I was checking out a book by Gary Norden called “Technical Analysis and the Active Trader.” I am not endorsing this book or his views, only that in the book he presents many studies on Stocks, futures and FX, probably options to. But the studies he has presented tell an entirely different story about technical analysis that I have heard. Most of the studies he tells about in his book claim that technical analysis is basically worthless and back testing is a joke. He also advocates Behavioral Finance, which makes a lot of sense to me and that the markets are random and you can’t trust technical tools. I thought it to be interesting, I haven’t finished reading it yet. Any thoughts on this and has anyone read this book.
Let me get this right… are you saying you are surprised that someone is saying that tech analysis is worthless? What’s the surprise? Were the guys making millions in the pits using tech analysis? With all of the millions of threads across the universe on tech analysis, how many of them are actually getting anywhere with their trading? With tech analysis being so popular why do most wannabe traders fail?
Tech analysis is the lazy persons totem they pray to when they wish for success. It’s wearing Nike clothes hoping to lose fat.
…tech analysis is not worthless: we know, for example, that the two-hundred-period moving average is looked at for sentiment shift; also, order flow is measured and hedged, and targets are based on price levels, not thin air. You can call that whatever, but they are technicalities that have to be dealt with; so, Goldman Sachs traders, say, will not use RSI and Fibonacci, but a 200-day MA and understanding of price levels (supply and demand areas) is indeed what professionals would look at, even if position trading over six to twelve months: that is why banks have two or three-year forecasts on all traded asset classes: what is that, if not technical analysis?
Forecasting; mathematical modelling; algorithmic modelling; order flow analysis; risk modelling: all these are technically based, through and through. Penny is right in saying that there is a ‘cheaper’ (my words) rendition of tech analysis, which is indeed what is sold on some websites as a ‘sure-fire’ means to millions: yet, true technical analysis is a fundamental element (excuse the wordgame) not of randomly plotting lines on a chart but of analysing market sentiment through price. This is why institutional trading floors have charts on their screens, just like you and me: they will use their ‘Nikes’ (to quote Penny’s witty comment) differently from us retail traders, but they are essentially the same tools…
Just my opinion.
Peace x
… and so it becomes a game of semantics, and who means what when they talk of tech analysis. This is always the case, and forever will be.
The tech piece of order flow trading although has the appearance and similarities of typical tech analysis I suspect that you and I both know that it’s not at all the same thing. T/A from the T/A perspective manifests stories and reasoning from the shapes in the clouds… or rather, the shapes in the charts. T/A from the order flow perspective is looking for legitimate areas of where players may be getting in or out of the market, and where stop clusters may be positioned, and this results in a technical set of data to analyze.
One is an inside-out perspective based on hopes and dreams and make-believe, while the other is an outside-in perspective based on real-world understanding of the market and its players devoid of flights of fancy and woo.
Indeed, Penny, we would not need to get stuck in semantics, would we In the end, both retail and institutional traders can make money, even if they look at markets from different sides… So you do not have to ‘think like a banker’ if all you want is the crumbs left behind by those with pockets much deeper than yours. I am happy to use tech analysis to serve me in my small effort, and we cannot demonise people who make it work for them, even if they were 1% of all retail traders… It is not the tool that is broken: it is the way in which is used that is broken.
In the end, much failure in retail trading seems to be down to overleveraged positions on undercapitalised accounts, rather than necessarily faulty analysis …You can have the best analytical minds on order flow and order clusters, but if you leverage like a lunatic then it will all count for nothing… I think that the fate of LTCM shows how all can be victims of that…
I don’t agree that it’s trading too large that kills retail traders. It can, but it’s not THE reason. It’s just the reason that ends the pain sooner rather than later. Most retail traders are trading based on woo and superstition, or half-baked ideas, instead of having an edge. In a desperate attempt to compensate they engineer convoluted betting schemes that inevitably tank the account.
