TA for prediction

[It's Snake Pliskin]

Is TA a viable tool for predicting future prices?
If so, why?
If not, why not?
What alternatives are there and are they any better?
(forget tainting the thread with money management and regurgitated lines borrowed from books)
I am interested in what people think or believe.

 

[nizar]

Is TA a viable tool for predicting future prices?
If so, why?
If not, why not?
What alternatives are there and are they any better?
(forget tainting the thread with money management and regurgitated lines borrowed from books)
I am interested in what people think or believe.

Hi Snake,

What does TA or technical analysis actually mean?
Is it the study of:

*Price action?
*Volume?
*Indicators?

All of the above?

We should define this before we move further.

 

[It's Snake Pliskin]

Hi Snake,

What does TA or technical analysis actually mean?
Is it the study of:

*Price action?
*Volume?
*Indicators?

All of the above?

We should define this before we move further.

Nizar,

Nice to have you comment.
TA might mean different things for different people. I believe it is the analysis of visual action of price historically displayed in hindsight on computer or paper. It can and often does involve the above or can involve other tools that posters may want to talk about. It may be a bit simple to simplify it to the small list you gave.(expand on indicators, uses, studies etc) Why not include all of the available visual stuff in the meaning?

 

[wayneL]

Nizar,

Nice to have you comment.
TA might mean different things for different people. I believe it is the analysis of visual action of price historically displayed in hindsight on computer or paper. It can and often does involve the above or can involve other tools that posters may want to talk about. It may be a bit simple to simplify it to the small list you gave.(expand on indicators, uses, studies etc) Why not include all of the available visual stuff in the meaning?

Yeah it's a very broad church.

There are three broad churches as far as I know

1/ fundamental - the study of value via company reports
2/ quantitative - the development of mathematic models
3/ technical - study of price movement, volume and interpretation of such.

IMO there can be a blurry line between quantitative and technical, but basically, if there's a chart involved, it's technical.

My 2c. I'll leave the question of prediction to others.

 

[It's Snake Pliskin]

Yeah it's a very broad church.

There are three broad churches as far as I know

1/ fundamental - the study of value via company reports
2/ quantitative - the development of mathematic models
3/ technical - study of price movement, volume and interpretation of such.

IMO there can be a blurry line between quantitative and technical, but basically, if there's a chart involved, it's technical.

My 2c. I'll leave the question of prediction to others.

Wayne,

Your comments bring some perspective to the discussion. That blurry line is there indeed.

 

[theasxgorilla]

Is TA a viable tool for predicting future prices?

Techniques don't predict the future, people try to and no-one can...it's just not possible...my unshakable belief. I think there are people who make bets, get it right and say, "see, I told you I knew what would happen!". Some people are better guessers than others. Betting with probabilities is not prediciting the future.

What alternatives are there and are they any better?

I actually don't believe there is anything better for trading the stock market for retail level investors than technical analysis. Fundamental analysis is too time consuming and you're too distanced from where the real wheeling and dealing happens to stand a chance at getting it right. I don't care for a discussion about why I'm wrong...I believe it and am not currently at a place in time where I'm willing to accept counter arguements, sorry.

The only superior alternative to technical analysis IMO is macro economic analysis...in other words, the big picture. The stuff that Richard Farleigh made his fortune doing. But even he describes using what I interpret to have been a rudimentary form of trend analysis to make sure that he was getting with the herd. The big picture analysis helps you identify imbalances and build theories about what trends could occur and trend analysis tells what trends are occuring.

 

[ducati916]

Is TA a viable tool for predicting future prices?
No




If so, why?
If not, why not?
Technical analysis is a deterministic construct that incorrectly assigns higher probabilities than 1/3

As the future is unknown, information that will move price is by definition unknown, allowing a positive/negative outcome to move prices, or a 1/2 probability to make money [no movement is a loss due to transaction costs and the time value of money] Then, 2/3 you lose money, 1/3 you make money. Or as far as prediction goes, no change would be a null outcome.



What alternatives are there and are they any better?
*Fundamentals
*Quantitative
*Arbitrage
*Market making [Bid/Ask spread

Not necessarily better, different.




(forget tainting the thread with money management and regurgitated lines borrowed from books)
I am interested in what people think or believe.

The method must suit the individual, no point mis-matching the individual with a strategy they cannot understand, or feel stressed by.

jog on
d998

 

[Frank D]

Some people have the skill to chart-read by forward-thinking of likely events happening because those same patterns have occurred in the past. This is the theory of all forward looking methodologies. Some people like to call it predictions. But they are simply modeling patterns of likely events that might or might not take place.

These type of traders will use this skill, but will only trade when the alignments occur and subject themselves to trade when it conforms with the view. Elliot-wave is an example of forward-looking methods. So is mine. Whether the trade works or not, they simple move on to the next.

There are others like ASX gorilla who can’t, or don’t want to forward-think in probabilities using modeling patterns. They believe it can’t be done and believe that no one else can. They don’t understand it so they dismiss it. These traders rely on systems and price-based indicators to trade, and don’t give a rats-**** about trying to predict the market. When the trade comes along they take it regardless of any view, prediction or perception others make. Whether the trade works or not, they simply move on the next.

