Experiments in Technical Analysis

Dear friends,

When the new year comes most people make new year resolutions and try to follow during the year. When the year comes to an end it is time to look back and analyse what was achieved, what was missed etc. At the beginning of this year (2007) we (Karthik, Murthy, Myself, rpc etc) had started 'System Implementation Exercise'. It is therefore time now to review the exercise. I was about to propose this and meanwhile Mr. Amarnath opened the topic. I was glad that he has taken up what I wanted to do and just waited to see some good discussions and some useful outcome. But what really took place was entirely different. Instead of discussing the merits and demerits of the experiments it went into personal attacks, belittling individuals, calling names etc. The language went down to such a low level and unparliamentary words were used that Traderji had to intervene and warn about the foul language. I would like to express my views through this forum without tresspassing the limits of decency and not hurting anybody.

At the beginning itself let me make it clear that I am not taking any side, not supporting any person or persons, nor attacking them for whatever they have written. I will just record my impressions.

The whole thing started with Mr Amarnath questioning 1000 posts devoted to MACD. May be he was asking a genuine question. But the way it was termed did not suit the decorum. The language went down to low level, people were attacked and counter attacks followed. Was it necessary to do so? Well, let me give an example.

Let us say one fine morning we go to a sea beach. We see some people playing in the water, some just basking in the sun some taking a walk etc. Each one has individula interest in whatever is being done. Even the people playing in water would be entering to different levels. Some just wet their feet, some go knee deep and some may go neck deep. Some may carry a life saving device to prevent drowning (STOPLOSS). As long as each of them is enjoying whatever he/she is doing, it is fine. The problem starts if one starts criticising or belittling others. If the people enjoying on the golden sands (The digital filters) claim that sands are the right place and not the water (the MACD) the trouble starts. The people enjoying on the sands may warn those in water that it is dangerous as there is a high probability of drowning due to a wave when you are playing in water (MACD) but on sand it is safe as there is no chance of drowning. Well, they are right to some extent. But suppose they say it is worthless to play in water just to get wet because you can get wet in your bath room under the shower instead of travelling ten km (1000 posts of MACD) just to get wet. It is the beginning of trouble. It is true that if you enter the sea you may be drowned. It may take a tsunami to drown the people sitting on the beach of digital filters. Buy the joy of playing in water can be felt only by entering in the water. To take care of being swept away by a wave, the new entrants should heed to the warnings of those who have gone deeper. The newbies should enter upto the level where it is comfortable and safe and slowly venture deeper once they get accostomed to the situation. If, even after the warnings and advice, the newbie gets trapped into the water, the other people around including those on the beach should try to save and point out what mistake the newbie is doing. You can even admonish the newbie for taking a wrong step. It is of no use to shout "don't go in water, you will drown". As long as the two groups cooperate and save each other and share their joy it will be a very exciting and enjoyable experience.

Now in addition to the water lovers and sand lovers there is somebody else present there. He is the Bhel Puri vendor. He can add to your joy by supplying the Bhel Puri and charge for it. It is no offence for this vendor to be there on the beach. No one expects him to give his product free. Note that he does not enter water. Well, that is no problem. Nobody expects him to do so. But if he shouts at you saying "You should not play in water and it is no pleasure. The only pleasure is buying my Bhel Puri and eating it" then it is unethical. Surely people will attack the statement and the person also especially when the language is foul.

So, let us be decent in our language, control our outburst and enrich this forum.

This is not yet over. I would specifically take up the subject and analyse who was right, who was wrong, who was understood right and who was mis understood. That will be in the next post.

TO BE CONTINUED ...

Regards.

-Anant

Waiting for the next episode!!!

Well I am a follower of this thread. I don't have any experience in trading etc. I find this thread very useful in learning some of the things I am interested in.

In my knowledge, no person, be an ace investor or ace trader or ace analyst can ever claim to make 100% profit. That is not the way of stock market.

I understand that most traders do experimentation in the beginning to find his style of trading.I don't see any wrong in that.

If you had simply pointed out the shortcomings of experiments or any specific indicators that would have been much better than indulging in personal mudslinging.

You ,yourself claim to be an ace trader , but the poise required for such a vocation is exhibited by its absence. Of course you are intelligent, but first hallmark of intelligence is humility. And of course we are still searching for magnifying glasses to find a trace of it.

It takes a note from traderji moderator to put a stop note.

I am sure you would respect the sentiments of other readers as well. Not all are endowed with your type of intelligence.

regards
pankaj

i agree...

http://tradersconsortium.com/communi...showtopic=1444

What.... jose silva himself talking about MACD ......oh..must have lost all his shirts ......

Dear friends,

Now here is the next part. It is a flashback story.

The first post in the thread "Experiments in Technical Analysis" was on July 22, 2006 by Karthik. It was not about MACD. Initially he posted some techniques based on Moving Averages (EMA). After 100 posts in the thread by different people, Mr. Amarnath entered and there were some questions, discussions and suggestions. At that time his tone and language were acceptable. He did not question the utility of moving averages and cross-overs but suggested inclusion of MM into the system which was a very valid point. He also suggested sticking to one system instead of trying out many. Karthik had replied to both the suggestions. In message No. 108 Amarnath has clearly mentioned that he is not against experimenting and developing trading systems. He even suggested developing the system in a professional manner. A very good suggestion indeed. Karthik replied to that explaining it is more easy to say than to do. Probably Amarnath was not satisfied and finally he quit saying that he would not take part further in the thread till there was some useful outcome. He kept his word till recently. But at that time the tone was harsh but I would say still tolerable.