In the end a trader with an edge needs neither mysterious trading secrets nor disaster-guaranteeing betting schemes. The grind is enough.
Maybe you are familiar with a different breed of retail traders than what I’ve noticed online.
I agree: ‘The grind is enough’. Trading, like running a grocery, is not fun, it is a business-like, repetitive, on the main quite boring activity, really… But overleveraging is a big problem for newbie traders, definitely…
everbody has his own opinio on tech analysis.
the starter only read a book that is probably build upon the “theory of a random walk through wallstreet”, in that book they explain their views on stocks etc tech analysis. there are quite a impressive number of people believing in the random walk so ul allways stumbble upon people who say tech anaylisis is useless.
I partially agree to the random walk theory and partially disagree.
but in general, for swing and day traders the only thing they have in their repertiour to fight the market is tech analysis and that itself makes tech analyisis part ofa good strategy to earn money.
when you know that after a certain formation the market is going to behave in a certain way because 1 million traders push buy after their tech analysis you can make some good money on that “behavioural pattern”
However; for a person working at a bank or a fund as a trader, tech analysis is only 5% of work that needs to be doe to be sucessfull. there other things play much bigger roles. portfolio management, asset management, value buying, risk spreading, difference trading, etc. etc. tech analysis comes pretty much as last.
Thank you, TurboNero, for your thoughts!
I may still buy/read the book suggested by the OP…after my long list of books still waiting on my shelves
In his book he raises some interesting view points. No it is not rocket science. But in his book he does bring to lite things that some traders may or may not realize. Like past price movement relating to present or future price movement and how past price movement does not have any relation to present or future price movement. And that in the past when markets weren’t regulated or laws weren’t there to protect the little guy trader, some technical analysis was more relevant then than now especially when pertaining to insider trading knowledge. Which when thought about is only common since to most traders today. Personally I see the markets as an auction house where price is bid constantly based on market dynamics and fundamentals. As far as past price movement I think that is in the eyes of the beholder. Not totally sure about Gary Norden’s total view, haven’t finished reading his book yet, though I think he is a scalper, and I can see why he has these view points.
Do you have any proof on this, or just some type of hope or gut feeling?
Do you have any proof that this 1 million ever have trades that reaches the interbank market and thus has any significance at all to market movements? You do realize that the interbank deals in milliards, not millilots, right?
Your response is, frankly, typical. I have no reason to think you have any data to back any of this up because it’s the same tired reasoning every other retail trader uses to justify them looking at technicals.
AFAIC at this point you are all selling the idea to yourselves and keeping each other in the dark. You are doing it to yourselves.
Maybe there’s a reason why pit traders weren’t sitting in front of charts plotting squiggly lines and moon phases, or why the richest folks you hear about inevitably keep their ear to the ground more than their eyes on charts. Food for thought.
At this point I’m probably going to bow-out because it’s inevitable that the tech-lovers will need to justify their trading without actually justifying it, so around in circles we shall go.
What ARE we doing to ourselves, exactly?
We are having a conversation… Nobody here has to pull up an institutionally-verified spreadsheet SHOWING just how the truth looks with percentages to boot… Let us get down from high horses: we are not here dealing with ‘milliards’ and playing pro-traders…we are the ants, yes, the retail traders, and we live by tech analysis, so what is wrong with that? Nothing at all.
At least a little bit of something of substance would go a long way, but if you’d rather talk of things based on hope and gut feelings then go for it.
… Let us get down from high horses: we are not here dealing with ‘milliards’ and playing pro-traders…we are the ants, yes, the retail traders
Clearly, from your own high horse, you missed the entire point of what I was saying. If someone is justifying T/A because a million other traders are seeing the same thing then THIS ONLY MATTERS if their orders ACTUALLY AFFECT THE PRICE. Firstly, the “1 million” was just a number I assume was made-up on the spot and has no reality behind it, and secondly, regardless of whatever number of traders it is that are basing their trades on T/A their orders have to in aggregate reach the interbank market for it to even matter. Considering how many different ways you can spin tech analysis and configure indicators and plot lines and squares and circles and extensions… I can’t imagine even a million tech traders could agree on much of anything except maybe some support and resistance lines, if that.
