Does Technical Analysis Really Work??

Dear Loknath,
Sharing my observations

- TA is a tool to pick LOW RISK trades

Av - Technical analysis just points out to the possibility of price action in the future...you have to look for evidence, cross verify, go to the past and future...AND THEN DECIDE whether the probability of occurance AND the CHANCE of FAILURE fits within your RISK - REWARD ratio. Using different forms of money management with different account sizes, what my be suitable risk reward to you, may not be suitable to me. There are nothing like UNIVERSAL low risk trades...then everybody would have taken that and the trade would immediately move away from its base making it a higher risk one.

- TA by itself is not a saviour

AV- It is just a study of crowd behavior through price actions, that shows important pointers to POSSIBLE future behavior

- Position sizing, Stop losses, Exit method are important to stay in the game than right entry

AV - WRONG, WRONG and WRONG. From experience, Entry is the most important thing. A good entry means the trade immediately moves into your favor. Thats half the battle won already. Then comes your other parts. The way you have emphasized is because lot of experts/authors emphasize like that as most traders do not think about those things. They are very important and saves your account from a faster probability of ruin, but they are not more important than entry. IF THEY WERE, systems would have generated trades randomly with just position sizing and money management and exits and in the long run, they would have won.

- Staying in the game will bring wealth in due course

Av - Nothing can be further from the truth...staying in the game and learning to play it correctly will improve you r probability of winning. NO GUARANTEE OF AUTOMATIC wealth if u just hang on.

- There is no readymade formula for making wealth. It is observance, gut feeling, attitude which requires

Av - Incomplete sentence? Anyways, it is method, mind and money management (however you interpret it), and nothing else.

- It is not technique that is required but strategy, that will win the game

Av - Did not understand this one. ANyway if u have the best strategy, but do not have the right execution, no one cansave u. BOTH are required.

Regards

Hi Praveen,

Technicals is all about identifying patterns..and so is neural nets...it requires lot of training..i also have a basic idea..they have inproved vastly since the days i studied them with the hidden layer being much simpler than they are today. i dont know how far the forward propagating and backward learning has advanced...we used to have this basic fallacy of how it will identify a capital A if the top is not closed..as capita A or H...
I can talk more, but that will be childish gibberish (mostly theoretical)...so let the experts comment on it.

bye

Glad to see someone finally doing some straight talk on this matter. All this overemphasis on capital preservation and money management looks a bit silly to me. The best way to preserve your capital (if that is your primary aim) is to put it in a FD and not in the mkts (where the primary aim ought to be to grow your capital). And theoritically at least, it's still possible for a trader (specially one with a higher frequency of trades) to lose all his money on those 2% stops. This is off-course not an endorsement of recklessness but just a pointer to where the focus ought to be.

Regards,
Klayan.

Hey Avi,

I don't remember much of those learned in the college days. I don't know that they can be applied in trading. If I'd known that, I would have learnt it well

No problem. I will use my own neurals to train my eyes to identify the patterns. Why depend upon the computer neurals.

Praveen.

I too wonder whether Money management is that much important compared to the trading strategy. Of course they can be important, but let one first come up with his strategy(Method) first.

Just my two cents.

Praveen.

thx kalyan and praveen...u r right...first have a method with positive expectancy and then have money management to let your method run as long as possible to benefit from its expectancy...

Please do - would love to here more about neunets - how they are best used, the advantages & disadvantages. Am particularly interested in the fallacy you touched upon.

Everything starts with a Theory - an idea, a hypothesis and then progresses through an iteration of experiment, verification, refinement and finally produces a set of rules/laws. So no harm in knowing the theory a bit - at least would be far more stimulating then the same old clichematic rehashes on Trading psychology and money management (blah blah blah)

You seem to be a lot more capable than 'Wah ... you are great' (no offence intended) Please share your knowledge for the benefit of the less enlightened like myself.

Regards,
Kalyan.

Wah ... you are great...
LOL...but truly I cant stop appreciating the lovely posts by members from here...
will come up soon....
btw CV is the best person to talk on this though, as he has worked routinely on neural nets. (there may be others too, just that I am not aware).

thx

Hai friend technical analysis is absolute stupidity. only thing in technical analysis is that these technical guys make plenty of money by making fool of us. If u want to make money in this market select strong companies with good fundamentals invest in it ,make money.

hey rkthomas,

i have this habit of passing by traderji every now and then...so saw your post...
very good and correct observation my friend....

if u give a chiesel and hammer to me, an average sculptor and michaelangelo, we will all come up with somethings....i am sure i dont have to say the rest about what i will come up in comparison to them...