Both methods are the same: - Whether the trade works or not, they simply move to the next.

Regardless of whether you can or can’t, it makes no difference whether you use forward-looking models or not. The only thing that matters is making money by subjecting yourself to the markets, whichever method you use.

But in reality, every ‘systematic’ trade placed is literally ‘predicting’ the market, because of the belief that the past will repeat into the future. If not you wouldn’t place the trade.

I don’t think there are to many dart throwers amongst us.

BTW…fundamentals and fundamental analysis is the only thing that will make you wealthy in the market.

Technical analysis is at its best; only good for lifestyle choices and achieving an income. Sadly most traders using technical analysis would be lucky to be making more money than if they were working for someone else.

Just my view

Frank Dilernia

 

[>Apocalypto<]

Some people have the skill to chart-read by forward-thinking of likely events happening because those same patterns have occurred in the past. This is the theory of all forward looking methodologies. Some people like to call it predictions. But they are simply modeling patterns of likely events that might or might not take place.

These type of traders will use this skill, but will only trade when the alignments occur and subject themselves to trade when it conforms with the view. Elliot-wave is an example of forward-looking methods. So is mine. Whether the trade works or not, they simple move on to the next.

There are others like ASX gorilla who can’t, or don’t want to forward-think in probabilities using modeling patterns. They believe it can’t be done and believe that no one else can. They don’t understand it so they dismiss it. These traders rely on systems and price-based indicators to trade, and don’t give a rats-**** about trying to predict the market. When the trade comes along they take it regardless of any view, prediction or perception others make. Whether the trade works or not, they simply move on the next.

Both methods are the same: - Whether the trade works or not, they simply move to the next.

Regardless of whether you can or can’t, it makes no difference whether you use forward-looking models or not. The only thing that matters is making money by subjecting yourself to the markets, whichever method you use.

But in reality, every ‘systematic’ trade placed is literally ‘predicting’ the market, because of the belief that the past will repeat into the future. If not you wouldn’t place the trade.

I don’t think there are to many dart throwers amongst us.

BTW…fundamentals and fundamental analysis is the only thing that will make you wealthy in the market.

Technical analysis is at its best; only good for lifestyle choices and achieving an income. Sadly most traders using technical analysis would be lucky to be making more money than if they were working for someone else.

Just my view

Frank Dilernia

That is a excellent post!

You make some fantastic points in there Frank. You also hit some painful truths!

Great you made a comment here, I would also like to see Wavepicker and Magdoran make a comment here as they both use TA for prediction and do a damn good job at it, like yourself.

I believe you can use TA to predict, I am far from getting to that level of skill but I am working on it. Time fames is what I am still trying to get my head around weather u chase the smaller times or look at trading the actual market on a weekly to monthly time frame catching the real trend not minor jumps and dips.

Like Frank pointed out you also need to be aware of fundamentals.

Try factor them into the price yourself to try to gage the possible affect on the market. that can be a set up for disaster if not done correctly.

What I do know is getting some where in this business takes time and hard work.

my

 

[disarray]

TA is viable otherwise why would people get so excited about repeating patterns (head & shoulders, triangles etc.) ?

the market is a chaotic system and chaotic systems throw up patterns all the time - chaos is the mother of order. recognising and trading these patterns is purely TA and even if you can't predict exact prices you can predict trends, ally that with FA and you can predict the most probable strength of the trend.

anyway lines on charts look cool

 

[tech/a]

Motorway put it best I think.

Technically we Anticipate rather than predict.
I like this.

 

[explod]

Techniques don't predict the future, people try to and no-one can...it's just not possible...my unshakable belief. I think there are people who make bets, get it right and say, "see, I told you I knew what would happen!". Some people are better guessers than others. Betting with probabilities is not prediciting the future.



I actually don't believe there is anything better for trading the stock market for retail level investors than technical analysis. Fundamental analysis is too time consuming and you're too distanced from where the real wheeling and dealing happens to stand a chance at getting it right. I don't care for a discussion about why I'm wrong...I believe it and am not currently at a place in time where I'm willing to accept counter arguements, sorry.

The only superior alternative to technical analysis IMO is macro economic analysis...in other words, the big picture. The stuff that Richard Farleigh made his fortune doing. But even he describes using what I interpret to have been a rudimentary form of trend analysis to make sure that he was getting with the herd. The big picture analysis helps you identify imbalances and build theories about what trends could occur and trend analysis tells what trends are occuring.

This is close for me but I dont' think the macro economic is required. I like a trading Average as an indicator of overal sentiment but I like a basic fundamental big picture. Oil Serach, in focus at the moment, is a case in point, looking at a five year weekly chart an MA gives a good idea of when to get in an out. I am comforted to know that they have a great resource, oil coming out and gas reserves to be tapped and the world cant' get enough of the stuff. This wide view works well for me and dont' consider this punting but investing.

 

[nizar]

Motorway put it best I think.

Technically we Anticipate rather than predict.
I like this.

Yeh he has responded to this same question elsewhere on another thread.
He said: Recognise and Anticipate, not predict.

