Is it better to use technical analysis during the market correction? anyone knows where can I learn some technical analysis?
Tech analysis? May as well roll the dice.
If you do it right, technical analysis is always right… just like fortune telling.
From my understanding (which is someone who has no experience, but studying the subject), the “technical analysis” contradics the Effecient Market Hypothesis, and from what I’ve seen of it, it dosn’t look very impressive.
I worked with a day trader who only uses technical analysis to make his trading decisions. He’s been in the business for 6 years. He makes 7 figures a year (even made 8 figures one year). He was also featured in the Trader Monthly magazine in 2004. I also worked with a few other day traders who make close to 7 figures trading exclusively technical analysis. To each his own.
One cannot discern from ancetedotal information whether techincal analysis has merit. There could have been many other factors that led to his success, including those which were inherenlty random (or those that were inherently nepotistic or below-board).
I consider TA to be anti-CFA. BUT, it’s definitely legit, as many of the best traders use it, rely upon it, and swear by it. Believe it or not, they know more than me and you. As an analyst, you don’t need it though. As a trader who makes a living off swing trading and short-term (1-6 months) positions, TA is as close to a necessity as having the markets open. IMHO is that it’s best to use fundamental analysis to focus on certain bets, but then use TA to confirm or help you make a decision should you be on the fence.
SergeLang Wrote: ------------------------------------------------------- > From my understanding (which is someone who has no > experience, but studying the subject), the > “technical analysis” contradics the Effecient > Market Hypothesis, and from what I’ve seen of it, > it dosn’t look very impressive. I think this is wrong. TA *assumes* that all things, fundamental, noteworthy, biases, etc. or built into the price. So, if the trend is up, then the fundamentals are up too. If the trend is down, the fundamentals are down too. It just skips the step of analyzing and assumes that has already been done. Brilliant, if you think about it.
Nay, you are incorrect. Bodie states the following in p. 266 of his practioner’s textbook on Investments: “Technical Aanlysis assumes a sluggish response of stock prices to fundamental supply and demand factors. This assumption is diametrically opposed to the notion of an effeicnet market.” I’ve never seen “Techincal Analysis” discuss in any neo-classical financial theory texts that I’ve purchased. In fact, the only time I’ve seen the thing mentioned is in Bodie. I don’t think it’s in Sharpe. And really, as Bodie mentions the next paragraph, the active management is not likelly to be better hten passive-strategy constructions. “Technical Analysis” is an argument for information-arbitrage, this seems ponsy to me…
Serge, one day you will have to step out of Academics and into the real world. As they say, “you stink of the lamp.” Get your head out the textbook and look at what successful traders use to make massive amounts of money.
? The basic tenents of “Techincial Analysis” is that market clearing conditions are not the norm. If you don’t accept that, then you might as well just drop any sort of structured Economics arguments for anything. I mean seriosully, you can’t just pick and choose which ideas you find acceptable. It’s either all or nothing, cause they don’t work indepedently…
I don’t know your TA reference, except for maybe some “academic” slamming it for the lack of “academia,” but TA accepts any economics happening in the price or the world, but need not argue with it. It only need to look for the trend. If the trend is up, the fundamentals (as in, ratios, news, management, weather, etc. is up too). If there are market clearing conditions, it will be reflected in the price. But the goal is to spot trends. You pick out any 6 month chart of any stock, and I will show you a trend. It’s not the end all be all. It does fail at time. It is difficult to find the trend. It is even harder to find reversals. BUT, fundamental analysis is not infallible either.
You didn’t say anything that was not specious in your statement. Their is a fallacy that long-term (or short term) trends can be identified quickly enough to exploit. In general, security prices are stochastic, and that isn’t “academia,” that’s emperical study. I may read these from “books,” but you have provide me with at least an equally compelling argument (with relevent data) to convince me that “technical analysis” has any legitimate merit.
TA has much merit. Watch price and volume long enough and you will find that there is something to it. Old resistance becomes new support. Daily pivots do hold. As a trader of Emini SPs for for 3 years, I can attest to its worth as a tool. But to using it exclusively without a disciplined approach will lead to ruin. It’s that discipline, coupled with a competitive advantage that separates those very few winners from the loser. I off which, as a trader, spent most of my time in the latter camp. Nowadays, my TA experience comes in handy in times which require objectivity. For example, I value a breakdown much differently than I do the necessary pullback. IMO, money management is much more important than TA, particularly when it comes to trading. Anyone can get into a trade or an investment. Try getting out. It’s not easy. Read John Murphy’s book, Technical Analysis of the Financial Markets as a primer.
SergeLang Wrote: ------------------------------------------------------- > Nay, you are incorrect. Bodie states the following > in p. 266 of his practioner’s textbook on > Investments: > > “Technical Aanlysis assumes a sluggish > response of stock prices to fundamental supply and > demand factors. This assumption is diametrically > opposed to the notion of an effeicnet market.” > > I’ve never seen “Techincal Analysis” discuss in > any neo-classical financial theory texts that I’ve > purchased. In fact, the only time I’ve seen the > thing mentioned is in Bodie. I don’t think it’s in > Sharpe. > > And really, as Bodie mentions the next paragraph, > the active management is not likelly to be better > hten passive-strategy constructions. > > “Technical Analysis” is an argument for > information-arbitrage, this seems ponsy to me… There is a reason they are academics and not traders. The most anti-TA proponents are university professors and book authors, none of which have had any noteworthy success in the markets. Read market wizards, and you will read about stories of quite a few people that used TA and succeeded.
I suspect that in times of flux (e.g. banking stocks now), the real opportunity lies in fundamental analysis. A stock might be overbought/oversold, and it might bounce 10% or whatever, but chances are that bank valuations at the moment reflect a sort of weighted-average of widely dispersed views on fair value. That is surely an opportunity for a fundamental analyst that truly understands the sector.
Can someone who believes in TA shed some light for the rest of us? It is my understanding from investors like Buffet and books like Security Analysis that buy and hold strategies combined with fundamental analysis outperforms technical analysis clockwork. I guess I have never heard of the Buffet/Soros of technical analysis.
SergeLang Wrote: ------------------------------------------------------- > Nay, you are incorrect. Bodie states the following > in p. 266 of his practioner’s textbook on > Investments: > > “Technical Aanlysis assumes a sluggish > response of stock prices to fundamental supply and > demand factors. This assumption is diametrically > opposed to the notion of an effeicnet market.” > That’s just nonsense. Good thing that some academic who has probably never traded a thing in his life is laying out the assumptions for TA. > I’ve never seen “Techincal Analysis” discuss in > any neo-classical financial theory texts that I’ve > purchased. In fact, the only time I’ve seen the > thing mentioned is in Bodie. I don’t think it’s in > Sharpe. > LOL. Who cares? > > And really, as Bodie mentions the next paragraph, > the active management is not likelly to be better > hten passive-strategy constructions. > > “Technical Analysis” is an argument for > information-arbitrage, this seems ponsy to me… What’s “ponsy” mean?
JoeyDVivre Wrote: ------------------------------------------------------- > What’s “ponsy” mean? I don’t know, but the first image that popped into my head was of a guy with too much hair gel and a leather jacket pointing at me and saying “heeeeeeey.”
Haha. Yea, A PONZI scheme is a fraudulent investment operation that involves paying abnormally high returns (“profits”) to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business. It is named after Charles Ponzi. It makes no sense, the writer is just throwing out random flames to try to make his point more clear that he’s not too sure about himself, or life.