When the thread went past 300 posts I too started contributing whatever little I could. That was in Nov 2006. Even at that time the thread was about Moving averages and cross-overs. It was only when there were more than 560 posts that Karthik took up MACD entirely as a trading system. So, any kid can calculate whether there are 1000 post about MACD.

Meanwhile the 'System Implementation Exercise' started (around Jan 2007). Unfortunately, the exercise was not completed due to various reasons. Whatever results were available were useful in understanding the problems in system development. These should have been posted on the forum but it was not done as the people involved were not available due to various reasons, somebody was having a busy work schedule, some one was not well, I had to go out to a different place etc. If all the people are able to come together again we can still do it.

What I want to point out by going back in time is that the thread was never meant to discuss or propagate or glorify MACD. It was a platform for testing and discussing different strategies, trying to refine well-known methods, try out combination of more than one method into a single system in the hope of getting synergistic effect etc. It was not meant to invent or discover a Holy Grail System. My perception of Holy Grail is, a system which not only tells you what to do exactly at what time but also tells you what happens next. And no system can tell you what will be the price of a stock tomorrow. If such a system is formulated then there will be no market, no trading and no traders and investors. Because if you know tomorrow's price no buyer will buy and no seller will sell today. And tomorrow the same thing happens because tomorrow is today for day-after-tomorrow.

This does not mean there is no point in experimenting or innovating. It is only through experimenting we learn and improve even if the experiment fails. In fact we learn more and inprove more from failures than from successes. So, even if the "Experiments in Technical Analysis" did not produce a trading system we can not say that the 1000 plus posts (now more than 1200) are wastage of Band width and time and energy. We should learn from the failures and continue experimenting. So there is no question of closing this thread just because somebody did not like the experiment.

After the flash back we come back to the story again.

TO BE CONTINUED ...

Regards

-Anant

Subtley posted that link in another thread for those who says MACD is not usefull.
Mkt is an unknown entity,how can i say this does not work or that is useless becoz everybody's personal episode with the Mkt is dependent on his/her TF ,Risk defination etc.
Something which does not work for me may be giving better result to others,only fools & dumb like me make a final verdict whose quest is over.

Hi Friends

Now that some seeds of doubt have been sown with regards to the very purpose of this thread, I feel there is a need to put the objective of the thread in much clearer terms..

I am quoting my first post of this thread below. I was very clear from the beginning that I will be posting various experiments and studies I made during the course of my TA journey. I also encouraged others to share their experiments ideas etc.

At no point in this thread there was any effort to show something as the Holy Grail stuff or something is the best or better than any other.

We all know that the TA is a minor part of the whole trading game. The idea was to expose the newbie to different aspects of TA. We all go through a phase of experimentation in our pursuit of TA though most of us may not really realize it and term it as experimentation. But it is an essential part of learning purpose otherwise learning is bookish, slow and incomplete. If one does not experiment with an indicator how he or she is going to realize whether it is suited for his or her trading style. Experimentation provides far wider insight into the various aspects of the indicator and its behavior.

Also I fail to understand the hue and cry trashing the MACD. What is wrong with MACD when the man who made all the noise posted earlier like this..
Also the posts about MACD is far less than the posts on one of the system posted by me MABIUTS…

If Digital Filters are the answers to everything then John Ehlers should have to been the most successful trader today…

Also this thread never tried to exploit this forum for any gains like the "someone" who used this forum to Beta test his software which he claimed will be better and cheaper than the popular Metatrader.

In this thread, there is nothing wrong and there is nothing right. It is a discussion and in such a discussion we discuss the pros and cons without any acrimony. The minute acrimony enters a discussion it ceases to be one. So I hope this discussion will continue to be one… a discussion to share thoughts, views and ideas…

Warm regards

karthik

Dear Karthik,

You are absolutely right. That is exactly the reason why I went into flash back mode and brought out the historical events and facts.

The Moving Averages, Cross-overs, MACD, RSI etc. and their limitations are well known for a long time. Then why there is interest in these even today? Within their limitations these systems still work and are very simple to understand and implement. When a trader applies these techniques there is always an element of his/her own interpretation and observation going into it. That element comes from experimentation. If these techniques (with their own limitation) gave the same results then everybody should have bought or sold at the same price. But it does not happen. Even after following the signals the exact execution is individual's choice depending on the interpretation and the same holds for any system whether you use a digital filter or a coffee filter to trade.

If somebody wants to point out the drawbacks then it should be through a decent discussion and useful contributions to thread. It does not lead the people anywhere by just calling the people as brainless idiots re-inventing the wheel. If we go deeper into the subject we may even find out that digital filters are also some kind of re-invented wheel. Quoting electronic or digital filters, quantum mechanics etc. does not make the person very learned and knowledgeable.

I will on my part continue the "Experiments in Technical Analysis" and post in this thread. It does not matter to me if somebody thinks that I have vaccum in the top floor. I also request you to keep the thread alive and not to bother about the unholy sounds being made.

Regards

-Anant