 

[rub92me]

Is TA a viable tool for predicting future prices?
If so, why?
If not, why not?
What alternatives are there and are they any better?
(forget tainting the thread with money management and regurgitated lines borrowed from books)
I am interested in what people think or believe.

You can not predict the future no matter what tools you use. If it could be done it would have been done by now. Spending a lot of time trying to 'perfect' your predictive tools is therefore time wasted imho. Makes for entertaining reading though..

 

[>Apocalypto<]

You can not predict the future no matter what tools you use. If it could be done it would have been done by now. Spending a lot of time trying to 'perfect' your predictive tools is therefore time wasted imho. Makes for entertaining reading though..

So W.D Gann was a lier and he wasted his whole life learning to predict markets accurately.

 

[DTM]

Some people have the skill to chart-read by forward-thinking of likely events happening because those same patterns have occurred in the past. This is the theory of all forward looking methodologies. Some people like to call it predictions. But they are simply modeling patterns of likely events that might or might not take place.

I totally agree with this as I base my judgements on business cycles and recurring patterns based on those cycles. For shorter time frame traders/investors, T/A is very important because of how they look at the market and how it gives them a fair indication of when and where to invest or gamble. As you said, everyone's pretty much guessing based on past performance whether based on mathematical models or on price indicators.

At the end of the day in my opinion, there's no fool proof method of trading.

Investing long term based on fundamentals builds wealth but at a much slower pace.

But in reality, every ‘systematic’ trade placed is literally ‘predicting’ the market, because of the belief that the past will repeat into the future. If not you wouldn’t place the trade.

I don’t think there are to many dart throwers amongst us.

BTW…fundamentals and fundamental analysis is the only thing that will make you wealthy in the market.

Technical analysis is at its best; only good for lifestyle choices and achieving an income. Sadly most traders using technical analysis would be lucky to be making more money than if they were working for someone else.

Just my view

Frank Dilernia

Although I am a big fan of fundamental analysis and T/A, I do believe that they have an important but seperate roles in investing.

I don't believe that Fundamental analysis is the only way to sure riches.

I constantly do my own fundamental research and find it quite enjoyable and helps me understand the broader picture of the markets and how it responds to those develping reasons.

Where I have gone wrong in the past is letting that knowledge cloud my judgement when it came to trading. From my own experience, fundamentals moving the markets is more akin to a train wreck in slow motion. It takes a while to move.

Trading skills are a totally different kettle of fish and for my style, totally reliant on T/A. When I look at the longer term charts, I can see the fundamentals in play. In shorter term charts, you have every man and his dog jumping in and out and its everyone for themselves.

Even with Fundamentals, placing your investments at the wrong time can have serious draw down consequences. The money flows to where the markets thinks best returns will be achieved, not necessarily where the best business is located. More like a stampede to the next bubble. A good example would be the internet bubble. There was serious money to be made when the going was good. If you had good timing and smart money usually does, you would have left at the right time waiting for the market to crash to pick up bargains based on Fundamentals.

I believe that Fundamental Analysis is best served by using T/A as a timing tool. T/A is a good gauge of investor mood.

When the market crashes, T/A and Fundamentals go out the window.

Daniel

 

[DTM]

So W.D Gann was a lier and he wasted his whole life learning to predict markets accurately.

I think Gann had a great understanding of the markets and how prices move and I use some of his methods. I still don't quite fully understand what he was about but I'm sure there's a lot of people out there in the same boat.

Some people like him, some don't.

For me personally, I think he's alright.

 

[It's Snake Pliskin]

ASX Gorilla,

Techniques don't predict the future, people try to and no-one can...it's just not possible...my unshakable belief. I think there are people who make bets, get it right and say, "see, I told you I knew what would happen!". Some people are better guessers than others. Betting with probabilities is not prediciting the future.

You may have noticed I used the word "TOOL". (see red) Yes, which is why I started the thread on PREDICTION.

I actually don't believe there is anything better for trading the stock market for retail level investors than technical analysis. Fundamental analysis is too time consuming and you're too distanced from where the real wheeling and dealing happens to stand a chance at getting it right. I don't care for a discussion about why I'm wrong...I believe it and am not currently at a place in time where I'm willing to accept counter arguements, sorry.

Biased?

The only superior alternative to technical analysis IMO is macro economic analysis...in other words, the big picture. The stuff that Richard Farleigh made his fortune doing. But even he describes using what I interpret to have been a rudimentary form of trend analysis to make sure that he was getting with the herd. The big picture analysis helps you identify imbalances and build theories about what trends could occur and trend analysis tells what trends are occuring.

So your philosophy is disclosed. Thanks.

 

[It's Snake Pliskin]

You can not predict the future no matter what tools you use. If it could be done it would have been done by now. Spending a lot of time trying to 'perfect' your predictive tools is therefore time wasted imho. Makes for entertaining reading though..

Actually we can predict, but the achievement of the prediction is what we cannot GUARANTEE.

What predictive tools do you refer to?

 

[It's Snake Pliskin]

Motorway put it best I think.

Technically we Anticipate rather than predict.
I like this.

Prediction is prophecy, so anticipation is anticipation of what?