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Technical Analysis Fallacy Apologies
-no mentor, or course, or literiture can give anyone the holy grail to the secrets of success in trading in the markets.
-"and no one, sells the goose that lays golden eggs, probably the eggs, but never the goose"
Nevertheless, I will humbly attempt.
Since the late 70s and into the millinium.
Many "engineers" have made public, their inventions of reading probabilities into Technical Indicators. Many Technical Analysis Gurus came to the forefront to sell their research findings. To name a few,
The Grand daddy being Charles Dow and his Dow theory which later lead to the creation of the Dow Jones Indexes.
Rene Descarte who introduced the Spiral studies.
Leonardo Da vincci who fostered the fabonacci principles,
W.D. Gann, who introduced Cyclic Studies of Squaring time and price.
R.N.Elliot, who introduced the Elliot Wave Studies
W.Wilders.Who introduced the mathematics of calculating overbought and oversold markets by his introduction of the DI+,DI-, ADX lines and the Relative Strength Index.
The Stocastics, MACDs, ……………………………...etc
If one was to impliment all these studies onto their charts. What you will see is a beautiful piece of art, displaying very impressive hog wash, that do nothing but dazzle the uninitiated. If anything else it 'll confuse you even more.
Then you have the charting specialist who have introduced many ways to chart eg,
Linear Charts, HiLoClose Bar Charts, Japanese candlestick charts, Point & Figuring, John Hill's Bar Chart congestion & reversal patterns, reverse point waves, pivots, fractuals, ………..etc
Today, we find lots of originally and mutated techniques and methodologies available to the Chartist or Technicians.
What many fail to realise, is that all these studies, basically are statistical tables plotted in graphic form to present a "picture" to assist traders in their decision process. The maxim being, that a picture tells a thousand words.
"It is not theirs (the charts) to reason why,
But to signal Sell or Buy,
For the traders to do or die,
Hoping that the signal does not lie,
I would, from my many years of studies, go so far as to say, that they all work, some more than others but they all do serve a purpose. (to give traders, the "guts" to do or die)
If I may borrow from the quotes of Sir Winston Chirchill.
"That you can lie to some people all the time, all people some of the time, but not to all people, all the time."
Similarly, theses studies can work in some market conditions all the time, all market conditions some of the time, but not all market conditions all of the time."
Think about what I've just quoted very carefully.
The problem with some people and some professional Technical Analyst today ( being a certified Technical Analyst myself ) is that they use the Technical studies as if, it were the "Holy Grail" of trading & their pathway to the millions.
How far that is from the truth.
Any person with a good brain on their shoulders, will ultimate come to the realisation that these are just tools. Tools that are built on historical and lagging databases. Moreover the rigidity of the parameters used in the studies imposes rigid responses to changing market conditions. Have we forgotten that the market is a live beast that learns and adapts to trader behaviours? Many have forgotten that the market is the sum total of the behaviour of the participants engaged in the market place. These tools are used for measuring the markets health, not so unlike the thermometer to a doctor, or the measuring tape to a carpenter, just a tool.
Then how is it possible that these studies themselves can be considered the "Holy Grail"?
It may be due to ignorance (being new and uniniatiated), lazyness, or just plain stubborness ( a little knowledge is a dangerous thing). Of course it is not nice for me, to tell you about those who have "a little knowledge", trying to scam those who know less than them. That's another story.
Some do so, because of a very new disease discovered recently, the sickness of "the chance".
If you use the Technical studies as your "Holy Grail", I have only one word for you, GAMBLER.
I put it to you, that, to consider your Technical Studies to be more than what they are is a "fallacy" in trading the markets, not so unlike martingale gamblers' fallacy. It can lead you to a very dark place.
What many traders do not know, or may fail to recognise, is that your success in taming the markets, is comprised of a mix of ingredients. Not so unlike in baking cakes.
I suggest three very important ingredients. One is " Market Structure ", the other is "YOU", then Capitalisation. Of course there are many more components, for the moment these seems of dominant importance, in my humble opinion.
I hope you will think about what I've said very carefully.
I shall try to push these doors ajar for you slowly to show you the light at the end of the tunnel (please hope its no on-coming train), God willing.
regards
-no mentor, or course, or literiture can give anyone the holy grail to the secrets of success in trading in the markets.
