cool - thanks man. i find TA very interesting . . .
cfa_gremlin Wrote: ------------------------------------------------------- > GOTTA GO THE DEBATE IS STARTING…CAN’T WAIT > WHAT THESE FIGUREHEADS HAVE TO SAY more like knuckleheads… good post though, thanks. how do people feel about just reading the CMT books and not actually completing the designation? i will probably do that at some point and save myself the money.
^bromion, your method vs. taking the exams seems to be centered on motivation. Effectively, I am paying for the focus and urgency that the exams give me to get a jumpstart into the field…others may not need this and that’s totally fine. In the end, I plan to read and study many more books, magazines, etc. on technical analysis than any two or three year designation would require.
Exam will not help you much. You only need to know a few things about TA, it is really just a visual tool to help you see where market is. The only things matter is experience, more experience. Watch the market every day. It is also important to develop something different from crowd over time. That is what makes you better.
In my mind, any time you get into the technical analysis with responses like Joey’s that essentially say…well i know a guy who got rich using TA, it has a huge following, etc there are two main responses. Firstly, a following does not validate a practice, look at televangelists if you need an example. Secondly, regarding the fact that some TA practictioners are successful, I think this falls under the EMH coinflip scenario of basically saying if you have 20,000 individuals continuously flipping quarters, at some point the outliers of the normal distribution will develop.
Black Swan, Your line of argument also applies to fundamental analysis. For example: Firstly, someone who got rich off of fundamental analysis has a large following (Buffett for example)…doesn’t necessarily validate that fundamental analysis either. Secondly, if you have millions of people doing fundamental analysis, you are going to get a few like Buffett as well. (not implying that Buffett got there by luck) ------------------------------------ Your specific arguments neither invalidate technical analysis nor do they validate fundamental analysis. (I am not attacking you and apologize if it sounds like it, I definitely don’t mean it.) I am not saying that fundamental analysis or technical analysis does or does not work. Furthermore, the above statements are separate from my “own personal” belief in their respective validity. Specifically, my personal belief is that they both have their strengths, weaknesses, degree and domain of effectiveness/ineffectiveness. I use “domain” to mean: granularity of timescales examined (1 s, 1 min, 1 hr, 1 day, 1 week, 1 year, 1 decade, 1 century, and any intermediate timescale), different markets, different volumes, different financial instruments, different degrees of market efficiency…all as a function of time, technology, state of economy, etc.). I don’t think that it is correct to say that either view (FA or TA) does or doesn’t work. That’s trying to distill something enormously complex into a binary truth value, something I don’t believe can be done. So we have to specify under what circumstances, measures, etc., combined with what it means for a theory to be correct or incorrect.
Black Swan Wrote: ------------------------------------------------------- > In my mind, any time you get into the technical > analysis with responses like Joey’s that > essentially say…well i know a guy who got rich > using TA, it has a huge following, etc there are > two main responses. Firstly, a following does not > validate a practice, look at televangelists if you > need an example. Secondly, regarding the fact > that some TA practictioners are successful, I > think this falls under the EMH coinflip scenario > of basically saying if you have 20,000 individuals > continuously flipping quarters, at some point the > outliers of the normal distribution will develop. Poof - it’s simple to make money with technical analysis. I can teach you to do it and you will absolutely make money doing it. This is no coin flip thing.
I have also worked with people who made a fortune using technical analysis (the majority of them used Market Profile as their technical tool). I am of the belief that technical analysis works best in the short term (daily, weekly) and fundamental analysis is better for long-term trading.
And I like it better for the long-term (or more likely the big moves which happen meaningfully only in the long-term).
TA works because it is self fulfilling – enough people are looking at the same charts to act on the same breach of support and resistance.
