Where is support? Black Thursday or Black Friday?

[APXG]

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Does anyone really believe these charts work?

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some do. not sure why.

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same reason people jump on any get rich bandwagon.

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i'm as logical and fundamental as anybody gets...but there is some good reason (i.e. theories) why these charts (maybe not these exactly, but TA in general) can work far beyond what would be expected.

one theory is that markets are driven by humans and, throwing out all value indicators, humans tend to react similarly in similar situations over time. "supports" can be built by the net participants purchasing as some level is hit. other indicators TAs use can also work in a similar manner by using human interactions with each other in the market.

as everyone i think also knows, i highly respect benoit mandelbrot and, despite his thinking that TA is very bad to use as a practice, he has acknowledged that TA does seem to show persistant profits.

the thing that i always go back to though is that you can generate almost perfect replicas (supports, trends and all) of human price charts via a randomly generated process (Multi-Fractal Model of Asset Prices). kinda hurts the TA arguments...

Barron

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This makes a little sense, but are there any billionaire TA guys? There are at least a handful of billionaire fundamental guys.

Also its possible the TA guys who have done really well, just got lucky with a few positions and represent a survivorship bias.

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i wonder how many billions Buffett would have if he paid the taxes TA guys / short-term traders pay, compounded over 50 years. probably not even 1 billion.

[john kane]

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This makes a little sense, but are there any billionaire TA guys? There are at least a handful of billionaire fundamental guys.


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you know this is wrong statement, same as that there are a number of lifetime unemployed millionaires from the lottery, but no millionaires from working a 40 hour low paid job, thus we should go play the lottery rather than get a job blah blah blah.

sorry to be arsey, just i had to spend ages looking out for these things in psychometric testing, i am mentally scared from them.

gl whether you are TA or fundamentals, i reckon you can do well at both so long as you apply them well and consider the other's approach.

edit: may not be wrong statement, i just think it is.

[maxtower]

I think the tax thing could be the better explanation.

[Nonfiction]

Wow what an end of day rally here.

[CrushinFelt]

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Wow what an end of day rally here.

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Don't act so surprised, the charts obviously told you that was going to happen. l d o

[Thremp]

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Wow what an end of day rally here.

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Don't act so surprised, the charts obviously told you that was going to happen. l d o

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Japanese Sticks FTW

[sebbb]

hammer FTW?

[DcifrThs]

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Does anyone really believe these charts work?

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some do. not sure why.

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same reason people jump on any get rich bandwagon.

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i'm as logical and fundamental as anybody gets...but there is some good reason (i.e. theories) why these charts (maybe not these exactly, but TA in general) can work far beyond what would be expected.

one theory is that markets are driven by humans and, throwing out all value indicators, humans tend to react similarly in similar situations over time. "supports" can be built by the net participants purchasing as some level is hit. other indicators TAs use can also work in a similar manner by using human interactions with each other in the market.

as everyone i think also knows, i highly respect benoit mandelbrot and, despite his thinking that TA is very bad to use as a practice, he has acknowledged that TA does seem to show persistant profits.

the thing that i always go back to though is that you can generate almost perfect replicas (supports, trends and all) of human price charts via a randomly generated process (Multi-Fractal Model of Asset Prices). kinda hurts the TA arguments...

Barron

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This makes a little sense, but are there any billionaire TA guys? There are at least a handful of billionaire fundamental guys.

Also its possible the TA guys who have done really well, just got lucky with a few positions and represent a survivorship bias.

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well, i gotta first ssay that the # of billionares from A vs. B isn't the way i'd go about thinking about how to weigh persistance of returns to a trading strategy.

that 2nd point though is one thing mandelbrot specifically brought up (at least the luck part)but the returns persist despite that. survivorship bias may be far bigger than can be controlled for and may, int he end, explain the persistance of returns.

further, there may be unaccounted for risk in TA trading just not witnessed yet (though GSAM losing 28% in a month is pretty sick).

persistance of returns is only interesting if it is large relative to risk taken (or even similar to sharpe ratios of asset classes). if the hidden risk in TA trading is far larger than the existing known risk, then overall, TA would be seen in a worse light than it is now (especially if those risk adjusted returns would be near 0 once accounting for that risk)

this mandelbrot did speak to as well saying that we may have simply not witnessed the real risk involved in some of these strategies (or a curtailment in observed risk w/ losing participants. if a participant loses 80% and has to close when they would have lost 100% or more, that volatility isnt correctly accounted for)

just some more thoughts on the matter,
Barron

[johndenver]

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i predict the market will close up on the day either tommorow or friday... everything gets so overhyped these days seriously its black tuesday in america every 2 weeks, then the next week everybody is buying again cause ZOMG such great value

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soooooooo close

come on friday

one time one time one time

[Kirkrrr]

A lot of the prophetic power of TA is simply self-fulfilling, but that doesn't make it any less real. For instance - and this is an oversimplification, I'm just trying to illustrate a point - say large trader goes short a significant amount at $99 and sets a stop-loss at $100 because he believes it to be resistance and figures if it's broken he was wrong and he will get out... well, the market moves to 100.25 and his stop loss gets triggered, a big buy order hits the market and prices take off... now, a big trader with the power to push prices obviously wouldn't be in that position in the first place, but a lot of smaller ones are in that position, and support/resistance lines become self-fulfilling prophecies as stops get triggered and momentum in a given direction accelerates... well, now that everyone that matters has seen "resistance" break it has now become support, so when the price goes back down to that level there will be plenty of willing buyers to support the price at that level in the near future. What was perception is now reality.

Kirk