6 mths)
> So the question arises
> How do you apply it profitably to trading technically. Few are going to continue above or below 1.65 as seen on the chart offered.




Very, very easily.



> My argument is that this indicator is no better than any other as a filter---you could use an M/A,RSI,Stochastic.
> Bollinger band,Trend line.




What a stupid argument. 



> I argue its about the applier of analysis not market correlation.




Did you actually even bother to attempt to understand what serial correlation means? It doesn't seem so. Maybe ask your son.


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## sinner (28 May 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



DeepState said:


> My
> 
> What is required for this to be useful is for the TSI to be highly persistent beyond the lag effects inherent in its construction.  If high TSI today predicts high TSI in 100 days from now, that's when you can have confidence that application of trend following techniques can be profitable in the series.  If low TSI can be expected to persist, then you can be somewhat confident that reversionary methods are likely to be profitable.




The persistence is present, but due to nothing more than momentum effect and inherent predictability of vol, certainly not due to any magical property of the indicator or magic of its construction. After discovering the TSI I made several indicators which do essentially the same thing but use different inputs (e.g. historical vol rather than ATR) and have observed the same result across markets.


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## skyQuake (28 May 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

Great stuff gents.

I just started reading this recently too:

HURST EXPONENT AND FINANCIAL MARKET PREDICTABILITY 


> ABSTRACT
> The Hurst exponent (H) is a statistical measure used to
> classify time series. H=0.5 indicates a random series
> while H>0.5 indicates a trend reinforcing series. The
> ...


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## sinner (28 May 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



skyQuake said:


> Great stuff gents.
> 
> I just started reading this recently too:
> 
> HURST EXPONENT AND FINANCIAL MARKET PREDICTABILITY




From my notes:

http://www.bearcave.com/misl/misl_tech/wavelets/hurst/


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## sinner (28 May 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

My personal experience with Hurst cycles was not great in various markets. I generally found that (like many other things) that simplicity lends to robust results and complexity less so. 

So generally speaking, my findings have been that simpler measures (%rank of serial correlation, various measures of absolute returns divided by various measures of volatility, etc) have been much more effective.


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## CanOz (28 May 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

Looks about right....


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## CanOz (28 May 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

Here is the TSI with one of the strongest 'trends' in the world right now, the Shanghai Composite.


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## tech/a (28 May 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



> *sigh*




I am indeed honoured to have received your learned reply.


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## sinner (28 May 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



CanOz said:


> Here is the TSI with one of the strongest 'trends' in the world right now, the Shanghai Composite.




I didn't really want to get the thread hung up on TSI, the point was really more about what is actually driving the returns (or lack thereof) in traditional technical analysis setups.

But anyway, as mentioned above, I wouldn't recommend arbitrarily applying 1.65 as a useful threshold across different asset classes (e.g. individual stocks are quite different to stock indices, which again very different to commodities).

My suggestion is to use a long term median value as the threshold, e.g. ~500 day avg of TSI or watch a shorter term ROC to see when the TSI starts rising and falling.


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## lftrader (28 May 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



sinner said:


> http://www.priceactionlab.com/Blog/2015/05/fooled-by-persisting-market-conditions/
> 
> I endorse this analysis.
> 
> ...




Thanks, this is interesting. On another note, has anyone tried the Price Action Lab software? That also looks interesting to me but more as a scan tool. 

Another question, is this similar to the TSI?


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## sinner (28 May 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



lftrader said:


> Thanks, this is interesting. On another note, has anyone tried the Price Action Lab software? That also looks interesting to me but more as a scan tool.
> 
> Another question, is this similar to the TSI?




Kind of, sort of, but not really.


> When the market is “stable” it is easier to apply effective quantitative trading systems. When the market is in “chaos” mode, it is not necessarily volatile- but rather it is too complex to use for standard measurement and calibration of basic linear prediction.




If you think of the TSI as an example of an indicator which tells you whether to use your trend following or mean reversion system, the self similarity metric is an example of an indicator which tells you whether or not to use *any* system.