So, where is the proof of a) tech traders influencing price, at all, and b) tech traders making profits, at all?
and we live by tech analysis, so what is wrong with that? Nothing at all.
Do you? Do you really? You don’t care for fundamentals or order flow, you make your trading profits from tech and nothing else? I’m not going to ask you for proof, but I am asking that you do in fact confirm that you are that rare trader who is making money consistently and that it is in fact all based on nothing but tech. If you can honestly say that this is the case then you are a unicorn.
Furthermore, I can’t think of a single famous, successful, trader off the top of my head who bases their trades on nothing but tech. If you can clue me in to some, or one, I’d appreciate it so I can do some reading on the matter.
I agree with you, Penny, I just did not think Turbo was saying anything unreasonable…
All my threads and videos here show my trading style, so you can find out that way…I post regularly my fx videos here too… So, nothing personal, but I am not going to explain it all over again here
I am off to bed.
Good night everyone.
penny, you clearly did not even read what i wrote.
its funny, as in my post i stated that technical analysis is partially a waist of time. so please check yourself before you wreck yourself. u basicly said something similar as i said with attacking me for no logic behind it.
well here again for the people who read slow:
- read a random walk through wall street. (i dont say its a good book or you sould follow it, but when u talk about the random walk theory as you do ever since in this thread you should at least know what youre talking about AND NOT get your wisdom of a third leg person who read a random walk and then made his own unimportant/uninteresting/probably wrong theories on what he read)
- make some conclutions
- pretty much 80% of all traders use technical analysis to get a hint onto where the market is going in short terms. i dont think i need to explain you that when 80% of market participants think its going up because the technical analysis says its going up that exactly those people will go long. <- hence you can make some money by knowing what they will do.
just like when you see that 50% of young people plan to buy a electric car when theyre 30 i dont need to tell you that the TESLA stock will go up within the next 10 years. or do I?
THAT STATEMENT does not implyfy from my side that technical analysis is a tool or logic or good technik, it aswell doesnt implyfy that tech analyzis is bad or shouldnt be used, it only implifies that the mass is using technical, the mass follows its technical analyzis. have you ever heard of something called a “SELF FULLFILLING PROPHECY”?. ok then make your clue about people using tech, thinking it will go up connected with a self fullfilling prophecy.
the number of 1 million was pulled out of my “arse” because it doesnt matter if its 10.000 or 1.000.000 or 1.000.000.000 as if you undertand one thing about stocks and any other traded market then you should know that its “the masses” that moves the markets.
10.000 people going short on the dow jones with each 10.000 contracts is 100million and one hundret million will move the market a few points, a few points that will trigger another few thousand participants to go short, that again will trigger more people go short. mass triggers mass - like a snow ball running down the hill, starting out small, but weighing a few hundret kilos when it comes down 500 meters.
so when talking about high horse, plese come dwon from yours so u might learn something new as:
smart people say: im stupid - i have to learn.
“not so smart” people say: i know everything - theres nothing i have to learn anymore.
you should learn from pipmehapy hes beating the market since years and making money on it. do you do that?
btw this is partially how the interbank market works:
fxcm has 500 people going short, they secure themselves in the interbank market for liquidity and against those traders going short by buying packages from banks. so people on bucket shops aswell influence the market and the interbank by the broker securing himself against the shortings.
on stocks:
a grandpa who finished his tech analyzis going short on volkswagen with 500 shares (500 x 100$ = 50.000) he is trading with his home bank (deutsche bank, bank of america etc etc no matter) the bank secures itself agaisnt his trade by going on the market OR the bank ust wires his trade into the market (the stock exchange itself, so no interbank trading needed at all and btw the stock exchange is a level above the interbank market) functioning only as transmittor who charges a fee for execution (broker - in this case bank is broker OR the bank has its own bulk broker that executes trades on the stock exchange - but thats unlikely because since computers arrived thos middle men arent needed anymore) and the colkswagen stock moves 0,00001% down.
