Topic: in defense of technical analysis - page 3. (Read 3743 times)

'disproving' TA involves providing an example of a prediction made by TA that turned out to be false. It happens all the time on this forum. I do not have the time to do it now, but it would be pretty easy to take a bunch of charts from the past, ask the TA people to predict what will happen next, then reveal the next week of the chart and check their answers.

Hey, lets get the facts straight. You are constantly spamming this forum with your threads advertising the so called "methods" of "technical" "analysis". This is annoying at least

Even the mere fact that you use the words "technical" and "analysis" for some kind of coffee cup reading is infuriating for anyone who has learned his way in the hard sciences and knows how technology works.

So this thread is your chance.



And here you start with your manipulation and propaganda right away.

Again, lets set things straight.
By this "disproving" approach, you are implying that TA is even anything of a method.

This is not the way it works. Rather, you are proposing some kind of method, which you like to label "technical" and "analysis"
Now you have to show that this method indeed exists, and provide a verifiable description of it.

This works by starting from a null hypothesis, and disproving this.

So the null hypothesis might be:

• TA is not an exact method, i.e. it does not consist of any clearly delineated description of operations, which can be conducted with precision and lead to a predictable and verifiable result.
• and especially: TA is not a method yielding any reliable predictions of market behaviour with a probability significantly above picking of random hypothesis

So to disprove this null hypothesis, we need to give (1) a precise description of some method or algorithm, which can be executed in a reliable, rational, and verifiable way. And (2) we need to execute that method under controlled and verifiable conditions and yield a significant score of prediction.

Unless we succeed with that, there is no such thing as "Technical" "Analysis". It simply doesn't exist.
And thus its use should not be advertised further.

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But maybe there is a third solution. Maybe there is something much more level-headed. Something along the lines of "a long time trader's rules of thumb". Something more of a craft, than being technology or analysis. Then we should be so prudent to ditch all that pseudo-math and pseudo-scientific furnish and handle it just as that: a bunch of rules of thumb and gut feeling. There is nothing wrong with that.

It is empiricism of the efficacy of the discipline as a whole, stop and think.
Empiricism is the experience gained through the trial and error to see what works and what doesn't.
Given the millions of people using TA, experts traders, none of them seem to have made it. Why?
You can use all the excuses you might want, but the conclusion is clearer than water: it is useless in the real world.

In other words, the lack of successful technical analysts making it to the Forbes list is empirical evidence of its uselessness, especially considering that charting existed since the 17th century.

"Since there exist time-dependent autocorrelations in price data, past performance sometimes correlates with future results."

This is a general observation, but it does not support any specific technical analysis results. The fact that autocorrelations exist does not allow you to write arbitrary laws about these correlations. Your laws need to be stated as theorems and backed by proofs. Otherwise all you are saying is "observation: heads sometimes follows tales", therefore any time heads follows tales we can invoke technical analysis in support of the observation.

The problem with technical analysis is that due to its fractal nature it is unclear what time scales to consider. Any analysis that works on one time scale can be completely contradicted on another time scale.

As much as I enjoy looking at charts, the bottom line is there is nothing to it. It's just alchemy.

-facepalm-

this is not empiricism.

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let's not get offtrack here, because i gave a very straightforward hypothesis in the OP which you did not even touch, but one point -- 'proneness to apophenia' doesn't correlate with invalidity. it just makes the analysis easier to screw up (read: bias). that's all i was trying to say.

also, it's not surprising that well-known methods of technical analysis do not work. this is actually a good point. this is probably due to the fact that markets are anti-inductive. the fact that markets are anti-inductive also works against the so-called "Lemming Effect" that many claim is responsible for any apparent success.

Lets talk about empiricism, lets talk about real world cases of people who became filthy rich by doing only Technical Analysis.
How many TA do you find among the Forbes richest people?
So, far I find... lets see... one, two... NONE!

Lets see those who followed the value investing methods proposed by Ben Graham and David Dodd... how about their direct disciple Warren Buffet? Then followed by Carlos Slim, Li Ka-shing, David Koch, Charles Koch.
Value investing was born as a direct response against the chart reading, which is as effective as any pseudo-scientific school.

Investing is investing if you invest. Swallow that truism.
Also, data without context is meaningless.

PS: Oh, btw, don't exclude "elliot waves" as more prone to apophenia, we are prone to anything and everyone as long as we have human brains.

hey all you TA nay-sayers out there! this is your chance. i'm opening a thread for discussion on this very important point so you guys can stop spamming mine and lucif's threads.

let's set some ground rules:

-try not to repeat points.
-TA is a hypothesis that needs to be discredited properly (rigorously), i.e. not in the manner that nanopene employed.
-'disproving' TA involves proving a negative, which is not possible. avoid the use of that word altogether and stick to the idea of evidence.

let me also open with a well-defined hypothesis:
"Since there exist time-dependent autocorrelations in price data, past performance sometimes correlates with future results."

evidence against TA would be evidence that time-dependent autocorrelations do not exist in price data.

for example, a random walk does not exhibit any autocorrelations.

some examples of things that do not count as evidence against technical analysis:

-the relationship between technical analysis and herd behavior
-individual examples of poor analysis (stop picking on lucif )
-the fact that certain kinds of analysis (e.g. elliot waves) are prone to apophenia.

another note: if you don't understand the central premise here -- autocorrelation in stochastic functions, read up some more before replying for everyone's sake.

-===-

and with that i'll leave you with something cool: daily all-time price data compared to the DETRENDED PRICE OSCILLATOR, just an hour or so before the crash.



do you see what i see?