Are you lost in the technical analysis jungle ?

Niranjanam · #1 4th March 2007, 02:07 PM

Pradeep Bonde
http://stockbee.blogspot.com

There are hundreds of way to make money in the stock market, but the one which has the largest following is technical analysis. If you search Amazon database on investing, you will notice more books on technical analysis that any other topic. There are hundreds of newsletters dedicated to the art of technical analysis and chart reading. Most of them offer a very simple way to interpret the market and offer promises of riches.

Most traders and especially beginner traders are completely lost in the technical analysis jungle. It is difficult for them to accept any other interpretation of market. I know of people who everyday evening go through over 2000 charts or more in search of their esoteric patterns. Most beginner traders get hijacked by technical analyst and some of them are lost forever to the dark arts of technical analysis.

If you have noticed much of the Wall Street big money houses have over last 5-6 years retired or sacked their technical analyst heads. Much of the work is being now done by quantitative tools. But the cult of technical analysis continues to grow.

If you want to escape that trap look at some of the quantitative approaches to making money. Even if you have to follow technical analysis, use a quantitative method to select stocks and then apply your chart reading patterns.

Your Comments please.

beginner_av · #2 4th March 2007, 04:42 PM

ha ha ha....what do u think the quant models work on (other than the arbitrage systems, spread betting and CFDs, IV/HV deviations and hedging systems to some extent, which also requires substantial inputs of TA or else lot of $$ will go in unnecessary hedging affecting performance)...quant models usally take the subjectivity out of the equation...subjectivity vs objectivity is a different debate from whether TA be or not to be....more in some time...
btw this has become a trend now..earlier it was TA vs FA, but now its becoming absurd...someone wants to hear more of suze like things as he is tired of structure of the chart...as if financial planning is a good substitute for TA...

kurian · #3 4th March 2007, 05:40 PM

hai Niranjanam

wht u mean by quantitative tools and quantative analysis.

kurian joseph

Quote:

Originally Posted by Niranjanam

Pradeep Bonde
http://stockbee.blogspot.com

There are hundreds of way to make money in the stock market, but the one which has the largest following is technical analysis. If you search Amazon database on investing, you will notice more books on technical analysis that any other topic. There are hundreds of newsletters dedicated to the art of technical analysis and chart reading. Most of them offer a very simple way to interpret the market and offer promises of riches.

Most traders and especially beginner traders are completely lost in the technical analysis jungle. It is difficult for them to accept any other interpretation of market. I know of people who everyday evening go through over 2000 charts or more in search of their esoteric patterns. Most beginner traders get hijacked by technical analyst and some of them are lost forever to the dark arts of technical analysis.

If you have noticed much of the Wall Street big money houses have over last 5-6 years retired or sacked their technical analyst heads. Much of the work is being now done by quantitative tools. But the cult of technical analysis continues to grow.

If you want to escape that trap look at some of the quantitative approaches to making money. Even if you have to follow technical analysis, use a quantitative method to select stocks and then apply your chart reading patterns.

Your Comments please.

Niranjanam · #4 4th March 2007, 09:33 PM

Quantitative Analysis - Buying the Numbers

Pure quantitative analysts look only at numbers with almost no regard for the underlying business. The more you find yourself talking about numbers, the more likely you are to be using a purely quantitative approach. Although even fundamental analysis requires some numerical inputs, the primary concern is always the underlying business, focusing on things like management's expertise, the competitive environment, the market potential for new products, and the like. Quantitative analysts view these things as subjective judgments, and instead focus on the incontrovertible objective data that can be analyzed.

One of the principal minds behind fundamental analysis, Benjamin Graham, was also one of the original proponents of this trend. While running the Graham-Newman partnership, Graham exhorted his analysts to never talk to management when analyzing a company and focus completely on the numbers, as management could always lead one astray.

In recent years as computers have been used to do a lot of number crunching, many "quants," as they like to call themselves, have gone completely native and will only buy and sell companies on a purely quantitative basis, without regard for the actual business or the current valuation - a radical departure from fundamental analysis. "Quants" will often mix in ideas like a stock's relative strength, a measure of how well the stock has performed relative to the market as a whole. Many investors believe that if they just find the right kinds of numbers, they can always find winning investments. D. E. Shaw is widely viewed as the current King of the Quants, using sophisticated mathematical algorithms to find minute price discrepancies in the markets. His partnership sometimes accounts for as much as 50% of the trading volume on the New York Stock Exchange in a single day.

msn.fool.com

kurian · #5 5th March 2007, 07:03 AM

Hi Niranjanam
thank you very much.
how can i use this quantitative analysis in my short term trading.
any books or site about quantitative analysis

kurian joseph

Quote:

Originally Posted by Niranjanam

Quantitative Analysis - Buying the Numbers

Pure quantitative analysts look only at numbers with almost no regard for the underlying business. The more you find yourself talking about numbers, the more likely you are to be using a purely quantitative approach. Although even fundamental analysis requires some numerical inputs, the primary concern is always the underlying business, focusing on things like management's expertise, the competitive environment, the market potential for new products, and the like. Quantitative analysts view these things as subjective judgments, and instead focus on the incontrovertible objective data that can be analyzed.

One of the principal minds behind fundamental analysis, Benjamin Graham, was also one of the original proponents of this trend. While running the Graham-Newman partnership, Graham exhorted his analysts to never talk to management when analyzing a company and focus completely on the numbers, as management could always lead one astray.

In recent years as computers have been used to do a lot of number crunching, many "quants," as they like to call themselves, have gone completely native and will only buy and sell companies on a purely quantitative basis, without regard for the actual business or the current valuation - a radical departure from fundamental analysis. "Quants" will often mix in ideas like a stock's relative strength, a measure of how well the stock has performed relative to the market as a whole. Many investors believe that if they just find the right kinds of numbers, they can always find winning investments. D. E. Shaw is widely viewed as the current King of the Quants, using sophisticated mathematical algorithms to find minute price discrepancies in the markets. His partnership sometimes accounts for as much as 50% of the trading volume on the New York Stock Exchange in a single day.

msn.fool.com

Similar Threads for: Are you lost in the technical analysis jungle ?
Thread	Thread Starter	Forum	Replies	Last Post
Technical analysis course	sh50	Seminars & Tutors	18	10th June 2007 03:46 PM
Hello everybody.Technical Analysis	vijay chauhan	Introductions	2	30th May 2007 03:09 PM
Technical Analysis Vs Fundamental Analysis	omega	Equities	1	28th September 2006 02:49 AM
Technical Analysis	sparas	Technical Analysis	1	22nd August 2006 07:53 PM
technical analysis	channi_baba	Introductions	0	30th December 2004 02:29 PM