so yes either way, people doing something, through bucket broker or stock exchange directly has influence on the market and the price
btw when it comes to explaining things cartoons usually help out good:
micro mortgages explained:
Stock how the masses see it explains:
quantative easing programm explained in vedry truthfull details:
I read your post, and you started with one sentiment and then mixed it with another, and as such I asked for some type of qualification to some of the flippant things you had said. I understand that your overall post was pointing towards T/A being useless, but it’s the parts where you didn’t that caught my eye because, like I said, it’s the same typical mindset that T/A faithfuls cling to. If there’s something to back that up then I’d like to see where that data is because I’ve not encountered it and have only ever seen reasons to avoid T/A like it’s the plague (because, well, it is a trading plague).
If we are just going to argue about who said what then this is all going to become very boring very fast.
well here again for the people who read slow:
Nice one.
- read a random walk through wall street.
Why? Is there anything revalatory in it that people won’t have read elsewhere?
but when u talk about the random walk theory as you do ever since in this thread
Quote me where I’ve mentioned anything, at all, that even hints that I subscribe to random walk theory. When you find nothing you can come back and agree that you seem to be having a very hard time understanding my posts for some reason.
- pretty much 80% of all traders use technical analysis to get a hint onto where the market is going in short terms. i dont think i need to explain you that when 80% of market participants think its going up because the technical analysis says its going up that exactly those people will go long. <- hence you can make some money by knowing what they will do.
And now we are just going to go in circles. I heard you the first time. What part of this nebulous number of “traders” are actually making profit, and actually making any impact in the market such that their orders actually matter? You throw out these numbers “1 million traders” and “80% of traders”, and how many of them are overall losing in the end?
Do you actually know how long any business, not just trading, tends to last? Why should anyone do what the majority do wrong!? Think about that before you reply.
“SELF FULLFILLING PROPHECY”?
Everyone has, and I’m still waiting for any shred of proof to the notion. Platitudes don’t make for profits.
Once again you go from suggesting T/A is useless, and you read this book and so on and so forth, and now you are back to the old “but T/A this, and T/A that and 80% and self-fulfilling”. Make up your mind. Either T/A has merit in your eyes, or it’s nonsense. You, within both posts so far, have flip-flopped between both and you can’t have it both ways.
the number of 1 million was pulled out of my “arse” because it doesnt matter if its 10.000 or 1.000.000 or 1.000.000.000 as if you undertand one thing about stocks and any other traded market then you should know that its “the masses” that moves the markets.
AND AGAIN it doesn’t matter if a billion retail traders do the precise same thing if their orders never aggregate and get moved up the chain to the interbank market who ARE THE MARKET.
Truly, from everything you are saying I’m not inclined to think you actually understand how the FOREX market operates at a micro or macro scale.
10.000 people going short on the dow jones with each 10.000 contracts is 100million and one hundret million will move the market a few points, a few points that will trigger another few thousand participants to go short, that again will trigger more people go short. mass triggers mass - like a snow ball running down the hill, starting out small, but weighing a few hundret kilos when it comes down 500 meters.
Refer to my above reply. FOREX isn’t a centralized market where each order actually has weight. You are lucky if your order is consolidated with others and makes it one level up from your broker instead of them just bucketing it.
so when talking about high horse, plese come dwon from yours so u might learn something new as:
smart people say: im stupid - i have to learn.
“not so smart” people say: i know everything - theres nothing i have to learn anymore.
When you display some sign that you know what you are talking about I won’t have to ask you such basic, yet somehow seriously inflaming, questions that sets you off on this tangent of trying to prove something to me with all of these flawed examples and contradictory stances on the topic you are currently so passionate about.