JoeyDVivre Wrote: ------------------------------------------------------- > Black Swan Wrote: > -------------------------------------------------- > ----- > > In my mind, any time you get into the technical > > analysis with responses like Joey’s that > > essentially say…well i know a guy who got > rich > > using TA, it has a huge following, etc there > are > > two main responses. Firstly, a following does > not > > validate a practice, look at televangelists if > you > > need an example. Secondly, regarding the fact > > that some TA practictioners are successful, I > > think this falls under the EMH coinflip > scenario > > of basically saying if you have 20,000 > individuals > > continuously flipping quarters, at some point > the > > outliers of the normal distribution will > develop. > > > Poof - it’s simple to make money with technical > analysis. I can teach you to do it and you will > absolutely make money doing it. This is no coin > flip thing. You can guarantee positive alpha? Beyond that, I wasn’t validating fundamental analysis either. I like fundamental analysis because it makes sense, but at the end of the day I’m a strong believer in EMH. The main role I see in fundamentals is simply in keeping markets efficient, providing a sort of defensive due diligence process to ensure investors are working on accurate information and trying to avoid getting caught up in fraudulent instances like the all classic Enron. This is just my personal belief, and like religion, there’s no way to conclusively prove a right or wrong answer on this one so I don’t mean to make anyone angry. Personally, I believe in very efficient markets at the security level with more inefficiency existing periodically at the macro level when fluctuations develop that stray from fundamentals such as market bubbles.
JoeyDVivre Wrote: ------------------------------------------------------- > Black Swan Wrote: > -------------------------------------------------- > ----- > > In my mind, any time you get into the technical > > analysis with responses like Joey’s that > > essentially say…well i know a guy who got > rich > > using TA, it has a huge following, etc there > are > > two main responses. Firstly, a following does > not > > validate a practice, look at televangelists if > you > > need an example. Secondly, regarding the fact > > that some TA practictioners are successful, I > > think this falls under the EMH coinflip > scenario > > of basically saying if you have 20,000 > individuals > > continuously flipping quarters, at some point > the > > outliers of the normal distribution will > develop. > > > Poof - it’s simple to make money with technical > analysis. I can teach you to do it and you will > absolutely make money doing it. This is no coin > flip thing. You can guarantee positive alpha? Beyond that, I wasn’t validating fundamental analysis either. I like fundamental analysis because it makes sense, but at the end of the day I’m a strong believer in EMH. The main role I see in fundamentals is simply in keeping markets efficient, providing a sort of defensive due diligence process to ensure investors are working on accurate information and trying to avoid getting caught up in fraudulent instances like the all classic Enron. This is just my personal belief, and like religion, there’s no way to conclusively prove a right or wrong answer on this one so I don’t mean to make anyone angry. Personally, I believe in very efficient markets at the security level with more inefficiency existing periodically at the macro level when fluctuations develop that stray from fundamentals such as market bubbles.
Black Swan Wrote: ------------------------------------------------------- > JoeyDVivre Wrote: > -------------------------------------------------- > ----- > > Black Swan Wrote: > > > -------------------------------------------------- > > > ----- > > > In my mind, any time you get into the > technical > > > analysis with responses like Joey’s that > > > essentially say…well i know a guy who got > > rich > > > using TA, it has a huge following, etc there > > are > > > two main responses. Firstly, a following > does > > not > > > validate a practice, look at televangelists > if > > you > > > need an example. Secondly, regarding the > fact > > > that some TA practictioners are successful, I > > > think this falls under the EMH coinflip > > scenario > > > of basically saying if you have 20,000 > > individuals > > > continuously flipping quarters, at some point > > the > > > outliers of the normal distribution will > > develop. > > > > > > Poof - it’s simple to make money with technical > > analysis. I can teach you to do it and you > will > > absolutely make money doing it. This is no > coin > > flip thing. > > You can guarantee positive alpha? > Only if I wanted to get in trouble with CFAI. But I almost can if you wait long enough (say, 2 years). How about something like I am as confident of positive alpha over any two year stretch of time as I am that I will be able to ski in Greenwich sometime during that period (I ski around my neighborhood every year even if it’s skiing on sleet at 1AM). > Beyond that, I wasn’t validating fundamental > analysis either. I like fundamental analysis > because it makes sense, but at the end of the day > I’m a strong believer in EMH. The main role I see > in fundamentals is simply in keeping markets > efficient, providing a sort of defensive due > diligence process to ensure investors are working > on accurate information and trying to avoid > getting caught up in fraudulent instances like the > all classic Enron. This is just my personal > belief, and like religion, there’s no way to > conclusively prove a right or wrong answer on this > one so I don’t mean to make anyone angry. > Personally, I believe in very efficient markets at > the security level with more inefficiency existing > periodically at the macro level when fluctuations > develop that stray from fundamentals such as > market bubbles. How about across asset classes? Is there any notion of market efficiency that says you can’t construct correlation options or that largely untraded correlation is efficiently priced?