I've never tested it so can't say how effective or not it is at this. However I am aware of other indicators which are used similarly as filters for machine learning based systems (not sure whether or not they are capturing the same phenomenon though).


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## tech/a (1 June 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

*Sinner.*

Had a chance to have a look at all the thread references you posted up with regard to the heading of your thread.

I think there is a very long bow drawn with regard to "proof" that Traditional Technical Analysis has stopped working.
Offered up are two rudimentary systems the RSI (2) and a Two Day losing streak.(Hardly encompassing All of the available " Traditional Technical Analysis" available). 
Then benchmarks it against the S&P 500 and runs to two methods in the two timeframes showing that high correlation resulted in lower returns on these two tests against this benchmark.

To then conclude that all Chartists were fooled by high correlation in the years selected and that traditional Technical analysis has stopped working--I think is a very very broad brush.

TSI is still in my opinion another filter.
How it helps needs far more testing against a greater range of bench mark/systems/analysis and data.

I think its a long way from proving that traditional Technical Analysis has stopped working. 

But worth investigation.

I also note that his software is often referenced.


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## Habakkuk (1 June 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

Michael Harris is an interesting guy. Many of his posts make perfect sense (to me anyway) although their main purpose seems to be to promote his software at every opportunity. Can't blame him, really - it's his business. But then you look at what his Price Action Lab software does. I won't go into it here; you can look it up or you can download a (crippled) trial version to get an idea, which I have done.

Now, in my humble non-expert opinion it has little or no value, not even 50 bucks. No explanation for now, just my opinion.
However, I would not be prepared to bet even money against one of its signals that has shown a 90% success rate on backtests. Hard to explain that logic, so I won't.
But, like lftrader, I would like to hear what the more knowledgeable members think about the Price Action Lab concept. I don't believe that anyone here has forked out the US$ 2795 he charges (used to be 5 grand). But could you just read the description and give your considered opinion? 

http://www.priceactionlab.com/index.html

I said he was an interesting guy. You'd reckon with that software that is so valuable, and all his happy subscribers, he could afford to upgrade from Windows XP. Apparently not.


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## sinner (2 June 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



tech/a said:


> *Sinner.*
> 
> Had a chance to have a look at all the thread references you posted up with regard to the heading of your thread.
> 
> ...




You're taking it personally, because you think when he says "technical analysis" he's referring to what you do. He is not. He is talking about why, for example, setups like "head and shoulders", or indicators like MACD, used to work when they were invented but no longer do.


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## tech/a (2 June 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

No I'm not taking it personally.

I'm attempting to look at it objectively.

I see little evidence that technical analysis in its broad sense no longer works.
He has only presented his limited studies. I'm really interested in seeing how he
has been able to draw such a broad conclusion.

If that is the case why then is he pedalling his software?

---TSI is the filter that allows it to work??--It switches it back on??


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## Habakkuk (2 June 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



tech/a said:


> I see little evidence that technical analysis in its broad sense no longer works.




tech, please don't take my comments personally either. I respect and am impressed with your abilities. But what you are doing today is a long way from the TA that you have learnt in your ATAA course in the 1990's. That was textbook TA mostly based on Edwards and McGee, et al. but you are now trading fully discretionary. Of course you still use some of the principles but not in a strict textbook way. You have also recently discovered that your techniques can't be programmed because they rely on your judgment/intuition/experience/etc.

When people say that TA no longer works, they are not attacking you. They just point out that traditional indicators and patterns no longer work. I would go further and say they never really did. Not quite true because new discoveries always work for a while. But any popular (or even unpopular) indicator cannot really "make money". Not consistently.
Who would want to take the other side of those winning, "make money" trades? I'm not looking for an answer here.

Which brings me to the real point of this post. I'm shocked and saddened that nobody has responded to my question about Price Action Lab, so I'm going to make it easier. It has a brute-force algorithm that tests the profitability of 6-bar patterns over a time-series, looking for a specifiable win rate and minimum profit. There is no intelligence involved. Real 1990s software. The patterns are randomly generated permutations of OHLC over the 6 bars (it can be fewer or up to 9 bars in the gold version). E.g. today's low must be higher than the high from 3 days ago and yesterday's close must be above the open 5 days ago, etc. There are an astronomical number of possible patterns that can be generated and tested.