-"and no one, sells the goose that lays golden eggs, probably the eggs, but never the goose"
Nevertheless, I will humbly attempt.
Since the late 70s and into the millinium.
Many "engineers" have made public, their inventions of reading probabilities into Technical Indicators. Many Technical Analysis Gurus came to the forefront to sell their research findings. To name a few,
The Grand daddy being Charles Dow and his Dow theory which later lead to the creation of the Dow Jones Indexes.
Rene Descarte who introduced the Spiral studies.
Leonardo Da vincci who fostered the fabonacci principles,
W.D. Gann, who introduced Cyclic Studies of Squaring time and price.
R.N.Elliot, who introduced the Elliot Wave Studies
W.Wilders.Who introduced the mathematics of calculating overbought and oversold markets by his introduction of the DI+,DI-, ADX lines and the Relative Strength Index.
The Stocastics, MACDs, ……………………………...etc
If one was to impliment all these studies onto their charts. What you will see is a beautiful piece of art, displaying very impressive hog wash, that do nothing but dazzle the uninitiated. If anything else it 'll confuse you even more.
Then you have the charting specialist who have introduced many ways to chart eg,
Linear Charts, HiLoClose Bar Charts, Japanese candlestick charts, Point & Figuring, John Hill's Bar Chart congestion & reversal patterns, reverse point waves, pivots, fractuals, ………..etc
Today, we find lots of originally and mutated techniques and methodologies available to the Chartist or Technicians.
What many fail to realise, is that all these studies, basically are statistical tables plotted in graphic form to present a "picture" to assist traders in their decision process. The maxim being, that a picture tells a thousand words.
"It is not theirs (the charts) to reason why,
But to signal Sell or Buy,
For the traders to do or die,
Hoping that the signal does not lie,
I would, from my many years of studies, go so far as to say, that they all work, some more than others but they all do serve a purpose. (to give traders, the "guts" to do or die)
If I may borrow from the quotes of Sir Winston Chirchill.
"That you can lie to some people all the time, all people some of the time, but not to all people, all the time."
Similarly, theses studies can work in some market conditions all the time, all market conditions some of the time, but not all market conditions all of the time."
Think about what I've just quoted very carefully.
The problem with some people and some professional Technical Analyst today ( being a certified Technical Analyst myself ) is that they use the Technical studies as if, it were the "Holy Grail" of trading & their pathway to the millions.
How far that is from the truth.
Any person with a good brain on their shoulders, will ultimate come to the realisation that these are just tools. Tools that are built on historical and lagging databases. Moreover the rigidity of the parameters used in the studies imposes rigid responses to changing market conditions. Have we forgotten that the market is a live beast that learns and adapts to trader behaviours? Many have forgotten that the market is the sum total of the behaviour of the participants engaged in the market place. These tools are used for measuring the markets health, not so unlike the thermometer to a doctor, or the measuring tape to a carpenter, just a tool.
Then how is it possible that these studies themselves can be considered the "Holy Grail"?
It may be due to ignorance (being new and uniniatiated), lazyness, or just plain stubborness ( a little knowledge is a dangerous thing). Of course it is not nice for me, to tell you about those who have "a little knowledge", trying to scam those who know less than them. That's another story.
Some do so, because of a very new disease discovered recently, the sickness of "the chance".
If you use the Technical studies as your "Holy Grail", I have only one word for you, GAMBLER.
I put it to you, that, to consider your Technical Studies to be more than what they are is a "fallacy" in trading the markets, not so unlike martingale gamblers' fallacy. It can lead you to a very dark place.
What many traders do not know, or may fail to recognise, is that your success in taming the markets, is comprised of a mix of ingredients. Not so unlike in baking cakes.
I suggest three very important ingredients. One is " Market Structure ", the other is "YOU", then Capitalisation. Of course there are many more components, for the moment these seems of dominant importance, in my humble opinion.
I hope you will think about what I've said very carefully.
I shall try to push these doors ajar for you slowly to show you the light at the end of the tunnel (please hope its no on-coming train), God willing.
regards
Last edited by fti, Jun 20, 2010 4:43pm (31 hr ago
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