Re: Why are value investor types so rigidly opposed to TA?
 

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I buy and sell based on pretty basic TA but very little of my time is spent staring at the chart. It works and has worked satisfactorily for me so far and has been proven to be robust during testing.


So what is your definition of TA?

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The classical definition would probably refer to drawing trend lines and looking for classic chart patterns representing the footprints of the bulls and bears.

I've tried this, but it's too subjective and you need some serious discipline and emotional control to be successful. If you think/want/hope the market will go up then the trendlines you draw will have an upward slant and you'll probably look for bullish patterns.

I am only concerned with price and not value. Put simply, I plug the EOD data into a spreadsheet and this filters out 1 of 3 positions (long/short/aside), creates trading channels, entry/exit points, sizes positions (and whether my account can afford the position's risk), and suggests stops. I don't need a chart to do this, but I use the chart for some creative input which on the whole is probably -EV. Without this creative input however, trading would be just too boring.

Re: Why are value investor types so rigidly opposed to TA?
 

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EOD data

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By this you mean what exactly?

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I don't need a chart to do this, but I use the chart for some creative input which on the whole is probably -EV. Without this creative input however, trading would be just too boring.

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Interesting. Didn't expect to hear you say that.

Re: Why are value investor types so rigidly opposed to TA?
 

eod= end of day.

Re: Why are value investor types so rigidly opposed to TA?
 

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There are people killing the lottery too.

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horrible analogy for the guys killing the markets i mentioned. simons isn't some lottery winner. neither is shaw. there are TONS of TAs though that of course this analogy could very aptly apply to ... but simons and shaw aren't two of them.

Barron

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Do you have any links to verified track records and description of methods used?

Something like this one used in support of value investing:

http://www1.gsb.columbia.edu/valuein...ves/DOC032.PDF

Re: Why are value investor types so rigidly opposed to TA?
 

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There are people killing the lottery too.

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horrible analogy for the guys killing the markets i mentioned. simons isn't some lottery winner. neither is shaw. there are TONS of TAs though that of course this analogy could very aptly apply to ... but simons and shaw aren't two of them.

Barron

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Do you have any links to verified track records and description of methods used?

Something like this one used in support of value investing:

http://www1.gsb.columbia.edu/valuein...ves/DOC032.PDF

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Look at footnote 17 in the wiki on technical analysis.

Cliff notes: 56 studies show economic profits from TA, 20 studies mixed, 19 studies show negative economic profits from TA. More recent studies are more favorable toward TA than older studies.

Re: Why are value investor types so rigidly opposed to TA?
 

Also, wasn't there a really long FA v. TA thread in here a while back? I searched for it but couldn't find it...anyone have a link?

Re: Why are value investor types so rigidly opposed to TA?
 

Another reason TA is popular, it provides action. There is no action in value investing. This morning I was telling my wife about this great stock I found that I'd trading at one third book an will likely take two years to reach book value. So I have to wait around for a couple years, checking and rechecking to make sure I didn't make a mistake.

Contrast that with analyzing minute to minute movements of a stock, trying to predict its next action. TA is exciting, FA is boring. If they produced equal results no one would ever do FA. But even though the great long term track records are FA based, smart people still get drawn to TA because of the greater challenges and thrills.

Me, I invest very boringly but try to play poker every afternoon to fill my action void.

Re: Why are value investor types so rigidly opposed to TA?
 

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There are people killing the lottery too.

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horrible analogy for the guys killing the markets i mentioned. simons isn't some lottery winner. neither is shaw. there are TONS of TAs though that of course this analogy could very aptly apply to ... but simons and shaw aren't two of them.

Barron

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Do you have any links to verified track records and description of methods used?

Something like this one used in support of value investing:

http://www1.gsb.columbia.edu/valuein...ves/DOC032.PDF

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Look at footnote 17 in the wiki on technical analysis.

Cliff notes: 56 studies show economic profits from TA, 20 studies mixed, 19 studies show negative economic profits from TA. More recent studies are more favorable toward TA than older studies.

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I went to Wiki and found this:

[edit] Lack of evidence
Critics of technical analysis include well known fundamental analysts. For example, Peter Lynch once commented, "Charts are great for predicting the past." Warren Buffett has said, "I realized technical analysis didn't work when I turned the charts upside down and didn't get a different answer" and "If past history was all there was to the game, the richest people would be librarians."[1]

Some academic studies say technical analysis has little predictive power, but other studies say it may produce excess returns. For example, measurable forms of technical analysis, such as non-linear prediction using neural networks, have been shown to occasionally produce statistically significant prediction results.[18] A Federal Reserve working paper[7] regarding support and resistance levels in short-term foreign exchange rates "offers strong evidence that the levels help to predict intraday trend interruptions," although the "predictive power" of those levels was "found to vary across the exchange rates and firms examined."

Cheol-Ho Park and Scott H. Irwin reviewed 95 modern studies on the profitability of technical analysis and said 56 of them find positive results, 20 obtain negative results, and 19 indicate mixed results: "Despite the positive evidence...most empirical studies are subject to various problems in their testing procedures, e.g., data snooping, ex post selection of trading rules or search technologies, and difficulties in estimation of risk and transaction costs. Future research must address these deficiencies in testing in order to provide conclusive evidence on the profitability of technical trading strategies."[19]

However, a comprehensive study of the question by Amsterdam economist Gerwin Griffioen concludes that: "for the U.S., Japanese and most Western European stock market indices the recursive out-of-sample forecasting procedure does not show to be profitable, after implementing little transaction costs. Moreover, for sufficiently high transaction costs it is found, by estimating CAPMs, that technical trading shows no statistically significant risk-corrected out-of-sample forecasting power for almost all of the stock market indices."[5]

Re: Why are value investor types so rigidly opposed to TA?
 

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There are people killing the lottery too.

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horrible analogy for the guys killing the markets i mentioned. simons isn't some lottery winner. neither is shaw. there are TONS of TAs though that of course this analogy could very aptly apply to ... but simons and shaw aren't two of them.

Barron

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Do you have any links to verified track records and description of methods used?

Something like this one used in support of value investing:

http://www1.gsb.columbia.edu/valuein...ves/DOC032.PDF

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i guess this really goes back to the #1 thing that spider said: wtf is TA??

define it for me in a way you'd like to discuss so i can better understand how you'd like to bucket some of hte strategies and i'll do my best to respond.

overall though i think "chartists" are the least likely to produce anything (i.e. mandelbrot's suckers) excess return wise. but i don't know whether you group in highly quantitative trading rules that seek out small differenciations in prices and how they react to things over time. is that TA?

Barron

Re: Why are value investor types so rigidly opposed to TA?
 

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that technical trading shows no statistically significant risk-corrected out-of-sample forecasting power for almost all of the stock market indices."[5]

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