Michael Harris preaches about the futility of data-mining. Isn't this ultimate D-M , though?
More interestingly, could such 90% patterns show some persistence in the future? That's what I's like to find out. Without spending any money.

Any opinions? Please.


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## tech/a (2 June 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



> When people say that TA no longer works,




Why is it that people think I'm taking this personally.

I use T/A I use it often trading the DAX.
I've been using it for 20 yrs.
I find Support and Resistance a re occurring phenomenon which 
I cant imagine trading without.

I developed and traded a System live from 2002 to 2007
and turned $30,000 into $360,000 before shutting it down.
Its been published.

All after 1980.

If Technical Analysis no longer works then* I WANT TO KNOW*!

This thread is titled

*On why traditional tech analysis stopped working and on when it shall start again*

Terrific

I get that TSI evidently keeps you on the right side when trading Technically---but does that mean that it works now?.
Everything I've read (That's been offered) is just thin on evidence. You've got this massive statement supported by one piece of evidence---and that's pretty rudimentary.

If T/A doesn't work then buildings full of Quants will be devastated.
You wont be able to sell a charting package.

Its been mentioned that conventional T/A doesn't work---that's a lot of T/A
Pleeeeze show me where this has been proven.

I want to know more I really do-- But evidence based---not just a statement--and flimsy singular case study.

As for the software 
It has 2 rules 
Then randomly generates patterns inside those rules.
using 6 to 9 bars.
Other than amusement value what is it doing.
Price will either move above,stay stagnant or fall.---from what I see. 
The patterns within the rules have no criteria for qualification so how can they be used in the future?


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## Boggo (2 June 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



Habakkuk said:


> . There is no intelligence involved. Real 1990s software. The patterns are randomly generated permutations of *OHLC over the 6 bars* (*it can be fewer or up to 9 bars in the gold version*).
> 
> _*Any opinions?*_ Please.




I've got a few but I apart from one I shall refrain.

When a procedure operates on six bars, but nine in the gold version we are highlighting why over complicated crap gives TA a bad name.


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## Habakkuk (2 June 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

tech, people think you're taking it personally because you become defensive. That's my impression.

But I don't want to dwell on that. As I said my post above was just an excuse to get some opinions about this Price Action software. It would seem that I have been too optimistic in that regard. Thanks, Boggo for your view.

I'm not sure if your whole reply is even meant for me. It doesn't look like it. I had never heard of TSI before sinner's post and know nothing about it. I certainly didn't refer to it.
And I don't know what statement this is about:



tech/a said:


> You've got this massive statement supported by one piece of evidence---and that's pretty rudimentary.





One of my statements could probably be called sweeping (not sure about massive) but I didn't offer any evidence. I can only conclude that you are still responding to the OP, sinner, who is responsible for the provocative thread title.

Please let me know, tech, if you seriously want to know about research into the effectiveness of TA indicators and patterns. 
I've read heaps of that stuff over the years but it would take me some time to dig it up.
It needs to be pointed out that this does not generally include discretionary analysis because that's not quantifiable. Therefore "support" and "resistance", being somewhat subjective notions, are not considered. Neither is anything along the lines of Gann or Elliott Waves. But Fibonacci numbers are researched and shown to have no predictive value. Likewise common patterns like head and shoulders, triangles, flags etc. From memory, double tops/bottoms show a slight edge.

I hope that you are not really serious about this anyway, not just because it will save me some work, but if you were serious, you could relatively easily find those studies yourself. They almost always contain references to further studies along similar lines.

And finally, as you would be aware, it's "impossible" to prove a negative. Some people might want proof that TA *does* work. I don't. Although not wanting the last word, I hope we can leave it at that.