Come at me, bro, but with something of substance. I asked some simple questions, and this was your entirely broken reply.
@pipmehappy I’ll have a bit of a look at what I assume are your youtube videos if I get some time later. But, maybe you can spare me that if you can confirm that you take into consideration news and other fundamental drivers at all. If you do, then I would say to you that it’s again semantics and what you consider T/A, or mostly T/A, is perhaps sliding more into order flow territory? But, if you block everything else out and only look at your charts and base your trades from what you see then I’ll certainly take some time to watch some of your videos and see what’s up… I’ve never seen a unicorn in real life, so today could finally be the day.
I’ll be honest and tell you that I don’t follow your second example at all. Either you are just making something up, or your english is slightly too broken for me to properly understand your example, or you have no idea at all what you are talking about but honestly think you do.
I’m not even giving you crap here. That’s my honest take on this post. If you can clarify how you are bringing the FOREX interbank market into this example where you are speaking about share trading then that would be great.
aw god i find you cute. really.
you know theres a well explained tactic on psychology books of what you are doing. its called the 100% dennial, you denny every fact uve been served but you dont give any facts back. usually i get that only when i argue emotionally with my wife its kind of cute seeing this on a forum aswell.
there are 2 reasons y i see no need to answare to your thoughts:
1st: u r stubborn and think you know it all
2nd: i dont see any need to share my knowledge with you
its your money, trade with it as it suites you best.
its funny how 2 people can partially agree onto something but the way of talk/speech excludes them to come to a common point. -thats partially because you are lacking some knowledge but its not my job to explain things to you.
example: comming to a forum about repairing car - i dont see any reason to explain you the basic functioning of a fossil fueld engine and its mechanics to be able to talk to you about how to fix it - its your part to have that knowledge before you start a conversation.
continuition of that talk: im trying t tell you what moves markets, the psychology behind it, the mehanics which work into YOUR BRAIN - a traders brain - as a respnse of you i get “yah but the interbank market - supply vs demmand - when theres less products then demman the price goes up” etc. etc. <- you dont even need to consider those points as the “mechanics” are clear to everyone who at least has some basic knowledge of the market. you would like to add something to the conversation then focus on the important stuff and not the basics.
one basic knowledge thingyy i can tell you regarding tech analysis is that T/A works good in efficient markets but fails completely in unefficient markets. now google efficient vs unefficient markets. even of that ill give you examples, the forex is a efficient market except some currency pairs. Dow jones is temporarly a efficient market (yes i said temporarly, after lots learning youll know y i said temporarly) on the other side the Oil market is (temporarly) very unefficient hence tech analysis wont help you there at all. generally all commodities at the moment (temporarly) are unefficient markets, oil, gold, silver, copper alumium etc etc - but even fundamentals wont help you there. in unefficient markets the only thing can help you to beat the market is market psychology itself but thats again another very long story and many books read.
pipmehappy is smarter then me here, he simply agreed to you and got out of the conversation as he saw its a lost case and any tiped letter is a waist of time.
and anyways; im not “inflamed”. you started talking to me directly in a unfriendly way, so you get a response in your own style.
never the less, your autohor copy/pasted theories out of “a random walk through wall street” a book that i have read fully. now you with your huge logic tell me: y should i read someone who has his ideas and intellegince from another book instead of reading the original book?
its like reading a 20 pages guide called “bible for dummies” instead reading the bible itself. (im by no way comparing the random walk to the bible here or anyhow trying to implify that the random walk is the fiancial equivalent of the bible - that was just a random example)
we can aswell talk:
german
croatian
hercegovinian
bit of spanish and bit of slovenian
choose :27:
thats why i included cartoon links that explain you some stuff (in a joking/funny way of course)
but just to make you really happy, there you go- buy and read this book:
Market Efficiency and the Returns to Technical Analysis on JSTOR