Why are value investor types so rigidly opposed to TA?

[stinkypete]

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I find TA fascinating, but FA to be a frustrating trip into tedium.

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dingdingding!

[adios]

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I mean, I get that they are philosophically very different (if not opposed), but I really do not understand the immediate dismissal of all things TA by a lot of value investors I have come into contact with recently.

Friday I met with a group of analysts at a value investing firm, and when I told one of them about my interest in TA, he chuckled and said to not even mention it to the other analysts.

That is just one anecdote, but it seems like I have been getting this a lot lately - and I am hardly an opponent of value investing.

Why are those types so ready to dismiss TA as worthless? How could so many people use it so successfully if it is really all smoke and mirrors? And why do valuation and TA have to be mutually exclusive when it comes to making buy/sell decisions? What's wrong with using a combination of the two?

Any insight would be appreciated.

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Most people I encounter actually use both, they try to figure out good entry and sell points from "technical" indicators while selecting investment vehicles using FA.

Valuing equity using FA is a mathematically sound endeavor, just have to be accurate about the parameters that are used (not necessarily easy). Not so sure about TA though but TA covers such a wide range of things I suppose it would be good to talk about what people do in using TA.

[mo42nyy]

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?

[CrushinFelt]

lol TA

[stephenNUTS]

I always favored T/A as trader,but def. used fundamentals alongside as well.
Esp. on news info like EPS release,management changes,takeover speculation/arbitrage opps,an FDA drug being approved or rejected,...or even SEC related issues.

I always felt using both was a positive

SF [img]/images/graemlins/cool.gif[/img]

[DesertCat]

Hard core value investors view the markets short term movements as mysteries and don't feel they, or anyone else has special insight into them. If you want to work for one bear that in mind. Review Buffetts comments for detail, his quote about he stopped using TA when he got the same predictions when he turned the chart upside down, but most importantly the Mr. Market parable that is the basis of value investing.

And no one mentioned one reason TA is so popular. Value investors are lousy clients for brokerages, TA driven traders are great clients, so brokerages hire TA types to provide free research to clients because it promotes trading, same as they hire Abby Cohen macro predictors to get you to rebalance your portfolio.

I have had a few times where I felt I had special insight into price movements, basicly when I knew a large shareholder would be forced to sell lots of shares. Beyond that I don't have a clue and its led me to scoff at TA in the past. But as I get older I realize that some large quant operations have so much data and smarts they might have an edge over many securities, and a smart two plus twoer might be able to find a single stock where they can focus on they can develop an edge. But lots of what I hear from TA types seems too simple to be useful. I buy or sell illiquid microcaps ever day, and I create discernable patterns in their price movements because I typically push to close orders at days end. But if you try to use this predictively you will fail because you won't know when I start, when I am done, and when I was too hung over to open my laptop or when I had to take my daughter to her gym class. Multiply that by hundreds of participants and it seems almost impossible.

[kimchi]

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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.

[bills217]

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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.

[DcifrThs]

eod= end of day.

[Mark1808]

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I mean, I get that they are philosophically very different (if not opposed), but I really do not understand the immediate dismissal of all things TA by a lot of value investors I have come into contact with recently.

Friday I met with a group of analysts at a value investing firm, and when I told one of them about my interest in TA, he chuckled and said to not even mention it to the other analysts.

That is just one anecdote, but it seems like I have been getting this a lot lately - and I am hardly an opponent of value investing.

Why are those types so ready to dismiss TA as worthless? How could so many people use it so successfully if it is really all smoke and mirrors? And why do valuation and TA have to be mutually exclusive when it comes to making buy/sell decisions? What's wrong with using a combination of the two?

Any insight would be appreciated.

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There is no imperical eveidence to show that TA can give an investor an edge in the market. With computers it would be very easy to back test any theory you want, why is there no proof that TA works?

Value investing meanwhile has a strong argument for its success:

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