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## howardbandy (3 June 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

Greetings --

At the risk of stepping into a street fight, I hope these comments are helpful ---

We are using technical analysis (as well as other techniques), as tools that provide buy and sell signals for stocks, futures, currency, funds, etc.  The metric for whether technical analysis works or does not is whether the trades obtained using those tools are profitable beyond the in-sample development period.

One of the aspects of technical analysis that has changed significantly between the beginning (which I will put in the 1980s) of technical analysis and the present is the length of time that data series and associated derivatives and indicators are stationary.  Stationarity is a requirement for all forecasting.  In order for rules based on previous data to be useful in estimating / predicting the future, data used to determine those rules must have the same distribution for the entire period -- in-sample / backtesting / learning through out-of-sample / validation / trading.

If it appears that a particular trading system has lost its edge, it may be that the period of stationarity has changed.

I posted a YouTube video of a presentation entitled "The Importance of Being Stationary" that I made to the Seattle, Washington, Market Technician's Association meeting a few months ago.  Here is a link to it:
https://www.youtube.com/watch?v=iBhrZKErJ6A

Best regards,
Howard


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## grah33 (21 June 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

you lot still look for triangle patterns, and double tops/bottoms etc. , and other patterns, right??


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## tech/a (21 June 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



grah33 said:


> you lot still look for triangle patterns, and double tops/bottoms etc. , and other patterns, right??




Read The above from Howard

Then spend a few hrs here

http://thepatternsite.com/index.html

Then If you think you can do it without doing what Howard says
Go here and do 20 of these.

http://www.chartgame.com/


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## KnowThePast (22 June 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



tech/a said:


> Read The above from Howard
> 
> Then spend a few hrs here
> 
> ...




Interesting, just did 10 of those and beat by and hold in 9 of them.

This is without any knowledge of charting whatsoever.


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## tech/a (23 June 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



KnowThePast said:


> Interesting, just did 10 of those and beat by and hold in 9 of them.
> 
> This is without any knowledge of charting whatsoever.




Now do it as if you could only go long.
That cuts out short and CFD's
How most trade stock

Maybe a change of analysis styles KTP?


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## KnowThePast (24 June 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



tech/a said:


> Now do it as if you could only go long.
> That cuts out short and CFD's
> How most trade stock
> 
> Maybe a change of analysis styles KTP?




Nah, once I add in experience and knowledge, I will shoot myself in the foot.


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## mazzatelli (4 July 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

What about using traditional tech/a in non traditional approaches?

Like creating your own custom index that tries to track beta using say k-means clustering and then taking the moving average of your index vs. MA of market you're tracking e.g. S&P500. Rather than just throwing MA on a security and "read" its price action.


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## Modest (4 July 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



tech/a said:


> Read The above from Howard
> 
> Then spend a few hrs here
> 
> ...




Awesome game thank you for sharing!


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## craft (4 July 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

Has anybody read this book?





Here’s an Active Trader interview to give you some insight about the book and author.

http://invivoanalytics.com/wp-content/uploads/2008/03/ARONSON_200702.pdf


The second pdf on the website about Monte Carlo Evaluation is very good IMO and should be minimum understanding for people relying on back testing to support their TA assumptions. 

http://www.evidencebasedta.com/


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## tech/a (4 July 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



craft said:


> Has anybody read this book?
> View attachment 63274
> 
> Here’s an Active Trader interview to give you some insight about the book and author.
> ...




Yes both Kris and I
Kris has I'm in the middle of it.


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## Habakkuk (4 July 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



craft said:


> Has anybody read this book?




I've read it, all 450 pages of it. Not for people with a short attention-span.
Also best avoided by true believers in TA.


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## satanoperca (4 July 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

Does T/A work? Yes
Is anyone going to share their profitable strategy? No. Why would they? Most spend year studying, praticing and refining their skills. Cannot go to the doctors or accountants without paying. With the exception on Tech/A and Nick Radge who offer their experiences and knowledge in most cases free. I am one who has benefited from their insights and are appreciative that they continue answering newbies questions.

T/A requires both left and right brain analysis, which few people posses.