When I think of technical analysis, it reminds me of the Simile of the cave, naming shadows on the wall. Than again, it’s not like fundamentals have worked in today’s market either…
You mean Plato’s allegory? It’s just a condescending remark that is baseless. Do you know anything about it or are you just sure it’s naming shadows? Is it hard to believe that there are patterns in interactions among assets?
a trader friend of mine sent me this Q&A w/ paul tudor jones… i think its the best summary of the value of techs vs. fundamentals. "Page 1 of 3 Back to Hall of Fame main page | Louis Bacon | Alfred Winslow Jones What’s so special about macro hedge fund managers? I love trading macro. If trading is like chess, then macro is like three-dimensional chess. It is just hard to find a great macro trader. When trading macro, you never have a complete information set or information edge the way analysts can have when trading individual securities. It’s a hell of a lot easier to get an information edge on one stock than it is on the S&P 500. When it comes to trading macro, you cannot rely solely on fundamentals; you have to be a tape reader, which is something of a lost art form. The inability to read a tape and spot trends is also why so many in the relative-value space who rely solely on fundamentals have been annihilated in the past decade. Markets have consistently experienced “100-year events” every five years. While I spend a significant amount of my time on analytics and collecting fundamental information, at the end of the day, I am a slave to the tape and proud of it. Is it possible to teach someone to be a tape reader — what some might call a trend follower or technical analyst? Certain people have a greater proclivity for it because they don’t have the need to feel intellectually superior to the crowd. It’s a personality thing. But a lot of it is environmental. Many of the successful macro guys today, they’re all kind of in my age range. They came from that period of crazy volatility of the late ’70s and early ’80s, when the amount of fundamental information available on assets was so limited and the volatility so extreme that one had to be a technician. It’s very hard to find a pure fundamentalist who’s also a very successful macro trader because it is so hard to have a hit rate north of 50 percent. The exceptions are in trading the very front end of interest rate curves or in specializing in just a few commodities or assets. What’s your take on the next generation of managers? I see the younger generation hampered by the need to understand and rationalize why something should go up or down. Usually, by the time that becomes self-evident, the move is already over. When I got into the business, there was so little information on fundamentals, and what little information one could get was largely imperfect. We learned just to go with the chart. Why work when Mr. Market can do it for you? These days, there are many more deep intellectuals in the business, and that, coupled with the explosion of information on the Internet, creates the illusion that there is an explanation for everything and that the primary task is simply to find that explanation. As a result, technical analysis is at the bottom of the study list for many of the younger generation, particularly since the skill often requires them to close their eyes and trust the price action. The pain of gain is just too overwhelming for all of us to bear! " ive worked in both sell-side and buy-side equity research, and if there’s one thing i regret it’s not paying more to technicals and price action early on in my career. the price action tells you so much about market positioning and sentiment-- fundamental only traders/investors are missing a big part of the story.
And I’ve done lots of TA with Tudor’s money…
Thanks for posting that stylemog. Remember, there is a huge difference between traders and analysts. They both serve two completely different functions and they are both valuable. Oftentimes, traders make horrible analysts and analysts make horrible traders.
stylemog, thanks for the article post! This thread has convinced me to be more serious in learning TAm, as much as FA as I finish up the rest of the CFA exams. I especially liked the following quotes: >“The inability to read a tape and spot trends is also why so many in the relative-value space > who rely solely on fundamentals have been annihilated in the past decade.” > “While I spend a significant amount of my time on analytics and collecting fundamental > information, at the end of the day, I am a slave to the tape and proud of it.” >“These days, there are many more deep intellectuals in the business, and that, coupled with the >explosion of information on the Internet, creates the illusion that there is an explanation for >everything and that the primary task is simply to find that explanation. As a result, technical >analysis is at the bottom of the study list for many of the younger generation,”
hobbes928 Wrote: ------------------------------------------------------- > When I think of technical analysis, it reminds me > of the Simile of the cave, naming shadows on the > wall. When I think of technical and fundamental analysis, I think of stacks of money so high that they cast shadows on my wall and those shadows moving when the stacks fall over from getting to be too high. That’s the useful simile for me.