Discussion in 'Investments' started by tecate, 10 Jul 2018.
Can anyone point me in the right direction with regard to online resources to learn TA?
There some information and a link to a $200 online course here.
I know nothing about TA so this is purely my opinion -- I think it's voodoo. Simple logic dictates that it can't work, as otherwise it would simply add to the information available about the market and would factor into the price like all other market knowledge. (I presume the TA response is that "our special ACME $200 course contains the secret sauce that all the others are missing" ... so why are they selling it to you instead of making a killing themselves?).
Having sold Bitcoin a few months ago, I occasionally read the TA for a laugh. They can see a pattern everywhere and make predictions which are useless.
I don't discount what either of you say. However, for kicks I've decided to spend a little time on it which may serve to validate what you say or otherwise.
Technical analysis to the best of my knowledge is statistics.
All the graphs, charts etc are statistics. There is maths behind all the squiggly lines.
The CSO, government etc all use statistics to try and predict the future based on what has happened in the past and present.
Sometimes it works wonderfully and sometimes it doesn't.
You will learn a lot from this:
It's not the same thing at all.
Technical analysts in their purest sense just look at the charts. They don't look at anything happening in the market or company.
Economists will look at what the factors are and how they are evolving. Economists are are not good forecasters either, but there is some logic in what they do.
Good for you. Would be interested to see your feedback here in future. Don't want to be preachy, but if I were you I would aim for a dispassionate analysis of your results. It's very easy to be convinced something is working just because you want it to.
As Brendan said, it's not the same thing. Some signals contain useful information that allows the future to be predicted from the past. Some don't, because they are random. And some -- the so-called chaotic ones -- are even worse than either of those. They may show long term trends (e.g. the stock market always goes up in the long run), they may oscillate between bistable or multistable states, they may gravitate toward or orbit around attractor values, but will always be prone to unpredictably flipping into other metastable states.
And they don't even have to be random, like the Gaussian noise introduced by the Box-Muller transform in Brendan's example. It's possible to use perfectly deterministic mathematical equations (of the appropriate type, even if it's as simple as the equations of motion for the double-pendulum) and still get chaotic results. The weather is the canonical example of a chaotic system, one which is completely unpredictable beyond the short term even though it stays within long term bounds of climate oscillations.
The stock market is almost certainly another example, since extreme sensitivity to initial inputs is one of the hallmarks of chaotic systems, perhaps along with another property called self-organised criticality. It is in its very nature to erase predictively useful information about past movements, because the market always reacts to discount them, even if the inputs are coming from traders using technical analysis!
I'm not in any way 'passionate' about it - just keeping an open mind. Will report back if I even get that far with it.
The problem is that any success you might have will be due to luck alone, but you will attribute it to skill.
Technical analysis is like a moth to a flame.
I understand the logic of that. However, surely if an approach is taken (inclusive of tech analysis) over a more extended period of trading, then the outcome of that gives us the result as to whether it's it's effective or not?
Luck could only account for so many instances.
Perhaps. Maybe they're all misguided (those that use it). I'd like to apply it myself - even if the outcome is that I come back and agree that it's rubbish. My curiosity will have been satisfied at that point at the very least.
I don't know the maths but you would have to be doing it consistently for many years to know that your out-performance is due to skill and not chance.
Really? Surely if it's down to luck alone, a winning streak could hardly last that long!? Had I known that luck could carry me that far, I might have paid a bit more attention the couple of occasions I visited Vegas (rather than being completely disinterested).
On a complete tangent (don't delete it Brendan, it's interesting ), my kids told me yesterday that moths aren't attracted to flame or light at all!
You'd have to define luck. Sticking your money on a random number on the roulette wheel is random luck. There is absolutely no reason why the ball should land on that number ahead of any other number.
With investing, there are lots of different factors that can influence the price of a stock, lots of which are unrelated to that particular company. In the last number of years, it's been difficult to pick losers, a rising tide lifts all boats and all that.
But remember "Only when the tide goes out do you discover who's been swimming naked"
With the likelihood of their being a correction (fair to say within the next 18-24months?), is that where shorting comes in to play?
There could be a correct in the next 18 - 24 days, we don't know and we don't know what form it is going to take or how long it will be for.
If you short the market you have to pay to do so and if you don't know when the market will fall or by how much, you don't know how much you will have to pay for your position. But if you take a long term view on investing that capitalism works, you will be comfortable in the knowledge that equities produce the best returns over the long term but there can be uncomfortable positions during that period.
remember that shorting is a double edged knife. You can find out the level a company is shorted and you might think that a high shorted stock suggests it's overvalued and ready to fall,however, the sting in the tail is all those who have shorted are all using borrowed shares that the market knows they have to come back in to buy back so they are actually holding up the high valuation. The longer they stay in the short they are paying interest and only when they panic do some of them come back in the buy back to close their position.
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