Cheers - still on the side lines waiting to get back in the markets - short side player only


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## howardbandy (5 July 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

Hi Satanoperca --

There are several profitable trading systems fully disclosed in my books and presentations as examples of the results possible through use of high quality modeling and simulation techniques.  Some are in the free chapters.  You will need to read the book for others.  

Begin here and read the free chapters:
http://www.meanreversiontradingsystems.com/book.html

And these free chapters:
http://www.quantitativetechnicalanalysis.com/book.html

Here, for some background:
https://www.youtube.com/watch?v=iBhrZKErJ6A

Or here, for more information:
http://www.blueowlpress.com/WordPress/

Recordings of my presentations at two of the ATAA Annual Conferences are among the videos.

Also search Aussie Stock Forums for my postings.

Best regards,
Howard


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## howardbandy (5 July 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



satanoperca said:


> Does T/A work? Yes
> 
> Cheers - still on the side lines waiting to get back in the markets - short side player only




Greetings --

For tradables that have price series that are not symmetric in terms of upward price changes and downward price changes, it is more difficult to develop and trade short / flat than long / flat.  

Drops in price are of shorter time duration and steeper slope, and tops are less well defined than bottoms.  With equities, there is an upward bias in price due to productivity, inflation, population, resource extraction, government activities, etc.  In some circles, being short is considered to be unpatriotic.  All together, it is easier to be profitable trading long / flat than short / flat.

Short / flat traders do have one significant advantage -- being short is less risky than being long.

Best regards,
Howard


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## tech/a (12 July 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



craft said:


> Has anybody read this book?
> 
> View attachment 63274
> 
> ...





Craft
Have you read it?
What is your feedback?

This is----in my opinion applicable to all forms
Of analysis.


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## craft (12 July 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



tech/a said:


> Craft
> Have you read it?
> What is your feedback?
> 
> ...




No I haven’t read it yet. I was hoping to get some reviews. (Care to oblige?)

The pdf on the website I referred to makes me think it would be ‘technically’ robust discussion contained in the book. (As in good statistical methods)  I’ve read plenty of robust papers from academics but this one is from a seeming active participant in the market which makes it more unique.

I agree the principle of blasting subjectivity with a good dose of objective evidence is applicable to all forms of analysis. That’s what piques my interest from any field, the possibilities of application to my own approach.


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## tech/a (13 July 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

*Craft.*

You will love this book.

I've traded technically for 21 yrs.
Have worked with Kris for 7 mths.
This book articulates my own suspicions since 2008

For any serious analyst (Technical or fundamental) its brutal.

*It is* the future and we are fortunate enough to be in an era where we have the tools and the knowledge---which may need to be acquired---to step into the light.

Not for the lazy investor or the punter.

I've often said 

*"You need to know what you need to know''*

Fits right here.


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## Wysiwyg (13 July 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

EBT/FA -- uptrending, in-favour, great hype and potential stocks in a bull market have an edge.


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## tech/a (13 July 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



Wysiwyg said:


> EBT/FA -- uptrending, in-favour, great hype and potential stocks in a bull market have an edge.




Care to translate


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## Wysiwyg (14 July 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



tech/a said:


> Care to translate



E - evidence
B - based
T - technical
F - fundamental
A - analysis


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## tech/a (14 July 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



Wysiwyg said:


> E - evidence
> B - based
> T - technical
> F - fundamental
> A - analysis




The rest of it.
Much more to the book than what you can
Read on the links posted.
500 pages.

But agree with the addition of F/A.
Pretty well all we work with is NOT evidence based.
And would stack up to rigorous scrutiny.
In fact most people don't know what to
Use to produce "Evidence"


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## howardbandy (14 July 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

Hi Tech/a and all --

David Aronson is a friend of mine.  Please do buy, read, and study his book.

About evidence based analysis -- my "Quantitative Technical Analysis" book discusses evidence based (Bayesian) trading management.  Much of my work, writings, books, and presentations, is evidence-based.  You can read some of the free chapters here:
http://www.quantitativetechnicalanalysis.com/book.html

Also, watch the presentation of the very evidence-based discussion of stationarity, free on YouTube:
https://www.youtube.com/watch?v=iBhrZKErJ6A 

I will be presenting "Four Faces of Risk" via webinar to an IFTA audience on Wednesday (US time) July 15, to be followed by posting on YouTube in a week or so.  Again, very evidence-based.


Best regards,
Howard


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## Trembling Hand (14 July 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



craft said:


> The second pdf on the website about Monte Carlo Evaluation is very good IMO and should be minimum understanding for people relying on back testing to support their TA assumptions.
> 
> http://www.evidencebasedta.com/





I like these two from the above,



> you cannot use evidence to prove a hypothesis true.






> People who believe in subjective technical analysis don’t realize it’s an empty claim. Once you entertain the possibility that an untestable claim might be true, it’s very easy to find seeming confirmation.


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## banco (14 July 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

The Edward and Magee stuff was always basically about breakouts from consolidation.  I think one reason it doesn't work as well as it did is because anyone with an internet connection can see where the top and bottom of the consolidation is when in the 70's etc. you actually had to go to some effort. 

Peter Brandt who has traded classical chart patterns since the 80's has noted that the shorter term (for him shorter term is weeks I think) chart patterns have a lot more false breakouts then they used to.


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## tech/a (15 July 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



banco said:


> The Edward and Magee stuff was always basically about breakouts from consolidation.  I think one reason it doesn't work as well as it did is because anyone with an internet connection can see where the top and bottom of the consolidation is when in the 70's etc. you actually had to go to some effort.
> 
> Peter Brandt who has traded classical chart patterns since the 80's has noted that the shorter term (for him shorter term is weeks I think) chart patterns have a lot more false breakouts then they used to.




The big question which needs to be answered.

Where is viable evidence that chart patterns ever deliver/ed a consistent edge and profit.
Perhaps with an exception of Bulkowski
Who in my view pulls up short as we don't know how he derived his results and what methods he used---how it would be applied in a meaningful and profitable long or short term trading method!!.

I've spent a long time looking --- I can't find any " Evidence " lots of theory and examples but no evidence.

There is " some " (evidence) related to application of Technical Analysis.----not specifics.
Very poor and un convincing in my view.


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## Bayronus (24 July 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*

Tech, thanks for bringing EBTA to our attention. I'm about half way through and it has been a very insightful read so far. I'm looking forward to being able to apply the scientific method to my own trading. Is anyone else reading or have read this book? I'd be interested in seeing and participating in some discussion related to applying its ideas. After all some of the biases the book talks about my not be apparent to us straight away.

Thanks again Tech!


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## Wysiwyg (24 July 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



tech/a said:


> I've spent a long time looking --- I can't find any " Evidence " lots of theory and examples but no evidence.
> 
> There is " some " (evidence) related to application of Technical Analysis.----not specifics.
> Very poor and un convincing in my view.



The truth is, if there ever became a certainty to any T/A then that certainty would be quickly exploited and that exploitation would remove the certainty. You see no one reveals their trading success (except you ) for this reason. Another truth is T/A does not have any certainty. Look at the trading momentum thread on ASF and the brokerage, time and mediocrity that strategy has returned. The winners in this game know how to trick the ride or see the ride is being tricked and then profit from it.


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## tech/a (24 July 2015)

*Re: On why traditional tech analysis stopped working and on when it shall start again*



Wysiwyg said:


> The truth is, if there ever became a certainty to any T/A then that certainty would be quickly exploited and that exploitation would remove the certainty. You see no one reveals their trading success (except you ) for this reason. Another truth is T/A does not have any certainty. Look at the trading momentum thread on ASF and the brokerage, time and mediocrity that strategy has returned. The winners in this game know how to trick the ride or see the ride is being tricked and then profit from it.




Nice theory Wysi

I don't subscribe to the "They know secrets normal individuals don't '
school of thought. That is simply experience.

I'm certain you can track and profit from market emotion seen in range and volume.
I do it often.

The reason few reveal their trading is
They don't have a plan
OR
If they do don't have enough confidence in it to demonstrate it.


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